DeepLurker Posted July 11, 2011 Share Posted July 11, 2011 Why not just buy a load of gold? No counter party risk, like fiat savings in the bank or overpriced property, and a guaranteed winner with the way things currently are. ... because some of us just want to have a home, we don't have ambitions of becoming the next Auric Goldfinger and make loads of $$$$$? Quote Link to comment Share on other sites More sharing options...
inflating Posted July 11, 2011 Share Posted July 11, 2011 What make me wonder though is why the capitulating bears feel the overwhelming urge to tell other HPC posters of their decision to buy ? If I made up my mind to buy a house I wouldn't give a damn what the posters on here thought about it since it would be my decision and nothing to do with HPC. So what is the logic behind it then? Do these bears seek affirmation they have done the right thing? Do these bears actually work in very quiet EA offices and are trying to get business through the door? It is one of life's mysteries to me. Probably affirmation and reassurance in some cases, in others perhaps established bear posters reckon they have a responsibility to their forum "following" to announce they have changed to bull or have just bought a place Quote Link to comment Share on other sites More sharing options...
General Congreve Posted July 11, 2011 Share Posted July 11, 2011 I wish I had confidence to buy more gold instead of sell it all last week to buy a house, as even my NS&I index linked certs which I instructed to be sold today have not kept up with real inflation IMHO and the inflation that must be coming given the devaluation of the pound. Gold is screaming bubble to me, and there is hassle with ETCs or various gold accounts, when Lehman collapsed my silver ETC was frozen because it was backed by AIG. My Icesave account blew up. Physical gold is a PITA in my eyes. Had I put all my funds into it I would have done much better up to now, but it seems in more of a bubble to me than housing. I can live in a house, run businesses from its outbuildings, rent out bits for holiday accommodation, and do things with land, but I can't do much with gold. That is what has stopped me putting more than a small amount into it for long periods, although I held short term positions worth up to 30% of net wealth at various times over the last few years. I am as the poster above says, scared stiff of losing my hard won wealth. Buildings and land have a huge appeal to me in this respect. I'm buying because I'm more scared of the alternatives to be honest. I think on this particular house I'm exposed to about 10% drop in nominal terms. I could quite easily lose much more with gold I feel. I see, you've been in gold and silver before. Of course, yes, electronic gold, ETC's, ETF's, essentially paper gold, are not worth the risk and you have been at the sharp end with Lehman on that score. There will be much more of that to come in the future. Yes, physical gold has to be secured somewhere. This may involve security deposit boxes, safes, even a bit of midnight gardening! However, the effort will be worth it not to see your wealth vapourise in an Icesave-style bust - I got my money out of there 2 days before - but thanks go out ot Gordo for returning me my outstanding interest at tax payers expense. Like I said in my previous post, you're not taking a HUGE risk, but it is still a fairly decent risk, because it hinges on you keeping your job in what will soon be a depression IMO. IMO the only thing bubblicous about gold is all the bubble nonsense talk about it. Gold is millennia-old currency and still today, de facto currency, so can only float upwards as the dollar, euro, pound etc. sink, as they are prone to do, either via more money printing devaluing these currencies and/or through economic collapse leading to a devaluation of these currencies. It is not gold in the bubble, but debt-backed fiat currencies, gold is not so much rising (although it is in part as people rush to it for safety) as fiat currencies are falling. So, I'm interested as to why you think gold is a bubble set to burst? Quote Link to comment Share on other sites More sharing options...
General Congreve Posted July 11, 2011 Share Posted July 11, 2011 ... because some of us just want to have a home, we don't have ambitions of becoming the next Auric Goldfinger and make loads of $$$$$? It's not just about getting as positive return on investment. Of course, that will be a welcome bonus, but the main reason for holding gold is not to lose your shirt. I too, want to have a (bigger) home, that I can raise a family in, but I realise the best way to go about that right now, isn't to put up cash as collateral and get myself a big mortgage that is prey to interest rate rises in the future. The best way is to put my cash in gold, watch it grow, while at the same time watching house prices slide. When the time is right, BLAM, BLAM!!! The old one two! Gold up + house prices down = Much cheaper house. Quote Link to comment Share on other sites More sharing options...
