The Gold and Silver Thread

[Toro]

It will start in earnest when the excesses in the housing and mortgage markets are finally expunged, which, if you do the math, will be around 2014, give or take. That's how balance sheet recessions work.

How do you account for the big spike, over 200% in CT if memory serves, in first time late/missed payments on mortgages?

Real estate price writedowns as opposed to mortgage writedowns are a step function with treads of 24-36 months and is driven by the lack of funds to bulldoze abandoned buildings. With inadequate municipal, county and state budgets CA, IL and most of the Washington Boston corridor are headed for another downturn in 2014. The exodus of jobs and homeowners from the affected areas will be the big story in 2014 and really help the rest of the country recover.

So, while like you I expect most of the country to see rising or at least stable real estate prices from 2014 on the pricey areas will see continuous price declines until they revert to the price trendline and if they can't get rid of the abandoned buildings they will keep on dropping.

We are building about a million homes a year below the intrinsic demand for houses through normal demographic and depletion trends. Months in inventory - which is depressed due to low sales - is at the long-term average of six months. There is about two years of shadow inventory when you calculate the number of delinquencies and expected defaults. Homes are cheap and rents are rising. By 2014, this will have worked through and the economy will grow at trend again, though probably higher given the pent-up consumer demand that has accumulated over the past several years.

 

[KissMy]

It will start in earnest when the excesses in the housing and mortgage markets are finally expunged, which, if you do the math, will be around 2014, give or take. That's how balance sheet recessions work.

How do you account for the big spike, over 200% in CT if memory serves, in first time late/missed payments on mortgages?

Real estate price writedowns as opposed to mortgage writedowns are a step function with treads of 24-36 months and is driven by the lack of funds to bulldoze abandoned buildings. With inadequate municipal, county and state budgets CA, IL and most of the Washington Boston corridor are headed for another downturn in 2014. The exodus of jobs and homeowners from the affected areas will be the big story in 2014 and really help the rest of the country recover.

So, while like you I expect most of the country to see rising or at least stable real estate prices from 2014 on the pricey areas will see continuous price declines until they revert to the price trendline and if they can't get rid of the abandoned buildings they will keep on dropping.

We are building about a million homes a year below the intrinsic demand for houses through normal demographic and depletion trends. Months in inventory - which is depressed due to low sales - is at the long-term average of six months. There is about two years of shadow inventory when you calculate the number of delinquencies and expected defaults. Homes are cheap and rents are rising. By 2014, this will have worked through and the economy will grow at trend again, though probably higher given the pent-up consumer demand that has accumulated over the past several years.

Consumers may demand houses but they will not have good enough credit to purchase them. Housing demand will be from landlords who will rent them out to all the sub-prime renters.

 

[KissMy]

Of course there is no inflation!

The London Olympics of 1908 cost £20,000. The budget for the austerity games of 1948 was £750,000. The current estimate for the cost of the Olympics in 2012 is £11bn.

The earliest underground railway lines in London – and the world – cost half a million pounds a mile to build. Roughly, you can assume that average prices in Britain multiplied by 10 between the Victorian era and 1960, and by another factor of 10 in the 50 years following. The cost of the Victoria line, built in the 1960s, had risen in line with general inflation and came in at about £7m per mile.

This, however, now seems an astonishing bargain. A decade later, the Jubilee line cost £36m per mile to build and its extension in the 1990s 10 times as much. The tunnels for Crossrail, the newest underground railway connection in London, are budgeted at almost £1bn per mile.

The Forth Bridge, an engineering marvel that connects Edinburgh with Fife, was completed in 1890 at a cost of £3.2m. The parallel road bridge erected in the 1960s cost £19.5m – broadly in line with general inflation. The budget for a third crossing is currently £1.6bn.

 

[KissMy]

"36 times as many municipal defaults over the past 40 years as the conventional wisdom suggests."..."Moody’s Investors Service has reported that from 1970 to 2011, there were only 71 municipal bond defaults. But the Fed report counted 2,521 defaults in that time."

