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House Prices and the Illusion of Certainty; Parsing the April house price data
Topic Started: 30 Apr 2012, 03:20 PM (2,587 Views)
Sydneyite
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genX
30 Apr 2012, 11:14 PM
Because we've never seen an inflationary feedback loop in a fiat money system .... except for the Weimar republic, and Yugoslavia, and Zimbabwe and Argentina and ...

If the purpose of the fiat monetary system is to stop prices from falling, then it follows that prices must always go up. So what you are telling us is that inflation is on the way?

Time to get some bullion.
Sure inflationary spirals can also take hold - although generally they can only occur due to gross monetary mis-management. But yes, if the government, RBA etc have their way, there will always be inflation - they state this publicly all the time, it's in the RBA charter! But not just any inflation, they want 2-3% trend / underlying CPI. If it goes higher than that then monetary policy is tightened in an attempt to slow demand and slow monetary growth. It usually works - sometimes too well.......

PS: Buy bullion all you like, but historically gold has been a terrible inflation hedge for $AU, and also even for the $US - virtually zero actual correlation between gold price movements and inflation. Gold is much more a "fear" hedge than an inflation hedge, but really it's just a speculative risk asset that serves little actual economic purpose.
Edited by Sydneyite, 30 Apr 2012, 11:25 PM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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genX
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Quote:
 
Sure inflationary spirals can also take hold - although generally they can only occur due to gross monetary mis-management.

Like the kind we experienced in the Howard/Costello years. Thanks for the heads up.
Quote:
 
If it goes higher than that then monetary policy is tightened in an attempt to slow demand and slow monetary growth. It usually works - sometimes too well.......

Doesn't work once you are passed the 100% debt to GDP ratio, because the system is too sensitive to shocks. Raise rates and you get deflation and inflation (through wage pressure).
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Buy bullion all you like, but historically gold has been a terrible inflation hedge for $AU, and also even for the $US - virtually zero actual correlation between gold price movements and inflation. Gold is much more a "fear" hedge than an inflation hedge, but really it's just a speculative risk asset that serves little actual economic purpose.

Gold is a hedge against fiscal ineptitude, the kind practiced by our government AND the US. You do know that gold has appreciated 70% per year for the last 3 years?
Edited by genX, 1 May 2012, 12:04 AM.
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miw
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genX
1 May 2012, 12:03 AM

Gold is a hedge against fiscal ineptitude, the kind practiced by our government AND the US. You do know that gold has appreciated 70% per year for the last 3 years?
Gold has been some kind of a hedge against inflation in the past, and certainly a hedge against fear. But the correlation seems to be breaking down at the moment. I think it's one of those things that work until they don't.

Precious metals (like all commodities) certainly has a place in a diversified portfolio, although lately diversification has been harder and harder to get. The correlations between all asset classes are rising, which I find quite scarey.

Right now in US$ terms gold is below both the 50-day and 200-day moving average and the trend is down which indicates stay out. On the other hand a chartist would say it has undergone a 7-month consolidation and the signs are that it should break out on the upside or downside soon, probably up.

If you believe, like a lot of people, that the medium-term outlook for the AUD is bearish, then gold is probably worth a bit of a bump in prortfolion weight.

The truth will set you free. But first, it will piss you off.
--Gloria Steinem
AREPS™
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peter fraser
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genX
1 May 2012, 12:03 AM

Gold is a hedge against fiscal ineptitude, the kind practiced by our government AND the US. You do know that gold has appreciated 70% per year for the last 3 years?
I think that you should check that claim that gold has appreciated by 70% per annum over the last three years.

As at 30/04/2009 the price was $1211 per ounze - today is is $1596

That's a gain of $385 in 3 years - quite good but only a fraction of your claim.

http://www.bullion-rates.com/gold/AUD/2009-4-history.htm

Any expressed market opinion is my own and is not to be taken as financial advice
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Sydneyite
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peter fraser
1 May 2012, 07:03 AM
I think that you should check that claim that gold has appreciated by 70% per annum over the last three years.

As at 30/04/2009 the price was $1211 per ounze - today is is $1596

That's a gain of $385 in 3 years - quite good but only a fraction of your claim.

http://www.bullion-rates.com/gold/AUD/2009-4-history.htm
And in $AU terms the gains are less again..... Don't take investment advice from GenX I think! :)
For Aussie property bears, "denial", is not just a long river in North Africa.....
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Strindberg
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genX
1 May 2012, 12:03 AM
You do know that gold has appreciated 70% per year for the last 3 years?
Gold was AU$1200 in May 2009, it is AU$1587 now. A rise of 10% pa.

Gold was US$885 in May 2009, it is now US$1664. A rise of 23% pa.

