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1/21

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Global Business B.S.

Posted by: Michael Victory

Post date: 05/20/2011 - 21:13

Silver, Schiff & Sheep (not in that o rder).

Why the Is QE 3 Coming? Debate isa Moot Point Pt 2

Posted by: Phoenix Capital Research

Post date: 05/20/2011 - 14:42

The ENTIRE 2008 episode was the result of

the Credit Default Swap (CDS) market

imploding (CDS, a type of de rivatives,

comprised about $50-60 trillion in value).

And to claim that the Fed didnt know why

the Financial Crisis happened is a lie.

Indeed, as early as 1998, Ben Bernankes

predecessor, Alan Greenspan, tol , soon to

be chairperson of the Commodity Futures

Trading Commission (CFTC), Brooksley

Born, that if she pus hed for regulation of

the de rivatives market it would implode the

financial system.

Anthrax "Conviction" Falls Apart

Posted by: George Washington

Post date: 05/20/2011 - 14:42

The FBI always gets its man ... whether he'sguilty or not!

Home

Guest Post: Priced In Gold, Is Housing A Buy?

Submitted by Tyler Durden on 05/20/2011 13:57 -0400

Australia Case-Shiller Census Bureau Central

Banks Fail Federal Reserve Free Money Guest Post

Housing Market Housing Prices Purchasing Power Real

estate

Submitted by Charles Hugh Smith from Of Two Minds

Priced in Gold, Is Housing a Buy?

What is the relative value of housing if we price it in ounces of gold?

My basic point of view is that nominal prices and broad terms

such as deflation, inflation and growth should be v iewed with

extreme skepticism. The more useful approach is to examinethe purchasing power of various assets and the the purchasing

power of the income streams generated by those assets.

Put another way: to value housing, let's compare the price of a

house priced in loaves of bread, or ounces of gold, or barrels of oil to

historical norms. Secondly, let's look at the income stream generated

by the median-priced home (that is, the median rent and net income

after all expenses of maintaining and paying for the rental home are

deducted) and ask how many loaves of bread, ounces of gold and

barrels of oil that net income can buy.

Corrospondent Bart D. has charted some relative values for

essentials in Australia, and I will share his fascinating charts next

week. Inspired by his work, I have done some calculations on U.S.

prices of bread, housing, oil, etc. as well.

Today let's look at a chart of the Case-Shiller Housing Indexpriced in gold, courtesy of longtime correspondent Harun I.

Click on the chart to open a larger image in a new browser window.

Harun's comments are worth studying. Selling housing at the top

and buying gold would have enabled the speculator to buy back

his/her house at 1985 valuations. Alternatively, an equal investment

in gold in 2005 would have served as a hedge to the huge loss of

housing value as the bubble popped.

FXLiDER trgujte valutamaUzmite besplatni Forex demo raun sa $100,000 i ponite da trgujete! www.fxlider.com

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zerohedge.com//guest-post-priced-g 1/21


2/21

The Case-Shiller Index tracks the resale prices of homes, and is

widely considered to be the most accurate metric of house prices.

Median or average prices can be heavily skewed by a small number

of outlier homes (very costly or very cheap), and they do not reflect

the dynamics of the housing market as well as resale prices.

In broad terms, the ratio of the Case-Shiller Index and gold can be

understood as "housing priced in gold." We can see that the current

ratio is around 110, which aligns almost perfectly with the second

chart, which prices the median home in gold going back to 1970.

The calculation is easy: last report median home price of $166,000

divided by price of gold $1,500 per ounce = 110.

On Harun's chart, we can see the ebb and flow of both housing

and gold. A mini-bubble boosted housing prices dramatically in the

late 1980s as the last of the Baby Boom bought homes. (The Baby

Boom is typically considered the generation born between 1946 and

1964, but many dispute these dates.) Those born in 1960, for

example, reached their peak home buying years of 25-30 in 1985-

1990.

Gold declined modestly in price in that era, so the ratio moved

smartly as housing jumped.

In the 1990s tech/dot-com stock bubble era, housing and gold were

both flat, and this is reflected in the ratio's meandering through

much of the 1990s. Gold slipped in the late 1990s and housing began

a new asc ent as t he dot-c om capital gains and low interest rates

began to move real estate markets.

As housing prices climbed from 1997 to 2001, gold went nowhere, so

the ratio more than doubled. Put another way, housing greatly

outperformed gold.

As the dot-com bubble burst, housing increased its attractiveness as

a speculation and gold began its ascent. As a result, the ratio

stayed flat in 2001-2004 as both gold and housing rose together.

The housing bubble's last sprint to the peak in 2006 puched the ratio

up to 500: it took 500 ounces of gold in 2006 to "buy a share" of the

Case-Shiller Housing Index.

In terms of the median price, it took almost 600 ounces of gold to

buy the median priced house in 2005.

Then housing collapsed, and gold rocketed from $500/oz to

$1,500/oz. As a result of housing declining by 40% and gold

tripling, the ratio has plummeted by 80%, from 500 to just above

100.

How low can the ratio go? Some might look at the second chart

and conclude that the previous bottom around 90, in 1980 when gold

shot up to $800/oz, might well mark a bottom in the ratio.

Those who believe that 90 is the bottom would then sell their gold

and buy housing at that point. Since the ratio is currently at 110,

that point is still a ways off.

I am not so sure, as there is plentiful evidence that we are

entering an unprecedented era. The Baby Boom numbers about 65

million, and the generation behind them (Gen X) is considerably

smaller (45 million). That suggests there won't be enough buyers tobuy all the houses sold as Boomers downsize/retire.

As the U.S. economy grinds toward its event horizon, the

generations behind the Boomers are less wealthy--their wages have

stagnated, and they will inherit less wealth as assets in general fail

to keep pace with inflation (i.e. loss of purchasing power).

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3/21

If you examine the data in this list ofmedian home prices, by

state, in nominal and adjusted prices from the U.S. Census

Bureau, you will note a gigantic jump in housing prices

between 1970 and 1980. This coincides with the brutal inflation of

that era and the first wave of Boomers buying homes.

