Hyperinflation and Property Investment
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george.shaw
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Providing you are near certain of getting the rent - settled families with secure jobs not likely to move - nurses, gardai, teachers. etc would be essential or you have a secure steady income yourself.
The report below is very good re hyperinflation.
Is overly bearish even for me but best to consider all scenarios.
Think this is possible in US but less likely in the EU and with the Euro.
Best to hope for the best but be prepared for a less benign scenario.
Hyperinflation Special Report
Excerpt: Real estate also would provide a basic hedge, but it lacks the portability and liquidity of gold.
http://www.shadowstats.com/article/hyperinflation
The report below is very good re hyperinflation.
Is overly bearish even for me but best to consider all scenarios.
Think this is possible in US but less likely in the EU and with the Euro.
Best to hope for the best but be prepared for a less benign scenario.
Hyperinflation Special Report
Excerpt: Real estate also would provide a basic hedge, but it lacks the portability and liquidity of gold.
http://www.shadowstats.com/article/hyperinflation
Real estate has some elements which can prove an effective hedge against rampant inflation.
One would be using a debt to fund the purchase of your investment property. If you can lock in a fixed rate for a long period, and if inflation is high, a lot of your debt will be effectively paid off by inflation.
Also, it is likely that if inflation is high, rental incomes should rise in correlation to the inflationary rise. Also in inflationary environments, people may choose to rent, instead of buying their home, as interest rates would be higher. This could price a lot of people aiming to buy a house out of the market, hence improving the strength of the rental market.
One would be using a debt to fund the purchase of your investment property. If you can lock in a fixed rate for a long period, and if inflation is high, a lot of your debt will be effectively paid off by inflation.
Also, it is likely that if inflation is high, rental incomes should rise in correlation to the inflationary rise. Also in inflationary environments, people may choose to rent, instead of buying their home, as interest rates would be higher. This could price a lot of people aiming to buy a house out of the market, hence improving the strength of the rental market.
The gold argument for staving off inflation is a bit flawed in my opinion. Its akin to locking yourself in a storm shelter and feeling safe and unaffected buy the said storm. But there comes the time to emerge from the shelter back into the relevant currency from which you have come out of to get into the gold in the first place. Perhaps €'s were used to buy gold priced in $'s. This introduces an exchange rate risk, as you will inevitably be moving back into your base € currency to trade your everyday necessities. But firstly you'll have to speculate that the $/€ rate is not going to be much different than when you got into gold in the first place. If the currency is exposed to hyperinflation , does it not follow that when it comes time to realise your gold back to cash, that cash may have less buying power anyways. It does not necessarily equate that the price of gold will have continued to rise along with the inflationary effects on the underlying currencies.
Gold hit a spike in 1980 at somewhere around $850 an ounce. If you adjust for inflation to 2009 it should be somewhere in the region of $2178 an ounce. That $850 price was achived in a global crisis ( Soviet Invasion of Afganistan & Iran/Iraq war ). It dropped back fairly quickly once it was realised that the end of the world wasn't nigh. We are already well into a global crisis and the current gold price is $938 an ounce. If thats calculated adjusted back to 1980 then that would be a price of $316.23 same as it was in 2000. Therefore if you put your $316 in in 1980 which could buy a lot( average car price in US was $7,574) and sold in 2000 (average car price in US was $20,355) . You would need a lot more of you gold to make up the inflationary gap in 2000. Factor in the exchange rate ( Euro didn't exist , but lets use Sterling) which the high in 1980 for $/£ was 1 pound to $2.44. $316 = £129. at the end of 2000 the rate was 1 pound to $1.44. $316 = £219.
Today $316 will fetch you £222.
Todays gold price $938 will fetch you £661. However I believe this an already top heavy speculative bubble that may go on a bit but ultimately fall back once it is realised that the end of the world isn't nigh. You might make a few bob in the short to medium term, but as a long term safe bet to stave off inflation, I think it will fall back much like what occured in 1980 - 1985 period. Meanwhile all the FED money will have worked its way through and prices will have inflated whilst the Gold prices silently drop off.
