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    Running Out Of Cousins… The U.S. Boom Is Back

    "You’re going to run out of cousins," I told my house painter yesterday.

    It took him a minute to understand what I was saying. But once he got it, he couldn’t stop laughing. He knew I was exactly right.

    You see, my painting contractor is from Honduras. He does great work, and he does it with a big smile. He arrives on time and finishes when promised. As you can imagine, his business has grown.

    His workers are his cousins… from Honduras. As his business has grown, he’s simply called more cousins.

    I asked him yesterday how business is going.

    He told me it’s "booming." He said, "In addition to all of the new homebuilding, Bank of America now needs me to paint about 25 houses a month."

    That’s when I joked he was going to run out of cousins. Judging by the Cadillac he drove up in, he’s laughing all the way to the bank these days.

    Business is booming in my small town on the Florida coast.

    • New construction is happening again. We’ve quickly gone from too much supply and no demand to the opposite situation: no supply and lots of demand.
    • The roads are full of out-of-towners. We know they’re from out of town before we see the license tags. They’re the ones who are completely baffled by our basic traffic circles. (Remember, "yield" doesn’t mean "stop.")
    • The restaurants are full. Heck, I stopped at my favorite take-out place over the weekend. They told me I’d have a 50-minute wait… for take-out!

    I asked my friend, the owner of that take-out restaurant, what’s happening around here.

    "Things are definitely moving in the right direction in the economy," he said. He wasn’t willing to say that things are as strong as they were in the good ol’ days of a couple years ago. But things are better.

    I think what’s going on is that people are feeling wealthy again — wealthy enough to travel to Florida and open their wallets. And I think what’s happening in Florida is what’s happening in the rest of the country.

    I believe the U.S. Federal Reserve has tricked people into spending money again.

    By cutting interest rates to zero and printing money, the Federal Reserve has artificially pushed up home prices and other asset prices. This makes people feel wealthy. So they feel comfortable spending more money.

    The statistics prove what I’m describing. Millions of homeowners are now no longer "underwater" on their mortgages. Their homes are now worth more than their home loan. USA Today reported, "Rising home prices, up 12.1 percent in April year-over-year, have lifted 1.7 million home loan borrowers above water in the past year."

    Florida is the second-worst state (behind Nevada) for the percentage of mortgages that are "underwater." But that’s not holding Florida back today. Florida’s economy grew in 2012 by 2.4 percent — the fastest pace in six years. From my perspective here in Florida, 2013 is light-years ahead of 2012.

    For the Nation as a whole, economists are revising their growth estimates upward. Economists surveyed by the Federal Reserve (Philadelphia branch) expect U.S. inflation to run at 1.5 percent in 2013. And they expect the U.S. economy to grow in the first half of 2014 at a 2.8 percent rate.

    My painter is going to run out of cousins, and that’s a good sign for our economy.

    I believe this Federal Reserve-created boom will continue, and U.S. housing is one of my favorite ways to play it.

    Good investing,

    — Steve Sjuggerud

    Dr. Steve Sjuggerud is the founder and editor of one of the largest financial newsletters in the world, True Wealth. Since inception in 2001, True Wealth readers have made money every year with safe, contrarian investment ideas. Steve did his Ph.D. dissertation on international currencies, he's traveled to dozens of countries looking at investment ideas, and he's run mutual funds, hedge funds, and investment research departments. Steve's investment philosophy is simple: "You buy something of extraordinary value at a time when nobody else wants it. And you sell it at a time when people are willing to pay any price to get it." It's harder than it sounds, but Steve continues to be able to do just that for his readers. Click here to learn more.

    | All posts from Dr. Steve Sjuggerud

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