In broad brush, this data suggests that housing has retraced back to

around 1990 valuations when priced in constant/adjusted

dollars. Priced in gold, it has retraced to the early 1980s, but I think

it likely that the generational retrace could eventually fall all the way

back to 1970 prices in constant dollars.

That suggests housing could fall quite a bit further in markets which

retained the huge gains logged in the 1970-1980 period.

Meanwhile, at least one respected analyst has set a target for

gold of $5,200. Louise Yamada called the turn in gold in 2000-2001,

and set a target of $1,500/oz years ago. Thus her technical targets

should not be dismissed out of hand.

Yamada has also called for a turn in interest rates/the bond market.

The Federal Reserve has kept interest rates at historic lows for

years, but cycles cannot be eliminated, they can only be extended.

So once the 30-year c ycle of falling rates reverses into an era of

rising rates, housing will come under a pressure it hasn't experienced

in two generations: price compression from rising mortgage rates.

Simply put, the $300,000 home at 5% mortgage rates will

decline to $150,000 if mortgage rates double to 10%. The

average household can only afford so much per month for a

mortgage. If rates double, then the sum of the mortgage has to fallby half to be affordable.

Yes, there are cash buyers, but if central banks around the world

have t o stop printing trillions in free money t o rein in rising inflation,

then the flood of free cash looking for a quick return will dry up very

quickly.

We might also ask what happens to speculation in rising home prices

if interest rates start rising. If cash buyers are counting on hefty

returns from rental income, then we have to ask what might happen

to rents.

Even if housing stays at current prices, if gold triples to $4,500 an

ounce, then the housing-gold ratio would fall to the 30s: $160,000

divided by $4,500 = 35.

If housing declines another 25% to a median of $120,000, then itwould take a mere 27 ounces of gold to buy a median-priced house.

There are certainly good arguments (usually based on replacement

costs) that housing can't possibly fall much lower, but oversupply

and higher costs of money may well combine to push the speculative

value of housing to new lows.

This is all speculation and guesswork, of course. All we can do is

look at trends and study history for clues about what might happen.

What will happen is unknown.

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by Alcoholic Nativ...

on Fri, 05/20/2011 - 13:59

#1296205

Just don't get a mortgage. 30 year rape contract.

Login or register to post comments

by redpill

on Fri, 05/20/2011 - 13:59

#1296217

You think it's bad now , just wa it until they pull the rug out from

underneath homeowners and get rid of the mortgage interest tax

deduction.


by narnia

on Fri, 05/20/2011 - 14:10

#1296257

wait till the interest rate swap market explodes and every




4/21

fixed rate instrument immediate ly goes variable at inflation &

fed balance sheet contraction affected rates .


by That Peak Oil Guy

on Fri, 05/20/2011 - 14:36

#1296339

OT, folks, but important. Our wonderful politicians are

working to extend the Patriot Act for another four years.

Please take a few minutes at the below link to tell them

what you think of this. It only takes a moment to get the

message to all of your reps. I know it may not matter, but

we can't just sit around and do nothing about this.

http://www.votervoice.net/core.aspx?

AID=972&Screen=alert&IssueId=24744&A...

TPOG


by What does it al...

on Fri, 05/20/2011 - 14:41

#1296351

This is so dumb. Housing is overpriced. Gold is

overpriced.

How about Gold in terms of Silver, or Silver in terms of

Gold?

These ana lysis means very little. Except that Gold isovervalued and House s a re overvalued.


by Citxmech

on Fri, 05/20/2011 - 14:51

#1296376

Overpriced in terms of what? Inflating fiat?

You've got to measure in terms of something. Gold

and Land are the two most stable measures out

there. . .


by Alpha Monkey

on Fri, 05/20/2011 - 15:12

#1296467

You think gold is overpriced now... wa it until you

see what happens when the world central banks

start trading their ever-deteriorating USD for

whatever gold they can get their hands.

The price you see now is a price based on

expected price movements of a paper market.

What w ill happen w hen the paper market melts

down as the ability to own gold becomes more

important than the ab ility to trade a contract

reflecting an artificial price of gold?


by zaphod

on Fri, 05/20/2011 - 16:11

#1296643

Exactly, this is what Soros means when he

said Gold is the ultimate bubble. When/if the

scramble for gold hits its full stride, then you'll

be able to buy significant amounts of

land/other assets with your physical metal. But

leave it to TV to inform the public that Soros

meant gold is in a bubble today....


by Aquiloaster

on Fri, 05/20/2011 - 18:07

#1296887

Then economics mean very little. It is the study of

how much of x is equivalent in value to y. Its dumb,

but has profound bearing on everyone's agency

and wellbeing. Wars have been waged over

things that meant as little or less.




5/21


by DavidJ

on Fri, 05/20/2011 - 14:38

#1296350

When the dollar declines dramatically over next decade due to

high inflation (or pos sible currency collapse), those with 30 yr fixed

might make out like bandits.


by Joeman34

onFri, 05/20/2011 - 14:46

#1296368

That's the entire [unstated] goa l of the Fed. Repudiate the

debt, bitchez!


by gofigure

on Fri, 05/20/2011 - 14:56

#1296387

You might want to study up on the Weimar Republic, and how

they handled the "30 yr fixed" stuff...


by Hard1

on Fri, 05/20/2011 - 14:58

#1296389

Agree, if your view is hype rinflation and money becoming

worthless, you should buy real asset and preferably leverage

as much as you can, your $2,000 montyly payment in 10 years

will be same as buying gum, so tax deduction or not you

should take that fixed mortgage. Of course if deflations

happens then u r screwed.


by gofigure

on Fri, 05/20/2011 - 14:55

#1296397

You might want to study up on the Weimar Republic, and how

they handled the "30 yr fixed" stuff...


by sullymandias

on Fri, 05/20/2011 - 22:37

#1297368

gofigure, care to give us a hint on where to start?


