tag:blogger.com,1999:blog-31427364.post2487470996160184789..comments2024-03-26T03:52:23.395-07:00Comments on Housing Analysis: RBC Economics Reportmohicanhttp://www.blogger.com/profile/06094213357140749289noreply@blogger.comBlogger15125tag:blogger.com,1999:blog-31427364.post-70066328577631512292008-01-17T09:33:00.000-08:002008-01-17T09:33:00.000-08:00"# The Commerce Department announced that housing ..."# The Commerce Department announced that housing starts fell 14 percent, month-over-month, in December. That's an incredible 38.2 percent lower than one year ago. And it will get worse. Building permits also fell sharply, down 8.1 percent month-over-month.<BR/><BR/># Merrill Lynch announced a $10 billion dollar loss for the fourth quarter amid writedowns of $14.6 billion dollars of bad debt. "<BR/><BR/>From salon.com's how the world works blog.Mark Fengerhttps://www.blogger.com/profile/01922616270777907779noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-35825139419706355072008-01-16T22:33:00.000-08:002008-01-16T22:33:00.000-08:00I wonder how heavily hedge funds are leveraged int...I wonder how heavily hedge funds are leveraged into gold... <BR/><BR/>A currency trading corporation I'm involved with has access to gold through our broker. Our broker lets us leverage ourselves up to 100:1. We don't go anywhere near that (we're ~15:1 this week), but we could, and if we wanted to, we could go heavily into gold.<BR/><BR/>Sure, we wouldn't physically have possession of the gold, but as long as paper money is dropping in value, our broker won't call us on it, and profits on gold trading could be recycled into other metals or currencies without liquidating the gold trade.<BR/><BR/>The question of risk comes into play, though-- what if hedge funds are doing this? If, say, copper takes a dive, my broker could issue a margin call and close all my trades. If lots of other corporations are also getting margined out of their gold positions, what happens to the price of gold?<BR/><BR/>I'm in the firm belief that gold's price right now is higher than it should be-- a bubble. The only question in my mind is how many more greater fools are going to pour money into gold before they run into trouble at home and have to turn that gold back into cash? The price could go up quite a ways before it collapses.M-https://www.blogger.com/profile/11157896639592232047noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-83581113538032163972008-01-16T16:51:00.000-08:002008-01-16T16:51:00.000-08:00"what I'm thinking is that maybe people are dumpin...<I>"what I'm thinking is that maybe people are dumping money into gold, the 'safest' investment and waiting for the bond rate to spike so they get a better yield?"</I><BR/><BR/>The bond market is diverse enough that it being mis-priced to such a degree seems unlikely. You are more than welcome to speculate they have it wrong.jessehttps://www.blogger.com/profile/02155122147972263497noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-6015568728088384832008-01-16T15:55:00.000-08:002008-01-16T15:55:00.000-08:00jesse said... Oh really. Long term bond rates a...<I>jesse said...<BR/><BR/> Oh really. Long term bond rates are not going up that much; one would expect they would in the face of higher inflation. So what does the gold market know that the bond market does not?</I><BR/><BR/>This is just my understanding of the Bond Market, I could be wrong. When people want a "safe investment " they buy Bonds. Bonds pay a set rate of return IE: 5%. As interest rates go up and bonds return higher rates ie: 7% the bond that returns 5% is worth less since it wont pay as much interest.<BR/><BR/>If my summary is correct I wonder if there are a bunch of bears that are timing the bond market. The "great collapse" hasn't happened yet, when/if it comes inflation will skyrocket, and BoC will pump up the prime rate to try and kill the inflation (ala 1980) now if I were to buy a bond today at say 5% it might be safe but when that crash comes and someone else can buy a bond at 10% my outlook isn't so great.<BR/><BR/>So essentially what I'm thinking is that maybe people are dumping money into gold, the "safest" investment and waiting for the bond rate to spike so they get a better yield?Robert Reynolds - HMR Insurancehttps://www.blogger.com/profile/10939128478955272061noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-8524996254830341012008-01-16T15:42:00.000-08:002008-01-16T15:42:00.000-08:00"there would be many more uses for gold if it was ...<I>"there would be many more uses for gold if it was cheaper."</I><BR/><BR/>This is true with other commodities, not just gold, though gold's scarcity means its price is high. Gold is used as a currency but is subject to forces beyond just monetary policy of central banks, such as innovation of substitutes (e.g. using tin instead of gold in electronics manufacture) and new capacity (e.g. a new strike is found).<BR/><BR/>You can use gold as an inflation hedge if you want but if gold production markedly increases due to new strikes, don't be surprised if gold prices start falling, regardless of what the CPI does. <BR/><BR/>Something to consider is whether gold is currently subject to above average speculation. Gold is in many ways like housing so if you think there is a bubble in housing at least consider the same possibility for gold.jessehttps://www.blogger.com/profile/02155122147972263497noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-3476970563909453492008-01-16T15:03:00.000-08:002008-01-16T15:03:00.000-08:00"alarm bells should be going off in your head that...<I>"alarm bells should be going off in your head that there is inflation afoot."