GOLD THOUGHTS
by Ned W. Schmidt, CFA, CEBS
Schmidt Management Company
August 22, 2007

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.

© 2007 Ned W. Schmidt
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Ned W. Schmidt,CFA,CEBS is publisher of THE VALUE VIEW GOLD REPORT. That report now includes a weekly message, TRADING THOUGHTS, to help investors identify timely points for buying Gold and Silver. His monumental report, "$1,265 GOLD", with 255 pages and 98 graphs, is now widely known, and is available at www.amazon.com or from the author by clicking HERE This work has now been read by investors in over twelve countries around the world. Ned welcomes your comments and questions. 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 by Email.