20/20

eye1

A little perspective never hurts. We just don’t get enough.

Here are two charts worth viewing. The first shows how housing can turn into a national phenomenon, but not an international one, sometimes fueled by a common language which breeds a common media. Call it the CNN factor. Real estate values in the US, Britain and Australia (and Canada) have flitted in and out of bubble territory since Nine Eleven, while in Germany and Japan, housing has been a bust. In fact adjusted for inflation, homeowners in both those countries have made absolutely nothing on their ‘investments’ for almost 40 years.

It’s also quite easy to see that if you plot a moving average and a trend line of each country’s market and make the assumption they will eventually return to the mean, that prices have a long, long way yet to fall.

Fodder if you are dumb enough at the moment to be thinking about a 5/35 strategy.

House chart1

Now, to our fav metal. Gold of course had a bad week, shedding the most value in a month in the last few days. The reasons most often given were a new appetite for risk in the wake of the Dubai World mess (that could change again this week as a new bond defaults), and a resurgence in the US dollar.

Gold bugs claim the metal is money, or ‘private money’, which of course it is not. Gold is not a medium of exchange, which paper money is. That simply means you cannot exchange it widely for the necessities of life – gas, food, shelter or an iPhone. But as a commodity, it is a storehouse of wealth as is oil or corn, and subject to the same forces – with one addition. That’s human emotion, which makes gold more irrational, volatile and inherently more dangerous for average investors. That was shown in spades the last time gold hit an historic high, then spent 30 years trying to recover.

In any case, this chart should remind that it’s the fall of the US dollar, in which gold is denominated, more than an increase in the intrinsic value of the metal, which was behind the 2009 advance. If you happen to live in Euros or yen, the uptick in bullion was far less interesting than the dramatic rise in equity markets.

Gold-dollar1

120 comments ↓

#1 piccaso on 12.13.09 at 11:58 am

Where’s Canada on the chart?

#2 David Bakody on 12.13.09 at 12:03 pm

Good grafts …. as mentioned I believe we are all in a “Retribution” period or simply put, time to pay the piper. The rich and the famous have extracted the wealth out of the stimulus monies world wide. To-day governments will extract the remains from the working class to build up, the saving cash crops for the rich and powerful. The recent attack on bankers is just politics, these people plus the Wall/Bay Street gang are movers and shakers and governments they need them daily and we who may or may not vote are only needed for one day.

#3 JET on 12.13.09 at 12:05 pm

Picked up this tragically hilarious video from one of the comments in one of the G&M articles:

http://www.youtube.com/watch?v=vJtS9CuyuaU

(Shows how stupid a lot of people are, but there is some hope in the video – hint: old dudes playing chess).

#4 Adam on 12.13.09 at 12:16 pm

Garth is correct. Gold is not money. Gold used to be money. It may again become money.

As von Mises once declared: “Money is the most marketable of commodities.”

But before you throw away your gold in exchange for fiat paper, consider what would happen if, for example, the US had no gold in Fort Knox. What would the paper be worth? I can only speculate: somewhere between nothing and a few pennies.

#5 omg on 12.13.09 at 12:29 pm

That is a great graph showing the rise in house values in the UK and AU. My friends here in Victoria often point to the high housing prices in Italy, France and the UK in response to my suggestion Canada may be in a bubble.

#6 $fromA$ia ( o Y o ) on 12.13.09 at 12:41 pm

“with one addition…That’s human emotion, which makes gold more irrational, volatile and inherently more dangerous for average investors.”- Garth

Same frickin’ thing can be said about people that invest in real estate. (Human emotion) Those investers borrowed with a mortgage for several hundred thousand in fiat money.

You chose 1980, I knew it was comming…What do you think the odds are of hitting another 1980 buying gold today. 1980 translated in todays money is $2300 per troy ounce. We’re not there yet.

#7 $fromA$ia ( o Y o ) on 12.13.09 at 12:44 pm

Speaking of stimulous, you know printed money the government used not only to help the economy but also conveniently used to help prop up the housing market.

This is sick.

In a time when we should be saving, were actually lending more to high price tag homes.

That money should not be used for mortgages. Completely wreckless!!

#8 Nestor on 12.13.09 at 12:46 pm

“In any case, this chart should remind that it’s the fall of the US dollar, in which gold is denominated, more than an increase in the intrinsic value of the metal, which was behind the 2009 advance. If you happen to live in Euros or yen, the uptick in bullion was far less interesting than the dramatic rise in equity markets.”
_____________________________________________

You know this to be quite false. You should update your chart, it’s one month out of date. Gold has made new highs not only in USD, but in EURO, LOONIES, POUND STERLING, CHINESE YUAN, INDIAN RUPEES, YEN, SWISS FRANC….

Better yet, why don’t you put up a 10-year chart of gold in those currencies?? instead of one that is so myopic? Gold has been going up for the last 10 years. Quite Spectacularly i might add. Far better return in Gold than in stocks.

But let’s not confuse people with actual facts.

Gold 10-years ago, and today,
in various currencies:

252 USD/oz 1130
236 EURO/oz 787
382 AUZZIE$/oz 1221
157 GBP/oz 716
375 LOONIES/oz 1240
2092 YUAN/oz 8074
10900 RUPEE/oz 54700
26700 YEN/oz 104000
378 SWISS/oz 1181

#9 kansai_92 on 12.13.09 at 12:57 pm

Gold is cool to look at and mesmerizing to hold, but if you really want to be safe when TSHTF, you should stock up on the following items:
– canned food
– toilet paper
– ammunition
– batteries, heating oil, diesel etc.
– cartons of cigarettes (my favourite)

#10 kansai_92 on 12.13.09 at 12:59 pm

Watch Capitalalism: A Love Story
It only takes a few million and change to covet kick backs from Congress in the billions.
1000 to 1 return on your investment. Gotta love it!

#11 Dan in Victoria on 12.13.09 at 1:02 pm

Where are the Gold Bugs ? Easy, they are out trying to catch a Leprechaun.

#12 Gord In Vancouver on 12.13.09 at 1:05 pm

#1 piccaso

Where’s Canada on the chart?
___________________________________

Garth didn’t want Canadian real estate speculators to ruin their keyboards (fist or puke).

#13 omg on 12.13.09 at 1:16 pm

Re #3 Jets Youtube Video link

Good – These poor people are so unaware of what inflation actually means, but I bet they all have highschool education or more.

And I wondered how 20 and 30 somethings got suckered into subprime mortgages. I do not imagine the younger people in Canada buying the $400,000 condo are much more informed.

#14 Peter Pan on 12.13.09 at 1:27 pm

I too thought gold was an outmoded relic up until a year ago. Five years ago, my mother in law asked what she should do with her ingots of gold. I told her to get rid of it. She lived through WWII and worked as forced labour in Germany.
Last year, when I asked why she didn’t sell her gold, she told me this:

“In times of crisis, people will always accept gold.” Wise words… You can’t discount 5,000 years of human behaviour.

#15 Kash is king on 12.13.09 at 1:33 pm

I know this will likely get a snide comment; but I have some $50 gold maples, some $200 99999 gold maples, and a $10 1/4 oz gold maple.

Looks like money to me.

I have not gone overboard, however.

Has anyone ever wondered if there has been some longterm significance to the $ denominations chosen for these coins?

#16 bill on 12.13.09 at 1:42 pm

why chase leprechauns? Its way easier to let someone dig the gold up and buy it from them.

#17 miketheengineer on 12.13.09 at 1:47 pm

Garth et al:

Trying to predict the future based on past charts, with the “current crisis” is just plain nuts. All depends on:

(1) What happens to the USA, (2) What happens in the Middle East

We are just pawns in a big game of chess. Garth, you forgot to mention that everything could also go to “zero” or near zero in the worst case (aka a Detroit situation)

The big slow down will start in June/July, when the HST kicks in. Where it will go and how fast is anyone’s guess. The trend will be down.

Hey, do you think Mark Carney has ever watched the movie “It’s a Wonderful Life” with Jimmy Stewart. If he did, do you think, he would think of himself as “George Bailey” or as “Mr. Potter”. Every time I watch that film, I thank the lord that I am not a Mr. Potter.

P.S. I found a part time job, for minimum wage at my local food store, working midnight shift, and I am very greatful that I found this job. I start next week.

#18 crs on 12.13.09 at 2:31 pm

As our currency seems to be fairly tethered to the US and many investments are in US dollars, I bought gold about a year ago as a hedge against inflation and the falling US dollar. Its doing slightly better than I expected, but I’m not crazy about it. I like to think of it as keeping the profits that were made from the fat years during the lean years. In my opinion, that’s what the next decade will be all about, not making wealth per se, but rather, keeping whatever wealth you happen to have now.

#19 Another Opinion on 12.13.09 at 2:37 pm

Garth Garth Garth

You just lost a bit of my respect. I can’t believe you are placing yourself in the category as one of the pundits who at the first sign of weakness in gold are going to declare to the world that “CASH IS KING” again.

