Sure, gold had a good run for seven years out of the past few decades. But that's all over now.
No, this is the simple truth. As long main world interest rate are ZIRP....gold has teeth. When rates significantly rise is the time to say the gold bull is over with for a generation. As long as real rates are negative, gold will beat that over the long term.
Very poor analysis Shadow, are you equally faulty with with everything else?
The next trick of our glorious banks will be to charge us a fee for using net bank!!! You are no longer customer, you are property!!!
If you had $500K twelve years ago then you could just have bought a couple of Sydney median priced homes outright and be done with it.
Or you could put it on a trifecta at the Melbourne cup and be worth millions the following day.
There are a few good reasons why more people invest in property than speculate on ETFs...
1. Much lower risk 2. Much easier to leverage 3. Yield 4. Superior long term risk adjusted return
But sophisticated investors like yourself should probably stick to your esoteric 'financial instruments' rather than messing about with common property.
Kind of misses the point. If someone had read some nutty gold website (without antii-gold ETF warnings) and did what I said, they would have been able to buy a house outright in a shorter time than most people could ever hope to pay a house off. It's just the way it is. If you think it's similar to dropping into a casino, then so be it. But the whole word doesn't think that. But the whole world doesn't drop money into GOLD ETFs to be able to buy houses. They leverage, much like you do.
Let's put it another way. The capital gained over the same period would be much more than the median Australian salary for over 11-12 years.....without lifting a fly. It would have been like buying a business (a typical 9-to-5 worker) and taking home his salary over the time. You'd probably need at least 2 rental properties to get near that.
All your graphs show is how overpriced gold is relative to its long term value. When confidence returns to the real estate market gold is going to take a trashing. For 24 years house prices rose in terms of gold units. Now property prices crashed in 2007 and gold rose in a massive bubble.
There will be tears for gold holders when the bubble pops.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
Kind of misses the point. If someone had read some nutty gold website (without antii-gold ETF warnings) and did what I said, they would have been able to buy a house outright in a shorter time than most people could ever hope to pay a house off. It's just the way it is. If you think it's similar to dropping into a casino, then so be it. But the whole word doesn't think that. But the whole world doesn't drop money into GOLD ETFs to be able to buy houses. They leverage, much like you do.
Let's put it another way. The capital gained over the same period would be much more than the median Australian salary for over 11-12 years.....without lifting a fly. It would have been like buying a business (a typical 9-to-5 worker) and taking home his salary over the time. You'd probably need at least 2 rental properties to get near that.
Yes, gold had a good run for seven years out of the past few decades. Well done to anyone who timed that successfully and profited from the gamble. But it's over now. It ended in 2012.
Buying and selling gold is the very definition of speculation. Yes, some people get lucky, but it's bloody hard to manage risk compared with a property where you have many more variables that you can adjust to suit your personal situation.
Nice work. Good to see another member who can create their own charts/analysis. That makes two of us now.
One other thing to consider is the yield on property, which puts the total return well ahead of gold.
Yes, yield needs to be considered along with property buying and selling costs and the level of gearing (which is key):
High gearing naturally means high risk but higher investment returns. Low or zero gearing means lower risk but also lower investment returns. So let's compare the performance of an IP investment with an equivalent amount of gold over the period June 1999 to Feb 2015 The equivalent amount of gold is the oz of gold that has the same fiat value as the IP investors outlay in June 1999 i.e it equals the IP purchase price + costs less investment loan amount.
I have evaluated three scenarios for the IP: 1) 80% geared 2) 50% geared 3) No gearing
The bank loan for gearing the IP is assumed to be interest only. The gold investment is not geared.
Results: 80% geared IP 20% purchase plus costs ~ $50,000 Interest only investment property loan ~$160,000 Net investment value after selling costs and loan repayment but excluding capital gains tax = $412,000 (Feb 2015)
Equivalent Gold Purchase 125 oz at A$400/oz = A$50,000 (June 1999) 125 oz at A$1600/oz = A$200,000 (Feb2015)
Un-geared IP 100% purchase plus costs ~ $215,000 Net investment value after selling costs but excluding capital gains tax = $518,000 (Feb 2015)
Equivalent Gold Purchase 537.5 oz at A$400/oz = A$215,000 (June 1999) 537.5 oz at A$1600/oz = A$860,000 (Feb2015)
Interestingly the chart shows that the performance of gold is about the same as the IP investment if the IP has a gearing of ~50%. So is the Goldbug silly and the highly geared Housebug smart or is one just more risk averse than the other? Personally I have a mix of investments with current distribution: gold (~10%), property (20%) and shares (70%) I guess that means I'm only 70% Fiatbug - the rest is 10% Goldbug and 20% Housebug.
Other assumptions and data sources: Historical Property Price –Median Australian Capital City House Prices using historical data from Residex Purchase date June 1999 Sell date Feb 2015 Buying costs (stamp duty + fees) = 4.2% x purchase price Annual expenses (rates, insurance, land tax etc.) = 1.4% x property value Investor’s marginal tax rate = 47% Gross rental yield ( rpdata Historical – see chart) http://blog.corelogic.com.au/2013/06/the-destruction-and-gradual-reconstruction-of-rental-yields-in-australia/
Why talk about yields with property on IO loans anyway. We all know the money is swallowed up by the bank and then more is typically needed to balance the books
Only if the property is purchased using leverage (which isn't mandatory when buying property).
Only? Like only in 99.99% of cases you crack me up shadow.
"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works." John Stuart Mill
Interestingly the chart shows that the performance of gold is about the same as the IP investment if the IP has a gearing of ~50%. So is the Goldbug silly and the highly geared Housebug smart or is one just more risk averse than the other? Personally I have a mix of investments with current distribution: gold (~10%), property (20%) and shares (70%) I guess that means I'm only 70% Fiatbug - the rest is 10% Goldbug and 20% Housebug.
If that is the best that gold can do against a simple IP during its biggest bull run in history - you gold bugs have gotta be worried about what happens now when the gold ponzi style buyers start to drop out in order to get some real gains and real yields.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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