The whole US/Global approach of injecting trillions into the system is being done on purpose so as to cause rapid inflation, which will make a risky lent €350,000 mortgage debt look like a medimu sized personal loan in 5 years time. The Global problem is a debt problem, and whats the best way to deal with this?..Manufactured Inflation. Yes investments and cash will suffer as this inflation will erode wealth and gains, but the re-adjustment of the debt values will bring us back to a point where it can all start again.
So as the what OP alluded to , I think that property will recover quite quickly and that inflation and the subsequent wage hikes demanded will allow banks to easily lend 2-3 times these inflated salaries to purchase a property of similar values to the near height of the previous boom (rather than the 6-7 times salary madness). It may take 3-5 years to be back at the level, bearing in mind that pent up demand will ease into the market in all but the most "middle of nowhere" housing estates. There is no new supply worth talking about coming into the Irish housing market at this point, but people are people and most will ultimately settle down to have families and need housing.
To the ordinary consumer gold is useless(jewelry & microchips aside), you can't live in Gold and Tescos don't accept it yet for your weekly shop, however housing is always useful, even when its overpriced or undervalued.
Gold hit a spike in 1980 at somewhere around $850 an ounce. If you adjust for inflation to 2009 it should be somewhere in the region of $2178 an ounce. That $850 price was achived in a global crisis ( Soviet Invasion of Afganistan & Iran/Iraq war ). It dropped back fairly quickly once it was realised that the end of the world wasn't nigh. We are already well into a global crisis and the current gold price is $938 an ounce. If thats calculated adjusted back to 1980 then that would be a price of $316.23 same as it was in 2000. Therefore if you put your $316 in in 1980 which could buy a lot( average car price in US was $7,574) and sold in 2000 (average car price in US was $20,355) . You would need a lot more of you gold to make up the inflationary gap in 2000. Factor in the exchange rate ( Euro didn't exist , but lets use Sterling) which the high in 1980 for $/£ was 1 pound to $2.44. $316 = £129. at the end of 2000 the rate was 1 pound to $1.44. $316 = £219.
Today $316 will fetch you £222.
Todays gold price $938 will fetch you £661. However I believe this an already top heavy speculative bubble that may go on a bit but ultimately fall back once it is realised that the end of the world isn't nigh. You might make a few bob in the short to medium term, but as a long term safe bet to stave off inflation, I think it will fall back much like what occured in 1980 - 1985 period. Meanwhile all the FED money will have worked its way through and prices will have inflated whilst the Gold prices silently drop off.
The whole US/Global approach of injecting trillions into the system is being done on purpose so as to cause rapid inflation, which will make a risky lent €350,000 mortgage debt look like a medimu sized personal loan in 5 years time. The Global problem is a debt problem, and whats the best way to deal with this?..Manufactured Inflation. Yes investments and cash will suffer as this inflation will erode wealth and gains, but the re-adjustment of the debt values will bring us back to a point where it can all start again.
So as the what OP alluded to , I think that property will recover quite quickly and that inflation and the subsequent wage hikes demanded will allow banks to easily lend 2-3 times these inflated salaries to purchase a property of similar values to the near height of the previous boom (rather than the 6-7 times salary madness). It may take 3-5 years to be back at the level, bearing in mind that pent up demand will ease into the market in all but the most "middle of nowhere" housing estates. There is no new supply worth talking about coming into the Irish housing market at this point, but people are people and most will ultimately settle down to have families and need housing.
To the ordinary consumer gold is useless(jewelry & microchips aside), you can't live in Gold and Tescos don't accept it yet for your weekly shop, however housing is always useful, even when its overpriced or undervalued.
george.shaw
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Errr . . . there are some serious misapprehensions here.
Similar assertions were made on and rebutted this thread http://www.askaboutmoney.com/showthread.php?t=100972&highlight=GOLD
Gold is a universal currency (owned by central banks and traded off FX desks in investment banks internationally) and has been rising in all paper currencies in the world - including the US dollar which is the strongest currency in the world in recent months.
