The Golden Truth: Housing vs. Gold

Saturday, April 23, 2011

Housing vs. Gold

Okay then, when you price the value of the average house in terms of gold, or real money, the average house has lost 47% in value:

At its peak, the housing market in March 2007, the median U.S. home was $262,600, which was equivalent to 340.6 ounces of gold. Today's median income price is $186,100 or 109.2 ounces of gold. So in terms of real money, gold, the U.S. median home price has lost 47% since 2007 (Richard Russell from 321gold.com - Source LINK).

Please read the entire commentary I linked. It's short. Back in 2002 I suggested to anyone who asked me that housing would lose 75-90% of its value before the coming bear market in housing was finished. Some of those people are probably still thinking that I was overdosing on LSD. The good news is that I've never taken LSD (I know that's hard to believe for anyone who knows me, but it's true lol) and my prediction for housing is more than halfway home, so to speak, when viewed in terms of real money (uh, gold). I must admit that I wasn't thinking about using gold to measure the price of a home - I was using $dollars to measure home value. I know in many areas, distressed sales are occuring at more than 75% below the peak valuation level for homes. Having said that, I still believe that the average house will eventually drop at least 75% as measured in dollars and 90% as measured in gold.

There is also a good comparison chart in that link above showing the performance of the Dow vs. gold over the last 10 years. That the Dow has barely moved higher over that time period, and has plummetted vs. gold, will likely shock anyone who sees those charts.

I probably should start to focus more on the two bubbles that have yet to really blow up and crash - the dollar and Treasury bonds - rather than on housing. But there are still many people who ask me about housing and most of them refuse to believe that housing can go lower from here. Oh well. I guess you can look at it terms of gold like this: the dollar is going to go a LOT lower which, tautologically speaking, means that gold will go a LOT higher. So if you buy enough gold to fund 50% of a home purchase today, eventually - and possibly sooner that anyone thinks can happen - you will be able to fund the entire purchase of your dream home with gold you buy today.

To understand why the dollar is going to plummet, please read this quick commentary by James Turk in Eric King's blog: LINK Capire a tutti?

9 comments:

vamooseSaturday, 23 April, 2011
I would ask you to give some thought to Bernanke on Wednesday, this upcoming press conference, and thank you for your awesome work btw.

This guy is , i think, the worst liar i have ever seen, his voice quavers, his lips quiver, he is actually probably a nice person whose mother taught him not to lie.

He has a big Wednesday coming up, and so do we.

Greenspan, by contrast was a great liar, almost a gleeful liar, my theory has always been, he is so astonishingly butt ugly, that he did a great deal of masturbating as a young man, perhaps into his twenties.

He did this dalliance with Ayn Rand, made some unfortunate public statements, an ugly guy looking for girls, and it never changed.

So, to be loved, he destroyed America, well done Al.

Now Rickards says QE3 can go unspoken, it can be found in the rollovers, except there is an 80 percent haircut i the purchases, from a hundred billion a month to 17.

So who buys the poison paper. They will do it on the sly. I call it Qe on the QT.

I bot my first stock in 64. Inpropitiously.

I have a sense of terrible foreboding looking at that buck. We will prob get a rally. A meatball rally.

I have a sense this thing , America, as we know it, is over. I could write a book as to why.

Trying to time it is preposterously arrogant. Therefore i will.

Right fucking now. This week.
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Dave in DenverSaturday, 23 April, 2011
Thanks for the feedback vamoose. Agree that contemplating what life looks like when the dollar shits the bed is daunting.

Bernanke for sure can't pull off the pure lies the way Greenspan could. Bernanke reminds me of the whiney, snivelling kid you grew up with who got teased and beat up at recess and who I used to hammer with spitwads during physics class when the teacher stepped out to use the rest room or whatever.
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SatyaPranavaSaturday, 23 April, 2011
so what if we considered housing in gold 10 years ago as the peak?

eric de groot's graphs show that the median housing value has already lost ~ 75%, in gold terms, since its top in 2001 (2007 was only near the top in $ terms). a link for these graphs (which i've seen updated regularly) is: http://2.bp.blogspot.com/_m5i6pLhlNWU/TTcGrmWO6nI/AAAAAAAAD6o/bbs1Mz9qj6o/s1600/MHPGOLDR.JPG

so you were proven right. i told my friends to stop buying and to not buy houses in the summer of '03 (i was a little late to this game) and then to sell houses and put it into gold (i didn't think of silver at the time) in mid-late 2004. only one listened to me out of all of them, and i'm still waiting for them to take me out to dinner :) and we're still a ways away from any kind of top (gold) or bottom (housing, treasuries, dollar, debt, etc).

i'm not looking forward to how this plays out, but it will be interesting.
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fubsy_cooterSunday, 24 April, 2011
I deeply respect Richard Russell (and you), but....Maybe I'm missing something, but a drop from 340 oz to 109 oz is clearly more than a 47% drop. A 50% drop would have put the median home price at 170 oz of gold. It's closer to a 67% drop relative to gold.

Yes?
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danSunday, 24 April, 2011
dave

would you comment on your fund as to being able to invest in it
thanks
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mabmanSunday, 24 April, 2011
The easiest story to tell is about the 90% silver quarters. One of these bought a gallon of gas in 1959, and one of them buys a gallon of gas today. A pre-1965 quarter currently has a melt value of about $8.50. That is more than two gallons of gas in the USA.
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mabmanMonday, 25 April, 2011
http://www.zerohedge.com/article/apmex-starts-reverse-inquiry-seeks-buy-any-quantity-silver-clients-3-over-spot
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AnonymousTuesday, 26 April, 2011
Dave,

My sister bought a house 6 months ago with all cash. Considering that the housing market is expected to decline, and there will be rate hikes in the future, would it be wise for her to take out a mortgage on her house and buy precious metals and mining stocks as a hedge against falling home prices? Thanks in advance for the answer. Leilani
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Dave in DenverTuesday, 26 April, 2011
Leilani, I think that would the wisest thing your sister do, but good luck convincing her to do that. The other aspect is that you want to be a debtor in high inflationary times because you get to pay back the lender using "cheaper" dollars. That's what the U.S. Govt/Fed is trying to achieve with the QE programs.
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Add comment

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.