Maybe it’s best if you avoid the emotional part of being right or wrong on something and stick with what you know best…Real Estate.
People should be allowed to decide for themselves what money is. Money can be either the paper or metal, but if you choose to hold paper money or real estate denominated in paper money, or oil or stocks all denominated in paper money and history repeats itself as it has always and forever I hope you atleast spend some of that paper on things like food and clothing when that little piece of paper had some value…atleast you won’t run out of paper to wipe with.
Like Nestor shows Gold has been the best investment of the decade and if you look at the charts you show the price of Gold compared to what you call the bubble price of Real Estate look nothing alike.
So as governments around the world try to raise more paper $ for bail outs and economic action plans they are going to do exactly what the US has done…look to the central bank to create more money, it’s the easiest answer.
So you go on and hold those paper dollars, sure I hold some too as Safeway doesn’t except gold or silver…yet, but I hope you are hedging your bets because I think we all hope we can continue living in a world were a division of labour style economy can function. We can all specialize in the area we choose and we can all put food on the table if the farmers are willing to except the commodity we call “money” in exchange for what they produce.
So why would a farmer except paper dollars is the value of those dollars continues to go down?
Don’t get all tall and proud if gold continues down and the USD strengthens for a while. You’ve been around long enough to know nothing goes up or down in a straight line.

Your credibility would be greater without extreme statements. Cash is no more king than are commodities. I have owned gold for more than 30 years and consistently recommend it as an inflation hedge at 10-15% of portfolios. More than that is an overweight position which long-term investors will regret. — Garth

#20 Live Within Your Means on 12.13.09 at 2:38 pm

Re Gold – In the 70’s I worked for one of Montreal’s most prominent Jewish families who were involved in RE development and other major investments – oil & gas as an example. They wouldn’t touch gold as they considered it too volatile. BTW, they were the best company that I ever worked for. Treated their employees impecably.

#21 vreaa on 12.13.09 at 2:47 pm

Here’s the performance of Gold, the Euro, the Yen, and the Loonie against the USD since Feb 2001.
http://tinyurl.com/y9hhb6l

Many gold speculators have made money in the gold sector without falling in love with gold or, perhaps worse, marrying it. Gold speculators are not all raving loonie goldbugs. There is a time for all things. The very best time for gold buying was obviously 1999-2001. Then, young Canadian brokers didn’t know the names of any gold stocks (I know, because I asked).
The gold sector may look pretty hot, but it hasn’t yet shown the crazy blow-off top that will mark the end of this bull.
Most major commodity bulls run 12-20 years.
How many people do you know who have 5-10% of their net worth in gold? (very very few)
How many people have you overheard talking about buying gold? (one or two, but not a lot)
Sure, we’ve already seen a line up in T.O. during the recent run-up (as Garth highlighted), but sentiment will reach a significantly higher note before this is all over.
MSM articles about gold are still as cautionary and bearish as they are bullish. We know that, near a top, all you’ll hear is the bull.
We’ll also see little-guy participation in a way we’ve recently seen in RE.

All this is not necessarily a recommendation to newbies. The sector is volatile and it’s very easy for latecomers to get burnt and shook-out. But it is an observation that the final highs are likely to be way above the recent intermediate high.

#22 greyhound on 12.13.09 at 2:57 pm

So many gold bugs are hanging out on money-interest chat rooms. Sort of like a mob, they shout down anyone who dares to suggest that the gold price is like a tree that cannot grow to the sky.

More fun stuff is almost certainly coming: you could fill up Garth’s little comment box just listing the names of all the countries that are currently in danger of sovereign default.

We own gold, and we’re not selling it; but we’re buying US dollars. If the excitement hits the fan again, as it did in the fall of 2008, mining stocks and the loonie will likely take another bath.

2010 is going to be a volatile, interesting year with great opportunities for making money. Sadly, we’re not buying that summer bungalow just yet…

#23 kc on 12.13.09 at 3:04 pm

#65 tjmikey << yesterday said:

"Think about it….what if the state of California (which is by the way in a drought) decides one day that they can no longer ship fruits and veggies to Canada?

You idiots do realise that we as Canadians do not have the abilty…with all of our land and resources..to feed our own people with proper nutrition.

Sorry….Canadians are just plain stupid….seriously."

There is a greater problem and you were so close to hitting it. Look at the lot size of any "new" housing developement. (excluding condoes for the owners are slaves to the system) Even if the owners of a new place wanted to turn the turf and plant their own "fresh greens" they CAN'T. how can you grow anything in a yard that you can't swing a cat by the tail without hitting the fences??

Last spring I was lucky to be able to turn 3/4 of my yard into vegetables. Yes I rent, and the landlords are great people. Gave us the green light to do what ever we desired. All summer long people who walked by our place would stop and chat, you know the most often heard comment? I wish we could grow a garden!!! and of course my next question was… why don't you? Well we can't, we have NO YARD! <<< slaves to the safeway…

This coming spring we are being given the option of renting a 30 acre farm that is in my other halfs family since before the 1900's. We are jumping to the offer. And guess what we will be doing?? you guessed planting gardens, flowers veggies. Now the better part of this deal is that it is still farm land. We can and will be getting a calf a couple pigs and chickens, and there is nothing the neighbours can do to stop us. And yes we are still skirted by subdivisions. This land is a jewel that isn't lost (sold out) to urban sprawl.

I agree so heartly when you said "to feed our own people with proper nutrition."

cheers

#24 AxeHead on 12.13.09 at 3:46 pm

I bought 10 gold coins (Canadian) about 15 years ago for $350 each. I sold 5 of when gold hit $850. I kept the other 5 cause 1) they are so cool – pure gold is like no other metal, 2) make great gifts one day, 3) perhaps will give me some (albeit very little)leverage if a comming economic meltdown happens.

My money manager has precious metals in my investment portfolio, I think this is the way to do it since it is handled by a pro and is ‘liquid’.

Other than than, I see gold prices as simply a barometer of mass emotion, that’s all.

#25 AxeHead on 12.13.09 at 3:49 pm

Oh, and my daughter wants to move out and buy a house. I’ve convinced her (thanks mostly to Garth and this site) that it’s not good timing. She’s going to move into the basement and buy furnature and prepare to move out. I told her to wait for 1 more year at least here (Alberta) to gain value and more importantly, to not loose her investment.

#26 Weston on 12.13.09 at 4:14 pm

Notice how Garth selected which currencies to put on the gold chart?

Kindly do it again Garth.
This time include the CHF, CAD, Indian Rupee
and the Brit pound. ALL hitting new highs.

Tell yah what…I’ll do it for the blog dogs.

Mow down on this fellow dawgs….

http://www.galmarley.com/Chart_pages/currency_charts.htm

Also take a look at the crude oil (Garth’s preferred hedge) (And… yes Garth you are on record saying that multiple times) vs gold chart

http://goldprice.org/live-gold-price.htm

#27 Mike (Authentic) on 12.13.09 at 4:15 pm

Gold is a fad, like Cabbage Patch Kids.

It is interesting to note that another poster here a few weeks ago mentioned Oil, which is also priced in USD, is not gaining like gold is, even with the devaluation of the USD, thus, there is a lot of speculation built into price of gold.

All that glitters is not gold.

#28 Weston on 12.13.09 at 4:21 pm

#8 NESTOR NAILED IT

#29 jess on 12.13.09 at 4:31 pm

de-risking?

de-risking of the operations to ensure that supplies are not disrupted in case of any labour or industrial dispute.

“Customers are demanding that de-risking must take place and now we are considering that. We are looking at setting up new plants, at least 2-3 new ones,” Kapur said. However, he refused to quantify how much the company plans to invest for the new greenfield expansion.

The company, which produces engine, transmission and braking and suspension parts, is a crucial supplier to many companies that include Maruti Suzuki and Hero Honda in the domestic market and Ford and General Motors overseas. For many companies, the company is the sole supplier for some components and that made things worse at the time of the strike as the auto companies had to shut production or slow it down due to paucity of supplies from Rico.
Kapur said that the company would soon start the process of looking for a “suitable location” for the new plants. However, he refused to answer on whether the new plants would come out of the Gurgaon-Manesar belt of Haryana, that has been the hotbed of labour disputes.
The company currently has seven plants in India — four in Haryana, and one each in Punjab, Uttarakhand and Gujarat. Kapur said the company had estimated that business loss due to the labour unrest was to the tune of Rs 35-40 crore, though Rico was hopeful to make up for the lost production.

On the impact on the company’s financial performance, he said, “Rico’s turnover and profits for the full year could see ‘some impact’ due to the labour problems and loss of production at the Gurgaon factory.” The company expects to clock a turnover of around Rs 950-1000 crore this year. Strike at Rico’s Gurgaon plant ended earlier this month after the management agreed to take back some of the suspended workers. The labour agitation at the company’s plant had led to death of an employee, which had worsened the situation.
===========================================

employment generation opportunities and appealed to foreign investors to consider opening their plants in backward regions of the state such as Vidarbha, Konkan and Marathwada.

Jochem Heizmann, entrusted with responsibility for Volkswagen Group production, said the investment of 580 million Euros (Rs 3,800 crore) made in the plant was the largest one by a German company in India.

“This plant will establish the basis for significant and sustainable growth of Volkswagen in the Indian market,” he
==========================
temporarily” suspended operations at one of its factories located in Dowlaiswaram, Andhra Pradesh on account of disturbances over the proposed division of the state.

“The management of GlaxoSmithkline Consumer Healthcare has decided to suspend operations temporarily at one of its factory located at Industrial Estate Dowlaiswaram, in the interest of safety of its employees and to protect the assets of the company,” it said in a statement.

While tensions in the southern state have scaled up, companies have started mulling the effects of the proposed creation of a separate Telangana state, which according to top government officials could have Hyderabad as its capital.

===============

Ford is monitoring the Rico resolution to see when it can resume production in Chicago, Nissen said. Rico supplies Taurus transmission parts, he said.