</I><BR/><BR/>Oh really. Long term bond rates are not going up that much; one would expect they would in the face of higher inflation. So what does the gold market know that the bond market does not?jessehttps://www.blogger.com/profile/02155122147972263497noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-63092522505150435092008-01-16T00:54:00.000-08:002008-01-16T00:54:00.000-08:00But of course if gold were abundant enough for it ...But of course if gold were abundant enough for it to be an economic substitute for copper, it would have no use as money - except for fiat currency coins. It would just be another metal.patriotzhttps://www.blogger.com/profile/11154064267408955762noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-79454632073379685672008-01-15T21:44:00.000-08:002008-01-15T21:44:00.000-08:00Actually, copper is a better conductor than gold. ...<I>Actually, copper is a better conductor than gold. The standard pecking order is: Silver, Copper, Gold, and then Aluminum. The beauty of gold is that it's relatively inert, so does not corrode. Just don't expect your gold speaker wires to perform better than good 'ol copper ones. :)</I><BR/><BR/>Absolutely. It is Gold's inertness that would make it more useful. Imagine a house plumbed with gold - no more green stains in the tub and shower. And then there are other properties as well. Gold is incredibly malleable; an ounce of gold can be flattened to cover an acre with no holes. That's why the contacts on good stereos are made of gold.<BR/><BR/>My point wasn't to say that copper isn't useful. It was to point out that there would be many more uses for gold if it was cheaper. But it's not, and it won't be. Gold is 6 orders of magnitude below copper in terms of relative abundance in the earth's crust.Robertohttps://www.blogger.com/profile/03338787957419791384noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-63845424383357745842008-01-15T20:58:00.000-08:002008-01-15T20:58:00.000-08:00Off Topic:Deliverator said... [gold is] extremely ...Off Topic:<BR/><I>Deliverator said... <BR/>[gold is] extremely workable, anti-corrosive, highly conductive, etc. If it were as abundant as copper, we'd be using it instead almost anywhere copper is employed.</I><BR/><BR/>Actually, copper is a better conductor than gold. The standard pecking order is: Silver, Copper, Gold, and then Aluminum. The beauty of gold is that it's relatively inert, so does not corrode. Just don't expect your gold speaker wires to perform better than good 'ol copper ones. :)Fencesitterhttps://www.blogger.com/profile/00412903923931502556noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-30625068637454452732008-01-15T19:56:00.000-08:002008-01-15T19:56:00.000-08:00Over the long run gold maintains a constant real p...Over the long run gold maintains a constant real price because there's only so much of it and very little new supply is being added.<BR/><BR/>In other words it has a zero real return. Any actual investment, i.e. something that yields income, does better than that. Including housing of course.<BR/><BR/>Of course due to its gyrating price you can make money with gold if you outsmart everyone else. But everyone can't do that collectively. Like any commodity with no yield, the seller's gain is the buyer's loss. Just like baseball cards, etc.patriotzhttps://www.blogger.com/profile/11154064267408955762noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-61790854617241912612008-01-15T19:52:00.000-08:002008-01-15T19:52:00.000-08:00I never understood gold. At least there is a yield...<I>I never understood gold. At least there is a yield on housing. Gold just sits their and shines.</I><BR/><BR/>Gold is money. It is by definition a currency and is listed as such by the IMF. When gold is rising against all currencies (as it has been), alarm bells should be going off in your head that there is inflation afoot.<BR/><BR/>And saying gold is not a useful metal is pure nonsense. It is not widely employed because of <B>the price at which it is valued</B>. Gold is a wonderful material: it's extremely workable, anti-corrosive, highly conductive, etc. If it were as abundant as copper, we'd be using it instead almost anywhere copper is employed.Robertohttps://www.blogger.com/profile/03338787957419791384noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-67941407875411310142008-01-15T18:21:00.000-08:002008-01-15T18:21:00.000-08:00bearclaw "I never understood gold. At least there ...bearclaw "I never understood gold. At least there is a yield on housing. Gold just sits their and shines."<BR/>Its easy think of it this way, if you have a million dollars worth of gold commodities you can trade that straight across for a million dollars of oil, a M of las vegas chips, a M of pork bellies, a M of housing in any country in the world. If you have a M house you can't trade it straight across for anything because you have to research the houses" market value, you have to have it appraised, you have to spend a whole lot of time evaluating wether it is actually worth a million. With gold you can do it in five minutes.Stratamanhttps://www.blogger.com/profile/17562001878583509939noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-65034841045050447232008-01-15T17:56:00.000-08:002008-01-15T17:56:00.000-08:00therethereBearClawhttps://www.blogger.com/profile/15714953167582532109noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-1913216795651478512008-01-15T17:55:00.000-08:002008-01-15T17:55:00.000-08:00I never understood gold. At least there is a yiel...I never understood gold. At least there is a yield on housing. Gold just sits their and shines.BearClawhttps://www.blogger.com/profile/15714953167582532109noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-3937203407949232902008-01-15T17:45:00.000-08:002008-01-15T17:45:00.000-08:00Okay, so it looks like we are running into some co...Okay, so it looks like we are running into some core inflation. Food is getting more expensive. So should I take my money out of term deposits earning over 4% and put it in something returning more. This money is just being saved for the purpose of a downpayment later on. If housing costs are not in core inflation, do I care? As long a housing is starting to go down or inflating by anything less than 4%, then I'm still retaining the value of my money for the purpose which it is (eventually) intended. Gold and stocks seem too volitile and risky. Comments?Dorkerhttps://www.blogger.com/profile/08206361963140925500noreply@blogger.com