You bet

Days ago this blog mauled me for suggesting the US will not default on its debts, Europe will survive and returns from the stock market will track corporate earnings skyward. Since then (we’re on Internet time, after all), the debt ceiling crisis in Washington is all but over, the EU will save Greece’s ass once again, we have evidence our interest rates will rise, and markets celebrated fat profits by behemoths like IBM and Apple.

A few days mean little in the scope of things, but if I were sober, drug-free and celibate (one out of three is a passing grade), here’s what I’d be doing:

Selling my house if (a) it constitutes the bulk of my net worth (b) I have no equity (c) I’m retiring soon with a crappy income or (d) I’ve made stupid money just by living in it. After a decade of over-performing, real estate is about to become one of the worst possible assets to own for long-term appreciation. Houses will once again become possessions, instead of investments. If you have a real estate capital gain and don’t crystallize it now, you could successfully impersonate a bag of hammers.

Second action: I’d exit precious metals. Anyone caught long in gold and silver in the months to come will get a real good lesson in the dangers of avarice. Have you made money in the past three years? Absolutely. So harvest that gain. Once it’s clear even to the sackcloth set that America will never default, never devalue, that minor European countries can keel over largely unnoticed and the global economy is actually expanding, PMs go back to being interesting rocks that impress dentists and werewolfs.

Thirdly: I’d worship liquidity and load up on quality financial assets. You know – the ones I keep ragging you about. Sector and index ETFs in Canada, the US and the emergers, as well as small caps; preferreds in banks and insurers along with commercial REITs for income; government, corporate, real return and high yield bonds for income and cap gains. All nicely balanced so the growth assets and fixed income hedge each other, evening out volatility and giving you far more predictable returns. Shelter interest in an RSP or TFSA, and avoid high taxes through capital gains and dividend income. And never, ever, ever be more than 72 hours from cash.

Of course the world will continue to teeter and terrify – but the days of God-gold-&-houses are coming to an end. Most people won’t notice until the moment to act is a speck in the rear view mirror. The forces of mammon are on the move.

Let me give you three small examples.

First, evidence a real estate ennui is gripping even house-horny BC. Vancouver’s Royal Columbian Hospital has just lost $3 million on a giant vacation home lottery intended to raise bushels of money for a big reno. Now the hospital will have to divert badly-needed operating revenues just to clean up the lotto mess.

Figuring 120,000 people would spend $100 on a ticket with a good chance to win a luxury vacation home in Kelowna, Whistler or Vancouver Island, hospital officials were shocked when two-thirds were unsold. Said they: “We are certainly not going to move forward with something that the public doesn’t really want to support.”

And here’s an answer to the question of whether owning a house for 20 years is a better investment than owning, say, stocks.

This para from the Wall Street Journal, penned by a business professor, which should put Mikey the Re/Max nimrod into an oxygen tent:

“If a disciplined investor who might have considered purchasing that median-price house in 1980 had opted instead to invest the 20% down payment of $19,910 and the normal homeownership expenses (above the cost of renting) over the years in the Dow Jones Industrial Index, the value of his portfolio in 2010 would have been $1,800,016. The stocks would have been worth more than the house by $1,503,196. If the analysis is based on 2007, the stock portfolio would have been worth $2,186,120, exceeding the house value by $1,625,850.”

Finally, the ultimate evidence – a veritable, marital, pièce de résistance – that real girls are turned on by liquidity. (I knew that.)

Andre’s getting married to Liz. This was his note to me last night:

There comes a time in a man’s life when he must settle down, get married, start a family. And when this man has beendiligent about earning, saving, investing . . . how does the saying go? The best laid plans of mice and men . . . ? However, just a few days ago I received the following email from my fiancée (the big day is September 3rd). She’s just finishing university and works part time at a bank.  We’ve recently found a basement suite to rent in Langley that is just a few blocks from my work for $900/month that we’ll be moving into after the wedding. (Note: to my knowledge she has never seen your blog or any like it). Here is her email…

———
Liz writes:

I’ve been trying to figure out on my own my thoughts on owning a home in the future etc and I want to see if I’m missing some numbers. I used our amortization and bank employee interest rate as of today to figure out my calculations and Ed [co-worker] said the average mortgage we see at the bank is for $500,000 and the interest I would get today would be 3.79%. Am I missing something?

5 years no mortgage ($900 dollars rent): $54,000 ($10,800 per year)
plus utilities

5 years mortgage (%3.79 fixed over 5 years on a $500,000 mortgage – $2,318.53 payment): $139,112.06 plus taxes and utilities and upkeep. (ONLY $49,535.29 paid off of mortgage)

If someone did not get a mortgage they saved $85,112.06 over 5 years. Plus they are able to make a return on this money they have not been paying into their house, so this could potentially add another $6,852.39 using a 7% return. The total amount saved is $91,964.45. Saving approximately $2,000-3,000 in property tax a year could add at least another $10,000. So the grand total is over $100,000 dollars saved compared to $50,000 in equity in the home after five years. Plus home insurance which could be approximately $1000 a year adding another 5000.

——–

Cold feet? Hmm, for some reason I think we’ll be just fine.

Andre. Dude. When you tire of Liz, send her over.

A. Total. Goddess.

204 comments ↓

#1 Dr Doom on 07.20.11 at 9:40 pm

FIIIIRRRRRSST!!!

More to come………….

#2 Shawn Petriw on 07.20.11 at 9:40 pm

You used a pic of John Gruber of daringfireball.net? Odd…

#3 Golden Stewie on 07.20.11 at 9:51 pm

“Once it’s clear even to the sackcloth set that America will never default, never devalue..”

Sorry had to call WTF on that one. The dollar has been devaluing for decades, especially the past few years.

The illustrious leaders south of the border have more than doubled the US$ money supply in the past couple of years, in my book thats a huge devaluation.

http://www.businessinsider.com/heres-why-the-money-supply-has-exploded-but-we-havent-seen-rampant-inflation-yet-2010-3

Only reason I included the BI link is that, Joe Weisenthal of BI is a fellow paper bug like you and even they claim the US$ is in free fall.

In the spirit of soaking up other opinions I’d be interested to see how you reason it is not / will not devalue?

My meaning: no purposeful hyperinflation through currency devaluation. — Garth

#4 Pr on 07.20.11 at 9:59 pm

Second action: I’d exit precious metals..(I heard this at 900$,1000$,1100$ etc.)
Go a head i see you in the line up when its 2500$
Selling your house now is a great idea. Debt free just in case ,we , canadians, are not that special in this world!

#5 WatchandWait on 07.20.11 at 10:04 pm

Hey Garth, isn’t that you?

http://www.canadianrealestatemagazine.ca/index.php/news/item/699-harper’s-mortgage-policies-at-the-root-of-canada’s-housing-bubble-garth-turner

#6 BCing You on 07.20.11 at 10:05 pm

Here’s an interesting read on economic theory:

http://www.hoisingtonmgt.com/pdf/HIM2011Q2NP.pdf

#7 Golden Stewie on 07.20.11 at 10:06 pm

“In the spirit of soaking up other opinions I’d be interested to see how you reason it is not / will not devalue?

My meaning: no purposeful hyperinflation through currency devaluation. — Garth”

OK …. no certainties in this world but Hyperinflation generally accelerates due to lack of confidence in the currency.

To me everyone (ie the major holders of US debt) know the US are printing stupid amounts of fantasy money. I was China and had a couple trillion in US bonds and I see the US basically printing another $2Trill in the past couple years after they had worked for a couple decades to build up their “saving in US Bonds” Id be pretty pissed!

However they know if they ditch their dollars and all hell breaks loose. Other countries in the same boat, all trying to back out quietly without causing a stampede.

I hope you are right but for now, Ill hold my PM’s.

#8 JessicaJ on 07.20.11 at 10:07 pm

“but if I were sober, drug-free and celibate (one out of three is a passing grade), here’s what I’d be doing:”
—————–
Garth, I am guessing you are sober and drug-free! On the serious side, keep up the great job! You are one helluva writer!

#9 mid-Ontario on 07.20.11 at 10:08 pm

“the debt ceiling crisis in Washington is all but over, the EU will save Greece’s ass once again…” Garth

The debt ceiling is not over yet…another week of idiot politics are needed.

Greece will default. You are 100% wrong. When Greec goes, the unravelling starts everywhere. Goldman Sachs toxic OTC paper will show up everywhere.

“Second action: I’d exit precious metals. Anyone caught long in gold and silver in the months to come will get a real good lesson in the dangers of avarice.” -Garth

Wrong again bigtime Garth. yeah, silver and gold will go up and down BUT it goes up because people are worried and down due to manipulation which is blatant in silver’s case (read up on the shorts of JP Morgan). You remain so wrong with PM’s. I bet you don’t even have a fortified basement.

Still love your blogs. RE is crumbling beneath our feet as we type. When the ground gets soft, the general public will see the RE Ponzi scheme for what it is.

#10 Investigator on 07.20.11 at 10:14 pm

CNBC news thinks there will be major unrest created by the investment fraudsters. You may be thankful things seem for the moment calm, but this is the calm before the storm. I am worried because like Canadian real-estate, this will not end well because we have all been defrauded, and we don’t have the leadership to deal with it. If you’re not careful, you will be defrauded too!

http://www.stumbleupon.com/su/1Y2ai0/www.youtube.com/watch?v=2pnx8_4PsOY

#11 Investigator on 07.20.11 at 10:23 pm

CNBC news thinks there will be major unrest created by the investment fraudsters. You may be thankful things seem for the moment calm, but, this is the calm before the storm. I am worried because like Canadian real-estate, this will not end well as we have all been defrauded, and we don’t have the leadership to deal with it. If you’re not careful, you will be defrauded too!

http://www.stumbleupon.com/su/1Y2ai0/www.youtube.com/watch?v=2pnx8_4PsOY

#12 Priced Out in Toronto on 07.20.11 at 10:24 pm

Just talking condos in Toronto with a friendly real estate agent. Nothing is moving in that segment and investors are starting to list due to the huge inventory about to hit the market. Condo prices (at least) are starting to budge. Haven’t heard too much on house prices. Still waiting to buy as soon as I can afford to.
Don’t hate the thought of purchasing a home, it just hasn’t made sense for a few years now.
Finding a good place to rent isn’t as hard as it used to be though, so that’s good.

#13 Stevie Why ?? on 07.20.11 at 10:25 pm

” There comes a time in a man’s life when he must settle down ” ……. well that quote is close ( actually very close ) to what I heard a hundred years ago …. ” “there comes a time in every young mans life when he has to make a desision” . To that I say hMMM….. with emphasis on the MMM:
1. Marriage
2. Money
3. Mother

note: if either 1 or 2 above fail …. NUMBER 3 will always be there for you. God Bless All The Mothers On The Blog

#14 Sorry Garth you are wrong on 07.20.11 at 10:26 pm

I really like Garth and his logic would hold water if the markets were not manipulated. Mark “the greenspan” Carney will keep rates low until the ponzi housing bubble pops. How long will that be? People will borrow from their LOC , credit cards and whatever free money hey can from the banks until the game is over. That could take years. In the end banks will have to forgive debts and lower mortgage payments much like the US. Hundreds of thousands of people will walk from all their debts. I’ve seen reports on Americans walking away from thie homes and LOC debts. Some banks begged people to pay back $3k from a $100K LOC and the debters laughed at the bank and said NO!. Take the free lunch and enjoy it. I was foolish to work hard and save. Now I play the game of spend all the credit until it’s over. I’ve started to work less and use more credit. I can’t wait to move into my townhome $420K. Going to live it up and make alot of money. If it pops??? I walk from everything.

#15 Dr Doom on 07.20.11 at 10:28 pm

Reading this blog is very entertaining. I enjoy picking out the various personalities of the people that comment here.

When Garth knocks real estate, the realtors will get their back up…
The gold bugs think Garth disses gold and they get their back up…
Then there are the folks that tell how they have invested and really like to push their ideas because, well, that’s how they have invested and they want affirmation…

Then there are people like myself, who actually listen to what Garth says and listen:
– Garth is not anti real estate, heck, he owns a whack of it
– Garth is not anti gold, just recommends a balance
– Garth makes a living with money. He is good at it. He is a very smart cookie.

I never knew about Garth until last year but I can confirm I have been only making money following the investment advice he gives here for FREE to the people that actually see it. Last year I did not know about dividend shares. Today I have pulled my money from the orange guys bank and my former 1.5% earning cash is now earning just under 6% by owning preferred shares from a Canadian bank. Last year Garth wrote to get into bonds so I bought into a premium bond fund that last I looked was up around 7% for the year.
Don’t get me started on the doom and gloomers. People, if the world ever gets so bad that your shiny metal is going to be used as money to buy and sell….well, it ain’t gonna happen. You would probably all have 666 on your foreheads long before that. Please………….

I’m glad Garth has a thick skin, he sure takes abuse from a lot of idiots out there. I like to think that what keeps him going is knowing there are a lot more people on the sidelines listening and learning.

#16 Neo on 07.20.11 at 10:28 pm

For someone who hates talking about Gold. You sure enjoy talking it down…And being persistently wrong by the way. Until interest rates go up in the U.S. which isn’t happening in the foresseable future and negative real rates of return continue to persist. Gold is going to continue to go higher. That’s been the case for 40+ years. You know that Garth. I believe your last obituary for Gold was when rising margin calls caused it to slip below $1,500 and you prematurely claimed victory. Now several weeks later we are at $1,600. It doesn’t matter if it drops $300 like it did in 2008. That’s a buying opportunity then and it’s a buying opportunity now because they’ve only printed trillions more dollars since then and will continue to do that with the debt ceiling raised. Such bizarre times we live in when a country can improve there credit worthiness by adding more debt to avoid defaulting on what they already owe.

#17 Utopia on 07.20.11 at 10:29 pm

Terrific commentary Garth.

#18 Joseph [original] on 07.20.11 at 10:29 pm

Not the best article tonight Garth. Your graph on net worth describing investing in a house vs stocks really depends on your starting point. Place the starting marker at the year 2000 instead of 1980 and those numbers of houses vs stocks show a completely different picture. Also, when the stock market botomed in 1932, it took 22 years to get back to its pre-crash high. We might see the same thing ahain. Nobody really knows yet. Also, I don’t think the precious metal run is over because I don’t think the US and the Euro crisis are necessarily behind us either. At best, we’re lucky if we kick the can down the road for another cycle. Thirdly, sector and index ETF’s are now irrelevant in the face of Canada’s big banks offering 40 percent returns on new investment vehicles tied into Big 5 bank profits, with no risk to the principal. The principal is guaranteed. I went that way.