by mayhem_korner

on Fri, 05/20/2011 - 15:29

#1296526

Yes, but only if the i-rate is fixed AND only if they have enough

currency to survive the inflation.


by Jack Mayoffer

on Fri, 05/20/2011 - 14:58

#1296395

30 year? Shit, I was hop ing for a 45 year mortgage. It's the only

way I can afford my McMansion. It's my God Given Right to buy the

biggest house possible. It's in the constitution. Look that shit up

bitchez.


by Silver Shield

on Fri, 05/20/2011 - 19:20

#1296991

No we still have a long way to go in both markets in opposite

directions...

http://dont-tread-on.me/the-3-big-charts-i-watch-for-silver/


by Badabing

on Fri, 05/20/2011 - 13:59

#1296208




6/21

No


by MarketTruth

on Fri, 05/20/2011 - 14:20

#1296280

Agree, now is not the time to trade gold for a home as home prices

still have ~10% or more to fall PLUS the very high carrying costs of

property tax. As many in the USA know, your home fell nearly 15%

yet your yearly tax bill has actually gone up 10%. This means you

getting gouged over 25% more in taxes on your devaluating

'investment'. Of course gold has zero carrying cost or cost to

maintain while a home has a variety of costs from taxes toinsurance and upkeep.


by LawsofPhysics

on Fri, 05/20/2011 - 14:28

#1296311

Tax bill on my properties is down 22% YoY. Have not figured

out the catch yet, but I will take it.


by Hephasteus

on Fri, 05/20/2011 - 14:31

#1296322

Bon Jovi pays 100 dollars a year on taxes because his 30room mansion is a farm.

Which is probably why gov don't want people raising

chickens or growing food at home.


by Seer

on Fri, 05/20/2011 - 19:00

#1296951

$100/yr? Is this hyperbole?

I've got a modest home (below average?) and a fair

amount of land, land that's classed as Ag, and I still

pay a fair amount (much more than $100/yr!), though

a LOT less than thos e w ithout Ag zoning.

I'd think that it's more of an issue w ith the commercialfood producers than it is with govt (though the two are

nearly indistinguishable).


by Hephasteus

on Fri, 05/20/2011 - 20:55

#1297180

No it's not hyperoble.

http://topics.dallasnews.com/article/03Pa0LubDf7Z8?

q=Bon+Jovi


by LRC Fan

on Fri, 05/20/2011 - 13:58#1296212

The correct answer: Not yet. But in due time gold will shoo t way up

and housing will go way down and then will be the time to buy buy

buy. But no blood runnin in them streets yet.


by Citxmech

on Fri, 05/20/2011 - 14:13

#1296256

Agreed - values will continue to head down. I'm planning on

waiting until the QE pestilance has run its course and a

currancy/inflationary panic has set in - then I'm going to be trading

some ounces on a nice homestead somewhere.


by Captain Planet

on Fri, 05/20/2011 - 15:01

#1296404

exactly, according to the devils who made themselves wealthy

beyond any normal person's mental comprehension: ''when there's

blood in the streets, buy property''




7/21

that be ing said, i wish I had the funds for a villa in spain


by GeneMarchbanks

on Fri, 05/20/2011 - 14:03

#1296219

When 5 oz s ge ts me Miami condo I'll sell... maybe.


by Captain Planet

on Fri, 05/20/2011 - 15:02

#1296412

what else a re you going to do w ith your gold? eat it?


by Glasgow Gary

on Fri, 05/20/2011 - 14:00

#1296220

We're eventually headed to the 30's. That's been my call for two years

now. 30 ounces of g old will buy you a 150K house (and a nice one too)

before this is all over.


by beastie

on Fri, 05/20/2011 - 14:07

#1296248

At minumum. Take into account Gold is get ting scarcer and more

difficult to mine and housing is plent iful and using cheaper and

cheaper materials.


by Whatta

on Fri, 05/20/2011 - 14:19

#1296275

And you will buy it from the Fed w hen they become the buyer of

last resort in the national post foreclosure e ra.


by trav7777

on Fri, 05/20/2011 - 14:03

#1296232

the only question that matters is "are we go ing to see another

housing bubble?"

That is what caused the inflection in the ratio in the 80s.


by Yohimbo

on Fri, 05/20/2011 - 14:27

#1296304

can you not find a more sophisticated avatar?


by Sophist Economicus

on Fri, 05/20/2011 - 14:43

#1296362

I like his avatar. It's subtle and fits his character to a tee


by Captain Planet

on Fri, 05/20/2011 - 15:03

#1296427

are you brain dead travis, or do you work for GS?

of course we (depending on how old you are, but I suspect you

havnt been around more than 3 decades) will see another housing

bubble.

but if you keep playing the ratios, bubbles are just ways to

multiply your wealth....

ah, I get it....your mad you weren't born under the rothschild

shield....





8/21

by trav7777

on Fri, 05/20/2011 - 19:13

#1296983

oil supply hadn't peaked until 2008. 2005 for C&C. Things are

different now and shit is not cyclical merely because it has

been.


by InconvenientCou...

on Fri, 05/20/2011 - 14:07

#1296233

At the rsk of stating the obvious, RE as an investment or hedge iscomplicated so do your homework. It's should be treated like a

business, not a carry trade.


by cowdiddly

on Fri, 05/20/2011 - 14:05

#1296236

I prefer dow/gold because housing/gold is so hard to read right now.

But I look to at least 55/75 oz to the house given todays conditions.

With homes plummeting the way they are and gold in the perfect

setup we could see some historic and insane ratios. JHMO


by LRC Fan

on Fri, 05/20/2011 - 14:11

#1296249

Dow/Gold will hit parity before it's all over.


by cowdiddly

on Fri, 05/20/2011 - 14:18

#1296255

My thoughts e xactly 1:1 and Ill cash in. Im glad some people

are starting to value metals in something besides 2 ply fiat

which is pretty meaningless.


by Hugh G Rection

on Fri, 05/20/2011 - 14:22

#1296288

Mike Maloney thinks so, and he tends to get shit right.

