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House Price Crash Forum


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About ursamajor

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  1. Depends on the conditions stated in the mortgage. Most prohibit repayment within a period of time that is identical to any teaser rate. Forgive my naivity about the US but as I understood it teaser rates and subsequent re-sets were a big part of the recent problem over there? i.e. a lot of people were not taking out mortgages at a rate that would apply for the life of the mortgage. Also that in many states people are able to walk away from their mortgage without penalty (jingle mail I believe it's called?). Seems to me there are big problems on both sides of the pond. UM
  2. Credit creation can happen whether on a gold standard or not. In fact it was the Goldsmiths who started it when they decided to make more money by loaning out paper tickets representing other peoples gold! But there is a difference that becomes apparent in a time of crisis, typically bought on by the build up of too much debt and a subsequent loss of confidence. With a gold standard if you have a run on a bank then not all depositors can be repaid and some will lose their money. This happened in the 30's. Govmnt/CB's cannot stop this because, if people demand payment in gold, they may not have enough gold to cover the losses. However, on a fiat system govmnt/CB's can protect all deposits and effectively pre-empt a bank run by either borrowing more paper money, from future tax-receipts, or printing more money if no-one is prepared to lend. Debt default does not lead to destruction of the money created at the same time because that money is protected in this way. The ultimate consequence of complete depositor protection is of course inflation. The bigger the debt/credit bubble the higher the likely eventual resulting inflation once money velocity returns to normal. We've just had the mother of all credit bubbles so expect some pretty big inflation numbers down the line. That's what gold is signalling. Hyperinflation? Who knows but I wouldn't rule it out if the situation gets desperate enough and the CB has to start printing money just to cover current debt obligations, esp if UK debt is downgraded and servicing charges climb. We know the consequences of too much debt when on a gold standard (the great depression being the extreme example). We may soon find out the consequence when on fiat. Uncharted waters and all that.... UM
  3. Hi, any chance of creating an oil board on HPCF? We already have a gold and PM's board and, given the (likely) proximity of peak oil, there could be a lot of interest both from an investment standpoint and personal preparation. At the moment it's hard to know where to post on this subject. Thanks UM
  4. If you want very high leverage for a small amount of money you are prepared to lose then way-out-of-the-money call options may be best. IG Index deal in them I believe. UM
  5. I've gone for the etf CRUD. It is unleveraged, has low charges, and has a pretty good correlation with the oil price. The other, maybe complementary, approach is to load up on mid-cap oil explorers and developers. Small caps look very risky in the current financial climate whilst the majors have big issues with reserve growth. Examples of mid-caps traded on the UK market that I've gone for include Cairn, Dana, BG, Tullow and Soco. A basket of these takes out some of the single company risk and should give a leveraged play on rising oil. Obviously there is significant downside if oil continues to fall and stays low for years. Maybe 50:50 split between companies and underlying commodity (CRUD)? UM
  6. Hi Barry Be very careful with LOIL. LOIL is a twice leveraged form of CRUD, which itself tracks the oil price via the futures market (which means you are currently buying at a premium to spot because oil is dancing the contango). But the issue is not just with leverage. Look at how the moves in LOIL are calculated - as twice the % of any daily moves in the oil price. This has a rather unpleasent consequence for your wealth that only emerges if you try putting some actual numbers into a spreadsheet and watching what happens over time. Basically volatility erodes your wealth relative to CRUD. Simple example; Crude oil at $40, LOIL nominal price 6 Day 1; Crude falls 10% to $36 LOIL falls 20% to 4.8 Day 2; Crude rises 11.11% back to $40 LOIL rises 22.22% to 5.87 So although oil has returned to its initial value, LOIL has not. This effect will be very small on a daily basis but repeat the process enough times and you can see how it could be disastrous. LOIL may still be a good way to play a spike in oil prices but it should IMO be used as a short-term trading weapon (if at all) rather than a longer-term play. UM
  7. I agree platinum and palladium are rare, useful and valuable. But they are commodities not money. Valuable commodities that may well act as a better store of wealth than paper, but commodities nontheless. As you point out platinum is almost too rare and suffers from being harder to work than gold. But, apart from the metals' properties, the other reason it has to be gold is simply that it always has been. And in the end all forms of money are only good if they are recognised and trusted as such. And in that respect gold has heritage. The recent moves in gold vs commodities (including pt and pd) merely confirms this distinction. FWIW the commodity that is now absolute screaming value IMO is oil. But that's another story! UM
  8. The main one is that gold has all the qualities that make it perfect as money (rare with high value per unit weight, portable, uniform quality, divisible, durable, hard to fake etc). This was known thousands of years ago and still holds today. It is the reason that gold evolved as the predominant form of money instead of seashells or leaves or cows or anything else. In the absence or collapse of paper money it will likely once again become the default currency. UM
  9. It's not just other metals, gold has held up well against pretty much all commodities both soft and hard. Reinforces the view that gold is not traded primarily as a commodity but as a store of value/currency. IMO the arguments for holding gold are different from those for holding commodities.