[broken link removed]
Similar arguments were made a year ago and UK investors who listened to such arguments have lost more than 40% as gold was up by more than 40% in sterling terms last year.
Chinese, Indian, English or Irish investors do not and should not focus solely on the US dollar price of gold - they pay in local currency and thus should focus on the investment in local currency terms.
Gold is not "priced in dollars" as many uninformed observers continually say.
It is just that the COMEX spot and futures price is in US dollars and this is the most commonly quoted price in the world as seen in newspapers every day. But bullion dealers in the UK, Germany, Switzerland and internationally quote gold in local currencies and get paid in local currencies.
To the "ordinary consumer" gold may be "useless" but to large investors, hedge funds and central banks it is increasingly important in order to hedge against debasement of paper currencies through a use of the printing presses internationally on an unprecedented scale.
The FT, Wall Street Journal and Bloomberg all reported this at the weekend:
China to Boost Commodity and Gold Imports to Build Stockpiles
http://www.bloomberg.com/apps/news?pid=20601012&sid=ah9u8MmNxQGI&refer=commodities
China should invest its foreign exchange reserves in gold and copper, rather than in U.S. Treasuries to seek higher returns, Fu Jun, vice chairman of All-China Federation of Industry & Commerce, said at the congress today.
“We don’t need to buy more Treasuries as the returns are low, whereas if China buy copper and gold, the annual returns could be as high as 10 percent,” Fu said.
Hedge fund investors turn to gold
http://www.ft.com/cms/s/0/37fcba70-0c0a-11de-b87d-0000779fd2ac.html?nclick_check=1
Bearish Big Investors Catch Gold Bug
http://online.wsj.com/article/SB123655584569665995.html?
"Large investors, including some who anticipated troubles for the housing and financial sectors, have been buying gold, concerned that moves by governments to shovel money at problem areas could cripple leading currencies."
We are all subject to currency risk now - whether that be from the dollar, euro, or the pound and that is why a diversification into gold is important in these unprecedented times.
Similar assertions were made on and rebutted this thread http://www.askaboutmoney.com/showthread.php?t=100972&highlight=GOLD
Gold is a universal currency (owned by central banks and traded off FX desks in investment banks internationally) and has been rising in all paper currencies in the world - including the US dollar which is the strongest currency in the world in recent months.
[broken link removed]
Similar arguments were made a year ago and UK investors who listened to such arguments have lost more than 40% as gold was up by more than 40% in sterling terms last year.
Chinese, Indian, English or Irish investors do not and should not focus solely on the US dollar price of gold - they pay in local currency and thus should focus on the investment in local currency terms.
Gold is not "priced in dollars" as many uninformed observers continually say.
It is just that the COMEX spot and futures price is in US dollars and this is the most commonly quoted price in the world as seen in newspapers every day. But bullion dealers in the UK, Germany, Switzerland and internationally quote gold in local currencies and get paid in local currencies.
To the "ordinary consumer" gold may be "useless" but to large investors, hedge funds and central banks it is increasingly important in order to hedge against debasement of paper currencies through a use of the printing presses internationally on an unprecedented scale.
The FT, Wall Street Journal and Bloomberg all reported this at the weekend:
China to Boost Commodity and Gold Imports to Build Stockpiles
http://www.bloomberg.com/apps/news?pid=20601012&sid=ah9u8MmNxQGI&refer=commodities
China should invest its foreign exchange reserves in gold and copper, rather than in U.S. Treasuries to seek higher returns, Fu Jun, vice chairman of All-China Federation of Industry & Commerce, said at the congress today.
“We don’t need to buy more Treasuries as the returns are low, whereas if China buy copper and gold, the annual returns could be as high as 10 percent,” Fu said.
Hedge fund investors turn to gold
http://www.ft.com/cms/s/0/37fcba70-0c0a-11de-b87d-0000779fd2ac.html?nclick_check=1
Bearish Big Investors Catch Gold Bug
http://online.wsj.com/article/SB123655584569665995.html?
