gold-hit-2000-fed-easing

[Austin]

http://ca.finance.yahoo.com/news/gold-h ... 44818.html

Merrill Lynch has added its voice to the chorus of gold bulls who have been predicting that bullion will hit $2000 an ounce.
Francisco Blanch, Head of Global Commodity & Multi-Asset Strategy Research at the investment bank, says he expects the Federal Reserve to initiate an asset-purchasing program of as much as $500 billion in the second half of the year, which will drive spot gold much higher by the end of the year.

If this happens, Vancouver RE will stabilize.

[Taipan]

Interesting thought Austin - but I feel the two arent very much connected.

Is gold going to go a hell of a lot higher? Absolutely. How high?

If the US keeps going the way its going, with the debasement of money by printing, we could see gold go to 10,000 an ounce. But if it does, it maybe 5 years away.

In the short term, i still think we will see a mealtdown in the euro. It should have happened 4 months ago. They didnt avoid it, merely kicked the can down the road a little.

Next crunch time will be mid august. If it does, expect a rush to US$ and US treasuries. A$ and Cad$ will fall relative to the US$. Then over the coming 6 months it will reverse itself as people unload US treasuries.

Spain and Italy are now in the firing line. 10 year spanish bonds are now at 7.59% while 2 year bonds are at 6.66%. Thats bankrupt stuff.

Canadian property has topped and as indicated we will see Vancouver property fall 50% in value.

Gold will be heading the opposite way because of the massive debts in the euro, US and elsewhere.

There is no avoiding this. We are quickly reaching the end of the road.

[raventalk]

Gold will go higher the second QE3 is announced, third quarter and just before the election. It will likely rise well above 2,000 per oz and stay there, especially if China and India keep stocking up. So a buy call on gold. For that matter, a buy call on all commodities expect oil. The stock market will also rise above 13,000 yet again and hover there until Greece exits the Euro. All of this will keep Canadian real estate from complete collapse.

Vancouver is NOT going to see a 50% decline. Some mid range SFHs in the wrong part of town will see a max 35% peak to trough (much like April 2009), but upper end real estate and condos are not going to see anything close to a 50% or even a 30% drop. I'm guessing most attached won't drop more than 25% with downtown Vancouver seeing less than a 15-20% drop. Rents are still too high and while there has been some building of late, the bulk of downtown building was done before 2009, with April 2009 being the moment that building slowed to a crawl.

Like Garth Turner, god bless his pointed head, you Taipan will finally be partially right. There will be a "correction", but also like Garth, your timing has been way off and the total peak to trough call you've made is wishful thinking. Hand it to Garth (and Taipan) though, for the last ten plus years he's been calling for a correction and lo, it has finally come. Mind you, in that ten years a lot of real estate investors who DIDN'T listen to Garth, including myself, have done very well ignoring his free "advice", and a lot of other investors who held back have lost.

[jesse1]

and a lot of other investors who held back have lost.

There have been some mighty good returns over the past 4 years. Not saying where.

[Taipan]

Thanks Raventalk. Good luck with Vancouver real estate only falling less then 25%. Will you be here if it falls to 30%, 40%, 50%? - Ill discuss my reasons in the How F.I.T created and will crash this property bubble! Thread. Ill still be here, but as others get it wrong they slip away quietly and I’m sure try and self-justify that whocouldanode line...

But Im still here, and have been since 2008 when i joined and I first called your bubble. There was no bubble back in 1998. There are many things I disagree with Garth about.

As I’ve mentioned elsewhere. I think Garth is an optimist, and we will see major meltdowns. It won’t be just the GFC. It will be the GTFC1 GFC2(euro) GFC3(Japan) GFC4(USA)

So if you bought in 2008 have you sold out? If you did, then you could book a profit. Well done. But that is speculating, gambling, not investing for income streams.

But if you haven’t sold you haven’t made a profit.

See until you realize that asset you haven’t made anything.

But I do think over the next 6 months we will see a major move by gold upward. And I do think gold will go multiple times its current value. But it may yet take several years.

And it all comes back to some pretty simple things, Too much debt, Income to debt levels way out of whack, and governments creating money out of thin air.

How high could gold go? Sooner or later we will transition to a reserve currency backed by gold. Which currency?

Want to get rid of massive debts? Inflate it away, and in those times, gold is one of the few real assets that will be worth something. How much? 10,000 oz? Could be.

What we are living through now has not been seen on a global basis before - only on individual soveriegn basis.

But - and this is massive point. Hold physical gold even if you have to pay for storage. There are numerous depositories around the world. Do not store gold at home!

There is I believe something between 50 and 100x gold derivatives contracts to one of all the physical real gold in the world. In other words people have written contracts where they "might" have to deliever real gold in certain circumstances which is between 50 and 100x all the real physical gold in the world. That market blinks and fails - it will skyrocket. If your interested - not a bad clip to listen to.

http://www.youtube.com/watch?v=R54V_own ... _embedded#!