I'd like to see Dow/Silver parity.


by Chappaquiddick

on Fri, 05/20/2011 - 18:56

#1296946

You'll see it and Gold Silver parity too. Amazing times

ahead, just thrilled to be on board.


by Mercury

on Fri, 05/20/2011 - 14:09

#1296238

Priced in gold. is housing a buy?

A great thing to consider...if you've been s itting on gold for five or ten

years.

There are certainly good arguments (usually based on replacement costs)

that hous ing can't possibly fall much lower, but oversupply and higher

costs of money may well combine to push the speculative value of

housing to new lows.

The real wild card is cos t of carry, especially property taxes.

Municipalities are hurting right now and there is no telling what the

upper limit is on tha t future liability.


by Sgt.Sausage

on Fri, 05/20/2011 - 17:19

#1296793

==> The real w ild card is cos t of carry ...




9/21

Real estate throws off rents (income). Gold doesn't. At some point,

I'm making the trade. But ... not ... quite ... yet.


by oddjob

on Fri, 05/20/2011 - 14:06

#1296243

Buying property that will be taxed to the brink to fund endless public

sector entitlements is insane.


by pazmakeron Fri, 05/20/2011 - 14:33

#1296328

so where does one live?? Under a bridge? Do you think those

high property taxes paid by landlords will not be passed on to the

renters?


by Captain Planet

on Fri, 05/20/2011 - 15:06

#1296446

Exactly how does this work if your not a slumlord, and just

trying to keep the farm?


by oddjob

on Fri, 05/20/2011 - 16:10

#1296639

I think most landlords w ill wa lk away from properties when the

tax burden is too high and te nants unable to pa y higher

rents.This is not a new phenomenon.At that point you could

squat there.So wa it til housing is bas ically free, then dip your

toe into the housing market.


by trav7777

on Fri, 05/20/2011 - 19:15

#1296985

that is wha t happened in Detroilet when the population

destroyed the city's function. Peop le wa lked away. Thereare tons of units there owing massive ba ck taxes


by Sean7k

on Fri, 05/20/2011 - 16:15

#1296656

Methman and the rest already live under the bridges. I

sugge st a farm- they really provide a lot of tax breaks and the

rates are minimal to begin with.

You can never own a home in America anyway- you just get to

rent it from the government.

You could build an offgrid home on a farm. This may allow you

to only pay taxes on the land. If the house was not built to

code, it could be imposs ible to value. By the way, you can build

a very efficient, safe, non code home. Won't be able to sell it

as a home, but people w ill probably still give you the value if

they desire the same benefits.


by Seer

on Fri, 05/20/2011 - 19:13

#1296982

Homes should never have gotten to the excessive point

that they did. Pure hubris!

Modes ty... I settled for a modest home (under average?)

on Ag land. It is home to me, and one day I hope for it to

provide all my income, something that one is hard pressed

to do w ith a "condo" or other cage...

I opted to save my PMs for another day, plunk down asizable amount of fiat and then borrow fiat at a low

interest rate. This allowed me to get "in," unload a bunch

of fiat (still have some fiat for assets, like a tractor) and

hold PMs until I'm ready to pay off the balance of the loan

(or hold for emergencies).

Sold my previous house at the top of the market. Bought

this one on the low side, with interest rates at the




10/21

bottom. I view my current home as an investment in life,

not for speculation.


by Matto

on Fri, 05/20/2011 - 14:09

#1296245

Meh my pay didnt go up inline with gold so this valuation measure is

relatively useless.


by walcotton Fri, 05/20/2011 - 14:11

#1296250

Judas, Jesus Christ and the 30 pieces of silverAccording to

theProfessional Coin Grading Service, The value of 30 of these coins

was significant at the time. Such a sum likely would have purchased a

small farm. Quite a b ribe for the time On average , a Small farm goes

for around $240,000 in our country today . . . which would consist of

the farmhouse fo r the farmer and the family, barns, equipment, along

with 120 acres on which to plant and harvest crops. To put it in terms

most people can understand, $240,000 would buy:

some math on this,

13.73 grams each Shekel x 30 = 411.9 grams of silver.

28.350 grams in one ounce. So divide 411.9 grams by 28.350

= 14.53 oz's of s ilver.

Divide $240,000 (estimated value today of 30 Shekels in 33AD) by

14.53 oz = $16,517 oz.!!

$16,517 an ounce - todays inflation adjusted valuation of silver 33AD.


by Arttrader

on Fri, 05/20/2011 - 14:29#1296319

Just goes to show - wo uld have been a lot wiser for the long-term

investor (2000 years or so) to convert the silver (even before it

was demoted to industrial metal status) into productive capacity.

How much farmland are you buying today for 14.53 ounces o f

silver?


by dussasr

on Fri, 05/20/2011 - 14:32

#1296327

Except that a farm house back then was a tiny shack worth maybe

$5000 today and farm equipment was a mule and a plow.


by SilverRhino

on Fri, 05/20/2011 - 14:45

#1296365

Not true. A denarius back then was worth about $21 in terms of

purchasing power of bread and food. It was also a day's pay for a

legionnaire.

Shekels were actually considered to be worth 4 denarii.

30 shekels = 120 denarii ~ $2520.

Judas worked cheap.


by Sean7k

on Fri, 05/20/2011 - 16:22#1296661

Better check your numbers. 120 acres, a home, barns and

equipment would never sell for 240,000 dollars. Maybe love canal,

but most farm land sells for 3-6,000 an acre- raw land only. There

are places where you can get good land for 2,000 an acre, but it is

still raw. There might be a usable barn.


A 2007 Chevrolet Trailblazer for you and eight of your

closest friends,

a down payment on Luxury home, or

outright buy a brand new home in most of the USA . . .in cash.




11/21

by Henry Chinaski

on Fri, 05/20/2011 - 14:11

#1296251

Single family homes are too heterogeneous to form broad conclusions.