"Large investors, including some who anticipated troubles for the housing and financial sectors, have been buying gold, concerned that moves by governments to shovel money at problem areas could cripple leading currencies."
We are all subject to currency risk now - whether that be from the dollar, euro, or the pound and that is why a diversification into gold is important in these unprecedented times.
Getting back to the OC's question (why does nearly every post go back to the gold debate!! 
);
It is fair to assert that rental income can rise with inflation as the demand for housing (on a global scale anyway) will always be there. People always need shelter, and the global population is growing all the time.
Jason Hartman has interesting views on property and inflation. Worth checking out - www.jasonhartman.com
);It is fair to assert that rental income can rise with inflation as the demand for housing (on a global scale anyway) will always be there. People always need shelter, and the global population is growing all the time.
Jason Hartman has interesting views on property and inflation. Worth checking out - www.jasonhartman.com
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Buffett on cnbc today: A question on gold.
I want to get to a question that came from an investment club of seventh and eighth graders who invest $1 million in fake money every year. This is the Grizzell Middle School Investment Club in Dublin, Ohio, and the question is, where do you think gold will be in five years and should that be a part of value investing?
BUFFETT: I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola will be making money, and I think Wells Fargo will be making a lot of money and there will be a lot--and it's a lot--it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that. The idea of digging something up out of the ground, you know, in South Africa or someplace and then transporting it to the United States and putting into the ground, you know, in the Federal Reserve of New York, does not strike me as a terrific asset.
I want to get to a question that came from an investment club of seventh and eighth graders who invest $1 million in fake money every year. This is the Grizzell Middle School Investment Club in Dublin, Ohio, and the question is, where do you think gold will be in five years and should that be a part of value investing?
BUFFETT: I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola will be making money, and I think Wells Fargo will be making a lot of money and there will be a lot--and it's a lot--it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that. The idea of digging something up out of the ground, you know, in South Africa or someplace and then transporting it to the United States and putting into the ground, you know, in the Federal Reserve of New York, does not strike me as a terrific asset.
Couldnt agree more. To me it makes a lot of sense. Inflation is going to be a BIG problem.
Dare i say it but now is the time to pick up a property bargain or to be seriously planning your strategy/have your homework done.
I am seriously looking into it. I avoided the speculative bubble we just had. There are serious bargains appearing and you have the power to bargain these guys down.
The time to buy do is before the inflation sets in....my gut feeling is within the next 6-12 months.
I am talking very long term investing here.
Property can protect you in different ways to gold. Unlike gold, you can use someone else's money (the bank) to purchase the majority of the investment. Also unlike gold, property can be an income producing investment. You are not speculating on appreciation.
The key challenge (extremely difficult at the moment?) is to locking in low, fixed rate, long term debt on property in a non-bubble market.
The debt gets reduced in two ways. High inflation can pay off your debt, while the rent income passively pays off you debt.
The key challenge (extremely difficult at the moment?) is to locking in low, fixed rate, long term debt on property in a non-bubble market.
The debt gets reduced in two ways. High inflation can pay off your debt, while the rent income passively pays off you debt.
george.shaw
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Property can be income producing and can be income losing if cannot get tenants in a massive recession of depression and unemployment at 15%+.
Commercial property likely to be highly problematic but residential may be good. Location, location and location will be key and getting good tenants. Security will also be key and quality gated communities and communities/ areas with less crime will be sought after.
Central banks own gold passively for the long term and they are not "speculating" on appreciation.
It is not an "either or", "black or white" simplistic solution - "property good, gold bad" or vice versa. Both are essential and have different characteristics and are actually very complimentary.
Howard Ruff is an acknowledged expert on stagflation and hyperinflation and he favours gold, silver, real estate and hard tangible assets.