General Congreve Posted July 11, 2011 Share Posted July 11, 2011 its not odd at all, the whole purpose of countertrend moves is to destroy the smug certainty of those banking on the trend, alot of bears on here thought they could sit back, wait for an identical fall in one decline like the 90s and laugh, the market is doing its job of teaching them a lesson thats its not that easy. A bear trap(if thats what it is) has to do the same damage to the bears as the 90s bull trap did to the bulls, its job is to foster the same level of uncertainty of non falling prices as the actual bull market, often it creates even more certainty than the bull market which its doing with aplomb (the fact the reasoning is completely different to 2007 is immaterial, its the emotion thats important). I think its just people being taught a lesson that their is never certainty "Markets can stay irrational longer than you can stay solvent" - Someone famous once said that and in the case of our resident capitulators, I think he was right. Like I said though, a house with a modest mortgage might just still be a better bet than cash. Quote Link to comment Share on other sites More sharing options...
sell2rent Posted July 11, 2011 Author Share Posted July 11, 2011 (edited) You're not taking a ridiculous risk in terms of keeping up the mortgage payments if you can afford for interest rates to get to 25%, but there is still risk. Interest rates hit about 20% in the early 80's and now is worse than the 70's that resulted in that early 80's rate. Also there is the counter party risk of losing your job and losing the lot. Not to mention very likely capital loss. Why not just buy a load of gold? No counter party risk, like fiat savings in the bank or overpriced property, and a guaranteed winner with the way things currently are. Anyway, could be worse you could have a 5x earnings mortgage etc. The volatility of gold is of concern to me (it could just as well crash like oil did a few years ago), as is its massive bull run, how will you know when to exit? Every man and his dog want gold now, the press have picked up the mania, yet the view on housing is now quite bearish and there are deals to be had. Wasn't the time to buy gold over 5 years ago and now be thinking of exiting? Good luck in timing the peak. Historically if you mistimed the last gold bubble you still wouldn't have recovered your value when priced in other assets. In that context it looks like dubious inflation protection. How do you have zero counterparty risk? Surely you're relying on other people to assay, store, transport, deal, insure etc? My end game was all about buying a house again, but I'm not wedded to one asset class and try to switch when it is unfashionable. So far it seems to be working well for me. The only circumstances under which I would lose my job (since I am self employed) would be ill health (insured) and misconduct as my customer base is long term and about as assured as it could be and growing, one of those professions people will always need. As long as I can use a computer I can do more work on a second job which I don't presently have the time to do much with yet there is a demand for my services as I fill a specialist niche. Nothing is assured, but it is risk aversion driving me back towards housing. One of my metrics was when renting became more expensive than the interest on an equivalent house on new borrowing (with LTV correction to 100% for comparison purposes of course). This is now the case in my situation with 2.59% interest (until the MPC get another Sentance or perhaps 4 of them, or Merv grows a pair, but he's admitted he is targeting growth not inflation so I may as well play along). Edited July 11, 2011 by sell2rent Quote Link to comment Share on other sites More sharing options...
