Bloomberg recently ran a story on the hot housing market in Toronto.  While it is seemingly good times for those who own real estate there, it also shows all of the classic signs of a bubble that will eventually burst.

The one big problem with predicting bubbles, as with other investments, is timing.  Even if we can accurately predict that there is a bubble, we don’t know when it will burst.  We don’t know how much longer and further it will go higher.

If I owned real estate in Toronto right about now, I would think about selling.  Prices are up 33% from last year.  The average price of a detached downtown home is almost 1.6 million Canadian dollars.  That is about 1.2 million U.S. dollars.  Even the average price for all homes in the Toronto area is getting close to one million Canadian dollars.

This is simply unsustainable.  If you are an American, you may not think this applies to you.  But Canada seems to resemble the U.S. in many ways.  The policies of the two countries are often similar.  There is probably more military spending (per capita) in the U.S. and more domestic welfare spending in Canada (per capita).  But overall, policies are somewhat similar, including central bank policy.

The U.S. dollar has been really strong for the last few years.  The U.S. and Canadian dollars hit parity a several years ago though.  This trend reversed back in favor of the U.S. dollar around 2012.

Not all of Canada is in a real estate bubble, or at least not anywhere close to Toronto.  Vancouver is another Canadian city that is likely in a major real estate bubble.

It is no different in the U.S.  Major cities in California are in a big bubble.  Some of this is due to rent control, zoning laws, and other regulations.  Some of it is just hot money flowing into real estate.  In Silicon Valley, the tech boom helps fuel the real estate boom.  And it is no surprise that Hollywood has a lot of money to bid up prices in that area.

If I lived in California, I would move, unless I had a really great job there.  I don’t see how it is worth it to most people.  I understand that some people love the lifestyle and the culture.  Leftists want to be around leftists, but I know that it goes beyond the politics.  I also understand that some people stay there because of family and the weather.

While you can make a higher than average income in San Francisco and Toronto (to use two examples of major housing bubbles), you have to really be earning a lot to make it worth it.  Why would someone pay $3,000 per month in rent – or higher for a mortgage – to live somewhere?  You could find someplace a bit less expensive, but then why would you live in a tiny apartment and still fork over a lot each month?  What kind of lifestyle is that?

In the long run, this is not sustainable.  The last housing bubble in the U.S. started to pop about 10 years ago.  It wasn’t that long ago.  Yet, here we are again in some areas with prices going up sky high.

I think the current real estate bubble is more local than the last time.  Last time, most of the country was hit hard.  The next time around, only certain cities will get hit hard.  Everyone may get hit hard by a recession, but I don’t think house prices are going to get cut in half as they did in many cities last time around.

It is still a good test to compare rents to mortgage payments.  If you are planning to stay in one spot, then you can add up the costs of getting a house.  This includes mortgage, insurance, taxes, any association fees, and an estimate for repairs.  Make sure to account for repairs.  I just spent over $1,300 to fix an air conditioner, so don’t neglect this.  When you add up all of your monthly costs, is it still less than you would pay for rent for a comparable place?

Sometimes renting can make financial sense.  If you live in Toronto or San Francisco, it probably makes sense right now.  It makes more sense to live in a cheaper area with a lifestyle you still enjoy.

I didn’t vote for Donald Trump, and I didn’t expect great things out of him.  Still, I was hoping for a little bit of change (for the better) on the margin.

I can officially say now that Trump has blood on his hands.  I know that bombs have been dropping on his watch since he became president in January, but I give a little bit of leeway in the fact that it was all a continuation of the previous administration.  The whole government, which includes the war faction, has a life of its own.  This is why the term “deep state” has become more popular.  People are realizing that it doesn’t really matter who the top figurehead is.  Sure, he could have ordered a withdrawal of all troops from overseas immediately, but I was still giving him a little bit of the benefit of the doubt.

After reports alleging that Assad’s government in Syria used chemical weapons to kill innocent people, Trump ordered missile strikes in Syria.  He is falling right in line with his enemies, and he is also going against many things he said in the past.

When Assad was accused of using chemical weapons back in 2013, Trump stated that the U.S. government should not get involved.  And during his recent campaign, Trump said that Assad and the Russians were taking care of ISIS, so we should just step away and let them do the dirty work.

But just as George W. Bush called for a more humble foreign policy in his 2000 campaign, and Barack Obama was supposedly going to be the peace president, Donald Trump has fallen right in line with his predecessors.  He has backed off on his talk about peace and is joining the war hawks.  Now he will join his enemies in trying to overthrow the secular Assad regime.  If any dictator in the Middle East keeps order and allows Christians to live there, then it has become U.S. policy to get rid of that dictator and cause total chaos in the region.  U.S. foreign policy has murdered and ruined the lives of more Christians by causing war, destruction, and total chaos than any foreign dictator could have hoped to do.