Can read his book free online here. Don't agree with all in it but is very good and thought provoking:
Safely Prosperous Or Really Rich: Choosing Your Personal Financial ... - Google Books Result
by Howard Ruff - 2004 - Business & Economics - 288 pages
Real estate is another obvious choice — all kinds of real estate, even though in normal times it varies a lot by locality or region. ...
http://books.google.ie/books?id=O_l...X&oi=book_result&resnum=1&ct=result#PPA202,M1
Commercial property likely to be highly problematic but residential may be good. Location, location and location will be key and getting good tenants. Security will also be key and quality gated communities and communities/ areas with less crime will be sought after.
Central banks own gold passively for the long term and they are not "speculating" on appreciation.
It is not an "either or", "black or white" simplistic solution - "property good, gold bad" or vice versa. Both are essential and have different characteristics and are actually very complimentary.
Howard Ruff is an acknowledged expert on stagflation and hyperinflation and he favours gold, silver, real estate and hard tangible assets.
Can read his book free online here. Don't agree with all in it but is very good and thought provoking:
Safely Prosperous Or Really Rich: Choosing Your Personal Financial ... - Google Books Result
by Howard Ruff - 2004 - Business & Economics - 288 pages
Real estate is another obvious choice — all kinds of real estate, even though in normal times it varies a lot by locality or region. ...
http://books.google.ie/books?id=O_l...X&oi=book_result&resnum=1&ct=result#PPA202,M1
$897 george......
Ah safe havens.....
Thats a dollar for every link you posted to date hawking gold to date.
We get your gold stance.
No need to turn every thread into a gold thread. The broken record has been heard by everyone at this point.
You like gold - good for you - now lets move along....
Ah safe havens.....
Thats a dollar for every link you posted to date hawking gold to date.
We get your gold stance.
No need to turn every thread into a gold thread. The broken record has been heard by everyone at this point.
You like gold - good for you - now lets move along....
george.shaw
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LOL Cancan!
Gold could fall to $800 or $850/oz and likely still in bull market.
Besides, dollar price is irrelevant to me as I earn my income in euros and have bought in gold and property in euros through my pension.
Thus, like all pension holders I am up 40% from day one and Euro gold is up significantly since I bought and is up more than 10% since the start of the year - unlike property, equities and nearly every other asset class.
Unfortunately, the Euro is set to come under serious pressure due to European banks massive exposure to the Eastern Europe property meltdown. Even the very pro Euro Guardian is warning:
http://www.guardian.co.uk/business/2009/mar/08/currencies-credit-crunch
[broken link removed]
Never hawked anything - simply advocated prudent diversification and passionately believe gold should be part of that.
Unlike you I do not feel the need to continually and inaccurately bash one asset class.
Diversify.
Gold could fall to $800 or $850/oz and likely still in bull market.
Besides, dollar price is irrelevant to me as I earn my income in euros and have bought in gold and property in euros through my pension.
Thus, like all pension holders I am up 40% from day one and Euro gold is up significantly since I bought and is up more than 10% since the start of the year - unlike property, equities and nearly every other asset class.
Unfortunately, the Euro is set to come under serious pressure due to European banks massive exposure to the Eastern Europe property meltdown. Even the very pro Euro Guardian is warning:
http://www.guardian.co.uk/business/2009/mar/08/currencies-credit-crunch
[broken link removed]
Never hawked anything - simply advocated prudent diversification and passionately believe gold should be part of that.
Unlike you I do not feel the need to continually and inaccurately bash one asset class.
Diversify.
Balance george.
People reading might get the wrong impression.
You would be up three times that with a reverse triple etf on the market.
Just because you are up does not mean you know what you are doing, as plenty of people realised recently.
At what point are you going to realise your gain btw - what's the exit strategy?
You do realise the currency you are buying in is being eroded away, so while you think you are up one amount, the underlying currency trade has you down in another.
Just by converting your euros to dollars in the last year, you could have realised the same gain, without the crazy fees, and shady dealers.
People reading might get the wrong impression.
You would be up three times that with a reverse triple etf on the market.
Just because you are up does not mean you know what you are doing, as plenty of people realised recently.
At what point are you going to realise your gain btw - what's the exit strategy?
You do realise the currency you are buying in is being eroded away, so while you think you are up one amount, the underlying currency trade has you down in another.