[raventalk]

Taipan,

The last time I bought in Vancouver was in 2002. I have not sold that property or any of the others I bought in the early and mid 90s in the downtown area of Vancouver. All of these properties are currently and have always been very strong income producers with all but two of the seven paid off entirely (15 year mortgages are a gas!). Since my initial investment was a $40,000 downpayment and all of the rest of the purchases were a single string inter alia - even without selling I have seen some very nice profits via income from rent. About $32,000 a year average net over the last 20 years. That adds up to about $640,000 in total. In other words I have earned income well over that initial $40,000 downpayment. I think that counts as profit. And that's before I add in any asset appreciation and accumulated equity (which, your rightfully pointed out isn't realized until I sell - unless of course I use that equity as leverage to purchase, I don't know, shorts against Canadian REITs for one).

You can profit from an asset without selling it - you understand that right? In fact, from everything I've learned HOLDING principal assets WITHOUT selling them is the surest (though not quickest) way to stable wealth.

So typically I am a buy and hold type of guy when it comes to real estate and will not sell in Vancouver. Ultimately those properties will be folded into a trust for my children. Why sell at all if they are producing income with minimum maintenance? This whole buy and sell mentality is foreign to me. Rents are high and have been since I lived there. There is no incentive to sell. I have seen two drops in real estate value in Vancouver, the first was between 1994 and 2001 and the second was the 2007 to 2009 drop. I was urged to sell but in both cases but again, why? Where else are you going to park your money in the current quicksand world of investment?

[Warren12]

I'm with you raventalk! I'm not old enough to have been buying in the 90s but do have some real estate downtown free and clear that generates a steady income. I'm waiting to buy more during the next downturn.

[vancityeast]

I'm with you too Raven! Im buying homes with the intent to pay off and pass down to my kids. They can either rent it out for passive income or sell it if they want to! Buying gold too is great but its very speculative unless you buy gold stocks paying consistent dividends. Real estate is just my #1 choice of investment. You can live without gold!

[Taipan]

Raventalk you and I are on exactly the same page. True wealth in real estate comes from long term buying and paying down real estate.

Its about income and cash flow, not about speculative buying and selling. Currently there has been massive speculation in real estate in Vancouver.

Based on current values, what’s your return on current prices? Is it extremely low or very high? (Not return on cost)

So why sell? I learnt two important lessons that has stayed with me for years.

In Australia we had a billionaire Kerry Packer, who about 20 years ago owned the 9 network together with other large media holdings.

However the nine network was the corner stone to his empire.

"In 1987 Packer made a fortune at the expense of disgraced tycoon Alan Bond. It was widely reported that he sold Bond the Nine Network at the record price of A$1.05 billion in 1987, and then bought it back three years later for a mere A$250 million, when Bond's empire was collapsing. Packer later quipped; "You only get one Alan Bond in your lifetime, and I've had mine".

I also remember Kerry saying one time, "everything is always for sale, the question is whether your prepared to pay me enough to sell."

I have that with all my properties. Every property I have is always up for sale if you are prepared to pay me enough. No they aren’t all on the market. Again that comes back to discerning the difference between price and value. Properties being undervalued or over valued.

Sometimes opportunities to sell at massive profits only come every couple of decades, once or twice in a lifetime.

The second thing that people will say is, "If I sell I have to pay tax!". So? That profit that you look at was never all yours anyway. The only question becomes when do you pay the share to the CRA that they were always entitled to. Leveraging on that portion of the CRA/ATO unrealised/unpaid gain is very important in building wealth, and I do it, but sometimes, at market turning points you need to realise its value.

The other thing i learnt off my best mate who is a chartered accountant. I had a couple of big tax bills to pay and that was fine. The cash was there. Over lunch he told me he gets annoyed by so many people who complain about paying income tax. "They have made a profit, often substantial profits, and they only have to pay a portion of that to the ATO. They are still a long way ahead."

To me the current Vancouver bubble is "Vancouver’s vendors Alan Bond".

Where we disagree is how far the market will fall. If I’m right, by the time that happens, your opportunity is long gone. Thinking through and making the hard decisions are never easy.

This is a thread about gold. I’ve been in property all my life, but recently I’ve got into physical gold. I often ask myself, why? And then I go through the global position of governments printing money and being broke and the financial system being rigged (Libor? etc), to know that we are in the most dangerous economic time in 80 years. History shows, that at times like this, gold is the cornerstone to survival.

[semven]

This is a thread about gold. I’ve been in property all my life, but recently I’ve got into physical gold. I often ask myself, why? And then I go through the global position of governments printing money and being broke and the financial system being rigged (Libor? etc), to know that we are in the most dangerous economic time in 80 years. History shows, that at times like this, gold is the cornerstone to survival.

So are you a Pirate now?

[Austin]

And then I go through the global position of governments printing money and being broke and the financial system being rigged

Gee, no, really? Huh. Hoocoodanode? I wonder what that could do to the nominal price of real estate.