General Congreve Posted July 11, 2011 Share Posted July 11, 2011 (edited) The volatility of gold is of concern to me (it could just as well crash like oil did a few years ago), as is its massive bull run, how will you know when to exit? Every man and his dog want gold now, the press have picked up the mania, yet the view on housing is now quite bearish and there are deals to be had. Wasn't the time to buy gold over 5 years ago and now be thinking of exiting? Good luck in timing the peak. Historically if you mistimed the last gold bubble you still wouldn't have made your recovered your value when priced in other assets. In that context it looks like dubious inflation protection. How do you have zero counterparty risk? Surely you're relying on other people to assay, store, transport, deal, insure etc? My end game was all about buying a house again, but I'm not wedded to one asset class and try to switch when it is unfashionable. So far it seems to be working well for me. The only circumstances under which I would lose my job (since I am self employed) would be ill health (insured) and misconduct as my customer base is long term and about as assured as it could be and growing, one of those professions people will always need. As long as I can use a computer I can do more work on a second job which I don't presently have the time to do much with yet there is a demand for my services as I fill a specialist niche. Nothing is assured, but it is risk aversion driving me back towards housing. One of my metrics was when renting became more expensive than the interest on an equivalent house on new borrowing (with LTV correction to 100% for comparison purposes of course). This is now the case in my situation. Well, seems you've done your homework on the house front, and if you are self-employed in a niche industry, that is hopefully resistant to economic downturn, then you should fair OK. With regards to gold, the time to get out of housing and into gold was at its optimum point (to maximise financial returns from the two bull markets) in 2005, maybe that is what you are thinking of? Otherwise you might as well say the low in the early 2000's was actually the best time to get in as it was the lowest price. Who are all these people who want gold? I know of no one, bar one close friend who has followed the markets for a few years who has any, physical or paper. With the exception of him, it has never cropped up in conversation amongst friends or family. Hardly the bubble-like vibe that was felt with houses when every man and his dog in the office, BBQ's, parties, down the pub, was on about house prices. Where are all the gold investment programs? All I see is old peak market re-runs of 'Homes under the Hammer' on the TV. Sure there's the odd ad out there for BUYING it from people. But paying suckers below market rates for a valuable investment is the polar opposite to marketing and flogging gold by the bucket load to the unwashed masses. Seems the masses are only too happy to get rid of the stuff in return for a few bits of paper - no doubt to help pay a little bit of their share off the burgeoning debt bubble! The press have hardly picked up the mania. I have seen a couple of foot notes about it in the Sunday Times Money Section in the past year (I read the old man's copy occasionally) and they called it a bubble! Whereas just a few weeks back they were announcing it was time to get back into BTL on the front page Those that mistimed the last gold bull run were those piling in at the last minute. I am sitting on near 50% gains so far, so there is plenty of wiggle room for me. Not that we are anywhere near the peak. The 1980's peak came about because Paul Volcker raised interest rates to 20% to quell rampant inflation and dished out the economic pain the US needed to get back on track after it left the gold standard. This was a temporary fix of course, we are now back to square one in infinitely worse shape, having shot all the bullets in the fight against sound money. Had Volcker not acted, gold would have usurped the dollar back then and it would have been the dollar holders who mistimed. While real interest rates are negative gold ALWAYS goes up, this is historical fact. With real inflation nearer 10% than 5%, can you really see Merv putting up interest rates 20-fold to 10%+ to quell inflation? He wont even budge by 0.25%. And he is talking of more QE. Even if rates are forced up by the markets (this is what QE stops) or voluntarily raised to these heights, what will happen is bank, housing and economic collapse. In this scenario the govt. will be forced to devalue it's currency to meet its obligations or the markets will sell the currency and do it for them. In this scenario the currency fails and gold soars, see Iceland for details - currency down 69% vs. Euro, gold up 259% in Krona. With nearly the whole world up to it's eyes in this debt morass, there can only be one way this will play out. A bubble? No. The closest thing to a sure fire winner that most of us will see in our lifetime? Yes. Counter party risk is minimal. If you buy from a reputable dealer, research your coins/bullion properly etc. then risks are minimal compared to most other asset classes, e.g. oil ETF, pension fund, shares etc. Anyway, I'm not saying you've made an appalling decision, now I know some more facts, but you are most definitely wrong on gold IMO. Be interesting to check back in a year or two to compare notes. Edited July 11, 2011 by General Congreve Quote Link to comment Share on other sites More sharing options...
