• New house sales hit a new record in March. Existing houses sold well too… but we can’t help but think and say over and over and over again… this can’t last forever.
• A headline in The Washington Post today reads: "More Trouble May Be Found at Fannie Mae."
This whole Fannie thing smells fishy. The headlines read a lot like the developing disaster at Enron in 2001. "We very well might find more problems as we continue to review the company’s accounting," says Armando Falcon, director of the federal oversight committee.
If there had been no steps taken to identify the "accounting problems" Falcon continued, "they would have eventually manifested themselves in the form of some larger problem that might have created some kind of systemic disruptions" in the housing market. If Fannie Mae or Freddie Mac were to completely collapse, there would be much less credit for consumers to binge on in the form of mortgages.
• A note from our friend Greg Grillot, reporting from Beijing:
"As I strolled down the dusty Beijing alley, dodging the reckless construction workers and making my way to "The Best Peking Duck Restaurant in the World," Andy Carpenter decided to let me in on the true definition of inflation.
"You see, Andy has lugged over to China for over a decade — bringing intrepid investors the inside, dirty scoop on the then skulking dragon before anyone else even gazed away from WorldCom and Amazon.
"Here’s what he said: u2018Twelve years ago, my friend employed a girl (hooker, whatever word you guys like) for $15 US. He ambled toward me, all fired up, and then he told me he gave her a $20 tip. I chided him for that tip. I pleaded that he artificially pumped up the asset’s price.’
“u2018Then, three years after that, a different friend came to me and ecstatically professed that he had landed a girl for $30! And that she was so nice, he gave her a $15 tip! Stupid Americans ruin China! Inflating everything! Destroying the country!
“u2018Then, just last year — some new friend told me about the fair lass he landed for $50. I didn’t say anything except that I’m happily married, and I never dabble.’
"Andy has long since reserved himself to Americans raining inflation upon mainland China.
"Right after that conversation, we shared a $7 cocktail in our hotel… "
• The Chinese are making money — and spending it. Americans are cheap travelers by comparison. Catherine Chabrier, of Maison de la France, confirms this: "People planning trips to Europe always include three or more nights in France with Paris as the top attraction. The personal spending of Chinese tourists (in addition to board and lodging) is E430 (compared with E651 for Japanese and E328 for Americans)."
It costs a lot to get from China to France — about $2,000 in travel expenses alone. Plus, the Chinese government requires travelers to put down a deposit of twice that amount to make sure they come home.
"Over and above that," continues the news item, "Chinese tourists like to spend when they go abroad. It is not unheard-of for each traveler to fork out $2,000 in spending money on an overseas trip. Indeed, the money spent by mainland tourists in Hong Kong is thought to be the single most important factor helping to revive the Hong Kong economy. A number of factors explain the Chinese love of spending: the lure of foreign brands, the thrill of buying foreign products and the Chinese philosophy that one should u2018economize at home but have enough money when you go traveling.’"
• Jules has to decide which college he will attend by the end of this week.
"Well, how are you going to decide?" we asked.
"I don’t know, Dad… I can’t make up my mind. I like cities. But I don’t think I would like Boston University. It’s just too big. All of my friends are going to these little New England colleges. The guidance counselor recommended them to everyone. You know, Bowdoin, Bates, Emerson… But I don’t think I’d like them either.
"I was hoping to go to NYU, but I didn’t get into the film program. So, that leaves St. John’s. But it’s so small and quirky. And it’s not in a big city. Besides, the Princeton Review said it was the u2018most intellectual’ school in the U.S. That worries me, because I don’t know if I can handle it."
"Well, you don’t want to go to a school that would be easy," said Father Knows Best. "What would be the point? Things that are worth doing are usually hard to do… of course, that doesn’t mean that things that are hard to do are worth doing. It’s hard to stuff four billiard balls in your mouth… but it’s not a good idea."
"Thanks for the helpful advice, Dad."
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century.