#19 Chris no longer in England on 07.20.11 at 10:49 pm

“… we have evidence our interest rates will rise” –

How about this from the UK?

http://www.dailymail.co.uk/news/article-2016780/Bank-England-rate-setting-MPC-minutes-Inflation-peak-higher-expected.html

#20 Mr. Reality on 07.20.11 at 10:55 pm

Rather bearish Garth = you have done us chicken littles proud.

I wonder if all the house hornies feel the same way about precious metals?

On second thought…….Where did BPOE disappear to?

Mr. R

#21 WI Boomer on 07.20.11 at 11:02 pm

Yeah, Baby!!!

Me, and Smoking Man will share a bottle of wine/Brandy/Cognac, hit the Casino for a grin, and count the value of our Investments (not much RE here).

The World is NOT coming to an end…maybe YOUR world if you hold RE not paid for where your equity position is less than say 30%. Brtween carry costs, almost guaranteed intertest rate rises over the next half decade, and just look at the mess we in the United Snakes have made. Your different??, hardly. With the mix of French Politics, British Engineering, and American Culture, you might be more hosed than us, but I doubt it. Cash in your RE gains.

My portfolio is up from 13.7% to a low of -.3% depending on the investment for the year. (No RE or recious Metals). Holding residential RE would be the definition of the Greater Fool looking forward. Demographics, economics are pushing against ownership at this tim, but what do I know?

The US had made a huge mess in 2007-08 dealing with Banking & RE. We have post-poned the day to reckoning & cleansing, but it has not yet come to pass. We could still suffer a hue melt aka derivative bets, among others, OR we might decide to restore tax rates to their year 2000 levels who knows? We have the BEST politicians money can buy, and the least informed populace- wanna trade?

#22 Wise Guy on 07.20.11 at 11:08 pm

My friend is selling his 5 bedroom home in Reading, PA for $65,000. OK, I understand that it is Reading, PA, but I see very similar homes going for 10X this amount in downtown Toronto. Sure it is no palace, but neither are some of the houses that I’ve seen downtown. I definitely think that we are severely delusional this side of the border!
http://www.trulia.com/property/3050552776-731-Madison-Ave-Reading-PA-19601

#23 Jeff on 07.20.11 at 11:15 pm

I have to disagree on your Precious Metals comment. Granted, there is SOME froth in the air again at $1600 gold, but not nearly enough. If you were to ask the room at your next speech how many people own PHYSICAL gold or silver, the number of hands would be few to none. There is no bubble yet in the metals. In order to have a bubble you actually need people to own it. The fact that there is talk of a bubble and discouraging sentiment still as Gold reaches new highs is exactly what we want to see as the bull market continues. More people may talk about it or notice it – but they don’t own it………yet. I look forward to selling to them at MUCH higher prices :)

#24 Toxicosis on 07.20.11 at 11:21 pm

Such certainty Garth. What keeps you going…or sober? Is it hubris, arrogance, or that determined swagger. Or is it more that quantity of omnipotence which even keeps you impressed with yourself? We can all utter statements Garth, you however cannot mathematically back them up. Sure on housing and its inevitable decline, you see the devil in the details, and your deflationist self, so indignant, and so self-righteous is hell bent on projecting a return to “normal” come well…..hell or high water. No this won’t happen, no that won’t happen, how bout providing some meat on that bone for us intellectually challenged naive sycophantic doomers. Maybe we’ll all slink back in our survivalist bunkers and holes if you could truly provide some verifiable reassurance that all is well in the world. I mean peak oil, overpopulation, massive bailouts and money printing don’t provide fuel for the fire you’re feeding. So exactly what are you feeding it. Oh a dose of magical and fantasy thinking devoid of realistic assessments and tangible solutions. You speak as though you’re both a salesman and/or a politician…..oh wait. You’ve missed the forest for the trees there Garth. Perhaps if you have precious metals you should sell them so the rest of us can pick them up on the cheap. I mean in a couple of years when gas at the pump is $3.00 a litre you can at least still sleep in your hummer. The price of fuel doesn’t affect anything else right Garth……like food, transportation, like everything. Poor Garth he’s either really lost his noodle or he’s quite a clever little liar who thinks he’s perhaps better than both math and the common man. Some days you are better than the common man, some days probably not, but you’re never ever, ever more intelligent than math and the facts. If Garth honestly chooses to be an economic loser of the future holding on to fiat money which is ALL debt now with NO chance of real world growth than all the power to him. Too bad he has too taint the many who desire to survive with his inaccurate understanding of economics and finance. Good in business Garth does not necessarily make one good in math.

http://www.bmgbullion.com/library_images/x_550/1103.jpg

Thank you for so neatly embodying the ungraciousness which now personifies gold fanatics. Good luck with that anger. — Garth

#25 The Econoom on 07.20.11 at 11:26 pm

Hey Garth,

Thought you’d find this article interesting from Canadian Business Weekly: http://dl.dropbox.com/u/19892811/Rental%20Complex.pdf. That’s the public link to download it from my dropbox. Anyways, it’s interesting to see how mainstream this is going. I’m a trader (and paid well to do it), and when I see something get popular in terms of a trend, I usually sell/buy the momentum depending on my view. Unfortunately real estate markets move much more slowly, so I’ll have to be more patient (if I even buy at all; why limit career mobility?).

#26 waterloo Resident on 07.20.11 at 11:27 pm

Well, I’m glad to hear the GOOD news about America not defaulting, because if they did then the sky really would have fallen.

What I’m wondering is ‘WHEN’ will Mark Carney raise rates? Will he EVER raise rates? Frankly, I don’t think so, not in my lifetime, and I’m 47.

#27 BC Bring Cash on 07.20.11 at 11:29 pm

Knocking home ownership on the merits of, is it financially prudent and does it address everyones needs. For example if you own and like pets. Try and find a place to rent. Good luck. Even the ownership of Condos, Town Houses, etc. have all kinds of restrictions. I’m quite happy with my detached home I own without any restrictions on whom or what I choose to live with. Pets for some are a very important part of their lives. Renting with pets means living in substandard housing.

#28 Helicopter Ben on 07.20.11 at 11:34 pm

yeah sell your gold and silver to me. QE3 is coming and your telling people to sell gold? unreal. I dont remember anyone saying the world was going to end cause the states wasnt going to raise their debt ceiling , they always do, but thats no the point, the point is they will never stop raising it. how can something precious go down when limitless paper is flooding the market. America defaults every day they print money.

#29 Utopia on 07.20.11 at 11:44 pm

I was a little surprised by the harsh rhetoric directed at Donna’s stay at home husband yesterday. Not sure why exactly. It just seemed the verdict on him was too harsh. There were just no facts to go on and no good reason to be calling the guy a bum. What is wrong with dad’s staying home to raise the kids anyway? Who says Moms are the only valid care-givers…..

The thing is though, if every family relationship really only comes down to dollars and cents that each partner produces then we really are a failure as a human race.

And this is for you Kimi. Don’t forget, charity begins at home.

#30 race against time on 07.20.11 at 11:46 pm

“Thirdly, sector and index ETF’s are now irrelevant in the face of Canada’s big banks offering 40 percent returns on new investment vehicles tied into Big 5 bank profits, with no risk to the principal.” -#18 Joseph

40% return? Garth, is this true?

#31 Snowboid on 07.20.11 at 11:48 pm

Appreciate the expanded wisdom Garth, now do I still need to buy the book?

Just kidding, of course I will buy your books – it’s the least I can do after watching the proceeds of our Victoria home sale grow in a manner most mysterious.

Only downside is reworking all my spreadsheets to accept 6 figure columns!!

#32 somecatchphrase on 07.20.11 at 11:55 pm

Why dividend paying stocks are better than tenants – take your pick, one building, in one community, or, multinationals that generate revenues from operations all over the world –

http://www.youtube.com/watch?v=xS06J67mV7w&feature=view_all&list=PLDBD77E6609C65295&index=2

For a formidable argument as to why you boomers and younger should focus on large dividend paying businesses, rather than fixed income, fast forward the following podcast to around 35:00.

http://www.netcastdaily.com/broadcast/fsn2011-0716-2.mp3

Major businesses, such as Walmart, Johnson and Johnson, Proctor and Gamble, Kraft foods, BHP Billiton, Merck, Phizer, Eli-Lilly, Coca-Cola, Phillip Morris, Exon-Mobil, IBM, and Microsoft are dirt-cheap! (All above are “on sale” if your home currency is the Canadian dollar!)

Check out ETFs such as XLP, XLE, DLN, MGC, and OEF.

How’d you like to get a 9% pay increase every year?

#33 sluggo on 07.20.11 at 11:56 pm

Just an observation here but Global’s recent financial rotation includes buying houses and selling gold. A pretty good indication of what not to do. Fundamentals mean nothing if timing is off.

#34 timo on 07.21.11 at 12:03 am

Garth, could you possibly explain your definition of default?

The US cannot balance the budget to repay the debt so they are just kicking the can down the road. They are not going to get the tax-base back with inflation due to free-trade keeping wages depressed so how in the heck are they going to fix this?

I love your book but I see a major problem brewing and inflation is taking hold with no major way to increase wages. Speaking of brew i am going to make a pot of coffee and again stare at the bill which tells me that coffee is way up in price since last year.

love your blog but I know your wrong.

#35 The Phantom on 07.21.11 at 12:05 am

Garth and fellow bloggers:

Not a ton of thoughts to contribute tonight. I was interested in the comparative analysis offered between owning a house and owning stocks on the Dow and was recalling the fact that there was SO much hardship and so many families that struggled to just get by during the late ’70’5 early 80’s when rates spiked.

Being debt free is a wonderful achievement for anyone to aspire to but our culture or society or mind set seem to embrace a cavalier attitude regarding debt. This attitude evidently appears to span all age groups as well, not merely being a preserve of the boomers or the youth.

I got to thinking as an aside to everything else that was posited on the virtues of investing in the Dow over and against a home that IF one came across hard times (surprise as this does befall some of us from time to time) you would have an easier time accessing your capital from the one verses being bound to a continuation of exceedingly high interest rates (and payments) on the other. This is another check in the box for liquidity and being able to access cash in the event that hard times visit your life.

I still abide by my later grandfather’s philosophy, reflected by his lifestyle and his handling of money. Owe no man anything, always work hard at whatever you put your hands to and support the family that you elected to create and steer them in the direction they will need to go when they become adults and enter into the society at large.

the Phantom

#36 immigrantvoice on 07.21.11 at 12:09 am

Garth, you’re right, everything will be fine for now, more debt, greece bailout etc… This is a good reason to short silver (in the short term)- not a good reason to get out though.

The more debt piled on, the more fiat currency printed, the more gold and silver have to account for. Basic economic principles. If we were to get onto a gold standard gold would have to be re-evaluated to around 1 million bucks. Does $8000 seem that unbelievable with all of the bailouts going on in the world? Smart money is already there: Rogers, Sprott, University of Texas, etc…

#37 nonplused on 07.21.11 at 12:14 am

Garth, dude, you are loosing all credentials. You will probably be happy to see me go, but here is the thing. The 50 day moving average has declined in a regular pattern since 2008, but has never even gotten close to the 200 day moving average which has never gone down, in fact is going straight up, since 2008. Why? The money system is failing. No big deal, but quit warning people off their only escape.

Gold will eventually be a bad asset to own. But not until all government debt is acknowledged by everyone to be unpayable, defaulted, and written off.

#38 Hoof - Hearted on 07.21.11 at 12:15 am

US = bankrupt..and has been since the Federal Reserve was created in 1913…without a charter limit, as was the norm via incorporation legalities previously.

Research History.

” Taxes” were created as a Trojan Horse to pay back the Gang-Banksters.

The US Gov’t will remain…” solvent “…at the discretion of the Gang-Banksters..who will suck Bernankes “teat” till it shrivels.

Solution is…via historians..is outlaw the Fed….avoid usury….take control.

Simply keep the U.S. President safe in say….NORAD Colorado complexes…..enact the legislation several U.S. Presidents attempted ……if not….bend over.

The longer the Fed..aka a franchise of Rothschilds is allowed to exist….U-R- fooked…

#39 Basil Fawlty on 07.21.11 at 12:23 am

The US is defaulting through the destruction of the currency. The dollar has lost 50% of it’s purchasing power, in terms of gold, in the last three years.
So the US settles the debt ceiling deadlock, which gives them the opportunity to borrow a few more trillion, is this a good thing? Who will lend them the money? How much of the new borrowing will actually be created out of thin air by the Fed?
Greece should default, but US banks hold $160B in credit default swaps on European bank debt, which under a default would bankrupt many US banks. So, extend and pretend is the option given to Greece, along with the sell off of State assets at 30 cents on the dollar.
Sell gold at your peril, cash is constantly becoming worth less , as central banks continue to print. Solving a debt problem through more debt, leads to more money printing and is pure folly. Is this not obvious?

#40 timo on 07.21.11 at 12:27 am

William Clark
US strategy on buying r/e

Here is the best plan:
1. Buy a home that is way more than you need.
2. Immediately default.
3. 4 years later when the bank gets around to foreclosing make a payment or two.
4. When they try to evict have a friend come over and claim he is a renter. (3 more months).
Lather. Rinse. Repeat.

http://webinvest.dyndns.org/?p=4946

#41 nonplused on 07.21.11 at 12:27 am

Oh, and I forgot to address a couple other memes you are trying to promote at the bequest of Carney and Harper.

The debt crisis is only beginning. It was not averted you fool. We’ve found the greater fool and it is Garth, bought and paid for. The obligations were transferred from one group that could not make good on the debts to another group that most certainly never will.

Yes, there are good companies like Apple raging and caging. But the financial system is fu$ked. It will not get better.

And the Nth agreement to disagree about Greece has solved nothing.

Look, Garth, it’s clear that you are a boomer, which means that you thing if you wish it were true it has to be. It’s a bit of childishness that we have to forgive you for because you’ve been bought off for so long pretending it can be so. But you are suffering from your own delusions the same as anyone else.

This system will fail, because it’s based on lies. It’s a Ponzi scheme. Open your mind.

#42 Mike - I found the SOLUTION on 07.21.11 at 12:29 am

READ THIS CAREFULLY. Garth, is this doable?

We all Canadians go out there and buy 600K-1.5mil homes (or more) with minimum downpayment, we drive price another 15-20% up, and make sure we offer to pay more than needed (like today’s buyers). When shit hits the fan (everyone is priced out) and amrket is toast, we give the keys back to the banks, and declare bancrupcy. Move all assets out of country if needed on spouse’s or parents name. Our advantage would be living 1-2 years on subsidized variable rate at 2% on homes we won’t invest a penny (we’ll buy them removated).CHMC will then totally bankrupt, causing banks to bankrupt heavily, and financial ministers on last decade go to jail happily. (for protection)

Or we sell at 20% profit in 1 year, not bad!
Jim and Marc – are you doing it with us?