How do you arrive at 70% pa?
Housing costs to Income broadly unchanged since 1994 - re-ratified here
The People of Australia have the highest median wealth in the World
2002-2012 10 year house price growth the SLOWEST since 1952-1962
"There are two kinds of people in this world: ones that fiddle around wondering whether a thing's right or wrong and guys like us." (Hugo to Gagin in Ride the Pink Horse)
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genX
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Replying to all three in one.

"peter fraser"
 
I think that you should check that claim that gold has appreciated by 70% per annum over the last three years.
As at 30/04/2009 the price was $1211 per ounze - today is is $1596
That's a gain of $385 in 3 years - quite good but only a fraction of your claim.
http://www.bullion-rates.com/gold/AUD/2009-4-history.htm

Half right! Well done Peter.

http://www.bullion-rates.com/gold/USD/2009-4-history.htm
http://www.bullion-rates.com/gold/USD/2012-4-history.htm

In my original post, I said gold was a hedge against fiscal ineptitude. As you can see, the US govt is a few years ahead of our own muppets in Canberra, but our muppets are catching up. Hence my original claim: "Time to get some bullion. " As in present tense, not past.

"sydneyite"
 
And in $AU terms the gains are less again..... Don't take investment advice from GenX I think! :)

The goal was wide open and you STILL couldn't score sydneyite. Check Peter's post again for your error. Here, I will highlight the relevant part.
Peter wrote: http://www.bullion-rates.com/gold/AUD/2009-4-history.htm

"Strindberg"
 
Gold was US$885 in May 2009, it is now US$1664. A rise of 23% pa.

How do you arrive at 70% pa?


Ding, ding, ding! We have a winner. Yes, I wrote "per year". It was an error on my part. I meant to write "70% over the last 3 years".
I may be short on your long Strindberg, but I respect your ability to do the numbers.

23% compounded means that the price of gold (or ineptitude) is doubling in USD roughly every 3 1/2 years.
10% compounded means that the price is doubling in AUD roughly every 7 and a bit years.

If fiscal ineptitude by Canberra muppets reaches the stupendous depths of US muppets, then we can expect the price of gold in AUD to converge on the price in USD (which is a way of saying that I am bearish on the AUD).

I've just noticed a new post on the forum about RBA and ZIRP. Looks like the process has already begun! I will hit the bullion dealer tomorrow.

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peter fraser
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genX
1 May 2012, 07:26 PM
Replying to all three in one.



Half right! Well done Peter.

Sorry but you aren't playing with a straight deck.

If you are buying gold in $USD as an Australian spending money in Australia, then you are hedging twice, once in the currency and once in the metal.

It wouldn't have made any difference if I had done the math in shekels, gold didn't increase by 70% pa over three years, you were simply wrong and you should have the good manners to say whoops I made a mistake.

I didn't have a shot at you or try to be smarmy, I simply pointed out your error without embelishments.



Any expressed market opinion is my own and is not to be taken as financial advice
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Trojan
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peter fraser
1 May 2012, 08:02 PM
Sorry but you aren't playing with a straight deck.

If you are buying gold in $USD as an Australian spending money in Australia, then you are hedging twice, once in the currency and once in the metal.

It wouldn't have made any difference if I had done the math in shekels, gold didn't increase by 70% pa over three years, you were simply wrong and you should have the good manners to say whoops I made a mistake.

I didn't have a shot at you or try to be smarmy, I simply pointed out your error without embelishments.


Wonder why genx calculated this in USD whilst calculating a property investor's gain in AUD here?
http://australianpropertyforum.com/single/?p=8305419&t=9514611

Depending on which date you took the exchange rate, it was as low as 66c in Jan 2009 where today its over 103c
genx, can you do the housing calculation again in USD and see if it looks more similar to to your gold calculations?

Like peter, I suspect it was all due to the AUD getting stronger against the USD.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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genX
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Quote:
 
If you are buying gold in $USD as an Australian spending money in Australia, then you are hedging twice, once in the currency and once in the metal.

First of all, I haven't bought the gold yet, I am planning on buying the gold. And yes, when I buy the gold, in Australia, I will be hedging both against inflation and the AUD.

Quote:
 
It wouldn't have made any difference if I had done the math in shekels, gold didn't increase by 70% pa over three years, you were simply wrong and you should have the good manners to say whoops I made a mistake.

Gold didn't increase priced in AUD terms over three years. You are correct. However, I never said it did. I didn't specify the currency in my original post. Woops, I made a mistake.

Quote:
 

I didn't have a shot at you or try to be smarmy, I simply pointed out your error without embelishments.

You embellished my error with your choice of currency. .... I'll stop pushing your buttons now ...

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