“Dealers have a 40-day supply of the Taurus and we think we can work through the situation without it affecting sales,” Nissen said. “We’re pleased to see the labor situation in India is on its way to being resolved and we continue to work with Rico to improve parts flow.”

==================
Call for bank strike on December 16

KOCHI: A call for a strike on December 16 has been given by The All India Bank Employees Association and the All India Bank Officers Association have called a strike on December 16 in protest against the alleged move to close down the State Bank of Indore and merge SBI’s associate banks, including the State Bank of Travancore. A statement issued here on Wednesday by the All Kerala Bank Employees Federation said the employees in Kerala would join the agitation

#30 piccaso on 12.13.09 at 4:31 pm

24 AxeHead

Show your daughter these charts, it will sink in better

http://www.edmontonhousingbust.blogspot.com/

That’s if Garth will pass this post and let it been seen.

#31 kc on 12.13.09 at 4:53 pm

#65 tjmikey << yesterday said:

(strange if this is the second time that this goes through please delete, something glitched and possible deplucated)

"Think about it….what if the state of California (which is by the way in a drought) decides one day that they can no longer ship fruits and veggies to Canada?

You idiots do realise that we as Canadians do not have the abilty…with all of our land and resources..to feed our own people with proper nutrition.

Sorry….Canadians are just plain stupid….seriously."

There is a greater problem and you were so close to hitting it. Look at the lot size of any "new" housing developement. (excluding condoes for the owners are slaves to the system) Even if the owners of a new place wanted to turn the turf and plant their own "fresh greens" they CAN'T. how can you grow anything in a yard that you can't swing a cat by the tail without hitting the fences??

Last spring I was lucky to be able to turn 3/4 of my yard into vegetables. Yes I rent, and the landlords are great people. Gave us the green light to do what ever we desired. All summer long people who walked by our place would stop and chat, you know the most often heard comment? I wish we could grow a garden!!! and of course my next question was… why don't you? Well we can't, we have NO YARD! <<< slaves to the safeway…

This coming spring we are being given the option of renting a 30 acre farm that is in my other halfs family since before the 1900's. We are jumping to the offer. And guess what we will be doing?? you guessed planting gardens, flowers veggies. Now the better part of this deal is that it is still farm land. We can and will be getting a calf a couple pigs and chickens, and there is nothing the neighbours can do to stop us. And yes we are still skirted by subdivisions. This land is a jewel that isn't lost (sold out) to urban sprawl.

I agree so heartly when you said "to feed our own people with proper nutrition."

cheers

#32 Martin on 12.13.09 at 5:26 pm

#29 Picasso

Great link, and he’s got some charts comparing Japan’s, Canada’s and the U.S. bubbles. Pretty sobering.

http://edmontonhousingbust.com/files/091208-3.jpg

Article: http://edmontonhousingbust.blogspot.com/2009/12/big-in-japan-ii-electric-boogaloo.html

#33 Nestor on 12.13.09 at 5:38 pm

#26 Mike (Authentic) on 12.13.09 at 4:15 pm
“Gold is a fad, like Cabbage Patch Kids.”
_____________________________________________

Mike is correct. Gold IS a fad. one that’s lasted about 5000+ years? lol

#34 jjpetes on 12.13.09 at 5:51 pm

Garth, I am quite surprised at your take on gold, your missing the mark by quite a distance. You say gold is not money. Absolutely it is, I am not a gold bug per se so before you discredit me for saying that be known that I am not.
One cannot take a bushel of corn and go to the bank counter and exchange that for paper currency, either a barrel of oil. However, a gold Maple Leaf is exchanged at any bank anywhere. That is why they give a gold coin as part of the survival kit with fighter pilots. Gold is not an investment, however, is used as savings would be most prudent over the next few years.
I am not even sure if you understand secular and cyclical markets by your quasi know gold statements. It would appear as the debt, credit crises unfolds that the secular so called bull market for gold should remain intact until 2016-2020 give or take a year, or until some signals such as the Dow / Gold ratio equals one to one. That would happen when one ounce of gold equals one Dow.
I mean you seen this ratio hit that in the early 80’s when gold was at 850 per ounce, so this is nothing new. I am not sure if your discouraging those to enter gold or not but your statements do not seem to support it either. Your service for waking up the real estate reality if nothing short of fantastic and there as very appreciated folks out there including myself for all your work and thank you!
Your take on golds irrationality, was oil at 147 bucks a barrel last year, oh, rational? Or tech stocks in the late 90’s? Everything, absolutely everything (even tulip bulbs) are subjects for human greed and fear.
However, when it comes to gold, eh, perhaps you could either read up abit more on it or have a little more caution prior to downgrading its utility. It would seem the scars of the 70’s have left your age group (the boomers) with perhaps a shade of distaste for gold. I am a gen x mid 30’s to know. So gold is not money. Ok, I cannot buy it right at the pump for gas or store for groceries. Wait, I go to my bank, trade cash for it, then go buy gas and groceries OH! The inconvenience! You must have a pretty cushy run in your life to live with such trials.

There is a profound difference between money and wealth. Gold is not money. Nor oil nor corn. Currency is money. — Garth

#35 jess on 12.13.09 at 5:58 pm

wind farm (ponzi)scams…
http://www.nytimes.com/2009/12/14/world/europe/14wind.html?pagewanted=3&ref=business
…“Cash is king,” said Andrew Campanelli, a forensics investigator for Deloitte Financial Advisory Services in New York. “In a down economy, individuals might be more inclined to need more cash. They might look at green energy as a mechanism to use ill-gotten funds.”

#36 Sluggo on 12.13.09 at 6:08 pm

Real estate priced in ounces of gold.

http://www.chpc.biz/Value_in_Gold_Chart.htm

#37 Dave on 12.13.09 at 6:12 pm

Where are the Gold Bugs ? Easy, they are out trying to catch a Leprechaun.

——————————–

all those taking shots at gold, I challenge you, Garth included, to name a sector that has performed better than gold/silver mining or lithiums (I’m not going to reveal too much info).

Bring it on cowboys. People talk but can’t back things up. Truckloads were made in these sectors, and one will definitely continue with the next contraction.

Lets hear from those that claim gold mining was and is bad, and please enlighten or hint to us a sector with better opportunity. Please don’t talk about energies, because I’m in and have been in all them and have indexes to prove my point. I’m not aware of any major Canadian banks that tripled in price since Oct 2008, so they’re way way off too.

Enlighten us brilliant ones.

#38 Dave on 12.13.09 at 6:21 pm

Gold is a fad, like Cabbage Patch Kids.

It is interesting to note that another poster here a few weeks ago mentioned Oil, which is also priced in USD, is not gaining like gold is, even with the devaluation of the USD, thus, there is a lot of speculation built into price of gold.

All that glitters is not gold.
——————————————————–

which again proves that mining gold comes with a cheaper cost when considering the amount of oil required. More profit margins for gold miners.

Gold is mined in contractive economies. This is where the miners make most of their money.

Prove me wrong people. I’ll start getting into Kindleberger and research from the year 1688 until 2008 to validate my point about gold mining and its behaviour during credit contractions.

#39 Canada's Housing Bubble on 12.13.09 at 6:25 pm

PBO: cannot determine if stimulus is working

Matt Stiles Dec 12, 2009

Canada’s Parliamentary Budget Office, the independent watchdog charged with overseeing the country’s finances, deems that it has not received nearly enough information to make a determination of whether $4 billion in infrastructure stimulus funds (ISF) have succeeded in their objective of, “stimulating economic growth and creating jobs.”

“The “value of work completed” is a critical performance indicator. Unfortunately, at the present time, this value is not deemed to be an accurate assessment of program performance due to the limitations of the dataset,” the report stated.

It continued, “We also understand from officials at Infrastructure Canada that the data on project completion rates is unreliable because of inconsistent and incomplete reporting. As a result, at this point, the PBO is unable to provide an assessment of the ISF’s progress. It is important that the data quality and gaps be addressed so that Parliamentarians will be provided adequate and reliable information on completion rates.”
……

http://www.examiner.com/x-31999-Canada-Economy-Examiner~y2009m12d12-PBO-cannot-determine-if-stimulus-is-working

#40 Adam on 12.13.09 at 6:29 pm

“Gold is a fad, like Cabbage Patch Kids.” Or is fiat money a fad? Gold was money for thousands of years.

If you’re interested in the history of money, have a look at http://www.mises.org. Lots of articles there explaining the concept of money, and how governments dilute the value of it.

Why do governments love paper? To wage war, folks. Historically, every time a nation had to fight a major war, the govt. running that nation debased its currency.

Abe Lincoln was the first American president to print the funny green stuff. Guess what war he started.

#41 Oleksandr on 12.13.09 at 6:54 pm

I am impressed by the chart.
WHY Germany has no RE bubbles at all?
Japan has got the last one in 1991 and seems will never repeat that mistake again…
WHY these two countries are so different?
Who can explain that?
What the reason? Less greed more brains?
Maybe to become really smart it is worth to lose a world wide war like those two did?
Don’t know Japan, but Germans do their buildings only from genuine materials.
Did I mention that the best cars are from Germany and Japan?

#42 NotGarth on 12.13.09 at 7:24 pm

Garth, you are wrong on gold…well, not wrong…you indicate 10-15% of a portfolio – Dude, that makes you a gold bull!:)

Post 32 is bang on.