#43 Connie on 07.21.11 at 12:31 am

I looked all over google and I could not see a whisper of the debt ceiling crisis being all but over, but maybe your inside contacts provided that. I will check again tomorrow.

The story I read said that the GOP is leaning towards rejecting the Senate proposal. Of course this could all be political nonsense. Frankly with 63% of Americans against a debt limit increase, if I was a politico I would think that I would take a stand.

#44 Cato on 07.21.11 at 12:32 am

The US has already been defaulting and will continue to do so. Primary dealers flipped most of the debt they were supposedly buying back to the Fed, this is in addition to the debt which was monetized directly via QE. But the depth of the US economy is large enough to prevent a hyper inflationary event. That doesn’t mean we won’t continue to see loss in purchasing power. The phrase a dollar just doesn’t buy what it used to will take on a whole new meaning.

A weak USD is in US interests on a number of levels, and america will always put its own interests ahead of the world. Canada needs to wake up to fact our relationship is changing in a big way. The US wants to repatriate as many knowledge based jobs as they can and judging by activity I am seeing when down in California they are well on way to accomplishing that goal. Our gov’t is expediting the process, but can’t lay the blame fully at feet of conservatives. It was the liberals who enacted many of these misguided policies.

The purpose of the debt ceiling hike is to buy one more term at the trough. 2 Trillion provides just enough momentum to carry current politicians into one more term, including Obama. No meaningful cuts will be enacted, bulk of any cuts will be passed to some future administration in 2015. Obama is a wallstreet president, just look at where the campaign money has been going – just look at the legislation thats been enacted. Don’t listen to the words, look at the action.

Nothing has changed, therefore I keep my golden insurance policy. I’ll remove the hedge when the keynesians have been routed from political office. Until then there will more rounds of stimulus, more debt and a perpetual cycle of crisis.

The way out involves wage inflation, it lessens burden on over indebted consumers and swells tax revenues. Its dangerous but we have no choice. The second part of solution involves massive cuts in gov’t and hefty tax increases. Many current obligations simply can’t be maintained regardless how high taxes go, so cuts will have to run deep. Austerity will come, it can’t be avoided forever. We could have had a different outcome, but too many of us were busy shopping at walmart.

#45 americanadian on 07.21.11 at 12:35 am

So many things wrong with your arguments. But what Joseph [original] said is the most blatant.

You picked a choice timeframe to make your point. But then again, I guess your target audience would not have picked up on that as they are too busy agreeing with you.

#46 betamax on 07.21.11 at 12:38 am

#14 Sorry Garth you are wrong: “Going to live it up and make alot of money. If it pops??? I walk from everything.”

Good plan. Be sure to let us know how it works out.

#47 americanadian on 07.21.11 at 12:38 am

BTW…when you have an inflationary environment, don’t you want to borrow at today’s interest rates and invest in assets at today’s money so that when prices rise, your assets appreciate.

Or interest rate arbitrage. Borrow like hell on today’s interest rates, and lend like hell when interest rates rise?

Just sayin’

#48 Where's The Money Guido? on 07.21.11 at 12:40 am

Re: #18 Joseph [original] on 07.20.11 at 10:29 pm

. Thirdly, sector and index ETF’s are now irrelevant in the face of Canada’s big banks offering 40 percent returns on new investment vehicles tied into Big 5 bank profits, with no risk to the principal. The principal is guaranteed. I went that way.

And what may these investments names be, perchance???? I would love to see 40% returns too!!

#49 Suede on 07.21.11 at 12:45 am

After living in our place for 4 years, just listed our 2bed/1bath in the Cambie area of Vancouver near VGH to turn our stash into cash. We made the place show like a million bucks, with granite, stainless, hardwood and new paint. RE agent said this thing will be hot, heavy and full of frenzy in the offers so we went with her…Two weeks on the market, dozens and dozens of couples walking through. Not a single offer – why? No in-suite laundry. Picky picky.

Side note: Not a single slice of HAM came through. Looks like under 500k is like buying a tent for them and too risky. Who’d want to leave east of granville anyway? Too many bums and hippies with long hair around and crime is up 100% in every category. From 1 break n’ enter west of granvile to 2 bne’s east of it. Unbelievable.

#50 keny65 on 07.21.11 at 12:48 am

Trade your gold for paper…makes complete sense!!Gold has only been the base of ALL economy since they first found the stuff in Egypt…people have been killing,pillaging and building empire for this stuff.Gold is something that NO ONE can control fully and is the enemy of all fiat currency.A wise man once said “trust in gold or trust in your governement”I know on wich side I stand,duhh…

#51 Not 1st on 07.21.11 at 12:48 am

Garth, your chart is totally bogus. Check what the DOW and the U.S. greenback has done in the last 10 years, when priced in gold.

Don’t you realize you are making fictional gains in a stock market that pays you in devaluing currency with less and less purchasing power lost to inflation.

#52 Calgary Illusion on 07.21.11 at 12:51 am

The bond yields for Greece pretty much imply Greece is headed for default. Are you a buyer of PIIGS bonds?

#53 TaxHaven on 07.21.11 at 1:13 am

“Sell” the gold?

Ah, but what you don’ understand is that the gold IS the money…not that other paper stuff…!

#54 SV on 07.21.11 at 1:36 am

My apologies, please ignore the previous comment, bad math there. Still:
If indeed $19910 invested (plus say 2K/year) in 1980 would generate 1.8mln today, a return of 90 times (or 9,000%!) does this mean that left for another 30 years, this would turn into $162mln? or does this mean that the sharemarket dream run is over?

#55 SV on 07.21.11 at 1:37 am

My apologies, please ignore the previous comment, bad math there.

#56 Blacksheep on 07.21.11 at 1:42 am

Garth

Sold my home in the Fraser Valley three years ago to this month (you played a role in that decision, thanks).

My Home sold at the time in dollars @ $410,000 divided by gold value then $ 825 per/oz. = 496 ounces of gold required to purchase home.

The same house today is valued @ 410,000 (good luck selling, as nothings moving) divided by the current gold value now $1600 per/oz.=256 ounces of gold required to purchase the home.

Soooooo you say, how could I be confident enough to dump 90% of my house harvested revenue into a single asset class (bullion with Sprott) and HOLD ON TIGHT?

The same thing that gives me the confidence to hold now, NOTHING HAS CHANGED!

MORE DEBT THAN EVER!!!!

The US will NEVER default unless they choose to (other than Bond Vigilantes)
But you can bet your ass they are going to continue to print like they have for decades. The US has enjoyed a higher living standard than the rest of the Western world due to their reserve currency status.

As for Europe and the pigs, Greece and other WILL default do to austerity, a loss of GDP and the inability to print.

Where is ECB getting the Bailout funds now that their slush fund only has 150 Billion left to cover ALL the pigs? Lets say it together, They will PRINT!
You, I and the Worlds central banks now knows this, so save the link request.

This is NOT doom, it is just the harsh reality of the sich we find our selves in.

This is the great adjustment where the Western world now has to share/compete with the other three billion people on the planet willing to work for 1/10 of what I/we would.

Since the seventies we have tried everything to maintain our high living standards, automation, send the wife to work, get a second job, credit cards and finally the big one, inflate the crap out of the house providing one big ATM machine.

That worked for a while, but eventually the debt saturation point was reached. the debts have gone up the food chain to the sovereign level and now here we are.

PMs are STILL a no brainier, you were incorrect @ $800,
$1200 and will still be wrong @ $2000 per/oz.

Sorry, I had to speak my mind.

Take care
Blacksheep

#57 Brad in Cowtown on 07.21.11 at 2:06 am

boy, I don’t know Garth… this fellow below gave some very compelling reasons for holding gold. It was 10 months ago, but since the reasons all hold true today, I think I’m going to hold on. You should give the videos a watch. Not a bad looking dude!

“…so there’s no doubt in my mind where we’re going, and it may be a few months, or a year, or two from now, but I think it will become evident that we’re in a very inflationary phase in the economy…

I think there is a strong argument for holding gold. Gold is, traditionally, an alternative currency and when people have concerns about the economic future or the value of currencies issued by government, they generally try to find a safe haven, and gold obviously is that.

So there’s one reason that gold will go up is because of this confusion we just talked about between inflation and deflation

The 2nd reason is commodity values, and commodities are going to be one of the hot topics going forward. There’s alot of demand building up in India and China; there’s a huge population inbalance, an economic inbalance. There’s tremendous demand on that side of the world. There are commodities on this side of the world. You’re going to see increasing demand for gold, base metals, agriculture, potash, timber – all of these things are going to be very good places to have money in the future.

And number 3 is inflation. If we are going into an inflationatary world, gold has proven that it does have some inflation-battling qualities to it, that it will retain value.

And there’s one more and that is emotion. Like real estate, gold is a highly emotional asset (host: and has been for 5000 years!)”

“It has…yeah.”

http://www.youtube.com/watch?v=e29l9CqfQN8

http://www.youtube.com/watch?v=x1ZdoS8dpAs&feature=related

#58 Vulture Fun on 07.21.11 at 2:48 am

Well, Garth, at least we can agree that Liz is awesome and her fiance is damn lucky. I agree with most of your predictions but I can’t understand why you keep ragging on gold.

1. If gold sucks so badly, why have the central banks of the world (except doh-headed Canada) decided to be buyers instead of sellers?

2. Gold’s been money for 5000 years while 3800 fiat currencies have come and gone.

3. At one point gold represented 20% of an average investment portfolio. Now it’s under 2%. I call that underowned.

4. Take a look at a chart for the last decade and note the steady upward progression. We haven’t even entered the parabolic blow off phase yet. Sure, at some point gold should be abandoned for something else, but not before we see $2000, $5000, $10000 an oz.

5. China has about 1000 tons and is looking to boost that by many multiples. Which do you think they’d rather own right now, gold or 1.5 trillion Bernanke Bux?

Perhaps gold will get pounded into the ground. I suppose in that scenario the Americans will have decided to finally confront their debt monster by cutting spending and raising rates, bringing on the Stockpocalypse, and all in an election year because Obummer isn’t worry about his re-election chances, right?

Anyway, despite all the gold hating, I love your blog. Thanks for the service you provide.

#59 The Original Dave on 07.21.11 at 3:29 am

Okay, okay, I’m here writing to you from ground zero – Kelowna! I’m just visiting.

I was here one year ago and there were for sale signs everywhere! There are still tons…maybe a little less this time. Anyhow, there are now price declines! A realtor on the radio said the market is down 15-20% from the peak. He’s saying its a good time to buy (of course), because vancouver is too pricey and all the boomers from van will want to retire soon…kelowna will be the destination (lol).

Its strange because I do see commercial buildings going up and new places opening up. There is a shortage of a lot of businesses and services regardless of the economic situation. So maybe there’s opportunity for commercial buying and businesses, but residential real estate still seems to be trending down

#60 Jody on 07.21.11 at 3:56 am

Although I think it will be hard for the US to default on their debt I do feel their dollar will hyperinflate or perhaps they and other countries will try to introduce a world currency other than the US dollar. The US has been printing to many dollars (sorry, the PRIVATE US federal reserve has), for hyperinflation not to occur, their fiat paper is losing value at an uncanny speed, it’s like the puppet masters want this to happen.

http://www.jamesaltucher.com/2011/03/why-i-am-never-going-to-own-a-home-again/

http://dailyreckoning.com/a-positive-approach-to-a-us-government-default/

#61 Tim on 07.21.11 at 4:38 am

Ron Paul did an excellent interview with Ben Bernanke recently where he asked him why banks keep gold on reserve if its not money – Bernanke said its because of ‘tradition’. Banks do nothing because of tradition. If you people buy silver/gold, buy it for the long term investment, don’t get all upset with all these market ups and downs.

http://www.youtube.com/watch?v=G3TltMNbgGQ

There’s the link

#62 Anon on 07.21.11 at 5:25 am

GARTH: “I’d exit precious metals”.
ME: “Garth, why don’t we sign a contract that I’ll buy some precious metals from you a year from now at today’s price plus official rate of inflation?”

How about it?

#63 Chris L. on 07.21.11 at 6:08 am

Is there a way to invest in the US dollar? Would using a traditional bank with a US account work where money can be swapped with the click of a mouse?

Will the CDN see a big uptick at the next B of C rate rise, then slowly melt back to “normal.”

What’s the best way to take advantage of the overvalued CDN dollar?

#64 pbrasseur on 07.21.11 at 6:48 am

Garth – Your blog should win some kind of award or prize for helping financial literacy at such an important moment, when millions of BB are about to retire (better late than never)…

In particular it’s good that people start to understand that the stock market, despite appearances, is not a casino.

The stock market is a place where you can participate into the economy by owning parts of companies, even the very best on earth. The rewards can be substantial if you have enough patience and don’t let emotions dictate your behavior.

#65 David B on 07.21.11 at 6:53 am

Owing a home is about having a home and a good full life without financial stress.

#66 Smoking Man on 07.21.11 at 6:56 am

Why can’t main street media tell the truth to the tax farm slaves.

The Bank of Canada as well as other central banks raise interest rates not on price inflation, but WAGE inflation, in fact price inflation is good in their eyes as it means more corp profit so long as wages stay put. WAGE inflation they fear as once the genie is out, thought to put back.

No way in china will they allow a smelly forklift driver to get ahead without penalty.

They react to Job numbers and not the price of things. Although they carefully dance around the issue with smoke and mirrors, using words like output gap.

Every single trader, and banker on Bay street knows that if there is a big jump in jobs, expect a rate hike soon after.

Now if the tax farm slaves really understood the implications of this policy and what it means, heads would be on sticks in Ottawa.

#67 pbrasseur on 07.21.11 at 6:56 am

@Jody (62)

Although I think it will be hard for the US to default on their debt I do feel their dollar will hyperinflate

Hyperinflate against what? The $CAN?

Does this mean I will be able to buy that California mansion for $1000?

Do you realize how unlikely that is?

#68 bigrider on 07.21.11 at 6:59 am

Boy Garth you are so wrong on gold and silver it’s scary. Unless you meant slling gold and silver for gold and silver stocks. PE multiples dirt cheap on large cap and mid tier names.

You keep denying the long term bull market trend firmly established. Most agree with you as evidenced by lack of retail and institutional involvement on the long side of the trade. Definitely a good thing for those long.