123Jim Posted July 12, 2011 Share Posted July 12, 2011 What I found interesting was that if you value UK houses in dollars or many other currencies they are off by as much as US houses are off peak (about 30%). Additionally after 5 years waiting for a crash I am now thinking that whilst they may not pull it off, the government will try anything it can do to prevent significant nominal house price falls. They will do all they can to inflate their own debts away and try to keep interest rates as low as they can before a 2015 election. So many of my investment decisions that were theoretically good (eg selling housing, buying defensive stocks) have been thwarted by political interference. Another factor is that Scottish property has not participated fully in the rise in the prices over the last 30 years, although it has participated in the last boom more than the previous one where it looks almost flat throughout the English boom and bust. Mortgage is 40% loan to value, 15% to buy it, 25% to improve the remaining attached outbuildings. Mortgage is 1.25 times joint income in the last year, although my wife lost her job recently and we have no other debt. If I don't lose my job, I would struggle if interest rates reached 25%. These factors may or may not mitigate the stupid argument. I didn't expect or look overwhelming approval, but thought some may be interested in debating my change of heart. +1 here Of basically the same POV Consider UK property as our new gold standard Observe its price stability vs Sterling over the past 5 years compared with gold, commodities, currencies (excluding USD) In ounces of gold, silver, CHF, EUR, commodities ETFs, the risk in UK property (with a good deal) is starting to diminish. Sure I will still hold physical gold, silver, CHF, resource equities. Sterling and some ETF s, EUR will shortly be converted into 60-70% UK real estate here, with 30%-40% borrowed on a 3 year fix, which I might pay back with sold gold before 3 years Just have to secure the right property Quote Link to comment Share on other sites More sharing options...
MrFlibble Posted July 12, 2011 Share Posted July 12, 2011 Every man and his dog want gold now, the press have picked up the mania, yet the view on housing is now quite bearish and there are deals to be had. Surely you jest? The vibe is cash4gold at the minute with the media talking of bubbles and herding the Sheeple towards selling at what they believe is the top. Joe Sixpack is not buying Gold right now, people I have bought from recently have no idea what Gold even is, what it represents or why it has gone up so much, they think I'm somehow flipping it for a quick buck and cannot grasp why I'd want to hold it, despite the fact they have done very well out of holding it themselves. If in doubt ask your workmates how much Gold they own, when they look back at you like you're some sort of nutter you'll have your answer... Quote Link to comment Share on other sites More sharing options...
sleepwello'nights Posted July 12, 2011 Share Posted July 12, 2011 The only circumstances under which I would lose my job (since I am self employed) would be ill health (insured) and misconduct as my customer base is long term and about as assured as it could be and growing, one of those professions people will always need. are you a prostitute or a mercenary? Quote Link to comment Share on other sites More sharing options...
sell2rent Posted July 12, 2011 Author Share Posted July 12, 2011 The debate is reducing to gold vs housing, and that is the real question for many of us. I don't think owning gold is now the preserve of the tin hat/armageddon brigade, hence its massive rise in value, but it is nice that there is a divide of sentiment on gold and property because it makes a market. Should we look at average Scottish or UK house prices measured in ounces of gold and see how long you could be in a loss by being in one position or the other over previous cycles for each? I don't have the chart handy, but housing now looks very reasonable compared to 2006 measured in almost any currency or commodity except GBP I suspect? Quote Link to comment Share on other sites More sharing options...
sell2rent Posted July 12, 2011 Author Share Posted July 12, 2011 http://www.moneyweek.com/investments/property/gold-price-and-uk-house-prices-04909 Here we are. Green graph part way down the article. Scottish house prices measured in gold look like time to buy? Quote Link to comment Share on other sites More sharing options...