Real Estate – Garth, you are absolutely the voice of reason on this….I think the market will soften soon, spring ’10 will be a horror show.

#43 Nestor on 12.13.09 at 7:28 pm

Gold is not money. Nor oil nor corn. Currency is money. — Garth
____________________________________________

ok Garth. Canada’s “Currency” is the dollar.

could you be so kind as to DEFINE “DOLLAR”.

i’ll bet you can’t.

A medium of exchange. — Garth

#44 Onemorething on 12.13.09 at 7:39 pm

All I can say is same Sh*t different Pile! You’re gambling being overweight in anything right now. I’ve opted for silver as when purchased is was quite low and not even close to it’s highs, like GOLD has already hit recently. But only as hedge in usable denominations.

Bought a whack of USD when at 0.744 when my Swiss Francs and AUD topped out last week. I still carry a mix of all three and agree with Garth on paper.

Again, the gamble is still RE and there are various risk elements now that WILL detroy it’s overinflated value anytime soon.

Get out while the getting is good! The window to get out has suprisingly been extended so consider it the gift of a lifetime.

You know only 5% max will! The rest of us will be ready & waiting!!

#45 TaxHaven on 12.13.09 at 7:50 pm

We gold afficionados are well aware of the period 1981-2000, when savings rates began to head for zero, bubbly credit fizz was everywhere and unprecedented money creation heralded the emergence of new kinds of ‘paper’ assets.

That’s an awfully short-term chart. Too bad it didn’t start around the time of the dot-com bubble. Things changed in a rather fundamental way around 1999-2001…

As it stands, gold is not a legal currency anymore. Quite correct. The reason for that, though, is that legal tender laws mandate the use of government-issued fiat money:

“Fiat money is money declared by a government to be legal tender. Fiat money achieves value because a government demands it in payment of taxes and says it should be used within the country as a tender (offering) to pay all debts. Where fiat money is used as currency, the term FIAT CURRENCY is used. Today, most national currencies…are fiat currencies.” ~ Wikipedia.

Yes, the Canadian dollar is a currency. Yes, it must be used to pay all debts, public and private. But this is in no way a natural outcome. To put it bluntly, we are forced to use this paper because the control and issuance of same is in the hands of government.

Just ask Mr. Carney if he would be able to engage in his current free money extravaganza without those legal tender laws…

Legal tender laws raise questions about the fate of the sanctity of the private contract, just as they do about government debasement of the currency. Were the decision as to what should be accepted as money returned to the individual, gold would very likely be high on the list.

Yet, despite this, gold is still money. It is the preferred and ultimate form of payment, never refused; so much so that central bankers themselves have been loathe to part with it and have indeed become ‘buyers’ of it.

The Mexican Hugo Salinas Price points out that, since at least the closing of the ‘gold window’ in 1971, international debts have never been settled; that paper scrip has merely traded back and forth around the world while nothing of value has been transferred to effect final payment. This, he says, is at the root of today’s problems.

The Canadian dollar or gold? I know which I’d rather SAVE in, even though I have to swap my gold for currency to visit Petro-Canada. But, you know the funny thing? Just about every time I do that, I get MORE currency for my gold…

#46 kc on 12.13.09 at 7:58 pm

Garth, Did my post make it into you that I tried to send twice? is netland giving probs? I see that it didn’t become posted. too off topic? thanks KC

I’ll check the filter – if I can get through all the nuggets down there. — Garth

#47 jjpetes on 12.13.09 at 8:03 pm

Ok Garth how is currency money? All currencies created are created from debt. You know this, you worked in government for quite some time. Currency is only the end result of debt creation, therefore currency really only represents another entities debt.
No academics here in understanding this, if you believe currency is money, then therefore you must also believe money is debt, which in currency form it is. You do know how money is created and where it comes from? Especially a government employee should know this, Mr Bond. I however, do not believe debt is money or currency is money as it is created only from debt. Currency is actually the end result from debt, so money in the form of currency is not money, however is actually debt.
Again, I am not a gold bug, however, money is not really money if it is debt. I define money as a non-debt instrument. Gold in ownership has no liabilities attached to it. Paper currency does as it is created from debt. That is, considered currency not as money but debt, and gold as truly money.
There has been no paper currency in history that has survived over 300 years, none. That is simply because currency is created from debt, debased through fractional reserve, interest, and monetization of debt over time. Gold is not subject to this phenomena.
Ask yourself why central banks are moving towards net buyers of gold, as they did in the latter decade of the 1970’s. Could it be that to offset future credit expansion from the debasement of money to offset those debt repayment losses from inflation? It is creditors that lose in periods of inflation, not the borrowers, as the borrowers repay debts from a fixed loan with debased currency over time. Its little wonder why banks are restricting lending (especially the US), as a current trend and perhaps for quite some time yet.
Currency is not money. It is debt. We have few options to settle debts with other forms of repayment at this time, however, you can settle debts with gold as well. This has nothing to do with being a gold bug. Until currency becomes a utility, and it is not created from debt (ie no central bank), it becomes created from governments themselves (ie the people’s money), until it is not subject to fractional reserve, interest, or quantity debasement (ie printing or digitally created with no fiscal prudence), we are destined to have a so called monetary system that will eventually become obsolete. When the period of no central banking, no interest, and no quatity debasement arrives, yes I would then credit currency to be called money. At the time being, I would credit currency to be called debt, and gold to be called money.

Currency/money is a medium of exchange. Commodities are not. — Garth

#48 $fromA$ia ( o Y o ) on 12.13.09 at 8:05 pm

It always returns to gold.

#49 Goldenbear on 12.13.09 at 8:28 pm

Garth,

Only a hundred buck correction and you’re yapping?

Oh, well, the life of a bubble watcher who hates the site of
others doing well goes on.

#50 Dan in Victoria on 12.13.09 at 8:36 pm

Well, I’m part Irish. I enjoy partaking in mischief and practical jokes. I think I”ll go fix some shoes now. Ahh so predictable, good for a dull Sunday……..LOL

#51 Chris L. on 12.13.09 at 8:40 pm

Everytime gold is mentioned on this forum I have to skip half the comments because they are useless. Gold is garbage unless you bought it at it’s low. No fool would buy it now. Garth, please stop prodding the gold guys, they’re fanatical loons.

#52 TaxHaven on 12.13.09 at 9:08 pm

#43 jjpetes, all quite correct, but you forgot one important point: gold is NOT merely “a” commodity. Yes, gold is a commodity with very limited industrial uses but it has a virtually irreplaceable monetary role too.

The metal’s essential value is mainly that it functions as the most widely accepted money. It has the longest history of doing so and is accepted by a greater number of people than any alternative.

Any money worth its salt (yes, note the relevance of that expression!) HAS TO have a commodity component (for want of a better word, an ‘intrinsic value’).

Mises defined money simply as “the most widely accepted of all commodities”.

#53 jjpetes on 12.13.09 at 9:11 pm

Only those like Chris L. with no real input as a last bastion will run to their refuge for self validation and label savers as fanaticals. “No fool would buy now”. Good buy Chris.

#54 D from London, ON on 12.13.09 at 9:20 pm

#17 miketheengineer

Congratulations on finding part time employment. I have been following your journey through your posts on this blog, and I am happy that you have found this job.

You are a survivor. You are merely a few steps ahead of many of us who post and lurk on this blog.

If resentment rears its ugly head when you’re on the clock at this job, please try to back away from it, at least until you are on your own time and can let it out with friends and family. Something similar has happened to me in the past, and resentment just held me back far longer than circumstances warranted.

Good luck at your new job!

#55 Dave on 12.13.09 at 9:20 pm

people, with a pullback in the market, gold, gold mining companies, stocks, and everything else will decline and there will be a rally in the reserve currency (U.S dollars), just like in every other post bubble contraction.

Why do some of you come here and pat yourselves on the back because of a correction in the gold market? Has anything ever gone straight up?

So I’ve been shouting on here that gold mining shares will be the big winners for the next few years. I’m also saying that I recognize there will be one final sell off in this sector and a rally in u.s dollars before gold mining companies skyrocket.

I just know people will be on here when there’s a market correction claiming they knew all along that gold sucks etc. Well, I’m expecting the pull back but am expecting a major bull market in gold mining companies starting in 2010.

I’d love to hear the counter argument against gold mining companies. Still no one though

#56 Kurt on 12.13.09 at 9:24 pm

I don’t know if Garth shoud avoid annoying the gold bugs. For something to be called money, it has to be both a store of value *and* a medium of exchange. By that definition, gold is *not* money. It’s a very compact store of value, but it isn’t enough of a medium of exchange for every day use to be money. Fiat currency is a leaky store of value, by design – the 1-3% a year target devaluation is intended to keep people from accumulating currency and instead invest it, thereby keeping the economy at full throttle. The promises to repay a loan, backed by the property used to secure the loan, are the store of value for fiat currency. I’m happy enough with that except in current circumstances where our government is merrily abetting the creation of new promises that likely won’t be kept. By returning to this issue, Garth encourages people to think carefully about it and make good decisions about what kind of a role precious metals should play in an investment portfolio. Note that the 10-15% holding is quite a bit above what I see in “model” portfolios from trust companies and banks these day – they like to pretend precious metals don’t exist.