But, this simple trend analysis supports the idea that RE is becoming

relatively cheap. I wouldn't sell RE at this point and would be on the

lookout for buying opportunities in the nea r term. The nice thing is

that you don't have to pay for a house with gold; you can still use

FRNs!


by Dr. Engali

on Fri, 05/20/2011 - 14:14

#1296260

It won't matter before too long. Pretty soon commrade Ben will own

all personal property on the fed's ba lance sheet.


by LawsofPhysics

on Fri, 05/20/2011 - 14:15

#1296266

Interesting (but somewhat expected) observations . Could you do the

same thing for the Russian hous ing market from 1975-2005? That is

where we a re heading.


by dark pools of soros

on Fri, 05/20/2011 - 14:15

#1296268

"Simply put, the $300,000 home at 5% mortgage rates will decline

to $150,000 if mortgage rates double to 10%. The average

household can only afford so much per month for a mortgage . If rates

double, then the s um of the mortgage has to fall by half to be

affordable."

this is said a lot but has no truth behind it.. what is "affordab le"

anyway in this zero dow n world?


by Hondo

on Fri, 05/20/2011 - 14:14

#1296269

This conjecture would only be true if you were being paid in gold or did

in fact have all your savings in gold (or anticipate the releveraging of

the entire housing complex). If I'm being paid in fiat money then the

house value must be priced in fiat money terms. Nice exercise but

pretty worthless.


by OpenEyes

on Fri, 05/20/2011 - 15:07

#1296450

not so w orthless if one is holding more than a few oz's of gold and

wondering when, and for what, they will exchange them.


by malek

on Fri, 05/20/2011 - 17:42

#1296850

The only thing worthless in above's exercise was the mention of

"hedging house value de cline with gold".

The people in need to hedge their house value don't have the

money to buy gold, and vice versa.


by Stuck on Zero

on Fri, 05/20/2011 - 14:17

#1296271

As the dollar falls gold w ill climb and climb and climb. As local

governments add more and more taxes, rules, and regulations onto

the backs of homeowners home will fall, fall, fall. DO you see any

change in that trend?


by LawsofPhysics




12/21

on Fri, 05/20/2011 - 14:26

#1296301

Okay, keep extend ing your hypothesis out over time. Not

susta inable. Again, you identify the problem, now what is the

solution?


by Bay of Pigs

on Fri, 05/20/2011 - 14:36

#1296341

Buying more go ld? ;o)


by LawsofPhysics

on Fri, 05/20/2011 - 15:56

#1296592

always.


by Sean7k

on Fri, 05/20/2011 - 16:24

#1296664

Get rid of government. Easy so lution.


by Captain Planet

on Fri, 05/20/2011 - 15:18

#1296479

Until the ''government'' doesnt have the funds to pay a ''person''

to come and kick you out o f your house for not paying your taxes


by Rhodin

on Fri, 05/20/2011 - 16:40

#1296700

When they can't employ police to kick householders out for

back taxes, they will just sell/auction the tax deed at a

discount, and the buyer will either have to pay some

government mercenary or kick them out himself.


by SheepDog-One

on Fri, 05/20/2011 - 14:16

#1296276

Real estate still has a long way to plunge, but if people feel like buying

a house, go ahead.


by Seer

on Fri, 05/20/2011 - 19:24

#1296993

There's RE and then there's farm land. I doubt that farm land is

going to fall much further; I suspect that those with money are

buying it up. But, if you're talking stuff like condos, then yes,

they'll end up being next to worthless.


by Bangin7GramRocks

on Fri, 05/20/2011 - 14:19

#1296287

Thank you for the insight Lawrence Yun.


by LawsofPhysics

on Fri, 05/20/2011 - 14:20

#1296293

More economic modeling based on fantasy. Everything gets thrown

out the w indow when people change their definitions of "value" and

"money". Right now we are not paid in gold - nice try though. Taking

it to the e xtreme, having de fensible arable land and like-minded ( and

well armed) neighbors is worth a lot more than gold in Pakistan

already. So long as fraud is the status quo , don't think that the who le

world won't go this way.





13/21

by Yen Cross

on Fri, 05/20/2011 - 15:10

#1296364

Gold equals value! You can convert it to Money at any bank or coin

shop! Defensible arable land? You have been in the outback too

long!


by Rhodin

on Fri, 05/20/2011 - 17:01

#1296753

Having some farmland makes sense now and long term.Defensible does no t exist anymore though. In fact, visable

buildings or groundworks approaching defensible will get you

attacked by governments most places. Building underground

might approach defensible in a few locations, especially if not

visable from above and built before photo surveillance.


by Yen Cross

on Fri, 05/20/2011 - 14:22

#1296297

As an inflation hedge , I'll side with xau. If you look at inflation

adjusted post war (WWII) equity in real estate, it is clear real estate is

meant to live in. Sure there are spikes at times, but the dow nside

(risk) is extreme if you're trying to pick tops and bottoms. XAU is liquid,

and a better risk!


by hambone

on Fri, 05/20/2011 - 14:28

#1296302

Watching for the decoupling of strong dollar / weak dollar from Gold /

Silver / Commodities (or the coupling of equities w/ go ld / silver

prices...all up or all dow n).

Looks like the strong dollar meme (vis-a-vis scary Euro / JPY) simply

isn't holding water. Stores of liquid wealth (gold, silver, oil, etc) are

making very nice moves in the face of dollar strengthening (and equity

weakening)...looks like this could be the coming out party for the new

reserve currency, gold / s ilver.

Could break down as overleveraged sell strength to raise cash but

seems no one willing to sell the new crown jewel for fiat...could be thebeginning of the formal end for dolleur?


by Kyron95131

on Fri, 05/20/2011 - 14:24

#1296305

historically from what i have read ..

30oz of gold was the value of a nice house with land.

however we've over the last 40 years with suburbanization have

redefined that statement and drifted far far away from that statement

original paradigm of thought mostly in the coas tal regions of the us .


by Yen Cross

on Fri, 05/20/2011 - 14:43

#1296324

Good po int. Thanks for the reminder. Inflation in the coa stal U.S.

cities out of control.