ccc Posted July 12, 2011 Share Posted July 12, 2011 As I have said numerous times before - this measuring of house prices in gold really is pretty pointless for 99% of people. Because for the vast majority in Scotland - they will earn in £, save in £, buy their house in £ - and pay their mortgage in £. Whilst comparing house prices here to gold or wheat or monkey nuts or gravel may be interesting - it really means very little. The amount if time people spend discussing it is totally disproportionate compared to it's relevance. IMO anyway. Quote Link to comment Share on other sites More sharing options...
sell2rent Posted July 12, 2011 Author Share Posted July 12, 2011 (edited) That is very true except a third of my income in the last year was in dollars, but gold has been the only asset class mentioned here as preferable to property which is why the debate narrowed down to it. Happy to widen the discussion to other asset classes, but all of them scare me as I said already. Edited July 12, 2011 by sell2rent Quote Link to comment Share on other sites More sharing options...
General Congreve Posted July 12, 2011 Share Posted July 12, 2011 As I have said numerous times before - this measuring of house prices in gold really is pretty pointless for 99% of people. Because for the vast majority in Scotland - they will earn in £, save in £, buy their house in £ - and pay their mortgage in £. Whilst comparing house prices here to gold or wheat or monkey nuts or gravel may be interesting - it really means very little. The amount if time people spend discussing it is totally disproportionate compared to it's relevance. IMO anyway. In this instance I'm inclined to agree. Housing might look like a good deal right now if purchased in gold. But because 99% are purchasing in fiat, which is suffering a squeeze both in its value vs. gold and in terms of peoples real disposable income thanks to inflation, then house prices, whether priced in gold or sterling, have much further to fall. Quote Link to comment Share on other sites More sharing options...
ccc Posted July 12, 2011 Share Posted July 12, 2011 That is very true except a third of my income in the last year was in dollars, but gold has been the only asset class mentioned here as preferable to property which is why the debate narrowed down to it. Happy to widen the discussion to other asset classes, but all of them scare me as I said already. Well their value change in $ may actually be worth calculating. Seeing as a good bit of your income was in that. In this instance I'm inclined to agree. Housing might look like a good deal right now if purchased in gold. But because 99% are purchasing in fiat, which is suffering a squeeze both in its value vs. gold and in terms of peoples real disposable income thanks to inflation, then house prices, whether priced in gold or sterling, have much further to fall. Yep - if you are in gold (Majority) then I totally see the point of tracking UK house prices in comparision to that. Just most people arent ! I get a feeling a bit of a freefall in UK propertly may just ne starting now. Just get that impression. The delusion from so many people just seems to have been used up. Breaking point perhaps ? Quote Link to comment Share on other sites More sharing options...
abroad Posted July 14, 2011 Share Posted July 14, 2011 (edited) We saw a place that we wanted to view around two-three weeks ago in the Highlands, priced at OO 180 and i think it needed about 30K worth of improvements before you could holiday letr/use it, it was on market for a week and when we tried to get a survey it had already had an offer that was accepted. I'd have bought it if I could have got 10% off that price. If I can see the right place in the right location now I'll buy it. I STR in 2003 and have saved up since then and would have covered the purchase price ourselves. Mortgage for improvements I just couldnt swallow so I wanted it for around 160 and could have done what was needed over 12 months. So you are not the only one who is not quite so rigid in staying out of the market Edited July 14, 2011 by abroad Quote Link to comment Share on other sites More sharing options...
sell2rent Posted September 27, 2011 Author Share Posted September 27, 2011 Nearly 2 months from moving, things are going well. Two bathrooms ripped out - I've learned to use a crowbar and am much fitter. Sheep are grazing the field. Workshop has been insulated and lined, studio floor sanded, lots of painting and work outside done before the winter. Plans being drawn up to make a nice lounge out of a 42 foot barn. Best of all I got out of stocks and gold in the nick of time it seems. I have no delusion I could promptly sell it anytime soon and quickly for what I paid, but then I could have lost in a few days in gold more than I hope to lose ever on this house, and am really enjoying having moved on and bought a place after 5 years of albeit very happy renting. Not having to worry about some financial institution nuking my cash is nice, as now I don't have any and owe £60k to the bank Quote Link to comment Share on other sites More sharing options...