#57 goldenfox on 12.13.09 at 9:28 pm

Garth, I want to take this opportunity to thank you. In the 1990’s when all the rage was mutual funds and rrsp’s, I decided to learn about investing and rrsps. The first book I bought was your 1997 rrsp hand book. Until that point in time I had no knowledge of investing. Why would I , as every nickle I made went to paying off debt. Every time I paid one bill off, two more would pop up. Anyways after a lot of self education, I basically had two things going for me, some home equity and 40 grand of rrsp room. Over a 5 year period I went from GIC’s to mutual funds, to stocks with a broker, to finally a discount broker, where I ran my own show. By late 1999, after buying up $40 grand of rrsps, my rrsps were worth 50 grand. I had a self directed spousal rrsp and had recieved about 16 grand in tax refunds. I learned two things about investing. one was that stocks go down a lot faster than they go up and it is wise to be very conservative with your investments, but when a opportunity arises you have the fortitude to go for it. I discovered the internet and GATA which opened up a whole new world to me of central banking, Gold, Money, etc. At this point I transfered all of my rrsp assets into gold and silver unhedged mining stocks. At this time gold was about $290 and silver $4.50. Even though my portfolio was hammered last year, my rrsp has made me $340 grand. My house will soon be paid off, as my wife withdraws $20 grand, at a low tax rate, every year to pay down our mortgage. In summary I have over the years used my house, by refinancing a few times, to fund vehicles, children education and finally rrsps, which in turn are now paying off the mortgage, with lots left over for retirement and travel. I worked hard for years and never got ahead, however by learning how the financial system works and using my head instead of my back I have become independent financially.

#58 Nostramadus Le Mad Vlad on 12.13.09 at 9:42 pm

#17 miketheengineer — “I found a part time job”. Way to go; working keeps the mind and one busy.

#41 Oleksandr — “Less greed more brains?” — That pretty much sums it up! Let’s see. The US Fed was created as a private institution, prints all the US’s public money but CAN be dissolved. BoC, not so sure.

After perusing all the comments about pro- / anti-gold, silver, short- and long-term investments etc., I would go for a huge, extra-large deluxe pizza, with 10% of all the toppings on.

The more self-sufficient I am, the less I have to rely on fed. and prov. govt. payouts / handouts / bailouts etc., and that pleases me immensely. The less they know about me the better.
——
“. . . a resurgence in the US dollar. . . . it’s the fall of the US dollar . . .” — Is that what is meant by 20/20? Further to the US$

May answer some questioms — Obama; ever wonder who is behind this fiscal stuff? and getting warmer in different parts of theworld.
—–
More charts. Friends were over ‘ome earlier this year. Said the country is in a bloody shambles, glad they live in Canada. Wait ’til fall 2010, when the HST is in
place and the bills are due for these worthless ‘lympix. Chart Food & Water Shortages Could these lead to a fast-tracked version of depopulation?
——
More Signs of the times — Internet 2. Jay Rockefeller is one of the two advocates for ‘net control in the US (same as UK).

#59 $fromA$ia ( o Y o ) on 12.13.09 at 10:03 pm

I suggest you people that think gold is at it’s high to think again…

http://www.europac.net/videoblog.asp?a=watch

#60 Nestor on 12.13.09 at 10:10 pm

ok Garth. Canada’s “Currency” is the dollar.
could you be so kind as to DEFINE “DOLLAR”.
i’ll bet you can’t.

A medium of exchange. — Garth
____________________________________________

that’s not even a good attempt Garth. you get a failing grade. your assignment was to DEFINE “DOLLAR”.

cigarettes can be used as a medium of exchange. we can define “cigarette”. (aged tobacco leaves, chopped finely, wrapped in a thin paper, approx 4 inches in length)

you HAVE NOT defined “DOLLAR”. please attempt to do so….

#61 c c c on 12.13.09 at 10:29 pm

garth

I live in south western ontario can you tell me how to purchase silver wafers/bars. I received one as a gift last year and would like to purchase more as a saving vehicle for my neice and nephew. Thanks

Easiest choice for metals of undisputed quality is your local Scotia branch. — Garth

#62 nonplused on 12.13.09 at 10:58 pm

Depends how one defines “money”. Some people define it as a store of value and a currency. In which case gold is money but only for central banks and governments, not for the people. Paper money is a good currency, but not a store of value as it has declined 95% since the end of the gold standard in 1933 (purchasing power). So it isn’t money by that definition either.

But regardless, Garth is right, gold will never be currency again. Nobody is going to take a $1000 ounce coin to best buy to pick up an iPod. Paper and electronic exchange is here to stay, because the relative value of so many things for which we transact is so low now compared to the price of gold that there must be an intermediate mechanism of exchange.

The question is, what backs that medium? Obviously it’s all goods and services exchanged for that medium to some extent. $200 is worth $200 because it will by an iPod priced at $200. But what keeps the $200 worth an iPod? Limited supply of currency. If everyone had a million dollars, the iPod would cost $500,000. This limited supply was achieved in the past by keeping the real rate of interest above the inflation rate after taxes. This is a situation we no longer have today.

That is what is the worrying part about gold prices where they are today. They are well above the cost of production, which means somebody out there is wiling to pay a premium above “value” to hold the physical asset. Who would do that? Well, only central banks and Asians (including India) buy the stuff on mass as a store of value. In India a lot of the reason is that the banking sector just doesn’t reach to much of the population, so if you need to store $1000 you buy fancy jewelry. The paper currency is viewed with distrust.

But the Indians are not driving gold prices, a 1000 bucks in gold is the same amount of money spent at $500 as at $1000 or $270. They only have so much money, they only buy the amount of gold equal to savings/gold price, no matter the price. So demand actually drops as price rises, and it’s linear or may even drop faster as people feel “price shock” and wait for lower prices

Central banks and wealthy individuals, on the other hand….

Somebody with a lot of money thinks a $hit storm of inflation is coming and acting to avoid the devaluation of the currency, I figure. Whether they are right or not is up for debate. Garth may think no way, but I think it’s possible. These things the governments of the western world are doing right now are mathematically impossible. They can’t be funded out of current or future revenue. Therefore there must be inflation or default. Or both. Higher rates to save the currency are impossible. The governments of the western world are insolvent now with low rates. Double the rates and you have fiscal crises leading to default. It can’t be done. Keep the rates low and you have a funding crises leading to “quantitative easing” (already there).

And they are just spending more! Government spending is always a tax on the economy because they cannot spend money productively. It’s not possible.

#63 Dan in Victoria on 12.13.09 at 11:15 pm

Post #55 Dave, there are many on here that get it. We just choose to go about our business quietly and efficently. I see no need to run around waving my hands in the air. If you are correct and do well, good for you. Well done.
I found a niche that works very, very well for me, I don’t tell anyone about it though. I’m staying with that for now.
I enjoy following the gold markets, and am quite interested to see where it goes and what happens. http://www.usagold.com/gildedopinion/alf_field.html
I enjoy a good debate on occasion but i see this as a
All trees have bark
All dogs bark
Therefore all dogs are trees
Sit back, have patience and see where it goes.
I choose not to debate the subject.

#64 Wesley Moxam on 12.13.09 at 11:30 pm

Garth, I hate to be a stickler, and I do believe that RE is overpriced in ‘English’ nations, but comparing to Germany and Japan is a little disingenuous.

Since Japan’s RE peaked in 1990 the country has experienced no population growth since then, not to mention that deflation has been a constant problem since then.

And do those German numbers included home values in the former East Germany? Also notable is Germany’s lack of population growth since 1975.

Anyway, the real outlier here seems to be Britain, a country with little population growth that has seen a huge appreciation in RE values.

Check out the pop. growth numbers here:
http://www.google.com/publicdata?ds=wb-wdi&met=sp_pop_grow&idim=country:DEU:JPN:AUS:CAN:GBR:USA&tstart=-315619200000&tunit=Y&tlen=48

Anyway, I do agree with the overall message, a house is a home, not a scheme for ultimate financial liberty as some have come to believe.

— W

#65 nonplused on 12.14.09 at 12:03 am

#15 Kash is king

Yup. They will call them back and melt them, like they did in the ‘30’s.

The real purpose of the low stamp rate on a gold coin is to prevent the uneducated from thinking a gold coin is as good as cash or maybe better. For example, if they stamped Maple Leafs at $1400 (there was always a substantial “seniorage” on metallic currency in the past, that’s where the mint gets their revenue), people might think “well why not buy a coin for $1200?”

But when it says $50, only people buying gold with a different purpose will touch it at $1200. The mint is basically saying we will guarantee that it is one ounce of gold by stamping it but we make no guarantee as to its purchasing power. The people who buy gold coins are buying ounces of metal that they don’t have to pay to assay on return to the bank, not currency. The currency aspect of gold is useless at this point as Garth has laboriously pointed out, and will probably always remain so. We will never again take a gold coin to the store to pay for something. Probably not silver either, even though that is what we did until 1968.

#17 miketheengineer

You can predict a lot of stuff with charts. Since you are an engineer, have you ever worked in the oil patch with decline curves? That is how they predict how much oil or gas is actually connected to the well and it usually works pretty good.

Financial charts have booms and crashes. But some of them, like say the purchasing power of the dollar, are remarkable consistent over long periods of time. It’s going down, and it will continue to do so. Corrections are just that, we have enough data now to confirm.

I’m going to bet with Garth that real estate price charts have remarkable forecasting power too. And no, I don’t expect 30% per year up from here on in. Unless the dollar completely collapses. Which I also doubt, if it does collapse it should then be undervalued and return to the trend. Long term, a nice 5 to 6% decline in purchasing power every year, stated as 2% by CPI.