I guess Eric Sprott and John Embry soon to get fleeced out of their billions of $

#69 Robert Dudek on 07.21.11 at 7:03 am

Garth,

Silver is an extremely valuable industrial metals, perhaps the most important of them all.

And as long as the US has near zero rates and is printing money to keep their moribund economy going, gold’s downside is extremely limited.

Just like a SFH in Vancouver. Can’t you guys understand the concept of selling high? — Garth

#70 Kevin on 07.21.11 at 7:22 am

There are a lot of problems with Liz’s logic.

1. What makes Liz think her rent won’t increase at all over 5 years? Of course it will.

2. If the home rises in value by even just 2% per year, that’s another $50,000 in equity, which makes her argument a wash ($100,000 in interest saved by renting, versus $100,000 in home equity). And don’t tell me I can’t assume a 2% gain in home values during a period when she’s assuming a steady 7% gain in equities. “Home prices could drop,” you say, yeah, well so can stocks, so don’t try and play that game with me. If she can assume a historically-normal gain, then so can I.

3. She’s comparing apples to oranges. Of course living in some dark, tiny, musty cave below a family of strangers is going to be cheaper than your own half-million dollar mansion. In other news, bicycles are cheaper than cars! Only idiots buy cars!

It’s almost funny to watch the contortions renters go through to try and justify their choice. If you can’t afford a house, there’s no shame in renting. But trying to make renting look like the smarter financial choice just makes you look ignorant. One word: inflation.

Those were impression contortions of your own. I really liked the ‘dark, tiny, musty cave’ part. — Garth

#71 robert james on 07.21.11 at 7:55 am

Here is one for the goldbugs..I think food is becoming a very hot topic and something to think as well..http://globaleconomicanalysis.blogspot.com/2011/07/jim-grant-on-going-forward-with-gold.html

#72 Utopia on 07.21.11 at 7:56 am

#51 keny65 on 07.21.11 at 12:48 am

“Gold is something that NO ONE can control fully and is the enemy of all fiat currency”.
——————————–
You seem to have hit on the truth inadvertently there Keny. In fact, Gold can be controlled and for exactly the reason you stated. It is because it is the enemy of all fiat currencies.

Gold is an improbable means to keep economies functioning or to be used as money in the modern world. That is not to say it is not money but that it is still just an alternative to fiat.

The Gold-Huggers frequently cite Central Bank buying of Gold as one of the prime rationalizations for why the metal will rocket ahead in value. Obviously they don’t understand the power of Central Banks nor how they can cooperate with one another.

A point in time will come when the bulk of Gold will again be controlled by governments. We are on our way there now. But that should tell us not that prices will skyrocket but that instead the price will be managed to whatever level is then chosen.

That metal will again be relegated to it’s boom/bust status. And let’s face it, Gold is a threat to the financial system to some extent. If the idea of fiat coming into to doubt became really widespread the very power of Central Banks and governments would be undermined.

Do you really think that is going to happen without a fight? How would militaries then function? How would Social Security, pensions or the public service be paid? How could resources be shared seamlessly between nations or beneficial trade be conducted if gold was the limiting influence in the day to day lives of people all over the planet?

If every government was tied to gold does it not also follow that every government would have to prove reserves and live within those confines?

Would that not shift the balance of power dramatically around the globe too? Sure it would create some responsibility to function monetarily around a predefined base but that is the problem that almost nobody can come to terms with. Who is going to get on board that wagon anyway. Not one government I can think of except perhaps Libya but look where that got them.

I remain convinced that a gold standard will not return in our lifetime and that the very concept will be defeated by the many forces that are arrayed against it. That includes most of the public who might suffer should our existing fiat system fail dramatically in a hyperinflationary fireball.

That is not a judgment on the soundness of having a gold-backed currency though. Just reality. Like I said, it is improbable gold will ever be a currency again and it is much more likely that it’s price will be controlled once enough is back in the hands of central bank hands.

You Gold-Huggers are going to lose your shirts because you really have no idea what you are up against.

#73 Helicopter Ben on 07.21.11 at 8:30 am

John Embry talks about Debt, Hyperinflation, Gold, Silver………. http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/7/21_John_Embry.html

Conflict of interest. — Garth

#74 Vlad de Mad on 07.21.11 at 8:41 am

Why has there been no mention of the Chinese government imposing restrictions on property buyers due to the impending bubble in China? Purchasing a second property requires a 50% down payment (2), there is no bank financing for a third. It may make sense for Chinese buyers to buy in Canada for that reason, but if they require financing, where is it coming from? The Chinese authorities, he said, “are really worried by the real estate boom in China, so they restricted people” to buying no more than two properties. THEY ARE BUYING ALL OUR HOMES!

In other news, US consumers living on credit!

JOBLESS JUMPS AGAIN, RISES TO 418,000…
15TH STRAIGHT WEEK OVER 400K…

#75 Herb on 07.21.11 at 8:43 am

Garth and WatchandWait @ #5,

was it criminal stupidity or criminal culpability?

#76 gladiator on 07.21.11 at 8:43 am

Ah, Garth, Garth, Garth… Do you know the phrase “past performance is no guarantee of future results”?
You yourself say that if gold went up so much, then it’s time for it to “correct”, but regarding the stock market you don’t say the same thing. Ok, when the Western world was relying on producing goods more than on consuming them, the market had real grounds to go up. But the game has changed and it looks like it’s for good. We don’t produce enough in order to have real growth. The stock market’s performance since 2009 was based more on expectations and high-frequency trading than real growth. What keeps growing is the number of people on food stamps in the US – that Goliath of the world economy, and this affects everyone, not just the Americans. People are starving. Seen those documentaries about school kids and the empty fridges in their homes?
On gold bugs: do you believe in the official inflation numbers? Do you know that gas went up by ~30% and food went up by 4+% in May ALONE – read today’s newspapers. These are the official numbers and I think we agree they are total crap. Moreover, if you “annualize” them it’s a cool 360% for gas and 48% for food. So how’s your beloved paper money going to save you from this? I am not a gold bug and don’t have any except for my wedding ring, but trying to do my independent research, I tend to be on their side now. It is not the gold becoming more expensive – it’s money losing its value. And to put the cherry on the ice cream, I hope you are aware that the US government now want to “modify” the way they calculate the CPI. It wasn’t rigged enough, I say.
Peace!

Too bad you are so inconsistent in your views. Equity investing (plus bond investing, trust investing, and all financial assets investing) has a far more long-term and consistent post-War track record than piling into commodities. How that has anything to do with food stamps is lost on me, when North American corporate profits are increasingly global in source. As for gold and inflation and the value of currency, when you can buy gas or food with a wafer, I’m in (I own PMs). Until then, my strategy is to have a big pile of dollars, and to invest prudently and consistently to keep that pile augmenting faster than the rate of currency depreciation. So far, no prob. — Garth

#77 C on 07.21.11 at 8:49 am

Garth, I love your work, BUT, you sound like a politician in regards to gold.

Don’t love or hate an asset, analyze it. Don’t feel bad for gold being in a super bull market. It is what it is. People who bash gold when the fundamentals are extremely positive must have reason to? You can usually find those individuals on CNBC.

I agree with your call on housing because purely the fundamentals are looking very poor. Not sure why you can’t do the same analysis with gold. Having blind faith in paper is not constuctive analysis.

You can’t eat gold but you can’t eat dollars either.

Is it possible for people who disagree on gold to make an argument with a personal attack? Apparently not. Sadly it weakens your effectiveness. I have long recommended a 5-15% PM component to portfolios. When the metals rise and you are overweight, sell and rebalance, buying assets which have become under-valued. This is called investing, as opposed to trash talk about a ‘super-bull market.’ — Garth

#78 Carruthers on 07.21.11 at 8:54 am

The emotional hyperbole around metals from both sides is interesting. For me, the bottom line is that as long as the short term interest rates are below the rate of inflation, metals will continue to perform well. Gold in an investment like any other. There is always a time to buy or sell. I bought about 8 years ago and it has been a great play. I sold about a third of my position a year ago to pay off my mortgage and sold another third about 6-weeks ago to raise cash for other investments. The last third I will hold until short term rates begin to outperform that of inflation.

The emotion that surrounds owning metals is somewhat understandable considering it has been such a great investment in spite of the consistant derision towards gold bugs that started when the metals began their long rise a decade ago. I understand the reactions of metal holders when they feel that they are being dissed for making what has been an excellent investment. However, it is just an investment and knowing when to sell should not be influenced by emotional attachment or cranks proselytizing about the End of Days.

#79 Utopia on 07.21.11 at 8:59 am

#67 robert james on 07.21.11 at 7:55 am

Nice video. I appreciated James Grant message in the last minute of the piece where he notes that US medium and large caps are in the bargain bin.

Astonishing that this is just seeping into the minds of the public finally. These companies he notes are cash-rich, productive entities, marginally levered and trading at very reasonable price to earnings ratios. They are furthermore being strengthened by share repurchase programs making them very good long term bets for todays buyers.

I am on board with that and am convinced that these companies (particularly those in Canada and the US) will lead investor profits in the years to come.

This is all the more apparent as the global economy slows and commodity prices fall back thus boosting bottom line earnings as input costs decline. We may well be headed into a long period of very slow growth in North America and Europe. In that event what we will want most is stable sources of dividend income from productive enterprises with a healthy market share and well established distribution and market methods.

Slow growth certainly does not mean “no growth”. Some of the better companies can in fact boom and it is unlikely that sales will see declines in some sectors at all. On the contrary, defensives in particular will continue to grow along with populations and new demands developing in emerging markets.

Why the hell would we not want to own productive companies that offer income at a time when much of the world is swimming in unrepayable debts?

Gee. Big toss up. I can buy into an entity or other miscellaneous paper that has some probability of eventual default or I can buy strength, even lend to those who actually produce and earn real money.

Hmmm. Tough call. What ever will I do?

#80 ritenote on 07.21.11 at 9:01 am

“Andre. Dude. When you tire of Liz, send her over.

A. Total. Goddess.”

— From poetry akin to Shakespearean sonnets …to drivel worthy of our Neanderthal forefathers…how many Garth’s are writing this blog?….

Only one, who knows pluralization without punctuation. — Garth

#81 robert in london on 07.21.11 at 9:01 am

Hmm. There’s definitely a disturbance in the force in today’s comments. I don’t care for gold because I can’t spend it without converting to the abominable paper (and soon to be plastic) that everyone decries. I’d say having a marketable skill which allows one to convert one’s labour into whatever medium of exchange is current is far more valuable and easier to carry around (especially sans the boat anchor of a mortgage). That said, the assumption that the latest round of plutocratic obfuscation and prevarication has solved the debt and energy crisis is at best prosaic and at worst downright dangerous. The financial ancien regime is fighting for its life and it will do and say whatever it takes to perpetuate its increasingly meaningless and sordid existence. How soon the lies leading up to 2008 are forgotten.

#82 T.O. Bubble Boy on 07.21.11 at 9:07 am

@ #18 Joseph (and others asking):

sector and index ETF’s are now irrelevant in the face of Canada’s big banks offering 40 percent returns on new investment vehicles tied into Big 5 bank profits, with no risk to the principal

Joseph is not talking about a *guaranteed* 40% return, he’s referring to the “Market Growth GIC” type products, like this one from TD:

http://www.tdcanadatrust.com/GICs/mkt_growth_gics.jsp

These products basically take away your dividend income (the return is only tied to an index, not to the total return including dividends etc.), and swap it for downside protection.

These products have a few key flaws:
– You are locked in for a period of typically 3 or 5 years, which means that the investment is not liquid. Just like a normal GIC, if you get your money out before maturity, you don’t get any gains. This puts you at a MAJOR disadvantage, since you are essentially trying to time the market 3 or 5 years in the future.
– As noted, you don’t get the dividends, which misses out on a major tax advantage.
– The returns are capped, often far lower than the 40% that was quoted here… for example TD’s 3-yr “US GIC Plus” that tracked the S&P500 has a *maximum total return* of 10% (and, I’m not even sure if that is per annum, or a total over the 3-yr period).

Agreed. Market-linked GICs have been around for well over a decade, and have proven to be disasters for anyone trying to grow assets in a tax-efficient manner. Returns are in the form of income (taxed at 100%) as opposed to capital gains or dividends (typically taxed at 20% or less). In addition, built-in caps, as mentioned above, limit upside growth and eliminate full participation in market advances. Yes, the capital is guaranteed, but so is the cash in the coffee can buried in my back yard. — Garth

#83 jess on 07.21.11 at 9:11 am

“Next to saving for retirement, one of the biggest financial challenges the majority of Canadians will face is saving for their children’s education,” said Shahz Beig, associate vice president of personal lending at TD Canada Trust
=
supply siders does this mean : the >males = >aggression/revenge?

The United Nations found:
130 boys to 100 girls in parts of Asia, especially in countries with extreme poverty and overpopulation such as China and India.

55 million Pakistanis remain illiterate, according to the United Nations. And the government is billions of dollars in debt. … The babies are victims of what one relief agency calls Pakistan’s worst unfolding tragedy: the killing and dumping of newborns.

==========
Beijing school instructs Chinese girls on how to marry rich
Editor’s Note: The following piece comes from Global Post, which provides excellent coverage of world news – important, moving and odd.

A school in Beijing is offering courses in how to snag a billionaire or — if you can settle for it — a millionaire, or perhaps just an affluent man.
“We are nurturing internal qualities and developing potential. (cnn)

Why have a pimp? Girls

meanwhile back in New York
The “Slut” March vs the “Models or Maids”

The indictment charges that prices for High Class’s escort services ranged from $400/hr –>$3600 /hr

Creative billing
designed to conceal the nature of clients’ purchases on monthly credit card statements. Clients often spent more than $10,000 in one night. To conceal the nature of the business, escorts were required to sign employment contracts describing themselves as “models” and prohibiting sexual contact with clients, according to the indictment. However, the indictment charges that High Class not only accepted money from clients in exchange for sexual contact with the “models”, but that the “models” also provided cocaine and other controlled substances to clients, with the profits going to High Class.

The company is charged with operating several escort websites, including highclassny.com, discreteclub.com, nyadultdating.com, cupiddirect.com, and angelofyourchoice.com, which were all run out of an office at 2313 Coney Island Ave., where the Yampolskys, their managers, and their employees took phone calls 24 hours a day, seven days a week. They also advertised on backpage.com and craigslist.com, according to the indictment.