sell2rent Posted August 13, 2013 Author Share Posted August 13, 2013 Yes, sorry, but you are stupid. Buying at the top of the dead cat bounce. This HPC pupil gets an ungraded exam paper. Things are on the verge of kicking off big time. Another year to 18 months and we will be living in a very different world. I am going to wish you luck though, because you are going to need tonnes of it, or at least a massive capital cushion you can afford to see go up in smoke. Having said that, if you don't have gold you may be better off putting your capital into an overpriced property, rather than seeing it vanish into thin air via inflation, devaluation or bank collapse. Two years on how have your predictions turned out? Policy interference in the market is what drove me to buying again. It seems to me that they will keep this market irrational long enough to shut out the majority of a whole generation or two from property ownership in many areas. I do not think that is a good thing, but I would rather be holding property than any other asset still, because the vested interests are still very powerful. Wonder how long they can keep it going? Quote Link to comment Share on other sites More sharing options...
suggs Posted August 23, 2013 Share Posted August 23, 2013 (edited) The interest rate time bomb will kill thousands who are clinging on with finger nails right now my guess another 5 years od dripping house prices going down very slowly till they bottom out in 2018 Edited August 23, 2013 by suggs Quote Link to comment Share on other sites More sharing options...
dances with sheeple Posted August 24, 2013 Share Posted August 24, 2013 Two years on how have your predictions turned out? Policy interference in the market is what drove me to buying again. It seems to me that they will keep this market irrational long enough to shut out the majority of a whole generation or two from property ownership in many areas. I do not think that is a good thing, but I would rather be holding property than any other asset still, because the vested interests are still very powerful. Wonder how long they can keep it going? Until the US tapers and/or raises rates? Quote Link to comment Share on other sites More sharing options...
dances with sheeple Posted August 24, 2013 Share Posted August 24, 2013 The interest rate time bomb will kill thousands who are clinging on with finger nails right now my guess another 5 years od dripping house prices going down very slowly till they bottom out in 2018 What if UK PTB lose control of interest rates, which they have done in the past? Quote Link to comment Share on other sites More sharing options...
sell2rent Posted March 3, 2014 Author Share Posted March 3, 2014 Thought I would update this. Had I held gold instead of a house, I would be sitting on about £200-250k losses since this thread began. Main threat now is Scottish independence, that is one major screw up I hadn't seen coming, I think it will be no and we will see a Scottish property boom afterwards. If yes, I'm screwed. Quote Link to comment Share on other sites More sharing options...
sleepwello'nights Posted March 3, 2014 Share Posted March 3, 2014 Thought I would update this. Had I held gold instead of a house, I would be sitting on about £200-250k losses since this thread began. Main threat now is Scottish independence, that is one major screw up I hadn't seen coming, I think it will be no and we will see a Scottish property boom afterwards. If yes, I'm screwed. ? I don't understand, what time periods are you using. Without looking at accurate charts gold prices rose from $200 oz in 2000 ish to $1800 oz in 2011 and then fell back to a low of $1100 in 2013, back up to $1300 or so now. I can't see how you would have lost so much holding gold, or has your house increased in price? Your original post was in 2011 and mentioned that you sold to rent 5 years earlier, I can't see how house prices outperformed gold in that time. Quote Link to comment Share on other sites More sharing options...
sell2rent Posted March 3, 2014 Author Share Posted March 3, 2014 Housing vs gold both priced in GBP since this thread started, as that is what the debate ended up being framed as. How often do people return to an old thread where a decision was made to discuss how it turned out? I always intended to, whether it turned out good or bad. It may yet turn out bad and I will update... Quote Link to comment Share on other sites More sharing options...
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