I am mostly in cash right now with some gold, not enough it seems. The reason I am in cash is because I will take a 5% loss in purchasing power over what I think is going to happen to asset prices in the next few years as we “deleverage”.

The government can build a dike. They can even persuade people to buy land and build houses behind the dike. But what they cannot do is prevent the dike from breaking. After that, all they can do is try and plug the hole, with the total loss of all property and many lives by the time they fix it.

Garth on #19 Another Opinion

I am over weight gold buy your definition, but it wasn’t my fault! I went 10% long at $400/ounce and everything else I owned sucked since. But I am reluctant to “take profits” until the crises abates, if it ever does.

#66 Medic on 12.14.09 at 12:20 am

#19 (Another Opinion):

I would recommend that you ACCEPT some grammar and spelling lessons, EXCEPT I don’t think you would know what I was talking about.

#67 Nostramadus Le Mad Vlad on 12.14.09 at 1:35 am

At some point, we all have to prepare for The Grim Reaper
——
It’s always good to have a reality check.
——
To make sure everyone is thoroughly confused, the following is guaranteed to throw all into uncontrollable fits of laughter — US Default / Behavioral Control (“. . . biologist and co-author of Ecoscience, Paul R. Ehrlich is still calling for “interventions to decrease birth rates”.” / New Carbon Currency

Re: Change A Climate and Save The Donuts. Anyone been following / checking on these two? — Undersea Volcanoes / ?????
Warm Fuzzy Beautiful Edmonton
——
More on Soros and gold.

#68 Grantmi on 12.14.09 at 1:43 am

Garth….

A little satire to break the hold gold, or not hold gold melee! (or forever hold your peace(s) of 8!)

http://i47.tinypic.com/260350x.jpg

Move Along!! Nothing to see here!!

#69 $fromA$ia ( o Y o ) on 12.14.09 at 2:51 am

CCC,

Take the 1 ounce Canadian silver Maple Leaf coins over bars. They are stamped $5 as well as they are .9999 pure not .999 like most bars.

And yes thats stamped $5 Canadian currency. Buy in rolls of 25. I got a discount for buying a hundred.

#70 Emma on 12.14.09 at 3:38 am

#60 Nestor
Ahh, I get it – you are a monetary realist. While I agree there is no tangible definition – like 100 grains of silver – I am glad I don’t have to lug around pieces of coin that are the weight of their value. For now and for as long as we can all agree, I can use a C$ anywhere in Canada and its worth a dollar from coast to coast.

Cigarettes ‘might’ be currency in jail, high school or a bar IF you’re trading with a smoker but then, I can buy more smokes in Montreal than Toronto with my dollar. And with a gold bar in hand, I can’t buy any cigarettes at all.

Having said that, I do think it would be good if our cash was gold backed again – but can you imagine the pain between here and there?

#71 charles on 12.14.09 at 4:26 am

Thanks for the daily reality check and sharing your expertise.
Off topic, if I may. While researching why the Hon. Rob Nicholson wants to wage war on his own people by putting pot smokers in jail I noted that he is the only PC left in today’s Reform Government and that he served in Cabinet with you.
Please call him up and point out that according to a CBC poll 90 percent of Canadians are opposed to the more severe penalties for marijuana use and possession in C-15. The Senate also recognizes the insanity of this aspect of the legislation.
These guys need to get clued in on the cash cow a legalized and excise taxed a pot product could be.
Here in Windsor we are working on a petition to submit to his ala mater (University of Windsor Law School) that could taint his legacy for all time.
Thanks for your help if you can.

#72 Phil on 12.14.09 at 6:53 am

Here is a video that compares real estate price in Canada vs US from 2000 to 2009.

http://www.youtube.com/watch?v=MkqoenP0tjM

#73 Steve on 12.14.09 at 7:10 am

Garth, I think Jerome a Paris calls it the “Anglo Disease”. http://www.eurotrib.com/story/2008/4/8/65846/86979

#74 Taejonguy on 12.14.09 at 7:43 am

Tax Haven #45
“Yet, despite this, gold is still money. It is the preferred and ultimate form of payment, never refused; so much so that central bankers themselves have been loathe to part with it and have indeed become ‘buyers’ of it.”

As a small business owner, if a customer came in with a gold coin they would receive face value for it (the same as any other coin) as determining the exact “value” of it in any other fashion is too complicated and time consuming to do at my (hopefully busy!) cash counter. If a customer expected more than that they WOULD be refused!

It seems, as cash, that my $500 dollar (http://www.mint.ca/store/coin/100-gold-coin-10th-anniversary-of-nunavut-2009-prod530004) $100 dollar coin is a poor investment. However, as an investment it may or may not be, depending on when purchased/sold.

#75 Nestor on 12.14.09 at 9:13 am

#70 Emma on 12.14.09 at 3:38 am
For now and for as long as we can all agree, I can use a C$ anywhere in Canada and its worth a dollar from coast to coast.

Having said that, I do think it would be good if our cash was gold backed again – but can you imagine the pain between here and there?
_________________________________________

“worth a dollar from coast to coast”… .again. please DEFINED “DOLLAR”. if you can’t, then HOW is it possible to “EXCHANGE” it for something else if you don’t know what it is?

“can you imagine the pain between here and there?”
this is just the height of sillyness. nobody is going to carry vast amounts of gold and silver on their person for day to day transactions..

the gold standard has been historically the most reliable and most stable monetary system in history. the only problem with it were these scum called politicians.

#76 TaxHaven on 12.14.09 at 9:33 am

#65 nonplused…”to stop people from thinking a gold coin is as good as (paper) cash”?

Sorry, IT IS.

What would happen if a government ever stamped $1120 on a one-ounce coin? Well, first of all there’d be a run on every gold coin of any kind anywhere in the world, as paper-currency holders rushed to trade their paper in for the real thing. The value of paper would decline drastically, immediately: governments would be forced onto a gold standard. They are terrified of gold circulating as currency. And that’s the absolute last thing any of them want.

Greasham’s Law: Bad money drives out good. That’s what we have NOW.

#77 Kurt on 12.14.09 at 9:34 am

#60 Nestor – a unit of currency has two aspects, the physical and the social. There’s a token out there that is 99.9% gold (I think), weighs in at 1 oz, plus or minus a very tiny amount, and has maple leaves embossed on one side and a picture of some lady on the other. That’s the physical side. Thanks to #36 Sluggo, we know that in November it would take 372 of the little beggars to convince the average home owner in Calgary to turn over the keys to his house (that is, if they would accept them at all) – that’s the social side. Now, there’s a little pile of these *other* tokens on my desk. They’re made out of some iron alloy (they come to a magnet), they’ve got this bird on one side and the same lady on the other. IIRC, it would take something like 380 thousand of the damn things to convince Joe Average to give you his house keys. He’d probably prefer that you turn the tokens in for a special-purpose one-time token that represents 360 thousand regular tokens, but he has no problem with the general principle. Just because the tokens make crappy jewelry doesn’t make the social definition of a unit of fiat any less slippery and arbitrary than a unit of gold. And I don’t blame Garth for not answering your second post – your question was stated in a way that was whiney and petulant. You’ll get better results if you write like an adult.

#78 infernalmachine on 12.14.09 at 9:51 am

Garth – are you able to place Canada on that graph?

#79 McSteve on 12.14.09 at 10:25 am

Every portfolio should have some gold as insurance, (I do) but it is a somewhat “irrational” investment class. I’ll prove it – ask yourself this: What would happen if all of the gold in the world suddenly disappeared? We would switch to platinum or silver to make our jewellery and the world would carry on (n.b., both platinum and silver has far more industrial applications than gold).

If we ran out of oil or, say, potash, things would grind to a halt and we would all starve to death. Gold suffers from many of the same issues paper money does – it has value because we collectively think it has value, the only difference being it’s harder to get gold than print money. On the later point, why isn’t silver worth more than gold given its being consumed and probably just as scarce? Because we have been told its worth more and we believe it.

#80 Ian on 12.14.09 at 10:34 am

Currency/money is a medium of exchange. Commodities are not. — Garth

Just yesterday I visited Pearson Airport and currency exchange booth was also buying and selling gold and silver coins and bars.

Bullion is a foundamental international currency, accepted, exchanged and stored globally.

#81 Dave on 12.14.09 at 10:54 am

Post #55 Dave, there are many on here that get it. We just choose to go about our business quietly and efficently. I see no need to run around waving my hands in the air. If you are correct and do well, good for you. Well done.
I found a niche that works very, very well for me, I don’t tell anyone about it though. I’m staying with that for now.
I enjoy following the gold markets, and am quite interested to see where it goes and what happens. http://www.usagold.com/gildedopinion/alf_field.html
I enjoy a good debate on occasion but i see this as a
All trees have bark
All dogs bark
Therefore all dogs are trees
Sit back, have patience and see where it goes.
I choose not to debate the subject.
———————————————–

Its not about me running around with my hands in the air. So many people post on here knocking gold and its nominal price without realizing the real price of gold. Maybe this is a contrary blessing in my favour.

At the end of the day all dogs are trees. In the last two years, and especially after oct 2008, the costs to mine gold have gone down dramatically for gold mining companies. Have a gander at 20 random gold mining stocks and their charts. I’m guessing since Nov 2008, you will see their stock prices going up, up, and up for the most part

#82 jess on 12.14.09 at 10:57 am

foundations good as gold?

. .”She first told auditors that she didn’t have offshore holdings, before acknowledging she put money “over there” because she considered it “glamorous,” the affidavit states.”