High Class’s records show it earned more than $7 million, between September 2007 and November 2010, which Yampolsky is charged with laundering to hide his profits. Gorelik and Maystrovich each invested $700,000 in the company and were being paid back with interest, according to the indictment.
http://www.brooklynda.org/press_releases/2011/Press%20Releases%2007-11.htm#03

#84 Brett on 07.21.11 at 9:16 am

Garth has lost it, he doesnt understand that devaluation in the US, HAS already happened and will continue, he doesnt understand that devaluing your currency is another form of DEFAULT. he doesent understand the OTC derivatives crisis and what it means for gold, and he simply does not understand what gold and money and currency are.
sell your precious metals he tells us….for financials! hahahahahahaha, Garth is now in the same league as sherry cooper. and Garth you have been wrong on real estate as well, eventually you will be right, but damn what a horrible record you have.

See what I mean about the rudeness and myopia of people blinded by greed and the belief one asset will rise endlessly? In this regard, no difference from house-horny property virgins. Speaking of which, if you live in the US, dollars have increased in value dramatically relative to the cost of shelter. Doesn’t sound like devaluation to me. — Garth

#85 brainsail on 07.21.11 at 9:17 am

#37 immigrantvoice on 07.21.11 at 12:09 am

“The more debt piled on, the more fiat currency printed, the more gold and silver have to account for. Basic economic principles. If we were to get onto a gold standard gold would have to be re-evaluated to around 1 million bucks. Does $8000 seem that unbelievable with all of the bailouts going on in the world? Smart money is already there: Rogers, Sprott, University of Texas, etc…”

University of Texas currently holds $1B in gold which is slightly less than 5% of their $22.3B investment porfolio. Probably less than what Garth Turner has in his. Your point is moot.

#86 T.O. Bubble Boy on 07.21.11 at 9:23 am

Garth / other blog dogs… does anyone have information on which Canadian REITs will be most impacted by Flaherty’s new “Tax Fairness Plan”?
(soon to be known as Income Trust Fiasco v2.0)

http://www.theglobeandmail.com/globe-investor/ottawa-tightens-tax-rules-on-hybrid-investment-product/article2104134/

Is it accurate to say that any REIT that gets a piece of revenue from services (not just the general rents/leasing of properties) will get impacted here?

No, I do not believe is is. F is after ‘stapled securities’ which marry income generated form operations with interest from debt instruments. This is not the structure of the REITs I have referenced here. — Garth

#87 Utopia on 07.21.11 at 9:29 am

#78 Vlad de Mad

““The anticipated pickups in economic activity and job creation, together with the expected easing of price pressures, should bolster real household income, confidence, and spending,” ~~~ Ben Bernanke
—————————————

The comments above do show that Mr Bernanke is more than aware of the problems that commodity speculation have caused for the economy as disposable household income has been subjected to unexpected price pressures and has thus become a drag on economic revival.

What I have taken from this is that new policy is being formulated to stimulate the US economy in such a way as to minimize the impacts of another commodity surge.

The message has gotten through loud and clear.

We will get more economic activity and drive up usual consumption by slowing the rate of commodity price growth than through artificial inflation that only taxes consumers on baseline spending.

I am looking forward to the next Fed initiatives to be honest. They have already indicated that non-conventional tools will be deployed and it is my belief that this is signaling to the markets to expect different outcomes than what we have seen in the past.

Need I add that the moves will be Gold bearish if the froth continues to be blown off the commodity markets?

What we are all looking for is genuine growth and that means taking measures to boost organic demand, not kill it with massive increases to input costs.

As has been my contention for some time now this is very bullish for consumer staples providers and a wide range of other suppliers who will see revenue growth increase as more typical consumption patterns return.

Squashing the commodity risk trade is a valid exercise.

#88 Frobisher on 07.21.11 at 9:32 am

If you haven’t seen it already, here is Michael Burry, former head of Scion Capital (?) talking about why he bet against housing in 2007 (He made a killing BTW, cf “The Big Short”):

http://news.vanderbilt.edu/2011/04/video-burry-cls/

#89 Blacksheep on 07.21.11 at 9:38 am

Hey Dogs,
Been thinking about Garth’s anti gold (max 15%/ repeated time to sell call) pro paper stance.

I DON’T buy it.

I believe his day job/gig requires that he pump the paper/old system.
How could Garth be so visionary on multiple economic fronts, yet get blind sided, not recognizing the value of PMs?

Garth,
The next time your on the left coast, bring the Bagger (Harley, not the wife) I’ll pull out the FLHX, we’ll grab a beer at the beach and you can tell me what you really think, off the books of coarse:]

take care
Blacksheep

Metalheads revel in telling us how much their gold is worth – in paper. How can their be a more pro-paper stance than that? Obviously they believe dollars comprise the standard in which wealth is measured. I agree. That’s what I (and everyone reading this pathetic blog) live in. Having said that, being overweight in PMs now is a risk you need not and should not take. But then, if it makes you feel superior and gives you the right to call my wife a Bagger, I guess that’s compensation for a far deeper inadequacy. I’ll pray for you. — Garth

#90 Mr. Lee on 07.21.11 at 9:41 am

All of the talk of the demise of the the US is nonsence. Yes the combined US debt including unfunded mandates is 64 Trillion. Yes, there is 2.64 Qudrillion dollars of toxic derivatives transfered to public balance sheets. But this is a global issue with no credible alterantives to the US market. The Euro zone is experiencing its problems. The Chinese have their currency tied to the USD and the US bond market is more sophisticated and established than any other bond market. Couple this with the fact that the US is still the number one economy in the world, the conclusions drawn are obvious.

Secondly the gold issue. Yes own gold and silver, but do not own more than 15% as Mr Turner has stated many times in the past. Diversification, will serve you well no matter the econmic situation. Also remember to kick off your debt. Once you stop playing the consumer game, you start aquring wealth.

Cheers

#91 The American on 07.21.11 at 9:44 am

At #7: Goldien Stewie, on the flip side of your argument, consider this. The U.S. is PISSED that China for YEARS has been artificially and knowingly devaluing its own currency so that it can dominate or “compete” in the manufacturing and exporting business. In fact, China has devalued its own currency by 40%. That is pure insanity. This has raped and stripped portions of the U.S. economy, as well as others around the globe for that matter. As China began to amass much in way of reserves in USD and US Bonds, of course they felt this was a tremendous idea. Hell, who wouldn’t? I mean, they get to have their cake and eat it too, right? Unfortunately for China, all is fair game; hence the copious amount of money printing the US is doing right now. This devalues our currency (obviously), making it easier to repay China. In tandem, it also levels the playing field a bit with respect to the tremendous trade imbalance that has been created due to China’s artificial devaluation of the Yuan. The US can produce goods at a less expensive rate AND it can repay China. China has been asked for years to stop this kind of behavior, and it has completely ignored the pleas. All is fair game, my friend. All is fair game. BTW, the U.S. will NOT default. You can trust me on this one as I do have the inside track. The USD will continue to devalue at a rapid pace until Aug 2, when the deadline is reached. At this time, the debt ceiling will be raised (without a question), and a plan of action will come to fruition to bring down the national deficit from as little as $4Trillion by up to $6Trillion over the next decade. The USD will begin its recovery at this time, without question. Remember, the U.S. can easily sustain about a $9Trillion-$10Trillion deficit, and on a per-capita basis, it works out to be about the same as what Canada has today (unpublished, of course). For now, however, we’ve got to watch it devalue over the next 11 days at a rapid rate. Not to worry, however. I’d be buying the ever living shit out of the dollar right now, knowing its going to bounce back. Don’t believe me? Watch and wait. By that, I’m not talking a “bounce back” in a couple weeks (you Canadians are so impatient sometimes), but I am talking about it over the next two years. The USD will be at its cheapest just prior to Aug 2.

#92 Randis on 07.21.11 at 9:48 am

Andre is one lucky man, I am happy for you.

and of course, big hand for Liz.

#93 Keith on 07.21.11 at 9:51 am

I own my home outright. If I sell now I could realize a 50% gain in the original price. If I sold 5 yrs ago it would have been 100%. But I still need to live somewhere. Should I live in my car?

What make and model? — Garth

#94 The American on 07.21.11 at 10:02 am

At #88: Brett, you stated, “Garth has lost it, he doesnt understand that devaluation in the US, HAS already happened and will continue, he doesnt understand that devaluing your currency is another form of DEFAULT. he doesent understand the OTC derivatives crisis and what it means for gold, and he simply does not understand what gold and money and currency are.
sell your precious metals he tells us….for financials! hahahahahahaha, Garth is now in the same league as sherry cooper. and Garth you have been wrong on real estate as well, eventually you will be right, but damn what a horrible record you have.”

Garth responded, “See what I mean about the rudeness and myopia of people blinded by greed and the belief one asset will rise endlessly? In this regard, no difference from house-horny property virgins. Speaking of which, if you live in the US, dollars have increased in value dramatically relative to the cost of shelter. Doesn’t sound like devaluation to me.”

Speaking as a citizen of the U.S., Garth wins this one. USD’s value has actually RISEN for U.S. consumers in way of home purchasing power. The rest of the world right now, not so much. Putting your eggs in “commodities,” such as gold or silver, will ultimately prove to be a BIG mistake. Just like everyone in the US was putting their eggs into the housing market, and it proved to be a BIG mistake. Just like everyone in Canada is putting their eggs in housing there, it is already proving to be a mistake. How big you ask? Well, the correction in markets such as Toronto and Vancouver are going to be from big to “massive.” Just have a balanced portfolio, and you’ll be okay.

#95 brainsail on 07.21.11 at 10:03 am

#94 The American

Your statements about China are well timed. “IMF urges China to strengthen yuan.”

http://money.cnn.com/2011/07/21/news/international/imf_china_yuan/index.htm?iid=HP_LN

#96 arctodus on 07.21.11 at 10:04 am

hey guys..cut the G man some slack. He has always advocated owning some gold/silver….not enough but what the h…

What is problematic for me is how most folks do not really grasp why gold/silver are climbing hard…..the deeper and fundamental reason and the reason why we are truly screwed.

There is a flight into so called “hard money” because of a loss of confidence in fiat paper notes….that is obvious to anyone who can read a balance sheet or is even remotely curious about the financial system.

But virtually no one (outside of obscure blogs and I am sure, military planning sessions) understands why this is happening globally. Everyone confuses symptoms with actual disease.

The symptoms are
1) Massive debt overruns everywhere on earth
2) Massive imperial over reach by the USA
3) Hidden but rapidly rising inflation worldwide
4) Increasing social unrest worldwide
5) Obvious and rapidly increasing climatic upheaval
6) Per capita standard of living in free fall in developed nations and peaking in rising powers (china/india)

Those above are symptoms…treating them are sometimes necessary to alleviate pain but one cannot cure them..and the patient (global economy and the human enterprise: note I did not say human species) will certainly die if the disease process is not dealt with.

The disease is well documented and well understood at this stage. It is well past the point of “treatment” and all can be done is palliative care now (treatment could have worked if dealt with in the 1950 perhaps).

The disease is PEAK ENERGY…..and it is now in the rearview mirror….

I would hazard that we will see “Black Swans” aplenty
now (along with black dragons, black unicorns, black tinker bells etc etc etc) as the human economic engines begin to die. Gold/Silver will soar…..best bet in town in “near future” (next 5-10 years) but always remember the old adage “you cannot eat gold” is in fact the truth……and that is where we are headed.

The polar ice pack is set to set new decline records this year, the “prolonged wet bulb temp” (no it is not a porn term) for the tropics, subtropics and hot temperate zones is set to climb into levels that are unsurvivable for “free roaming” humans in the next 50 years….

Combine that with probable 5-8% energy decline rates now that we are on the far slope of the adjusted Hubbert Curve……I shake my head at our collective stupidity as a civilization and as a species.

#97 steevo on 07.21.11 at 10:08 am

“Andre. Dude. When you tire of Liz, send her over.

A. Total. Goddess.”

– From poetry akin to Shakespearean sonnets …to drivel worthy of our Neanderthal forefathers…how many Garth’s are writing this blog?….

Only one, who knows pluralization without punctuation. — Garth

Nice one, Garth!

#98 Basil Fawlty on 07.21.11 at 10:08 am

“Speaking of which, if you live in the US, dollars have increased in value dramatically relative to the cost of shelter. Doesn’t sound like devaluation to me. — Garth”
Just how many houses do you eat in a week?

Dumbest comment of the day, and from a smart guy that’s surprising. The context was devaluation of US dollars which metalheads are always harping about. If you live in America, and in American dollars, the currency has appreciated when it comes to the most significant asset citizens own. Your argument – expressing the value of housing in bullion – fails. — Garth

#99 blase on 07.21.11 at 10:10 am

What seems clear to me is that the “debt crisis” in the U.S. is not real. Take away the Bush tax cuts and 2 unfunded wars, and the U.S. wouldn’t be having this conversation. Notice how even though there is a “crisis”, no one is talking about cutting the Pentagon’s budget or raising taxes on the rich, which most American’s support. Get over yourselves doomers, because in once the 2012 election is done, watch America get back on it’s feet again. Not that it ever wasn’t on it’s feet.

#100 Government Dude on 07.21.11 at 10:10 am

Quite a few posters here questioning Garth lately…
Is it bubble cheerleaders’ burnout?

Only time will tell about a real estate bust.
We can forecast with emerging trends, compared to past patterns, symptoms, etc
Sometimes it’s also hit & miss

I say house resale prices will be steady (0% appreciation) for the next 5 years.

#101 The InvestorsFriend on 07.21.11 at 10:14 am

PAPER MONEY IS FIAT AND IS DEBT AND WILL BE WORTHLESS?

Even if you believe paper money will decline in value it does not follow that Gold and Silver are the only good investments.

Did you know that there is a lot more wealth in the world than there is money?

Money is bank notes, coin and bank deposits.

All wealth is MEASURED in money but not all wealth is money.

If you had literally all the money in the world you could not come close to buying everything in the world. Not even close.

If I owned long-term U.S. dollar bonds (I don’t) you could accurately say I was invested in U.S. dollars. If there is hyper inflation I would lose.

I am invested in stocks, shares of companies. That is NOT an investment in money as such. My companies are profit making engines that can increase my wealth, my purchasing power, no matter what happens to the value of a U.S. dollar.

Think Coke. It makes money and wealth in numerous currencies around the world.

It is interesting that people worry today about hyper inflation when inflation has been low for two or three decades. Those of us who lived through the 70’s know what high inflation is all about.

Nut bars who rave about fiat currency probaly have little money or wealth of any kind.

#102 vyw on 07.21.11 at 10:18 am

$900 basement suite vs $500K mortgage? I think Andre and Liz are comparing apples and grapefruit here. They should check out how much it costs for a condo that rents out for $900 a month. The numbers would be closer (though I’m not a keener on owning condos). Another option is buying an older SFH with a finished basement suite, live downstairs and rent the upstairs. Actually this might work especially if they are willing to ‘subsidize’ at $900 a month and live in the basement (at least for awhile).