Another tidbit. When property values are high, interest rates on

the long end tend to be higher. Gold is priced in usd so the net

gain in(real estate) equity is wiped out over time.

Inflation. The west coast real estate market, for the most part is

looking at 5-10 years before rea lizing any inflation adjusted equity.

Sure there are pockets of stability, but the building that went on

from 2000-2006 was out of control. Not to mention all of the Dark

inventory, that banks are hoarding.


by Sophist Economicus

on Fri, 05/20/2011 - 14:48

#1296367

YC, you're lucid aga in! Thought you had a t roll mind-meld...





14/21

by Yen Cross

on Fri, 05/20/2011 - 14:53

#1296379

Jet Lag. Have a nice weekend. We should have some

interesting gaps on the Sunday open. Lots of news going

into the w eekend. Any thoughts? I always appreciate your

input.


by Yen Cross

on Fri, 05/20/2011 - 14:57

#1296381

Aps. for x2 post. Got error message.


by gwar5

on Fri, 05/20/2011 - 14:37

#1296349

30 ounces of gold for a decent house sounds about right. If gold

traded in a free market and went to $5-10K, as many say, then it's

about right. Especially as the slow motion popping of the housing

bubble is allowed to lose air and deflate.

I don't see any serious ana lysts revising their 5-10 year gold price

estimates downward.


by GMS guy

on Fri, 05/20/2011 - 14:27

#1296307

I knocked up the same chart for the UK a couple of weeks ago...

http://www.goldmadesimplenews.com/gold/as-uk-home-prices-fall-

again-intr...

look how those ratios compare!


by gwar5

on Fri, 05/20/2011 - 14:33

#1296323

Massive housing inventory, ending the mortgage interest deduction,

rising property taxes, along with the expected higher borrowing rateswill abso lutely kill housing.

I don't even see where people will get the money to pay higher rent to

landlords to keep up with inflation, either.

The difference between the 1970's and today is that wages rose with

inflation back then and they're not going to do that this time around

because of cheap overseas labor. This time a round our standard of

living is going to go down with each upward tick of inflation.

It's already been said that America could become the world's first de -

developed nation. Vote wisely in 2012.


by dussasr

on Fri, 05/20/2011 - 14:44#1296355

I don't see the property taxes rates continuing to be increased

significantly. It's to the point that the tax payers w ill revolt. They

will vote out the bums that raised property taxes to fund overpaid

union government employees and replace them with better

stewa rds of taxpayer money.


by Rhodin

on Fri, 05/20/2011 - 17:50

#1296859

Taxpayer revolt will work where it can have effect, other places

will become ghost towns or disincorporate.

Some municipalities, the remaining local employees are most ly

volunteer or part time, but property taxes increase to pay forfederal, state, county and school district mandates that local

voters cannot control. Meanwhile paved roads go to dirt,

recreation departments are closed, libraries go to three

days`pe r week, 30 year old fire trucks are not replaced. Here

property values have dropped 30%. assesed values are the

same, and property taxes are up 10% despite massive local

cuts. I give the municipality five years max before it folds.




15/21


by akak

on Fri, 05/20/2011 - 15:26

#1296516

Portions of it have already been so for decades now --- ever visit

Detroit?

As much as so many people like to joke about Detroit, the grim

third-world reality would strike most Americans who have never

been there like a sledgehammer blow to the head.


by Strider52

on Fri, 05/20/2011 - 17:31

#1296827

I was bo rn (in a log cabin I built myself) in Detroit. Glad I left

about 53 years ago..


by Rhodin

on Fri, 05/20/2011 - 19:06

#1296965Reincarnation rocks :-)


by cat2

on Fri, 05/20/2011 - 14:38

#1296337

Don't catch a falling knife.


by Hook Line and S...

on Fri, 05/20/2011 - 14:37

#1296344

A buy? For anybody who was 100% vested in AU 10 years ago!

Then maybe.

We still have a long w ay to go, AU up, housing down. I'd wait on any

real estate investment until energy prices forces the jobs back to the

US. Rental property is no good if no one can can support your dream of

cash-flow in an environment with ballistic unemployment and wounded

credit.

Besides, who would want to buy an asset that w ill continue to be

losing value for the next x years whe n capital is flowing to the Golems

precious.


by apberusdisvet

on Fri, 05/20/2011 - 14:37

#1296347

Housing will be priced in Silver ounces, not gold. The new coppe r

money will get you a first class hooker. Gold is only for the "elite"

vaults, dontcha know.


by Captain Planet

on Fri, 05/20/2011 - 15:27

#1296519

that s ounds very nice for me....

i found a nice copper tube that w ould be a great ba rter for one,

two or three of those super-models turned pe rsonal hooker/trophy

wife.

I can't stand seeing banksters with hotties. soon holders of ''the

gentleman's'' money will have hoardes of followers.

ah, the w onders of AG....its so beautiful, but it buys even more

beauty!


by Slim

on Fri, 05/20/2011 - 14:37

It's already been said that America could become the

world's first de-developed nation.




16/21

#1296348

Honestly, I think some of this stuff is insanity. Housing is about

supply/demand (and ability to de mand i.e. financing and having

jobs/income not just willingness). Housing will be a buy when

supply/demand is in balance without games/intervention at levels

incomes can carry. Actually it will be a buy if it overshoo ts to the

downside as you can capture mean reversion, otherwise there's

nothing special. And no we aren't close yet.

This isn't rocket science and we don't need a divining rod. If you

understand the fundamental levers and drivers of supply/demand you

don't need to do exotic relationships between assets and try pricing in

Netflix stock or pre-IPO private market Facebook valuation multiples.


by Korrath

on Fri, 05/20/2011 - 14:45

#1296358

I'll be tempted to dip my toe in the RE water...AFTER I see just how

desperate the Baby Boomers are going to be w hen they start trying to

sell their homes to escape escalating property taxes when they retire.