Canada’s largest brokerage firm linked to alleged tax-haven scheme
GREG McARTHUR, Globe and Mail Update

#83 Nostradamus jr. on 12.14.09 at 11:20 am

Some readers/posters on this blog are quite dense.

…The U.S. is in process of bankrupting the world.

…In due time, Gold will be sold for food by china and india

…Canada’s Real Estate is, in fact, in a bubble.
Eastern Canada that is…w/ Toronto home real estate at a pinnacle.

…Hongcouver is of course “very different”.
Everyone knows that, but are too jealous to admit it.

Nostradamus jr.

#84 conf in Tor on 12.14.09 at 11:29 am

Gold! gold! Gold! Gold! Gold!!! I’m sick of this topic!
Garth, I thought this web site was about…
“The future of Real Estate”! -as it says on the top of my computer screen-
That’s why I’m on here! I’m interested in reading about where real estate is going…not gold.

#85 Another Opinion on 12.14.09 at 11:33 am

Medic – I gotta say. I’m not surprised we have problems in the world when people on this blog are debating real issues and passing along their (oh sorry is that there or they’re…I heard I was stupid) thoughts and you come out of the corner with ‘bleeping’ english lessons. You must be a very proud university graduate!

Back to the real stuff!

Thanks to the bloggers who put the time into writing their ideas and thoughts about money and gold. This issue is what I believe is at the center of the problem we face right now.

This isn’t just a recession like we have seen in the past. We have been living in a world where an elite group of people have been giving the power to control our currency. They were able to convince the greater population that paper money backed by the good faith of the government was better for all of us to use and it was a better medium of exchange. But REAL economic prosperity cannot occur from creating or borrowing more money into existence. It needs to come from real savings.
Anyways, sounds like people on this blog can either follow the road from that point to the answer (which I applaud you) or don’t care about it and would trust our government and the bankers who control currency.

Garth I reread what I wrote and I would like to offer an apology if my opening statement was offensive. I was just sad to see that kind of short term response to a gold sell off. But I guess the lesson there is we are all entitled to our opinions.

#86 pbrasseur on 12.14.09 at 12:47 pm

Garth, why do you keep bringing up this subject of gold? I mean who in the real world really cares what gold does?

Is it only to throw a bone to the gold bugs on your blog?

As far as I’m concerned gold is not money, even less an investment, it is (as are all commodities) nothing but speculation and as such it leaves me profoundly indifferent.

#87 shifty on 12.14.09 at 12:57 pm

“Globe & Mail states today – The household debt-to-income ratio rose 2 points to 145 per cent, the highest level since quarterly record-keeping began in 1990. That means for every $100 of personal disposable income, Canadians are now carrying $145 in debt”.

I’m far from being an economist but debt of this magnitude is not sustainable and could lead to a deeper recession.

#88 pjwlk on 12.14.09 at 1:08 pm

#62 nonplused: Thanks for your prospective on Gold. I too share your thoughts on some of the issues you mentioned.

I’m mostly in cash as well. The main reasons are the confusion on what going on in the different markets these days and what history is pointing to what is most likely to come next.

I’m still researching the whole precious metals thing to try and figure out what the best move, if any, on gold should be.

To me it seems that the real value of owning gold is in the protection if offers against some form of monetary disaster. I’ve always believed that in bad times, one way or another the government is going to find a way to relieve you of your savings. With the exception the elite of course…

#89 Lynn on 12.14.09 at 1:14 pm

Off topic, but worth reading: Cleaners worth more than bankers, says study.

http://news.bbc.co.uk/2/hi/business/8410489.stm?lsf

#90 Soylent Green is People on 12.14.09 at 1:18 pm

snore fest

#91 TheBigLebowsky on 12.14.09 at 2:00 pm

I don’t want to dive back into this but I guess some misconceptions need to be cleared up in this article with regards to gold and its function. The last bull market in gold and bear market in financial assets and equities together occurred during the 1970’sand early 80’s. During that period the driving force behind the rise in gold was massive inflation. The U.S dollar being unpegged from the gold standard in 1971 caused foreign countries to demand their foreign reserves be cashed in for gold. Foreigners holding dollars had a few more years to exchange their U.S dollars for gold than local citizens were given. This flooded the market with paper dollars and began the gold bull market. Central banks became net buyers of gold and not sellers, just as they are now doing today. To combat this massive flood of U.S dollars entering the market,hence causing a devaluation of the currency, Paul Volcker, the Federal Reserve Chairman at the time, massively raised interest rates. By 1980 interest rates were above 20%, soaking up the excess liquidity in the market, and gold had peaked at $850 oz. The gold bull market had run its course.
The people back then who knew what gold’s function really is did not fall in love with their coin and bullion collection. The time came in 1980 to roll their gold holdings back into financial assets, real estate, small businesses etc. That is gold’s function, essentially an inverse to turmoil and stagflation as it was in financial markets and equities. The people who saw this coming back in 1971 did very well.
Today the gold market is very similar but also very different from back then. Today the gold bull market is being driven not only from massive money printing by all governments. It is also being driven by something much more ominous. It is being driven by the knowledge that governments now hold massive amounts of unpayable debt and unfunded liabilities. Today the gold market is being driven by a flight away from paper currency and towards hard assets. Governments are in a box this time, if they massively raise rates, it makes the interest on there debt explode. The only way out of this mess is either for governments to print their way out, or default on their debt. That is why gold in going up, it a flight to quality.
As far as gold being in a 30 year bear market, this is true and also not true. Back in 1988 Ronald Reagan was President. He passed executive order 12631. It was called Working Group On Financial Markets. It was their job, Goldman Sachs, JP Morgan, CITI Group, to take government money and to go into the markets at a time of crisis to stabilize any volatility by buying and selling equities. But as with anything government touches, it has become a grotesque abuse of power. For almost 25 years these banks have been in the markets on a daily basis manipulating prices up and down. Their main job has become the suppression of the gold market. Gold is like a canary in a coal mine for government money printing. These banks have tried to silence the canary for the past 3 decades. But as you can see their control is being overwhelmed in the gold market by more and more buyers . Real inflation , without any suppression of price puts gold at $2500 oz, unofficial inflation put that at $6700 oz. So to anyone who takes a cheap shot at gold because of a natural market correction, really doesn’t understand what they are talking about.

#92 junius on 12.14.09 at 2:27 pm

#85 Shifty – You are exactly right. Our leaders have failed us. We created an economy based entirely on driving up consumer consumption by making it easier and easier to finance this with debt. Meanwhile we forgot how to make or produce anything valuable. Where will the jobs come from now?

How is it that the banks will continue to offer insane loans to consumers but will not finance growing businesses. I had a meeting at a major Canadian bank last week on our company that would have blown your mind.

The answer of course is that the government and the tax payers are guaranteeing the home loans but not the business loans.

It must get worse before it can get better. Our leaders have failed us.

#93 Fred Barker on 12.14.09 at 2:33 pm

US housing to fall further 2010

http://money.cnn.com/2009/12/08/real_estate/housing_outlook.fortune/index.htm

Will Canada catch up(down)?

#94 Kurt on 12.14.09 at 2:35 pm

#89 TheBigLebowsky – where can I read more about the unofficial inflation rate? One of my concerns with inflation measures is the exclusion of any measure of asset inflation, thus hiding the underlying devaluation of currency. I’m assuming that by suppression of the price of gold you mean the focus on where to put excess liquidity has been manipulated to exclude gold – am I correct?

#95 T.O. Bubble Boy on 12.14.09 at 2:59 pm

To anyone who was quoting that Federal Bank of Cleveland report on “why Canada didn’t have a housing bubble”:

http://whispersfromtheedgeoftherainforest.blogspot.com/2009/12/follow-pea.html

The one telling stat (that the author highlights more than once):

“between the beginning of 2007 and 2009 Canadian Banks increased their total mortgage credit outstanding listed on their books by only 0.01% — possibly the smallest amount of change in post WWII history.”

So, during this 2007-2009 re-inflating of the bubble, the banks have taken on exactly ZERO risk. We’ve all said it many times, but there’s the stat to prove it.

The most shocking part here comes when you pair this stat with the fact that over 50% of all new mortgages require CMHC to even exist (i.e. they are < 20% down and/or above 25-year amortization)… this means that our government has a MONOPOLY on sub-prime lending.

Maybe Mr. Flaherty is just setting himself up for his next job — I'm thinking the one he'll get after this whole thing blows up, his skills might be useful for something like running a Money Mart or being a Loan Shark.

#96 DuckSoupRus on 12.14.09 at 3:49 pm

Speaking of currency being money…Every Christmas, the duck rises a bit from the pot to look at the paper thermometer…..

$12.99 for a paperback this year????

#97 Mikey on 12.14.09 at 3:58 pm

Garth, Its pretty sad when revenue tax Canada has to audit RBC to see if they can find money to help them pay back there Debt to Canada.

Mikey

#98 Nestor on 12.14.09 at 4:04 pm

#75 Kurt on 12.14.09 at 9:34 am
And I don’t blame Garth for not answering your second post – your question was stated in a way that was whiney and petulant.
____________________________________________

bah. Garth didn’t answer the question the FIRST time.. why would he attempt to answer it when he CAN”T.
you obviously didn’t define “dollar”…. can anyone?

nope. and that’s the cause of most of the world’s problems. it’s why politicians can wage wars. why central bankers are able to steal people’s wealth and transfer it to themselves and their governments, and why Bernie Madoff can steal $50B from people, why banks can blow up, why we have perpetual inflation, why the US is able to run a current account deficit for 30+ years…

but hey… whatever you think makes you happy..