Langley and Fraser Valley prices (like Vancouver prices) will fall at some point and hopefully they will find the right home.

#103 Joe Bloggs on 07.21.11 at 10:20 am

“…Once it’s clear even to the sackcloth set that America will never default, never devalue, that minor European countries can keel over largely unnoticed and the global economy is actually expanding, PMs go back to being interesting rocks that impress dentists and werewolfs.” – that is true and obvious if you are an idiot… Good luck Garth!!!

#104 squidly77 on 07.21.11 at 10:21 am

The metal Bugs are going insane, insult after bloody insult, their thick headed metal brains do not function properly.

Gold up 60% since 2008
http://www.kitco.com/charts/popup/au1825nyb_.html

Ford up 300% since 2008
http://finance.yahoo.com/q/bc?s=F+Basic+Chart&t=2y

Harly davidson up 500% since 2008 http://finance.yahoo.com/q/bc?s=HOG+Basic+Chart&t=5y

Sirius XM up 600% since 2008
http://finance.yahoo.com/q/bc?s=SIRI+Basic+Chart&t=5y

I could list hundreds maybe thousands of stocks that have outperformed Gold.

Anytime I buy a stock I have a sell price, by the time SIRI hit $1.25 I had pulled my entire investment out, the SIRI stocks I own now cost me nothing, nada.

I dare even 1 Gold bug to list their sell price here, it wont happen because none of them have one.

There’s absolutely NOTHING WRONG with owning Gold, but your mindless attacks on anyone that only points out whats only rational is plain nonsense, and self defeating.

#105 Stephen Bryant on 07.21.11 at 10:21 am

I’m starting to feel like part of a social experiment similar to the Trading Places movie. I’ll bet you $1 I can convince the people to sell their PM while convincing them that everything is okay in the United States. The US will remain on top regardless of what happens. Why…just because. Is there ever anything that could de throne these guys in your eyes? Not that you see it hapening but is there anything that could push them over the edge?
I certainly enjoy and agree with your well researched RE comments, which you back up with excellent data. However to make broad based comments to just sell PM or to move in a direction without some supporting information is weak at best. I can only assume that you are trading from the inside.
It is interesting how 2 people can read the same book or hear the same speaker and come away with totally different understandings. I guess that comes from persons base and life experiences.

Inside trading is illegal. You should be ashamed to make such an allegation. Withdraw. — Garth

#106 Brad in Cowtown on 07.21.11 at 10:24 am

” See what I mean about the rudeness and myopia of people blinded by greed and the belief one asset will rise endlessly? In this regard, no difference from house-horny property virgins. Speaking of which, if you live in the US, dollars have increased in value dramatically relative to the cost of shelter. Doesn’t sound like devaluation to me. — Garth ”

You’re right on one thing Garth – some of us metalheads get too heated and sometimes disrespectful in our remarks. Hopefully that won’t diminish the otherwise valid points being made.
I can respect your idea of taking profits after a good run. But I just don’t agree with it in this particular case, because as I’ve written before…
1) The fundamentals, which caused the rise to 1600 in gold, have actually gotten stronger. The fundamentals behind Vancouver’s house bullishness have not. Apples and oranges.
2) Most people were so completely underweight in PMs before the runup, that I think it’s highly unlikely they need to do a rebalancing even after the gains are evaluated. House rich people are, in many cases, 100% “invested” in their houses. Again, apples and oranges.
3) Fiat money – surely you’ve heard the expression by now that it’s a “race to the bottom” as in the more they print, the faster they die. Inflation in money supplies (btw, unless I’m reading the charts wrong, the U.S. money supply has doubled in the past 12 years) must cause commodity prices to rise. You can’t double the money supply and expect prices to fall simultaneously.
4) Instead of flat-out selling, why not use advanced methods available like trailing stops? That way, if you’re right about the PM market being frothy, you get stopped out. If you’re wrong, and I think you are, people can continue enjoying their gains. Not because of greed. Because of analysis.

Watch the videos I posted of a younger Garth making the case for Gold. None of those bullish facts has changed.
I’m not a doomer.
But if the fundamentals say keep holding a position, I don’t care if it’s already a 10 bagger, keep holding it. But protect your gains with trailing stops…

#107 arctodus on 07.21.11 at 10:28 am

that is 5-8% energy decline rates per year globally (say good bye to super giant oil fields…say hello to low EROEI sour gas, shale plays, tar sands….low EROEI does translate into economic suicide long term)

#108 Utopia on 07.21.11 at 10:28 am

#59 Vulture Fun said regarding Gold….

“Take a look at a chart for the last decade and note the steady upward progression. We haven’t even entered the parabolic blow off phase yet”.
—————————————–

I have a question for you. What makes you so sure that Gold will see a parabolic move? Because it happened once before?

This piece of evidence that the Gold camp keeps providing as proof of Golds future price strength is not even fact. It is mere speculation. Maybe it will happen….maybe it will not.

The very suggestion coming from the Gold camp though that there might be a parabolic move is evidence of a lack of real faith in the metal and instead tells us that greed is the motive behind ownership. That is a fact.

How do I know?

Because acknowledging a parabolic move means accepting that there is a boom/bust cycle. There is therefore an end date to the current high prices and an ultimate reversion to the mean. This also tells us the Gold camp itself is admitting that pricing will form up into a bubble (good for their one asset class) and then crash (like it always does).

In turn then we can only conclude that Gold is purely speculative in pricing and unpredictable as nobody knows how high it may go nor how far it may fall. Just that it will.

It follows that it is in the interest of the gold camp to sow fear and promote doom and gloom scenarios that are bullish for yet higher precious metals prices.

This is not about fundamental values for metals versus weakening currencies. It is a power play. It is about profiting based on fear. And that is why I place myself firmly in the camp that supports close oversight on precious metals purchases and possibly even confiscation if necessary.

Gold is not just a simple metal for investment anymore.

It represents destabilization of our monetary system and has become politicized as an outsiders vote against the conventional financial framework. It is symbolic of anarchy and as such there is no guarantee it will go parabolic as forces line up against that heathen trophy.

Why don’t you Gold-Huggers just admit you have a gambling problem?

#109 Mr. Plow on 07.21.11 at 10:28 am

#73 Kevin

I agree with your points, she makes a lot of assumptions that are in favor of her argument and a lot of assumptions against the alternative to further her case, cognitive dissonance?

However, taking on a huge mortgage like that is crazy so living in the basement is probably the best bet for them.

#110 Aussie Roy on 07.21.11 at 10:31 am

When the metals rise and you are overweight, sell and rebalance, buying assets which have become under-valued. This is called investing, as opposed to trash talk about a ‘super-bull market.’ — Garth

Great paragraph Garth. It’s the same here with most RE investors the saying here is NEVER SELL, its all about Equity maaate. Go bigger and better house prices never fall (insert “local its different here spiel”). Never have been able work out why the buy low and sell high style of creating wealth went out of fashion.

Aussie Update

Even the RE Bulls now getting worried.

http://macrobusiness.com.au/2011/07/bulls-at-sea-in-falling-market/

Sneek peek into Aussie property infestors blog. What is happening out there?.

http://www.somersoft.com/forums/showthread.php?t=72778

Well the BIG 4 banks need to make living wills in case of another credit crunch or the housing market going pouch up..

“The housing market is also a concern, and APRA’s living wills are seen as acting as an insurance policy against a possible collapse in house prices”.

http://www.abc.net.au/news/2011-07-20/apra-asks-banks-for-living-wills/2803170?section=business

Garth, yes it’s slow news day, I noticed you tell some guys to grow a pair, perhaps they also need this?.

http://www.australiagift.com/sale/scrotum_1.htm

The Legend says
Once upon a time there lived in the center of Australia an aboriginal boy. One day he came upon a small kangaroo in the bush, caught it by the tail, and made a purse out of its dear little symbol of masculinity. He gave it to his girl, and she kept seeds and berries in it.
Next he saw a large kangaroo. He caught it with a spear and made another purse from its thick symbol of masculinity. He gave it to his father who kept stones and things of value in it.

Now that brings a tear to my eye.

#111 JohnnyBravo on 07.21.11 at 10:33 am

For those interested in gold: http://fourthcurrency.com/

It is a piece that was written in 2006 by Eric Janszen. Janszen called the tech bubble collapse, the US housing collapse, the 2008 crash (I think). And he advised buying gold in 2001. His record is not perfect, but he is one the best economic analysts I have come across on the Internet.

Recently, he sold ALL of his silver bullion right at the $50 peak price. He does not see silver going higher than $50 for quite a while, but his opinion on gold is different. Why?

Janzen sees a new Bretton Woods international gold standard as inevitable. Note: this does not mean national currencies will be gold-backed. Rather, gold settlement will be used for transactions between nations.

An international gold standard does not necessarily mean a windfall for gold hoarders who hold their gold indefinitely. He foresees potential “confiscation” via a 90% capital gains tax on gold. That said, until such time, he sees gold peaking at $5000/oz.

#112 Jocelan Tracey on 07.21.11 at 10:34 am

Garth, for a moment I thought you were dedicating an entire column to me!

Goddess of Kamsack

#113 squidly77 on 07.21.11 at 10:45 am

Since market bottom

$1,000 invested in Gold=$1,600 today
$1,000 invested in Ford=$4,000 today
$1,000 invested in HOG=$5,000 today
$1,000 invested in SIRI=$6,000 today

Since market top

$1,000 invested in Oil=$660 today
$1,000 invested in NG=$200 today

#114 T.O. Bubble Boy on 07.21.11 at 10:47 am

I noticed this post that mentions a few of the “SIFT” companies that would be impacted by the Tax Fairness Plan changes:

http://www.investorvillage.com/groups.asp?mb=6781&mn=66862&pt=msg&mid=10738377

It sounds like most REITs or SIFTs will be issuing press releases to clarify how they are impacted… most non-REIT entities (such as Westshore Terminals and some Energy-related former Income Trusts) look to be the target of this change.

#115 squidly77 on 07.21.11 at 10:49 am

Market bottom and market top – various points between July 2008-March 2009

#116 squidly77 on 07.21.11 at 10:51 am

O.K. back to RE

Canadian real estate agents will give up their lock on listings data by the end of the year, paving the way for a proliferation of U.S.-style websites that allow users to browse enhanced listings before buying a home.

The Canadian Real Estate Association has long guarded the data it generates with each sale its 100,000 members close, preferring to drive consumers toward its realtor.ca Web portal to look for listings.
http://www.theglobeandmail.com/globe-investor/websites-to-fill-vacuum-for-canadian-real-estate-listings/article2104248/

#117 BrianT on 07.21.11 at 10:52 am

#112Utopia-Yeah anarchy reigns-next you are going to tell us Sprott and Embry were torching police cars at the G20. Look-the bottom line is the bottom line-what is it with the whole political focus this site has taken?

#118 C Rock on 07.21.11 at 10:53 am

Homeownership trumps renting article of late:

http://money.canoe.ca/money/business/canada/archives/2011/07/20110721-082454.html

I think it needs a few more comments. LOL

C ROCK

#119 Smoking Man on 07.21.11 at 10:56 am

Sucks to be a fat basterd today in toronto……Spotted one on Bay street today……poor guy………….

Now kids, about a month ago the one and only Smoking Man Told you that money was going to hit safe canadian shores in a big way…. Holy moly way bigger than I thought……..

Carney cahoonas are so tied right now. The big shoot thought he was cute doing his part to try and cool our nuke reactor real estate market, now look what he did.

ba hahahahahahah the wait just got longer bubble heads.

#120 waterloo Resident on 07.21.11 at 11:00 am

The Canadian dollar just hit $1.06 today, all on the expectations that our rates will be heading up soon. But time and time again Mark Carney says that with the high Canadian dollar there is too much risk to our export sector to be raising rates, so basically the high dollar is PREVENTING him from raising rates. This ‘chicken-or-the-egg’ thing will continue for a few years, our Canadian dollar will keep rising and rising, probably up to $1.25 or more , mostly on the expectation that our rates will soon be going up, but its PRECISELY because of the high dollar that our rates WON’T be going up anytime soon. Sad isn’t it?

#121 bill on 07.21.11 at 11:04 am

garth is quite right about the gold …..
if you didnt get get in early say at the 276 level [ what are you buying that useless gold for they said…] then as far as I am personally concerned you have great potential as a bagholder . your who I sell to to make a profit.which is the object of the exercise
I gradually exited pm ‘s over the last year and have no regrets.
and following garths advice further ,I am in energy and starting a position in agriculture.
for the record I still hold slx and pvg in small amounts .
natural gas reminds me of gold back in 2001. nobody wants it….probably the time to buy, eh?
the smart money has already left gold.those that remain should keep an eye on it.

#122 Beach Girl on 07.21.11 at 11:05 am

Basements are generally cooler. Have a nice day.

#123 Devore on 07.21.11 at 11:24 am

#73 Kevin

3. She’s comparing apples to oranges. Of course living in some dark, tiny, musty cave below a family of strangers is going to be cheaper than your own half-million dollar mansion. In other news, bicycles are cheaper than cars! Only idiots buy cars!

Of course she is. That’s the point of renting, to save money, a concept foreign to most recent home moaners.

And, like Garth, I appreciate the imagery of a dark tiny musty cave. Project much? Or maybe you are one of those Vancouverites fortunate enough to share their house with complete strangers in order to meet daily expenses.

#124 Derek R on 07.21.11 at 11:27 am

It’s strange reading these posts to learn just how many people think they can predict the future. Even stranger to see how many think that Garth has predicted the future and got it wrong. Why do I think it strange? Well, Garth’s whole strategy is an anti-risk strategy based on the fact that we can’t predict the future. So when he makes predictions it doesn’t matter whether they’re right or wrong. His basic message of diversity is intended to ensure that no matter what happens you won’t lose your shirt. Sure doing things his way means that you won’t “get rich quick” through gold, real estate or anything else. But it does mean that you won’t lose it all either.

I am very happy for those who “know” that gold is going over $2000 before year end, or that RE is going to rise for at least one more year in Toronto. But for those of us who only know that we don’t know what is coming down the pipe, the GT balanced portfolio is the thing to aim for.

