"There's no question that in the past year, the ability to monetize shareholder ignorance has never been exceeded."

Warren Buffett, Shareholders Meeting, April 2000.

Now it is homebuyers who are most ignorant. Five years ago, tech stock buyers thought something that wasn't true - that tech stocks would go up forever. Now, it is the homebuyers (speculators) who think something that isn't true - that houses go up in price forever.

But how to "monetize" their ignorance?

Sell!

There's the rub. Who wants to sell his own house just to monetize the ignorance of house speculators? Not many people. Besides, you have to live somewhere. If you're already living where you want to live, what's the point?

Latest reports, however, tell us that house builders are monetizing householder ignorance in a big way. They're selling their own stock as if they expected a crash.

Our advice: follow the insiders. Sell the builders.

Meanwhile, the builders are looking to the bayous for another big payday. Hundreds of thousands of homes need to be rebuilt or renovated. They're expecting some easy money from Washington to help pay for it. Alan Greenspan is meeting with President Bush today. They will probably hatch a plan to use the hurricane as cover for another big dose of credit.

The maestro has been slowly "normalizing" interest rates - that is, edging them back above the inflation rate! He is also warning the nation against too much debt. But the only way things could be normalized is by raising rates so that consumers stopped borrowing and spending so much money, which would mean - almost certainly - a recession. Neither Bush nor Greenspan want a recession. They'd much rather put the whole country under water. Heck, let the next administration and the next generation worry about drying things out. So, the little steps towards higher Fed funds rates are likely to stop.

Our guess is that this will send the dollar down another few notches. It dropped yesterday to $1.25 to the euro...gold shot up $8.

Chuck Butler had this to say from the EverBank trading desk in St. Louis...

"One day into September and we already saw a huge move of over 2-cents in the euro yesterday.

"This move was fueled by the ongoing situation in the gulf, and the thoughts that the Fed will pause rate increases beginning Sept. 30th.

"The selling of the dollar was fast and furious, with no pauses, and no bouts of profit taking in the euro and other currencies. As I said yesterday, the dollar had finally cracked under the pressure, and in my opinion, that will continue to be the case..."

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.