While Trump’s enemies demonize Steve Bannon, it was actually Bannon that supposedly arranged for Trump to meet with Congresswoman Tulsi Gabbard.  On foreign policy, Gabbard is brilliant.  She understands both the immorality and the stupidity of trying to overthrow Assad in Syria.  Since Trump met with her, I know he has heard the other side of the story, but he is choosing to ignore it.

These allegations, just as past allegations against Assad, are likely false.  It is more lies put out by the pro war establishment.  These are the same liars who told us about weapons of mass destruction in Iraq.  These are the same liars who try to get us involved in almost any war.

Assad is being set up again.  There are few, if any, reasons why he would use chemical weapons on innocent people.  There are many reasons he wouldn’t want to do such a thing.  It is likely that it was Assad’s enemies who set this up.  The question is whether the set up is from the Islamic radicals trying to overthrow him, or the U.S. government, or both.

Even though I don’t agree with Trump on many things, I have defended him in the past up to a certain point.

When Trump critics would accuse him of being mean to women or being anti-immigrant, I would point out that it is better than bombing and killing innocent people.  Now when they accuse him of being mean to women or being anti-immigrant, I will respond that it means little as compared to his bombing and killing of innocent people.

Not only is Trump’s attack on Syria immoral and bad policy, it is also politically stupid.  Now Trump is allied with the same people who have constantly tried to crush him.  Does he not think they will try to crush him again when given the chance?

Trump supported the horrible “RyanCare” bill and ended up in a fight with the Freedom Caucus.  He teamed up with Paul Ryan, one of his enemies, to push a bill that many of his supporters did not like.

Now Trump is teaming up with the entire establishment in waging war against Syria.  He is also showing his dictator/ authoritarian tendencies in not even consulting Congress.  He should be impeached (as many of his predecessors should have been) for waging an undeclared war.  He really should be going to jail for killing innocent people too, but I realize that is an even more remote possibility.  Bush and Obama should both be in prison serving many life sentences for the hundreds of thousands (millions?) who died from their wrath.

I’m sure some Trump supporters will stand by Trump on this attack on Syria.  But there are some libertarians, and even some conservatives, who supported Trump in large part because he gave some hope for a more peaceful foreign policy.  So much for “America First”.  I guess it is now “Syria First”.

Trump was also supposed to be the anti-establishment candidate.  On the repeal of Obamacare, and now on Syria, Trump has fallen right in line with the establishment.  He has become part of what he campaigned against.  Trump is now part of the swamp.

Nobody, especially libertarians, should be surprised.  Still, the whole thing is disheartening.  I held out a little bit of hope that Trump might be marginally better on this one issue.  I knew he was bad on economics and other issues, but I was hoping that maybe he would scale down the war machine a bit.  Instead, we are right back to more war and more killing.  The old wars continue to drag on while Trump will get us bogged down into another one.

More innocent people will die, and more terrorists will be created from it all.  When people are bombed, and they have friends and relatives die, and they watch their whole lives turn to chaos, they tend to get mad at the instigators of it all.  And if the U.S. hadn’t gone into Iraq, and hadn’t gotten involved in Syria, then Syria would likely be a relatively peaceful place to live right now.

Trump is either immoral or a total buffoon.  My hope is the latter, but he may just be both.

Legislation to audit the Federal Reserve was approved by a House committee recently.  Congressman Thomas Massie of Kentucky is a sponsor of the bill that would require the Government Accountability Office (GAO) to perform an audit of the Fed.

Of course, it was Ron Paul who originated this push to audit the Fed. While we can’t be sure of what would come out of an audit of the Fed, any exposure of the central bank would seem to be a positive step.  My one fear with such an audit is that it exposes enough corruption that discussions begin about Congress taking over the role of running the country’s monetary policy.

If there is one thing worse than the Fed running the monetary policy, it would be Congress doing it.  While I am not one to speak of a likelihood of hyperinflation, a monetary policy run by Congress might actually threaten a third-world policy of hyperinflation.  We already know how Congress runs up the national debt by spending recklessly.

Instead of “Audit the Fed”, I think there is better legislation that could move us towards liberty.  The best thing would be a repeal of legal tender laws and an exemption from capital gains taxes for gold and silver.  We need competition.  If Fed officials knew that they had competition, they might be more conservative in their monetary policy.  And if they weren’t careful, other forms of money could threaten to replace the U.S. dollar, which would also threaten all of the power of the central bankers.  It would also threaten the deficit spending ways of Congress.