I predict they will do far more damage panic-selling into existing

weakness then the drop we 've seen so far from the bubble popping.


by Yen Cross

on Fri, 05/20/2011 - 14:47

#1296374

Buy it ( real estate )when rate s are super high. Pay cash (for it)

and rent it!


by hambone

on Fri, 05/20/2011 - 15:10

#1296451

ding. ding. ding. We have a winner. Only deviation I'd

suggest is buy 4 houses at ultra high rates w/ 25% down (or

whatever it takes to be cash flow neutral on the rental) and

wait for lower rates to re-fi the loan.

Principle isn't usually renegotiated but rates sure can go down

from the top...


by Yen Cross

on Fri, 05/20/2011 - 15:22

#1296505

Then we can have a little ATM factory? The bank will want

cash flow positive. Probably 15% @ least, with a market

environment like that .


by hambone

on Fri, 05/20/2011 - 15:47

#1296559

Cash flow positive it is. I'm ok w/ that.

Bought rentals in late 90's, early '00's and worked this

strategy pretty well. Still, so many variables in play it's

really hard to project if leverage (responsibly) will once

again be your friend or buy things outright and ta ke

the sure return.

I can only imagine how w ill this all end...and restart?


by Hephasteus

on Fri, 05/20/2011 - 14:45

#1296366

Housing went from 50 dollars a square foot in the 70's to 35 dollars a

square foot in the 80's due to power tools improvements and the factthat the houses just fucking sucked.


by FoieGras

on Fri, 05/20/2011 - 14:46

#1296372




17/21

With all these ridiculous asset vs. gold ratios I am still wondering why

nobody ever made a Dow vs. lean hogs or Nasdaq vs. cocoa or what

about US GDP vs. corn?

Should yield equally great insights!


by firefighter302

on Fri, 05/20/2011 - 15:04

#1296433

How about goose livers vs, gold ratio's?


by Buckaroo Banzai

on Fri, 05/20/2011 - 14:51

#1296380

In other news, we now live in a police state:

http://www.newschannel5.com/story/14643085/police-profiting-off-

drug-trade

http://www.komonews.com/news/local/112097619.html

http://azstarnet.com/news/local/crime/article_d7d979d4-f4fb-5603-

af76-0b...

http://smargus.com/indiana-sheriff-if-we-need-to-conduct-random-

house-to...

What history has to say about men with guns holding up the public

purse:http://www.martinarmstrong.org/files/What%20Destroyed%20Rome%2005-

18-201...


by Maos Dog

on Fri, 05/20/2011 - 15:07

#1296449

Lol buck, just figuring that out now?


by Buckaroo Banzai

on Fri, 05/20/2011 - 15:36

#1296538

sorry forgot to include the

/sarc on /sarc off

tags


by RobotTrader

on Fri, 05/20/2011 - 14:55

#1296383

Shorting this market is near impossible.

The only "guaranteed profit" to make money on the short side is to

short gold stocks when General Jim starts screeching "This Is It!!!".

However, even though that trade is usually good for a 30% - 45% gain

in some junior equities, the trade must be closed within weeks,

otherwise you can give up your gains.

Amazing how the market simply shakes off everything.


by tekhneek

on Fri, 05/20/2011 - 14:56

#1296385

Why the fuck would you buy a house with that much gold? My ex-

girlfriend's dad's a contractor -- He'd build a 240k house fo r 60k and

sell them hand over fist month after month after month before the

bubble burst.

It makes 0 sense (opinion here) to pay 166k for something that only

costs 50k to build.

Wasteful if you ask me. Hire a professional contractor who knows his

shit and ge t a discount. The materials are shite anyway, not like you're

going to get a solid house because you're forking over your lifes

savings.

Hell, it's even better to just buy land then drop a modular home on it.

>30k (minus the land) and you're se t. You can even expand on that

too. If you wanna go hard core gridless luxury you might spejnd more

than 30k, but at that price just buy 10 freight cars and weld them

together.




18/21

Who the FUCK wants another cookie cutter home anyway? If you're

going at it for rental income I get that, but when housing drops

another (roughly 13% or so) you'll be able to generate $1.22 of rental

income for every $1 invested into the property itself. So, yeah.

Measure it in whenever you want, but it makes no sense to talk RE

right now until the parity between cost and rental revenue is wide

enough to make sense to drop physical gold on it.


by Yen Cross

on Fri, 05/20/2011 - 15:01

#1296418

Your post is a definite keeper! Printing it off as I post. Nice work!

Just use the gold to finance the project. Win Win!


by tekhneek

on Fri, 05/20/2011 - 14:57

#1296403

x...


by Buckaroo Banzai

on Fri, 05/20/2011 - 15:01

#1296421

dupeLogin or register to post comments

by YHC-FTSE

on Fri, 05/20/2011 - 15:14

#1296424

This is not a bad analysis. If you are sitting comfortably on a mound of

cash, it's PMs or P roperty. A bit of both to d iversify your risks and

returns is a strategy to consider (Depending where you live). While

wa iting for the housing market to bottom out further is just fine, if you

buy-to-let (with cash, especially in a busy metropolis), the returns from

collecting rent could be going towards buying more PMs.

I don't think being a landlord is fo r everyone, but with the right

property portfolio, you could get quite a bit ahead of the game in

collecting assets that mature we ll with time as you buy more PMs with

the proceeds.

Edit: Some people still don't seem to get it. The whole po int is not to

have any cash in your account. PUT IT TO USE so it can have VALUE

instead.


by Spider

on Fri, 05/20/2011 - 15:01

#1296426

People are forgetting the wealth is no longer really in the US. There is

no comparative comparison with home prices in the 1970's and 1980's

(possibly the go lden years o f US history) - you can buy the

median residence in Egypt for probably 10-12 ozs of gold because

their economy is weak.