Just by converting your euros to dollars in the last year, you could have realised the same gain, without the crazy fees, and shady dealers.
george.shaw
Registered User
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Silly Billies !
Can't handle the truth and the facts presented.
A real case of attacking the man and not the ball here lads.
See a recent quote by you Smiley:
"yes, it means he is still holding the shares....as far as i understand it.
He wont reveal which companies....he had to write the values down due to the dilution from the government guarantee.
It is a VERY positive development. VERY positive.
If the most successful investor in the world bought shares in our banks (and hasnt flogged them) it is fantastic news. "
What commission are you on from Irish stockbrokers or banks to peddle Irish bank shares? Not the safest investments in the world now Smiley especially as they look set to be nationalised.
Ok for you and others to be positive on equities, Irish equities and Irish bank shares.
Not ok for me to advocate diversifying into gold.
Hmmm . . . bit unfair that.
Lets try and keep on the topic that the person who started the thread asked and not engage in personal attacks.
Really is incredible that we have the biggest financial and economic crisis the world has seen (possibly ever) and you lads can't bring yourselves to say that yes possibly gold might be worthwhile having a small allocation in.
No wonder many people in this country have lost a fortune - even when confronted with the facts they still don't get it !
Can't handle the truth and the facts presented.
A real case of attacking the man and not the ball here lads.
See a recent quote by you Smiley:
"yes, it means he is still holding the shares....as far as i understand it.
He wont reveal which companies....he had to write the values down due to the dilution from the government guarantee.
It is a VERY positive development. VERY positive.
If the most successful investor in the world bought shares in our banks (and hasnt flogged them) it is fantastic news. "
What commission are you on from Irish stockbrokers or banks to peddle Irish bank shares? Not the safest investments in the world now Smiley especially as they look set to be nationalised.
Ok for you and others to be positive on equities, Irish equities and Irish bank shares.
Not ok for me to advocate diversifying into gold.
Hmmm . . . bit unfair that.
Lets try and keep on the topic that the person who started the thread asked and not engage in personal attacks.
Really is incredible that we have the biggest financial and economic crisis the world has seen (possibly ever) and you lads can't bring yourselves to say that yes possibly gold might be worthwhile having a small allocation in.
No wonder many people in this country have lost a fortune - even when confronted with the facts they still don't get it !
If your allocation of gold speak was relative to the allocation of it you recommend to hold in a portfolio, I think people would not have a problem.
But hijacking every thread with gold speak gets repetitive.
Your "facts" are just links you agree with. I could post 897 links saying the opposite if that would help.
But hijacking every thread with gold speak gets repetitive.
Your "facts" are just links you agree with. I could post 897 links saying the opposite if that would help.
george.shaw
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Errr . . . I have not "hijacked" any thread Cancan.
Nor have I ever started a thread relating to gold.
I have merely reponded to other peoples comments and questions.
Would not have to comment so much if there were not so many inaccuracies and misconceptions re gold.
A little knowledge is a dangerous thing.
Suggest you re read this thread and others and you will see that other contributors have frequently thanked me for my comments/ responses.
Enjoy your "reverse triple ETF"!?! with sugar on top and other leveraged speculations but not for me as are extremely high risk and belong in the casino.
Might as well just go and roll the dice.
Passive long term asset allocation is a slightly more conservative, sensible and prudent strategy in these most uncertain of financial and economic times.
Nor have I ever started a thread relating to gold.
I have merely reponded to other peoples comments and questions.
Would not have to comment so much if there were not so many inaccuracies and misconceptions re gold.
A little knowledge is a dangerous thing.
Suggest you re read this thread and others and you will see that other contributors have frequently thanked me for my comments/ responses.
Enjoy your "reverse triple ETF"!?! with sugar on top and other leveraged speculations but not for me as are extremely high risk and belong in the casino.
Might as well just go and roll the dice.
Passive long term asset allocation is a slightly more conservative, sensible and prudent strategy in these most uncertain of financial and economic times.