With that said, what we have before us is a possible passing of this legislation to audit the Fed.  With Republican majorities in the House and Senate, and with Trump as president, it is all of a sudden a real possibility.  While statists like John McCain and Lindsey Graham are opposed to such legislation, politically they might have to go along with it.

Meanwhile, most of the Democrats are against an audit of the Fed.  These are supposed to be representatives of the people, particularly the little people.  Yet they are defending the actions of a secretive central bank that provides massive bailouts for the big banks.  I hope the Democratic constituents really feel taken care of.

While I am not predicting passage of this legislation, it is more likely now than ever.  So if it does pass, what would that mean for us?  More specifically, what would that mean for the price of gold?

We don’t know what would be found in an audit.  It isn’t a bunch of Austrian school economists who would be doing the auditing.  It would be a government watchdog.  We can be sure that the auditors would not be completely independent from politics.

Still, any exposure could do damage to the Fed and its ability to set policy.  The Fed is already on the ropes, at least to a greater degree than in its history of slightly more than 100 years.  The Ron Paul presidential campaigns and the Internet have served us greater criticism of the Fed than we could have imagined 10 years ago.

Anything that calls the Fed into question is likely to be bullish for gold.  It is possible that it could work the other way though.  The Fed might feel more timid and be tighter with its monetary policy, thus being bearish for gold.  But the more likely scenario is that the Fed will continue doing what it does while more people become skeptical of the central bank.  This could draw more people into buying gold.

The one big thing I want to see is an audit of the gold holdings of the Federal Reserve.  I doubt it will happen any time soon, but this would be the big bombshell.  Does the Fed actually have the gold that it says it has?  Has the Fed sold or leased out gold to other parties?

If there were an audit of the gold held by the Fed and the holdings came up short, then I would expect the price of gold (in terms of U.S. dollars) to skyrocket.  This would also be quite bearish for the dollar, as people would lose confidence in the world’s reserve currency.

Although the dollar is not backed by gold (and hasn’t been for some time), there is still something of an implicit backing.  That is why central banks own gold.  It maintains a sense of confidence in the fiat currency issued by the central bank.

In conclusion, I don’t expect any immediate spikes in the gold price even if such legislation were to pass.  If there is an audit of the gold holdings, then things become more interesting.  Still, if anything, I think this legislation is slightly bullish for gold as it calls the central bank into question.

I recently listened to a Friday roundup episode of the ChooseFI podcast.  I was surprised that comments I had recently made were discussed by Jonathan and Brad, the two hosts of the show.

I first heard these two as guests on the Radical Personal Finance podcast.  I left a comment for that show, and I also wrote a blog post discussing it.  While I had a couple of criticisms (constructive) of what was said (or perhaps not said), I am obviously still listening to the podcast, as I find value in it.

I think Jonathan and Brad took this as constructive criticism, as they used my remarks to clarify their thoughts and to add to what they had previously said.

My two main points:

1. Don’t take a high income for granted in achieving financial independence.
2. I wish they would have explored ways to make a good income without going into debt for college.

On the second point, I agree that there are better ways to make a high income without taking on big student loans.  Whether or not this means going to college at all is another topic for discussion.

On the first point, it was stated by one of the hosts of the ChooseFI podcast that they will be discussing more about playing offense in the future.

I can understand having a podcast that focuses more on playing defense (saving money by cutting expenses) than on playing offense (earning more money).  It is easier to find common ground with cutting expenses.  Almost everybody deals with buying (or not buying) cars, houses, cable television, and $5 lattes.

When discussing earning more money, it is hard to find common ground with a broad audience.  They did a show on real estate investing, but it gets harder when it comes to finding a better job or starting a side business.  But while this may make for a tougher show, we shouldn’t take a high income for granted.

My blog here frequently discusses economic trends and investments to protect the wealth you have already accumulated.  But I try to stress (perhaps not often enough) that your main source of income is the most important aspect of your financial life unless you have a really significant net worth.

If someone has $200,000 in assets and makes a bad investment that loses him $20,000 in a year, he is obviously not going to be happy.  But it is a minor setback.  If that same person lost his job paying $100,000 per year, that will be a much bigger blow.  Even if he finds another job paying $80,000 per year, he will be “losing” $20,000 every year compared to before.

So while it is important to protect your wealth through smart investing, it is even more important to invest in yourself and protecting your income.  If you are nearing retirement or if you have a large net worth (at least one million dollars), then this may not apply as much.

If you really want to achieve financial independence quickly, you need to play offense.  You have to make a decent income whether this is through a business or a well-paying job.  Defense is still important in that you don’t spend the extra money that you make.

If you can live a middle class lifestyle on an upper middle class (or upper class) income, then you will be well on your way.