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The Gold Bubble... Just how badly have the silly goldbugs failed?
Topic Started: 21 Jun 2014, 11:46 AM (27,207 Views)
Count du Monet
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Shadow
20 Mar 2015, 09:48 AM
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!!!

Don't be SAUCY with me Bernaisse
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Shadow
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Evil Mouzealot Specufestor

Count du Monet
20 Mar 2015, 03:28 PM
As long main world interest rate are ZIRP....gold has teeth
World interest rates have been at ZIRP since 2012. In that time gold has fallen 40%. There goes your toothy theory.

Posted Image
Edited by Shadow, 20 Mar 2015, 03:37 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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Kuyuss
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Shadow
20 Mar 2015, 01:34 PM
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.
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skamy
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FiatBug
20 Mar 2015, 03:16 AM






Posted Image
Correction - that's 200oz in USA
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.
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Shadow
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Evil Mouzealot Specufestor

Kuyuss
20 Mar 2015, 03:44 PM
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.
Edited by Shadow, 20 Mar 2015, 03:48 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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stinkbug
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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.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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FiatBug
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Shadow
20 Mar 2015, 09:40 AM
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.

Posted Image
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/

Property Loan interest rates (Historical RBA Cash rate + 3%) http://www.rba.gov.au/statistics/tables/xls-hist/f01dhist.xls

Property manager fees = 0% (i.e. excluded)
Vacancy rate =0% (i.e. property never vacant)
Selling costs (RE agents commission) = 3.75% x sale price
Posted Image
Attached to this post:
Attachments: Gross_Rental_Yields.jpg (94.25 KB)
Attachments: AUD_Gold_vs_IP.jpg (120.62 KB)
Edited by FiatBug, 20 Mar 2015, 05:24 PM.
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The Whole Truth
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Shadow
20 Mar 2015, 01:09 PM
The Whole Truth
20 Mar 2015, 11:59 AM
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 :lol 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
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skamy
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FiatBug
20 Mar 2015, 05:09 PM


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.

Posted Image

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.
Posted Image
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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Guest
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Shadow
20 Mar 2015, 03:37 PM
World interest rates have been at ZIRP since 2012. In that time gold has fallen 40%. There goes your toothy theory.

Posted Image
Nice selfie shadow 8-)

The gold bubble is yet to begin.
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