Gold Thoughts

By: Ned W. Schmidt | Wed, Aug 22, 2007
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With U.S. mortgage defaults up 90+% from a year ago, collapse of U.S. mortgage market is being felt around the world. U.S. housing starts have fallen to a ten year low, and are headed lower. Financial infrastructure that fueled this speculative bubble is being dismantled. Rate is important, but so is means of funneling money to borrowers. Mortgage financing system begins with mortgage brokers at front end. Mortgages then travel through layers of investment bankers till ultimately residing in portfolios of gullible investors around the world. That system is disintegrating through bankruptcies and layoffs. System that created the money flow from investors to housing is being dismembered. Less money will flow to housing market. Less money means lower prices. Given long-term nature of housing and collapse of financing mechanism, U.S. housing starts will fall 50% from current levels as sales stall.

Central banks around the world have been forced to provide emergency funding to financial institutions troubled by impaired holdings of U.S. mortgage debt. Germany, for example, seems to have a weekly problem. These central banks may look to their investment portfolios for funds to aid these institutions. For the past two weeks official institutions have been net sellers of U.S. government and agency debt. Should they be sellers this week, that would be three weeks in a row, which has not happened in two years. Collapse of U.S. mortgage market has burned many foreign investors They most likely will be forced to become net sellers of U.S. dollar debt. Dollar's structural bear market will continue as foreign investors shun and sell dollar debt. Gold is the only true refuge in such an environment.

GOLD THOUGHTS are from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report, monthly, and Trading Thoughts, weekly. For a subscription go to Ned will be exploring the Gold Super Cycle at The Wealth Expo in NYC, 19-21 October. For information go to To receive a copy of the new Agri-Food Value View, an exploration of Agri-Food Super Cycle, write



Author: Ned W. Schmidt

Ned W. Schmidt,CFA,CEBS
The Value View Gold Report

Ned W. Schmidt,CFA,CEBS is publisher of THE VALUE VIEW GOLD REPORT and author of "$1,265 GOLD", published in 2003. A weekly message, TRADING THOUGHTS, is also available to electronic subscribers. You can obtain a copy of the last issue of THE VALUE VIEW GOLD REPORT at The Value View Gold Report. Ned welcomes your comments and questions, and tries to answer most all. His mission in life is to rescue investors from the abyss of financial assets and the coming collapse of the U.S. dollar. He can be contacted at

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