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<p>[QUOTE=&quot;InfleXion, post: 1562801, member: 29012&quot;]mikem2000, the question in my mind is why are we in a commodities bull market? It is because of negative real interest rates. This is more true now than ever. Until interest is raised higher than inflation, which is not likely to happen for 2-3 years at the earliest, if ever, hard assets will continue going up in price.&nbsp; </p><p><br /></p><p>I doubt real estate will drop any further now since with QE3 the Fed is buying up all MBS that the free market doesn&#039;t want, but I don&#039;t see housing outpacing inflation until the jobs come back. Sure RE is an asset, but you can&#039;t just buy a small portion of a house. You have to be financially stable enough to be in it for the term of the loan which requires jobs. The jobs aren&#039;t coming back until we have deflation (contrary to what the inflationeers will tell you) because then savers will be able to afford to buy more goods and services with a more powerful currency (good for jobs), and will also have more spending cash (good for home purchases -&gt; demand -&gt; price++).&nbsp; </p><p><br /></p><p>However, since deflation would initially drive home prices down before allowing time for the free market to find its legs the transition period would put the mortgage holding institutions underwater as their net worth would tumble due to their current holdings. RE recently got a shot in the arm with government programs, but all that did was temporarily entice in a new wave of flippers with enough cash to buy a home outright. However, as for existing homeowners upgrading to a better home which is the life blood of that market, those purchases are at historical lows. </p><p><br /></p><p>Money printing will have to continue to prop up these banks until the economy can eventually sustain higher interest rates (banks surviving from real profits instead of ZIRP skimming) otherwise they will take the derivatives market down with them which is essentially the inevitable reset button they are trying to avoid, but in order for the economy to handle higher interest rates we need a fair playing field so the little guys can compete and survive, and encourage job growth. Since this would require taking away the punchbowl from the big 5 it&#039;s a catch 22, and only achievable goal is to push the reset button as far down the road as possible. They won&#039;t crash the party until the police show up or they drink too much and hyperinflate.[/QUOTE]</p><p><br /></p>

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