#125 kimi on 07.21.11 at 11:28 am

Hi Utopia … Sadly I didn’t say that the children should be raised by just anyone. I think its great husband or wife is always with the child before they enter the school system. But in this day and age living off of one income, does not bring charity to the home. It brings poverty. While the kids are in school, you can’t still bring in a suplemental income by working at home, part-time out of home, anything really.
If you go back to that comment on ‘marriage is the biggest financial decision you’ll make’. Its so true.
If they had say 100,000/year, hey dad or mom stay at home. But reality is that they have 45,000/yr.
Having children is a serious undertaking, its about putting them first, if they are at school, what is the purpose of having one ‘partner’ doing nothing to help aliviate the stress on the other ‘partner’.
Children sense stress, they sense imbalance, love, fear, anger they don’t sense whether you rent or own. Money problems cause marital problems. And its not doing the children any favors when the parents are stressed. They grow up thinking money is about stress and its not, its about freedom.
If you read my other posts, I encouraged the father to rent closer to work so he could spend time with his kids, kids need thier parents, not workaholics, never seen parents, they need love.
The whole thing I am trying to convey is Balance. Give and take, in Donna’s situation, kids now going to school, why not have father work part-time… here is the kicker: What Donna ‘didn’t’ say is that my husband is now looking for a parttime job since the kids start school in September, so we will have a little extra income and so the kids won’t be alone when they are back from school.
Today, getting a job is not just send-out-resume-start-tommorrow, its send-out-tons-of-resumes and maybe get an interview and maybe get a job. Its a process, that process was not stated in Donna’s case.

On top of that we are creatures of habit. Habits are hard wired in your brain. Neuro-path ways stimulated over and over eventually become hard wired. An addiction to neuro-peptides. Which is why the saying ‘we are creatures of habit.’ Actions speak louder than words and all I read in that article was that he read about a plan.
We all hear people talk, what they are going to do, what they want to do, what they plan to do, but what they do … now that is the most important part.

I took from that article what was given, every situation is different, I do not by any term put money first. Children, whether they are mine, or the neighbors should be regarded as most valuable.
We live what we learn and never underestimate children, they formulating relationship ideals, as we speak. So seriously set a balance.. so then… in thier future, they will experience ‘that balance’ as adults.

#126 Brad in Cowtown on 07.21.11 at 11:46 am

“…the currency has appreciated when it comes to the most significant asset citizens own. Your argument – expressing the value of housing in bullion – fails. — Garth ”

That’s like saying even though 2 dudes are running down a hill, one guy is really going uphill because he’s running slower than the other dude.

Lunacy.

It merely proves gold has depreciated against US dollars in the United States. You need a reality bath. — Garth

#127 Prof ANON on 07.21.11 at 11:51 am

Anyone else getting the feeling that the surge in the stock market over the last couple of days has more to do with people unwinding their long positions in the face of looming uncertainty than it does with earnings?

#128 Hammer1 on 07.21.11 at 11:51 am

#27 waterloo Resident on 07.20.11 at 11:27 pm
you said
Well, I’m glad to hear the GOOD news about America not defaulting, because if they did then the sky really would have fallen.
yeah
the “Good news of Garth”praise be !
keep drinkin that kool-aid

#129 squidly77 on 07.21.11 at 11:51 am

Show me 10% plus interest rates and I’ll start believing in Gold.

#130 Mr. Reality on 07.21.11 at 11:55 am

When are the gold bugs going to learn their “paper gold holdings” are just paper……Just as worthless as the currencies they trash on a daily basis. If you do not have bullion or physical metal in your hands you have nothing but a precious metal dirivative.

Understand?

Mr. R.

#131 disciple on 07.21.11 at 11:59 am

A lot of you are making a logical mistake called straw-man. You are implying that there are only two alternatives in which to store your money: paper or precious metals. WRONG.

You are ignoring the many other options. One of these is a wealth-producing business. That’s what quality stocks and bonds are. Cash, as a store of wealth is useless also, it could be working for you in a TFSA or other tax-sheltered growth vehicle.

Yes, central banks create money out of thin air, and are a completely unnecessary cancer upon the corporeal citizenry, BUT, you just have to simply stop playing their game and put your money in wealth-producing businesses, circumventing their debt offerings altogether. In fact, that is precisely what THEY do everyday. They take the money that YOU let them create and place it in the market. Generally, they do not care if they make a dime, because they already did when they gave you a loan, anything else is just bonus. Milking the wealth created from your labour and technology while contributing none themselves. At least, if you do it as a working individual, you are contributing to your own self-enhancement through the promotion of wealth-producing businesses rather than promotion of wealth-sucking businesses such as central banks and their minions.

Taking your money out of your bank accounts will not do a damn thing, they can simply create more to replace it with a wave of the magic wand. That is not the answer. The answer is circumventing them. Think of other ways to circumvent them, a form of civil disobedience in a sense. For example, a first step is to never get another mortgage ever again. If we all did this, the world would change overnight.

#132 blammo on 07.21.11 at 12:01 pm

RE: “5 years no mortgage ($900 dollars rent): $54,000 ($10,800 per year)
plus utilities

5 years mortgage (%3.79 fixed over 5 years on a $500,000 mortgage – $2,318.53 payment): $139,112.06 plus taxes and utilities and upkeep. (ONLY $49,535.29 paid off of mortgage)”

Your house actually generates dividends in the form of rent so you need to subtract the $54,000 you paid in rent from your savings:

$85,112.06 – $54,000 = $31,112.06

In fact, with a $500,000 mortgage in Langley you could live in the top floor and rent out the bottom. So your $900/mos basement actually becomes cash flow and your “rent” goes against the mortgage. Lets say your top floor would rent for $1500/mos so that is $90,000 you have to take against your savings as well:

$31,112.06 – $90,000 = -$58,887.94

You are now $60K in the black for having bought your own home (not accounting for price appreciation/depreciation, whichever the case may be). Plus you don’t have to live in a basement suite.

#133 Devore on 07.21.11 at 12:08 pm

#132 Brad in Cowtown

That’s like saying even though 2 dudes are running down a hill, one guy is really going uphill because he’s running slower than the other dude.

No, it’s like saying two dudes are running down a hill, but one is really going much faster because he got caught in a landslide.

#134 Cookie Monster on 07.21.11 at 12:09 pm

Regarding ‘good money drives out bad money’, I got it backwards, from Wikipedia

Gresham’s law is an economic principle “which states that when government compulsorily overvalues one money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.”[1] It is commonly stated as: “Bad money drives out good”, but is more accurately stated: “Bad money drives out good if their exchange rate is set by law.”

But my thinking is how are companies today supposed to write long term contracts and financial values when the standard of value is unstable and deteriorating daily? Gold amounts soon will be, or must already be stated in contracts of any long term duration. Bad money will be used daily to dispose of it, good money will be hoarded for real purchases and business contracts.

#135 Screwed in BC on 07.21.11 at 12:11 pm

Central Banks are quietly buying gold hands over fist. That should tell you something.
Devaluation of the US$? It is happening for the last ten years or more.
Default? What is a default? Paying your debtors with worthless US$ is not stealth default?
Now the morons in Washington are talking about fudging the CPI to screw pensions.

#136 from kits on 07.21.11 at 12:28 pm

1. why are you getting a 500k mortgage on your first place.

2 . 350k, 400k can still get you a place with a basement suite.

nice blog today..you’ve been on fire this week garth.

#137 JohnnyBravo on 07.21.11 at 12:35 pm

There’s been a lot of, what I would euphemistically call “spirited”, discussion on this blog around the issue of valuation: gold v.s dollars; gold vs. houses; houses vs. dollars; DOW priced in gold; etc., etc.

All of these arguments assume that these assets are always either positively or negatively correlated, and thus you can always judge the absolute value of one asset by comparing its price relative to another specific asset.

I think the entire basis for this is flawed.

Today, we keep hearing proclamations such as, “Gold has not gone up; the US dollar has gone down.” Or, “Priced in gold, the DOW is well below its 2000 peak.”

Let’s take the first one. Since 2001 an ounce of gold has gone up almost 600%, priced in US dollars. If the first quote was true, and the US dollar has actually lost that much value, then shouldn’t the price of many other things (food, fuel, cars, furniture, electricity––and let’s not forget houses) have also gone up by about 600% as well?

We all know US houses have actually gone down, not up. Food, cars, furniture, electricity? How high have their prices gone. Not 600% higher. Oil has gone up significantly, but even this most fundamental economic input has increased in price less then 400% from 2001 to today. And it’s very volatile ($147 to $33 in ’08, remember?).

I tend to value asset prices based on CPI inflation. Yes, CPI is flawed, but at least it represents a basket of goods, not one cherry-picked asset, whose valuation and price can fluctuate based on supply and demand forces that may have nothing directly to do with other assets other than they are priced in the same currency.

I’m thinking of buying some gold. What does an ounce cost in trout?

#138 The InvestorsFriend on 07.21.11 at 12:42 pm

January 1, 2000 was the Beginning of time?

Some creationists think the world only began about 5000 years ago. Maybe so. Interestingly it was only around that time that agriculture really began and written lanquage developed (spontaneously in three different areas of the globe)

But doomers and gold bugs seem to believe that all financial results should only be measured from January 1, 2000.

GOLD has walloped stocks in the last 11 years!

No one has made money in stocks in the past 11 years!

Stocks are only at the level of of 11 years ago!

etc.

Ignoring completely that over the long haul stocks (owning wealth producing corporations, that is) have totally walloped Gold. Beaten it to a yellow pulp!

#139 Vulture Fun on 07.21.11 at 1:01 pm

112 – Utopia

Parabolic phases are indicative of irrational markets and not much else. The fact that the housing market went parabolic is not a strike against houses. They provide utility and pleasure, basic shelter, and a place to plant my raspberry bushes. I would like to own one someday, preferrably when I can buy it for cash out of one of my buffers.

When oil went parabolic to $147 and then crashed to $33, I didn’t take that as proof of “lack of real faith” in oil. Oil is rather useful. Watch civilization collapse without it.

So price movement, irrational exuberance, and bubbles in general should not be confused with an item’s usefulness or true value.

For gold I expect a parabolic phase because eventually people (maybe even you) will come to understand that there are minimal ways to store wealth that don’t result in destruction of its value. How are you feeling about the USD these days? Does the Euro seem stable? The Yen? The Loonie seems fine now, but how will it do when China implodes due to huge off balance sheet loans, brand new empty cities, and 64 million empty apartments?

You’re right, this is all very unpredictable, which is why I have a pile of cash (although it is vulnerable to the ravages of inflation), a bunch of stocks (although Stockpocalypse may be near), and a bunch of gold (because the stupidity of politicians and policy makers seems to be a safe bet). Inflating away debts by devaluing the currency seems to be the easy way out, and politicians are all about what’s easy.

As far as gold huggers spreading fear. Here an’s alternate explanation: maybe huggers are trying to save as many lives as possible. Read up on the Weimar Republic.

I would rather not own gold. I would rather trust the wisdom of my government. I would rather they did not constantly rob me through taxation and inflation. I would rather own quality stocks that pay a good divident at a reasonable price. It would be great if we had politicians who a. understood financial issues and b. showed some kind of fiscal responsiblity. That’s not the world we live in. That’s why I’m a reluctant holder of gold.

Your comments about confiscation were interesting. It’s happened before and it may happen again. Yes, perhaps we should have a system where investors who do really well have all their money confiscated. Good idea, comrade!

#140 randman on 07.21.11 at 1:04 pm

Squidly #77

“Statements are sometimes repeated to the point that they acquire the status of truth despite being deceptively false. In my mind I am undecided as to whether the greater morons are those that make such statements or those that accept them. The statement that “gold pays no interest” is one of the finest examples of intellectual bankruptcy and dishonesty.
There will of course be those that will point to the period between 1980 and 2000 when gold went backwards. These people do not deserve a detailed reply in respect of that period unless they can open the doors to Fort Knox for inspection and unless the paper games played by JP Morgan and friends come to a close. We need to be reminded once again of those startlingly clear words of Chris Powell that there are no markets anymore, just interventions.

My interim reply to those that berate gold is that the last decade has punished them with a badly faltering stock market, a hideous real estate market and a laughable rate of interest on their savings. These people are now perhaps more respectful of Mark Twain’s words to the effect that ”I am much more interested in the return of my capital than in the return on my capital.”

As events unfold in Europe, China and in the USA, it may well be that the next decade will be just as punishing and cruel to those that place their trust in money printing and market interference by government.

SO HOW CAN GOLD PAY INTEREST?

In the spreadsheet below I have 11 investors. The first one bought $100,000 worth of gold on January 1, 2000 (or the first trading day), the second one bought $100,000 on January 1, 2001 and so on and so forth until the 11th investor bought gold in January 1, 2010.

On the last trading day of each year, each investor sold $4,000 worth of gold which equates to a fair rate of return on $100,000.

Let us examine how they faired.

So the investor who made his or her initial investment of $100,000 in gold in January 2000, was able to draw an income of $44,000 over 11 years (by selling $4,000 worth of gold each year) and was also able to see his or her investment grow by another $272,654 or 12.7% compounding over 11 years.

SO YOU STILL BELIEVE THAT GOLD PAYS NO INTEREST?

Google

The proof that gold pays interest

BY Peter Souleles

Now…be quite please!!

#141 jess on 07.21.11 at 1:07 pm

Pentagon’s bubble
649 billion …I wonder what the chinese spend?

over 50 percent of all unrestricted spending in the federal budget. In fact, this level of spending approaches 45 percent of global defense spending, almost as much as every other country on the planet combined.

1) $124.8 million from the Pentagon’s $324.8 million budget for military bands.

2)$150 million for the military’s Task Force for Business and Stability Operations, which has the Pentagon starting business ventures in Afghanistan, including sourcing cashmere for New York fashion designer Kate Spade.

3)amendment limits military recruitment spending on subsidies to private motorsports companies such as NASCAR and the National Hot Rod Association to $20 million, down from an estimated $63 million. (The Hill)

Rep. Betty McCollum (D-Minn.) serves on the House Appropriations and Budget Committees. Identified spending cuts that would promote fiscal responsibility without compromising national security. During debate on H.R. 2219, she offered three amendments to accomplish this goal in saving $320 million.

#142 Cookie Monster on 07.21.11 at 1:14 pm

This is a re-post. The original posting seems to have disappeared. If this was intentional then that is unfortunate. Please defend your position Garth, defend your belief in holding fiat based bonds, illustrate how your purchasing power is rising while all fiats sink.

I listened to a few minutes of your youtube interview explanation of the dangers of deflation and now firmly realize you have a modern textbook understanding of economics, which is completely wrong. Hence your misunderstanding of what’s happening with gold and silver. You’ve done a great service for people regarding your advice on housing, but it’s a disservice to still advocate holding debt, good advice would be to stick to PM’s and equities as a balance and hold zero debt instruments. The only thing worse than holding cash is holding a promise to be paid in cash in the future.