I guess all that bond paper will keep you warm for a couple of minutes when you light them on fire. Maybe you can eat them for fiber althought the ink on them may not be so good.

Warren Buffett is paying early termination penalties to exit the muni bond market!!!

 

[Toro]

Consumers may demand houses but they will not have good enough credit to purchase them. Housing demand will be from landlords who will rent them out to all the sub-prime renters.

That will right itself over time. Credit is starting to loosen in the mortgage market, albeit slightly. But as the banks repair their balance sheets, and as the bad debt is expunged, credit will become more available. Not as available as it was in the Housing Bubble but it will normalize.

 

[editec]

Looks to me like precious metals will be (has already) losing ground in price comparison to food commodities.

Basically gold's value has been closely mirroring the world price of oil for decades.

Gold-Oil Ratio = Price of Gold (per oz.) / Price of Crude Oil (per barrel)
The gold-oil ratio helps us to identify overbought and oversold opportunities for gold. The chart below shows solid support between 8 and 10 barrels/ounce of gold over the last 30 years, with occasional spikes carrying above 20 but seldom holding for any length of time.

source

Great chart but it ignores advances in drilling technology. With fracking and off-shore drilling the supply of oil and especially natural gas is exploding worldwide. I would also use the DJIA vs. Gold.

That a VERY valid point, William.

AS the composition of hydrocarbon energy sources changes, the historical linking of the price of gold to crude oil will probably uncouple.

I wonder if anyone has ever tracked the price of gold to the average cost of energy per ERG?

I'll bet that price relationship is even more cloely aligned than the price of crude to gold.

 

[KissMy]

The gold standard has returned to mainstream U.S. politics for the first time in 30 years, with a “gold commission” set to become part of official Republican party policy.

 

[Toro]

Just to deviate a bit. New home inventory is at the lowest level on record. Existing homes swamp new homes, but this is another data point demonstrating that the housing market is repairing itself.

Sales of newly built homes rose briskly in July, and inventory fell to the lowest level on record, suggesting the housing market is showing continued signs of recovery and that builders may need to ramp up construction in the coming months.

The Census Bureau said Thursday builders sold a seasonally adjusted annual rate of 372,000 homes in July, up 26% from the same month last year. Inventory of new homes available for sale fell to 142,000 units, the lowest level recorded since the government started tracking the figure in 1963.

New-Home Sales Jumped 26% in July - WSJ.com

 

[KissMy]

QE3 Baby!!!

 

[Truthmatters]

buying gold now would be stupid

 

[Plight]

They were saying that at gold $500, 750, 1000, 1250, 1500...golds going to 4-5K an ounce...the criminals at the FED are bankrupting this country

 

[Truthmatters]

buy at the high if you want to stupid.

it will make others very happy and rich

 

[Plight]

ive been buying since $600/ounce...people like you were mentioning how its too expensive at that price...yeah, it could pullback, but it wont pullback much...golds going higher

 

[Truthmatters]

your fine if you bought that long ago.

Now if you dont sell at the right time it wont make any differance when you bought it will it?

 

[Truthmatters]

Gold goes down when the economy is doing well.


people need to free up their assets for other investments.


You going to eat that gold if you dont have money to buy groceries?

 

[Plight]

Ill start selling some at 3K an ounce..youll probably still be on the sidelines yapping how its too expesnive at that price as well

 

[Truthmatters]

Guess what the wealthy do.

they buy low and sell high and tell you the whole time to keep buying because it means they get a higher sell price.

Your ass will be the last to know when you are supposed to sell.

 

[Truthmatters]

Ill start selling some at 3K an ounce..youll probably still be on the sidelines yapping how its too expesnive at that price as well

what makes you think it will reach 3000?

idiot

 

[Plight]

I have more wealth than you do. Much more. Im an educated doctor who trades futures/options/stocks/bonds...when gold gets to that price, ill come back and laugh in your face...how does that sound?

 

[Truthmatters]

come on tell us your reasons that you forsee a move to the height of 3000 for gold?