#99 Nestor on 12.14.09 at 4:07 pm

#89 TheBigLebowsky on 12.14.09 at 2:00 pm

125% correct on everything you’ve said. !!!

#100 AxeHead on 12.14.09 at 4:17 pm

On another topic, it’s -35 C today in Alberta. I think all the Copengreenies should come here and idle their Limo’s so’s we get a little of that global warming feeling. Brrr.

Sorry, I have nothing to add to the topic at hand, it’s spent anyways.

#101 Popeye on 12.14.09 at 4:34 pm

#85 shifty on 12.14.09 at 12:57 pm
———————————————–
What’s the definition of ‘disposable income’? And if Canadians are so indebted, why all the talk about ‘investing’ and ‘savings’ and ‘equity’?

#102 brico9 on 12.14.09 at 4:46 pm

Even Garth has his “slow news days” I think when he is busy or just too tired to post a new RE topic – he takes on the “gold bugs”. Throw some chum in the water.

The result is always an active discussion.

Its been a pattern over the past few months. The active readers of the blog and followers of Mr. Turner know he is a real sheet disturber – that’s why I like him. I like gold too!

Why trash gold and the gold bugs when there are so many RE targets?

Gold and gold companies make up such a small part of the total investment world it’s hardly worth talking about.

#103 Soju on 12.14.09 at 6:01 pm

Still got my gold bar hanging around my neck. What else can you do with it?

#104 kevin on 12.14.09 at 7:01 pm

Stick to housing Garth because you don’t know diddly squat about gold. Gold is the only real money in this world. It is divisible, portable, durable unlike anything else that has ever been used. That is why it still stores wealth to this day.

Alhough it is not officially used as money by any country, it is still money, that is why it is priced representing the strength of the currency it is being priced in, thus exchangable for that currency.

Lastly, gold has never lost it’s value. What has happened is the currencies gold was being priced strengthened. In simple terms, 1 ounce of gold will always buy you the same amount of goods irregardless of it’s priced. Gold stores the value of your FIAT currency, the purchasing power, on that day you buy the gold. No more, no less. That is gold’s role.

Not money! HA!

You are an ugly bunch. As for gold never losing its value, you obviously were still in Pampers in 1980. — Garth

#105 Roial1 on 12.14.09 at 7:08 pm

#102 Soju on 12.14.09 at 6:01 pm
Still got my gold bar hanging around my neck. What else can you do with it?

Go swimming?????? with it???????

(Nasty snickers)

#106 shifty on 12.14.09 at 7:19 pm

#100 Popeye
You got it Popeye, for every $100 of personal disposable income, Canadians are now carrying $145 in debt therefore what’s left to invest for the future. Where do you see yourself in 10 years?

#107 kevin on 12.14.09 at 7:35 pm

There is a profound difference between money and wealth. Gold is not money. Nor oil nor corn. Currency is money. — Garth

OMG! That is completly false. Currency is not money, currency is a medium of exchange. It is not money for the main reason it has no intrinsct value. Gold is money because it is exchangable for currency, has intrinsic value, is durable, portable, and divisible. Garth you have totally surcumbed to central bank brainwashing of what they want you believe money is.

There is no substitute for gold as money. Not oil, not corn because these are either not divisble, portable, or durable enough to be money. Metals yes, perishables no. This is what discovered by all cultures 1000s of years ago and that is why metals served as money.

It is the discipline of fiscal responsiblity that metals impose on governments which they dislike that is why the negative propganda on metals is worldwide now. You can’t print metals. And if you can’t print, you can’t buy or win elections based on non performance.

You can demonize smart people by calling them lunatic gold bugs, but it won’t work. Politicians are a small group with a large media base. No matter how hard you try, truth will survive and people, although swayable, know the truth.

I garantee in 7-8 years a new gold backed currency will emerge. It will be just a percentage of the currency but it will be backed so as to give it a floor.

Any takers on that bet? Because I love to gloat.

#108 TaxHaven on 12.14.09 at 8:00 pm

You paper “money” lovers should ask yourselves why the $US is defined in the Coinage Act of 1792 as being composed of

“… between 371 and 416 grains (27.0g) of silver, depending on purity, and a ‘eagle’ ($10) being between 247 and 270 grains (17.0g) of gold, again depending on purity…”

Somehow paper got in the way. What we trade with now are NOTES, stand-ins for the real thing.

“Money” is in fact a stand-in and store of value which allows it to substitute for goods in trade. If I’m a farmer selling milk I accept gold or silver in payment because those metals retain value long enough for me to later trade them for some other good which I need. “Currencies” today have lost this intrinsic value.

I’m not trying to push historical fundamentals here. Just saying that the world’s currencies are running on air and that their purported value can only go DOWN.

#109 GoldenBear on 12.14.09 at 8:08 pm

Soju won the Darwin award again.

Try a gold rope next time Soju.

#110 $fromA$ia ( o Y o ) on 12.14.09 at 8:15 pm

“…Hongcouver is of course “very different”.
Everyone knows that, but are too jealous to admit it.”- Nostratard Jr.

It’s Vancouver, you idiot.

Forget ESL, you can’t even speak engrish.

#111 $fromA$ia ( o Y o ) on 12.14.09 at 8:18 pm

“You are an ugly bunch. As for gold never losing its value, you obviously were still in Pampers in 1980.” — Garth
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Garth, so you think we are about ready for another 1980? I don’t see any other 1980’s around? Think this one, if its comming, is going to take a while because it’s been so long since the last on. Thoughts?

Nice picking of a cherry. I said nothing of the sort. But I did say your colleague who claimed gold had never lost was himself lost. — Garth

#112 tech4monkies on 12.14.09 at 8:35 pm

Debt and more debt. It boggles the mind…

“…the household debt-to-income ratio rose 2 points to 145 per cent, the highest level since quarterly record-keeping began in 1990. That means for every $100 of personal disposable income, Canadians are now carrying $145 in debt.

Back in 1990, by comparison, Canadians were carrying $88.60 in debt for every $100 of income…”

http://www.theglobeandmail.com/report-on-business/were-richer-but-deeper-in-debt/article1399381/

#113 Nostradamus jr. on 12.14.09 at 8:42 pm

I predicted nearly five hundred years ago that Garth’s next topic Monday night/Tuesday will cover Merrill’s prediction of Canada’s Potential Bubble.

…Of course Garth will zero in to explain that the potential bubble exists only in Eastern Canada.

…Garth will initiate a zero tolerance on this site regarding insults between posters.

Garth will also acknowledge that “it is different in Hongcouver to the rest of Canada.”

Nostradamus jr.

Are you still here? — Garth

#114 Jeannie on 12.14.09 at 9:12 pm

There are some of us who do remember a period when gold and silver lost it’s value.
Going back to the 1980’s, our smart schoolteacher friend had us all collecting silver coins, quarters, dimes, etc., taking the rolls to the bank, and making good profits …it was easy then.
The more ‘sophisticated’ speculators were lining up to sell granma’s sterling silver. Some truly beautiful pieces of sterling silver… candlesticks,tea-sets, bowls, genuine antiques even, were being melted down for their silver content. This destructive frenzy continued until the bottom fell out of the market, and the famous American Hunt brothers lost a whack of the family fortune betting on silver. Silver did go as high as $50.00 an ounce, supposedly on it’s way to the moon, but alas it soon fell to earth.

#115 45north on 12.14.09 at 11:13 pm

Fred Barker will Canada catch up?
Why Didn’t Canada’s Housing Market Go Bust?
http://www.clevelandfed.org/research/commentary/2009/0909.cfm?ref=patrick.net
Canadian house prices over the past decade closely resemble U.S. house prices with a two-year lag

#116 Tony on 12.14.09 at 11:32 pm

Housing should return to the mean in the countries where land is abundant. Especially America and Canada. Pertaining to gold it seemed everyone got the same stupid idea a long time ago that the only end result in America is inflation. I believe deflation will rule for several years making gold and silver a sucker’s bet. The only true reason that gold and silver went up was they usually move opposite to the direction of the stock markets which are more overvalued now than they were in 1929. Forward earnings must be some sort of a pipe-dream.

#117 gold bugger on 12.15.09 at 4:40 am

I’ll tell you what, Dan: When the loonie is officially declared worthless, I’ll meet you at the location of your choice: Mega-Lo-Mart, Lose-On-Foods, the union hall on Esquimalt Road, the bank. Then we’ll see whose “money” talks: your brightly coloured pieces of paper or my shinny yellow stuff.

#118 Dan in Victoria on 12.15.09 at 6:15 pm

Whatever, Guns, ammo, axes, knifes, food, generator, gas, diesel, propane, canning jars, seeds, solar panels, firewood etc. Bring lots of shinny yellow.

#119 Uncle Joe Pipe Smoke on the Volga on 12.15.09 at 9:16 pm

Deutscheland’s graph has Erich Honecker’s socialist ideals to tank. We [had] a wall divided, On the one side private ownership – the other state rental.

#120 LB on 12.17.09 at 1:21 am

Of course this blog is a great place for gold bugs to promote it. Anyone getting out of real estate needs to put their money somewhere, and they have a vested interest in encouraging as many as possible to buy gold -driving prices up so they can then reap their profits! Duh.