[Geyser]

Taipan wrote:

True wealth in real estate comes from long term buying and paying down real estate.

Wow! No s#*t Sherlock, you finally figured it out.

[Taipan]

And then I go through the global position of governments printing money and being broke and the financial system being rigged

Gee, no, really? Huh. Hoocoodanode? I wonder what that could do to the nominal price of real estate.

Your right Austin. I mean whocouldanode? Trouble is that the warning signs are so far removed from everybody’s radar, they never notice.

Even if they did notice, they would need some grounding in economics to understand the implications.

And it happens slowly over time so with everything that is happening in a persons life, it is the furthest thing from a persons mind.

I was talking with my wife the other day over dinner about the issues. My 10 year old son, asked what I was talking about.

I pulled a $10 note out of my wallet the other day, scrunched it up and asked him how much it is worth?

He said it was worth $10. No its not worth anything I replied. It has no function to do anything else apart from a medium of exchange and has no other intrinsic value to do anything else.

But as long other people think its worth $10, then its worth $10 to exchange for goods and services.

So when did the rot really set in? 1971 with the collapse of the Bretton Woods system.

I read it as a couple of paragraphs in economics text books in 1976 and thereafter.

Why was it important. Quite simply politicians learnt that like all fiat currencies in the past, they could just print money to gain favour and votes.

It made borrowing easier, they could run deficits and run up huge loans. All the time kicking the can down the road.

But they had one Achilles heal. Inflation!

Some of us remember inflation in the late 70's and 80's.

Inflation rises, then interest rates must rise. That smashes property prices, and did do in the late 80's.

Even Geezers admits his properties lost 40% in value when the late 80's recession hit and interest rates were at 17%

How many times have you seen somebody on this board say. There is no inflation so they wont raise interest rates?

When supposedly 83% (somebody can run away and come back with the exact figure) of an average persons disposable income is spent on property in Vancouver because your property values have doubled over the last decade tells me you have an inflation issue. But it was never reflected in the CPI. So wages never went up, but property prices could and not affect inflation nor interest.

And why is that?

Because in the mid 90's, the central bankers of the world (G20, G8) agreed to change the definition of what constituted inflation.

No more problems like they had in the 80's!

Now the stage was set. Unlimited ability to print money, changing house prices that wouldn’t feed into interest rates, it was party time!

Lot more to discuss on how this relates to gold and ill get to that shortly Austin.

Now it is a beautiful sunny winters day here - I’m going to go and do 70km on the bike. Getting those legs in tone to ski in beautiful BC at xmas.

[semven]

Hurry up Austin is waiting patiently for your lecture to continue

[Taipan]

"gold hit 2000 fed easing" says it all.

They will print money, and every time they do they devalue every other dollar in circulation.

So do you want to be sitting in assets that will devalue.

Well i suppose those sitting in Vancouver real estate do, because it will certainly fall.

My own feeling going forward is that those who merely maintain current purchasing power will be the big winners in a decades time.

We will get some sniggers with that, but already we have the following members of NIRP. It stands for Negative Interest rate policy.

Holland, Germany, Denmark, and Switzerland are all currently negative.

That means you lend Germany $1m and in 2 years time you will get less then $1m back.

Why would anybody do that? Because there is so much money trying to find a safe home that people are prepared to pay interest for those countries to hold their money.

Anything as long as they are not exposed to a potential drachma, lire, pesetas.

Where else? US treasury bonds. When you look at the massive US debt burden and increasing debt levels?

Why - well its not the euro, the drachma, lire, pesetas or yen. The US will be the last to fall.

Why gold? IMHO it will be the last thing standing. In every fiat currency where they have gone to the presses, the end has always been the same in varying degrees. Hyperinflation.

As indicated to you above they have already been manipulating the data. So whats that really look like? Junes figures.

June CPI Inflation. The June 2012 CPI-U was unchanged for the month, with year-to-year inflation
holding at 1.7%. The headline CPI-W also was unchanged, with year-to-year inflation holding at 1.6%.
The SGS-Alternate inflation measures for June showed a 5.0% annual inflation rate (1990-based) and a
9.3% annual inflation rate (1980-based).

Capital flows that survive will shoot in ever decreasing directions globally for things of limited availability and value.

The BRICS are starting to trade in gold and if they are ever to create a new reserve currency after the future examples of the euro meltdown, the Japanese meltdown, and the US meltdown all grown on fiat currencies, then they will need a hell of a lot of it.

Mainland China’s gold imports from Hong Kong surged more than sixfold in the first quarter, adding to signs that the country may displace India as the world’s largest consumer of the precious metal on an annual basis.

Imports from Hong Kong were 135,529 kilograms (135.53 metric tons) between January and March, from 19,729 kilograms in the year-earlier period, according to data from the Census and Statistics Department of the Hong Kong government. Shipments in March rose 59 percent from February, yesterday’s data showed.

China’s Gold Imports Jump as Country May Become Biggest User

Inflation, interest rates and property - big subject. Another time