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 The slump in the new home market will continue “well into 2008,” said researchers at Harvard yesterday. A record 37 million U.S. households, or 1 in 3, were paying a "moderate cost burden" of 30% of their income toward housing in 2005, the report states.
Without an increase in low-income wages, the study concluded, and looser home-building regulation, many Americans will be priced out of the housing market for “quite some time.”
Oh yeah, they called for more government spending, too. Shocking.
 Trade wars on the horizon? New legislation that would tax Chinese imports (proposed by Sens. Schumer and Graham) is expected to rear its ugly head this month. The last time this dynamic duo tried to get their bill passed, they proposed a 27.5% tariff on all Chinese goods coming into the U.S.
That’s a really bad idea.
“After years of lending hundreds of billions of dollars to U.S. consumers and the U.S. government,” explains our Dan Amoss, “the Chinese have purchased a very valuable economic shock absorber: over $1 trillion in dollar reserves. They are now in a very powerful position should Chuck Schumer and Lindsey Graham get their supposed ‘veto-proof’ protectionist legislation through Congress this summer.
“Support for their bill is apparently strong enough that it’s all but a done deal. Thinking they are helping local constituents -- or their political careers -- these modern-day ‘Smoot and Hawleys are acting in total ignorance of vital international capital flows.” (The Smoot-Hawley Tariff Act of 1930 enacted similar tariffs in the 1930s and helped to deepen the Great Depression.)
“Even Ben Bernanke recognizes that protectionism would raise the price of the most important U.S. import -- credit; so it would be a really, really bad move. The Chinese can indeed send a strong message to U.S. legislators via the bond market. Let’s hope Sens. Schumer and Graham value the future of the credit-dependent U.S. economy more than their political careers.”
When we met with Warren Buffett earlier this year, his No. 1 concern regarding the trade deficit was that some knuckleheads in Washington would take advantage of economic illiteracy in this country and push through protectionist legislation -- just like this proposed tariff. Buffett’s dad was a congressman in the ’40s and ’50s. Warren grew up with goons like these guys.
If there’s one thing you can count on from Washington… somebody there will always at least try to do the wrong thing. God bless ’em.
 The recent IPO of Yingli Green Energy marked the 10th IPO of a Chinese company on American exchanges this year -- a record. In 2006, there were only nine by the year’s end.
“The record reflects an obvious growing interest in Chinese shares,” remarked Capital & Crisis’ Chris Mayer. “Whether that is bullish or not for these stocks is another matter. Generally speaking, IPO frenzies are not so good for investors, but very good for the insiders and promoters of the companies selling the stock. One day, we’ll have our pick of the litter. But for now, I’d advise readers to just watch the fireworks and keep their money in their pockets.”
Instead, buy “boring” stocks, Chris recommends. His track records tops the list of Agora Financial editors, so it might be a good idea to listen to him. For details on getting a free report that details Chris’s 10 favorite “boring” stocks… follow this link.
 “Food-based ethanol fuel will not be the direction for China,” said Xu Dingming, an official of the Chinese National Energy Leading Group.
Chinese leaders are suspending all research into ethanol derived from edible resources, the Times reported today. The moratorium comes in response to a rapid rise in Chinese food prices and the intense demand ethanol poses for indigenous farmers. American farmers would do well to follow the Chinese government’s lead.
 Spectra Energy Group, an Outstanding Investments recommendation, received final approval from the Federal Energy Regulatory Commission to begin work on new pipeline facilities in Pennsylvania and Ohio. The stock jumped almost 2% on the news.
We asked Byron King for a comment… but he’s still lost in the Alaskan wilderness en route to or from his private tour of Prudhoe Bay. Comments on Spectra’s pipeline coming soon.
 Newmont Mining, another Agora Financial pick, announced yesterday that it will sell an estimated 1.6 million ounces of gold this year from its Peruvian mines alone. Total year sales are estimated in the 5.2-5.6 million-ounce range. Strategic Investment and Outstanding Investments readers both stand to profit.
 If you bought Newmont in 2001 when we recommended it, you’d be enjoying a 140% gain. But this far into the bull market, is there any room left for big gains?
“You bet,” says our longtime friend David Galland of Casey Research. “While you'd be correct in suspecting that the easy money in gold shares has already been made, it would be financial folly of the highest order to assume that it's too late to make the big money. The big money is still on the table.”
Check out the following charts:
Gold’s grim bear market during the ’80s and ’90s was largely perpetuated by a lack of funding within the mining industry… and for good reason. Who would pump a ton of cash into mines while gold was heading south toward $253 an ounce?
Given renewed interest as gold tickles its way around the $700 mark, “Exploration's dark age is over,” David says. “But it had a profound effect that hasn't played out yet. A fluke string of discoveries during the late ’90s spawned a rush of new exploration investments. The time required to move a good geological idea into production is typically six-10 years.” So…
We’ll give you a second to do the math.
Increased production of bullion at these prices should translate into higher profits for specific mining companies. For details on which companies we recommend, see: Gold $2,000.
 “After Friday's gold sell-off,” writes one reader with a rebellious flare, “I used $2,105 to buy three $20 Liberty (I like that name!) Head gold coins, all uncirculated condition, all dated prior to 1900. For some time, I've used my suspect Social Security checks -- (I'm 76) -- to buy gold, and don't think for one minute my gold will show up in my estate for the tax man to salivate over.”
 “You write that the poll of 1,000 boys and girls conducted by Charles Schwab showed what a pleasant dream world Americans live in,” responds another reader. “I disagree. I prefer to view these boys and girls as realists. They have factored the current rate of inflation into their expectations of what they will earn in order to stay above the poverty line and survive!
“Yes, $114,200 as a teacher?! In eight-10 years, about the time these kids graduate college, teachers will have to be paid this amount, or there will be no teachers!”
 Several readers wrote in from New Jersey last night, each claiming that they already know grammar schoolteachers making six figures. Seriously!? Nothing against teachers… but c’mon. Six-figure teaching salaries are almost as shocking as the Canadian dollar reaching parity with the U.S. buck.
Regards,
Addison Wiggin
The 5 Min. Forecast
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