  10. Tungsten has a similar density to gold. Almost impossible to forge coins using it (none have been recorded that I'm aware of) because of its hardness and dye-breaking properties. But I imagine a lump could be hidden within a bar quite easily. An advantage of coins? UM
  11. Even QE is a form of borrowing that has to be repaid in the future. UK govmnt can only continue to borrow money for as long as people are prepared to lend to it. It's not impossible that we will get to the stage where people no longer believe we can repay the debt through future earnings and bondholders demand higher returns or go on strike altogether. It all comes down to whether or not lenders believe we can grow our way out of the hole we are in. Ultimately it is a view on the productivity and competitiveness of UK plc. Even more so now that we are gradually losing the N Sea prop that rescued us in the 80's. If it is deemed we cannot repay our debts then we are left with 2 options; Actual printing of currency (as opposed to borrowing) - collapse in confidence, hyper-inflation. For more details google Zimbabwe. Default. UM
  12. Apologies, daiking, I should have read your question more carefully. As squonk sais the decision is then based on which currency you think will be weaker whilst you hold the gold. 6 months ago I would have unequivocably said sterling but the market seems to have woken up to UK problems and now it's a harder call. The euro zone is not without its own difficulties, strains between different economies (exemplified by north/south european divide) and recessionary winds. There's a good chance IMO of competitive devaluation of all major currencies so why not convert both your euros and pounds to gold? Or perhaps half of each if you really must keep some paper? UM
  13. Hi, It surprises me just how much confusion this causes. Bottom line you are buying gold not another currency. All that matters is how much the price of gold changes in your currency of interest. I live, earn, spend and trade gold in sterling. Therefore what happens to the $ or euro or Mongolian Togrog price of gold is of no consequnce to me whatever. Changing your money into a different currency before buying the gold and repeating the process on selling will simply incur more transaction costs so please don't bother. UM
  14. I think we need to be a little bit careful here when discussing interest payments. It's something that troubled me when I first watched the otherwise excellent 'money as debt' videos on youtube. The problem I have is that it is wrong to view interest payments + capital repayment as money coming out of a pool of just capital, This is because interest payments are part of the circulation of capital - you need to consider these payments as re-entering the economy (e.g. as employee wages, shareholder profits etc) as well as being payed by debtors. The total money stock does not have to grow to enable banks to charge interest. Inflation can continue for as long as the money supply is increased faster than it is repaid or defaulted on. All the inflation since WWII has happened because debt has not, on balance, been repaid but has instead increased to the point where about 97% of the money stock is debt-based. It's a sobering thought that if all debt was repaid house prices would drop to an average of little more than £5000. I'd hazard that's lower than even the most bearish prognosticators would assume possible! UM
  15. Hi id5 I'm amazed that 1980 sovs go for £150 at Spink auction when you can pick them up for less than £120 from Chards and probably cheaper on ebay with a bit of patience. Are you sure it's not the Spink catalogue price you are quoting - now that I would believe Otherwise I think we're on the same page wrt bullion vs numismatic and I agree staying clear of the modern shiny stuff is generally a good idea. I've never really understood why collectors like them - power of marketing I guess. For me, collection is about things that have historical interest and scarcity value as well as aesthetic appeal. But each to their own I guess. cheers um
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