Ratios are only good with a decent comparison...


by Stuck on Zero

on Fri, 05/20/2011 - 17:56

#1296867

You are right on. If real interest rates we re to climb to 10% or

more real estate w ould die instantly and gold would tank. It

happened in 1983. I wonder about 50 caliber ammo as an

investment?


by el Gallinazo

on Fri, 05/20/2011 - 15:05

#1296440

I am usually a big fan of Smith, but this time he made a ha rd bunt to

the first baseman. RE is a four year old deflationary popped bubble

with plenty of room to fall more. PM and risk assets are just peaking

for the ride down. Buying a house now with debt, or even with cash, is

to catch a falling knife with your bare hands. There are no safe harbors

for sure, but I think the way to go right now is cash or cash

equivalents and rent.




19/21


by magne13

on Fri, 05/20/2011 - 15:28

#1296522

This post misses some key analytical points, average wages, money

supply and debt. This post conside rs affordability based upon ounces

of gold. Yes of course on a nominal scale we are back to nearly 1980

price levels, however lets look at the following wages on an inflation

adjusted basis for the middle class maybe grew by 30%, not enough

to exert upward demand price increase to the levels that we still see

today, but the biggest key I think is of course the large increase in

money supply and even more so, in debt levels. the debt to gold ratioin 1979 was $1.5m (US debt/price of gold) even w ith the increase in

gold in 2010 that same ratio is now $9.6m or an increase of 640%,

now of couse more money means higher prices, but as you know,

more interest as well, which is the real reason new debt will always

have to be created, which in turn means that more capital has to be

put to work to just service debt, and that reason in of itself is why

housing will not find a bottom, more capital and resources have to be

put towa rd debt service and not into sustainable production, nor

susta inable housing. We have tipped that crucial point by which our

Federal Reserve has sold everyone out for the benefit of the very few,

what you will have is houses in the millions and then the rest of

everyone else, as income disparity continues to widen, the real bubble

is in debt. Which we all know where that leads...I'd rather hold my

gold than put it into housing, even at these over inflated levels...thats

housing (still inflated) I'm talking about, not gold.


by Transformer

on Fri, 05/20/2011 - 16:10

#1296637

Hey guys, nobody is talking about the tax consequences of buying

a house with Au or Ag. The gov does not look at it as if the dollar

went down and your metal held its value. they look at as if your

metal appreciated and they want a cut on every dollar your made

from that appreciation. So do all the states, with the exception of

Utah. (at least so far). If you factor that in, then all this ounces for

property nonsense goes away, or at least comes out with really

different numbers.

but, if gold and silver is money, what then?


by malek

on Fri, 05/20/2011 - 17:54

#1296862

So you think in Utah you don't have to pay capital gains tax

when selling your gold?

LOL


by jomama

on Fri, 05/20/2011 - 18:15

#1296894

paying taxes on PM gains is bullshit. there's got to be a

way around it.


by ronin12

on Fri, 05/20/2011 - 16:09

#1296636

You sir, are very clueless.


by zaphod

on Fri, 05/20/2011 - 16:12

#1296640

sorry, dup


by hugovanderbubble

on Fri, 05/20/2011 - 16:10

#1296647

Thanks, as a lways Cha rles Hugh Smith , very interesting reading.




20/21


by DNB-sore

on Fri, 05/20/2011 - 16:55

#1296747

Interesting and can be put in another perspective.

If a gold standard is accepted at this moment, how much gold is

there in for example the US, total by banks, investors and jewelry.

What is there that has to get paid by gold(backed) currency? Every

transaction! And also anything that allready existed has to get a

relation to gold

Even your toilet sea t then has a been waged to gold, when you buy

one at the mall it can be paid by a microscopic piece of gold so

goldbacked paper and coin is going to come in handy. Speaking of

coin, maybe silver?

There is no way transactions are going to be paid in physical gold

except big transactions, and on the street maybe silver will be nice,

directly taking a cut in the industrial value. Just keep w hatever you

own physical and is rare.

GDP to physical gold?

Total assets in a country/continent to physical gold? A house changing

hands for a couple of gold eagles? Whether i'm rong or right I'm

keeping the metals

Todays dimension is screwed up


by honestann

on Fri, 05/20/2011 - 18:07

#1296882

Not yet. Wa it for 80 to 100.


by lemonobrien

on Fri, 05/20/2011 - 19:21

#1296987

I'll buy a house for 1 or 2 ounces of gold... here's why:

1) I can just hold go ld, it's money, harder to sell a house .

2) Everyone is broke, city, county, state, fed; all want money: easies t

target-> property owne rs... cause the y're fixed to the land.

3) Cost to maintain; even if you rent it, you have to fix it, improve it,

maintain it. That means money, time, effort. Gold don't need no thing

except time.

4) Property is tied to the location; I can buy a house now in Detroit for

$1,500; but

I'd be tied to Detroit and it's economic plight; Where in the US w ill the

economics be growing to allow me to feed myself while living and

paying taxes in my new home?

5) Demographics; after the baby boomers die, nobody is going to

replace them; at least not until we finish another great war. Even the

echo-boom generation is smaller. All we can do is import illegals, and

they send most of their money home.


by Richard Whitney

on Fri, 05/20/2011 - 20:23

#1297091

The median house o f 2011 is bigger, with a different configuration of

space and utility than the median house of 1980. It is hard to account

for this difference, but a be tter metric might be oz AU / Sq ft.


by sullymandias

on Fri, 05/20/2011 - 22:21

#1297335

Median or average prices can be heavily skewed by a small number of

outlier homes (very costly or very cheap), and they do not reflect the

dynamics of the housing market as well as resale prices.

Where to start? By "median or average prices", is the author

suggesting that "median" and "average" are synonymous? If so, they

are making a serious error. The average is the mean, which is quite a




21/21

different thing from the median.

Medians are notheavily skewed by outlier values. In fact, this is ofte n

why the median is chosen over the mean, even though the mean is

eas ier to work w ith. Simple example: Let's say the median was

$200,000, and the highes t value was $1,000,000. Okay, fine, let's

change that highest value to be a really serious outlier, say

$1,000,000,000. What is the median now? $200,000.

This is basic, basic stuff, and anyone writing serious a rticles citing

Case-Shiller data should understand it. Read the Wikipedia article on

"median". Go there and search for the term "outlier".


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