Monday, October 25, 2010

Will the Dollar Decline Inflate Real Estate Prices?

By Troy Corman,

Don't look now, but your cash accounts in your bank, 401k, and IRA are now worth about 7% less than they were 2 months ago - when compared to currencies in 6 other major countries. In fact, today the dollar is flirting with dropping below the 15-year record low of 80.90 yen.

Inflation is already apparent on the farm. As gold, silver and agricultural commodities sky-rocket, prices of Texas farm land continue to climb. Wheat and corn are both up 34% in a year, while milk has risen 32%. The result has been rising prices on Texas farm land.

Gold and land have long been a hedge against inflation. As those with cash see their savings evaporate in very low interest-bearing saving accounts, some turn to real estate, and rental real estate, for inflation hedging and tax deductions. That's what makes real estate a more practical investment than the stock market, in my view.

Speaking of the stock market, TV pundits continue to promote the bull market, yet in the 30 days prior to October 18th, corporate insiders (company executives) HAVE SOLD SIX TIMES as many shares as they've bought. They've sold $3.5 BILLION of stock, and bought a mere $236 MILLON. What do they know that Joe Public doesn't know?

One thing we do know is that Ben Bernanke is determined to prevent deflation and falling prices. Look for him to continue to rev up the printing presses and flood the economy with more dollars, making the dollars you have worth less.

Inflation is the enemy of mortgage rates. The following is quoted from Adam Quinones from, "We do however know that the Fed is looking to spark a little "Demand Pull Inflation", and we also know inflation is the enemy of mortgage rates. While demand pull inflation won't ignite immediately, if the Fed's QEII plan is as successful as previous alternative policy strategies (which were intended to stabilize the economy, and they did), mortgage rates will eventually rise, and it will happen on the slightest hint of consumer led inflationary pressure or sustained job creation. I'm not even going to venture a guess on when that might happen though. Traders, economists, and analysts alike are still operating in a very reactive manner. Outlooks are constantly changing as the economic and political environment evolve. Let's see what the Fed says on November 3rd and go from there...."

For tips on how real estate can fight the ravaging effects of inflation, contact Troy Corman.

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