===========

Your original post was deleted because it was disrespectful. So it has been deleted again. Make your point without attacking those who disagree with you, and you’ll be published. — Garth

#143 The InvestorsFriend on 07.21.11 at 1:17 pm

Prof ANON at 133 asks:

Anyone else getting the feeling that the surge in the stock market over the last couple of days has more to do with people unwinding their long positions in the face of looming uncertainty than it does with earnings?

Perchance he meant unwinding SHORT positions.

Stocks go up in the long run with GDP and earnings. Volatility is just noise. Get on board!

#144 detalumis on 07.21.11 at 1:26 pm

#131 kimi having 100K or 45K isn’t really the issue, depency is. My dentist is married to a heart surgeon and still worked part-time while her kids were babies in order to remain in the workforce. Some things are hard to do and it’s much harder to stay in the workforce and rush home and look after the kids then it is to stay at home with them. The problem is that I know of almost nobody that stayed home for any length of time and then was re-established in any but the most marginal of jobs.

The divorce rate is almost 50%. The minute you let an adult become dependent on you then you are responsible for them for life. You can never ever “force” your spouse to go back to work not even when the kids are 18 or 20.

If people want to think that marriage is all cupids and cherubs forever then at least go into it with your eyes open. I know too many long married couples that literally cannot stand each other but they cannot separate for financial reasons.

I also think its not a good role model for kids to see a parent who gave up their career “for them”. It gives them some strange sense of failure because there is possibly a .0001% chance that they will live in a world where financially it will ever again be possible for one person to stay at home.

#145 Blacksheep on 07.21.11 at 1:28 pm

Garth,

1] Apologies to the missus, no harm intended.
2] It’s all about real value in hard assets like real estate, gold or oil, paper spot means nothing.
3] Thanks for the offer of prayer, but I’m a Godless heathen.
4] You got me Garth, sometimes I do feel deeply inadequate, but after schoolin you in # 57, NOT today,
today, like you said, I just feel superior;]

take care
Blacksheep

#146 eddy on 07.21.11 at 1:38 pm

Greece a Dress Rehearsal for United States

http://www.youtube.com/watch?v=KKRzNgoL9h4&feature=player_embedded/

#147 Brett on 07.21.11 at 1:44 pm

See what I mean about the rudeness and myopia of people blinded by greed and the belief one asset will rise endlessly? In this regard, no difference from house-horny property virgins. Speaking of which, if you live in the US, dollars have increased in value dramatically relative to the cost of shelter. Doesn’t sound like devaluation to me. — Garth

Garth garth garth. 1.-Rudeness and myopia dont negate an argument. by the way, it is rude to point out rudeness, you hypocrite.
2.- never said an asset will rise endlessly, certainly not gold, how can it continue to rise against a fiat currency, after that fiat currency dies?
3.- the US dollar can buy more house now then 4 years ago- thats your case for the US dollar not being devalued!!!- uh, NO Garth, the numeraire par excellence is GOLD, not the price of MCmansions in Vegas.

#148 Mister Obvious on 07.21.11 at 1:46 pm

#137 disciple

“A lot of you are making a logical mistake called straw-man. You are implying that there are only two alternatives in which to store your money: paper or precious metals. WRONG.”

I hate to be a nitpicker D, but…

A “straw man” argument attempts to counter a position by attacking a different position – usually one that is easier to counter.

What you are referring to is a “false dichotomy” where one arbitrarily reduces a set of many possibilities to just two.

Glad to be of help.

#149 Cato on 07.21.11 at 1:47 pm

#115 JohnnyBravo – I agree with your assessment on Janszen. The conviction of his silver call was big reason I pulled trigger on my silver holdings. He is an analyst well worth following for anyone not already doing so. He not only correctly called the collapse but also resulting reflation following Fed intervention. I have found his research compelling and have yet to disprove any of his models used in forecasts he puts forward.

I think he is absolutely correct in his call for a multilateral currency, and it fits evidence we are seeing regarding continued central bank movements into Gold. Gold should be treated as a hedge and not an investment, I won’t be exiting until the storm is over and what we are seeing now is just the eye of the hurricane which began late 2007. There is no need for confiscation, all the Fed would need to do is a side deal with owners of the large gold ETFs like GLD to liquidate the fund.

What makes me take notice is Janszen has slid down a few points on doomer scale. If 1 being mad max pessimist and 10 being mary poppins optimist Janszen has now slid from a 5 to a 3. I’d probably say I’m now a 2.5 , mainly because I chose to make my life in Canada and not in the US. Our structural flaws will not be as easily overcome and we’re too arrogant as a nation to recognize the hole we’ve dug ourselves into.

One thing is for certain, its going to be a rough ride and knowing when to move and and out of cash is going to be everything. For anyone sitting above 5 on the doom scale lets talk a few years from now – I guarantee you’ll be down the scale with the rest of us.

#150 SwampLily on 07.21.11 at 1:52 pm

#28 BC Bring Cash
“Renting with pets means living in substandard housing.”

That’s simply not true. I don’t know when or where you have looked for rentals, but we’ve never had a problem renting with pets. We currently live in a beautiful heritage house in Victoria, complete with fruit trees and garden, and we have 3 cats – no problem. The house is valued at just under $1M and our rent is $1450 a month. I just did a quick check at our property management’s site and they have 24 apartments/duplexes/houses for rent and only 4 indicate “no pets.”

Our experience has been that even owners who state “no pets” will often change their minds once they meet you, especially if you show them pictures of your pets. :) We have always had cats and never had a problem finding a nice place to rent, here or in the U.S.

#151 Anon on 07.21.11 at 1:52 pm

Garth, did my offer to buy precious metals from you not interest you even a tiny bit? I’ll subscribe to $100k if you are up to it.

#152 Brett on 07.21.11 at 1:58 pm

Metalheads revel in telling us how much their gold is worth – in paper. How can their be a more pro-paper stance than that? Obviously they believe dollars comprise the standard in which wealth is measured. I agree. That’s what I (and everyone reading this pathetic blog) live in. Having said that, being overweight in PMs now is a risk you need not and should not take. But then, if it makes you feel superior and gives you the right to call my wife a Bagger, I guess that’s compensation for a far deeper inadequacy. I’ll pray for you. — Garth

good point Garth, we should not value our gold in fiat dollars, but in ounces. But the Popular standard that anything is measured in is transient, except of course for gold, for millenia everything has been measured against gold ounces, especially by the thugs who rule this crazy world…the banksters.

as for it being risky to be overweight in PMs now- well that has to be either the most misinformed statement from you ever, or a lie.—How can precious metals be risky while we are still in the beginning phase of the implosion of the greatest debt era in the history of man?

Because we aren’t. — Garth

#153 eddy on 07.21.11 at 2:04 pm

Ron Paul, Giving Legitimacy To A Conspiracy Theory That The Gold In Fort Knox Is Fake

http://www.youtube.com/watch?v=AaES4r53XT0&feature=player_embedded/

#154 Kitchener1 on 07.21.11 at 2:04 pm

Wow, the goldbugs are out in full force today.

Same mindset of the first time buyers etc..

Nobody ever got hurt taking a profit, but a few pigs get slaughtered everyday trying to catch falling knives………

Commodities drop, with it so will the CAN $$. watch the price of oil– seems that $1.30 a liter (GTA) is now the new 1.00 a liter we were paying last year. If a barrel of oil goes to $110 and up, we are screwed.

The Baltic dry index has been trading pretty flat all year, no ramp up’s etc.. it is slighty above 08 levels.

#155 Timing is Everything on 07.21.11 at 2:11 pm

Garth…Gold worship rituals in Lebowski’s basement…Toxicosis et al were there. Talk about scary!

http://tinyurl.com/3q9snp7

;)

#156 Brett on 07.21.11 at 2:19 pm

I love when people preach “balanced portfolio” (#98 the american) just like a balanced diet…. including some high fructose corn syrup, a lil bit of olestra, a daily dose of aspartame, and of course grains like Wheat, are at the broadest point of the food pyramid, so we all get our balanced dose of anti nutrients like lectins, gluten, and phytates. Im not eating that crap, and im not swallowing a portfolio that includes government bonds or high levels of cash- which by the way is the 2 pronged diet being sold to the public as “wealth through safety” hahaha – the banksters are about to throw cash and treasuries into the blast furnace, and im supposed to rebalance by selling my “RISKY” gold. people just dont understand whats going on….. THIS IS NOT 1980! gold is not about to crash, but your currencies are!

Just an incredible day. — Garth

#157 Cookie Monster on 07.21.11 at 2:19 pm

Garth, I don’t know what exactly in my refused post is a personal attack. You and Bernanke both have beards and both state that gold is not money. This comparison is purely humorous.

The use of the term willful blindness is also appropriate for your situation due to your books and many years of investment advice. Yes it’s personal but so is your investment advice. What happened to your thick skin? These comments or similar references have already been stated by others which you allowed.

And in case my third attempt was also denied, can you please just delete the personally offending paragraph so I can stop guessing at what’s bothering you.

#158 JohnnyBravo on 07.21.11 at 2:21 pm

#142 The InvestorsFriend on 07.21.11 at 12:42 pm

First, let me say that I am not a gold bug –– or a “bug” of any kind. When it comes to investing, I am agnostic and try to be completely objective. Stocks, bonds, RE, gold, oil, manure? I don’t care; whatever will realize the best real, net gains–that’s what I like.

When it comes to comparing ROIs, you can always “prove” one asset is better than another by using a timing bias. Want to prove gold is a better investment than stocks? Or vice versa? Easy. Just pick your time frame, and then to strengthen your case even further conveniently emphasize (or ignore) things like inflation, or dividends, or volatility, or taxes, or sectors, or etc., etc.

But the only time frame that really matters is the one that affects you. More importantly, what is your investment horizon from here? 10 years? 20 years? 40 years?

We know that there have been periods of time when stocks (in nominal terms) have gone nowhere for as many as 25 years. We also know that between, say 1980 and 2000, stocks were a virtual, well, gold-mine. And gold, even after going up 600% in the last ten years, has still not reached, in inflation-adjusted terms, its high of three decades ago.

There is no right or wrong. Good or bad. There is only timing.

#159 HouseBuster on 07.21.11 at 2:22 pm

@Kitchener – Canadian dollar drop? It is going much higher, unfortunately.

#160 JohnnyBravo on 07.21.11 at 5:14 pm

BTW, RE: my previous comment:

My “timing” remark concerns asset allocation, which is but one facet of an investment strategy. Of course there is much more to smart wealth management than timing asset purchases and sales. Something I’ve been learning more and more about, thanks to Garth.

#161 Thoughts on 07.21.11 at 5:15 pm

Doomers, libtards and gold-bugs, they find their refuge on the internet. Every Paulite I’ve ever met is so wrapped up in their pet topic that they are insufferable to talk to in person.

#162 Amarillo on 07.21.11 at 5:23 pm

Look outside, it’s one hunnert and four,
All the bloggies keep saying they want more and more
Of everything nice that the big world now offers
But especially if it fits in our coffers
Paper or houses but especially gold
Silver is nice but more volatile we’re told
In the meantime the merlin named garth
Rides herd on the bloggies while dishing his mirth.
Wow, do I need a coffee break.

#163 Pr on 07.21.11 at 5:42 pm

There’s No Fever Like Gold Fever! Its coming, the temperature is rising! This blog is a good reference. If you just made a fortune in the last 8-10 years in real estate jump in the gold-silver train right now!

#164 vyw on 07.21.11 at 5:46 pm

Central banks and Govts own about 30,000 tonnes of gold; about 20% of worldwide holdings. They can crush speculators in one coordinated move. Some gold funds are buying physical gold taking product off the market. They will put product back on the market if/when the ETF sells off.

If there’s confidence in the world economy, the USD goes down (yes, in part due to the QE policies) and everything else goes up ie. gold, stocks, real estate (at least in Vancouver), other currencies. BUT, when there’s a crisis, money flows into the USD, bonds and ‘bubble assets’ are dumped. Garth is right, it’s a good time to be prudent and take profits off the table.

Re inflation, well there’s also productivity and innovation to consider. How much was a laptop, flatscreen TV, new car, house appliances, etc. 5 – 10 years ago. Prices have fallen – purchasing power (of fiat currency) has gone up. The key is to have some savings to make the purchase. Otherwise, where’s the fun?

#165 Markey on 07.21.11 at 5:57 pm

American dream on life support as U.S. moves to ‘rentership society’ – see http://www.investmentnews.com/article/20110721/FREE/110729989

#166 ballingsford on 07.21.11 at 6:02 pm

Very hot in Ottawa today, along with Toronto, the Prairies, Quebec, and some of the Maritimes.

It would suck though buying a property and living in the basement and renting the upper as some bloggers suggest.

What’s wrong with these young whipper snappers these days?!?!?! That’s no way to live.

Anyway, the humidity here is 46 degrees and I need to take a dip in the salt water pool. Glad I’m renting and letting the Air Conditioner work full time today without costing me anything.

It sure sucks to be renting! Baawwaaahhaahhhaaa!

It sure sucks too that I have a chilled mug in the freezer to pour my ice cold beer into when I get back from my 30 second walk from the pool. Times are tough!

I’m a survivor though!

#167 Brad in Cowtown on 07.21.11 at 6:02 pm

Another post stricken. :(

Garth told me I needed a reality bath. I replied that he needed a humility bath. And that people with poor track records in making predictions shouldn’t be so condescending.

If that’s the basis for what you call a “personal attack” or “disrespectful” Garth, you need to look in the mirror… you get away with saying much worse in the way you belittle people in your posts and comments.

Stick to the topic, cowboy. If you can’t argue your case without attacking someone with an opposing view, you fail. — Garth

#168 The Original Dave on 07.21.11 at 6:13 pm

Most of you people are screwed! Garth doesn’t believe in being over weight in any asset. Get on with it. He’s not anti-gold, he’s anti-overexposure….in anything. Please shove off. Most of you sound new. I’d bet my nuts I’ve made more than 99% of you in gold, gold stocks (juniors and majors) in the past 10 years. Garth’s argument is simple to understand.

Most of you new-schoolers won’t know when to get off a screaming bull market. Human nature. This is why garth does what he does the way he does. Let’s move onto interesting non-monotonous things

#169 The Original Dave on 07.21.11 at 6:16 pm

I bet most of the gold bugs wouldn’t know good drill results of a potential gold mine if it hit them in the head! I do know about results, but I do think garths methods are best for you amateurs. Clowns.

#170 Andy S on 07.21.11 at 6:16 pm

The fed was created and passed in congress in 1913 by the same bunch that are now pulling the same diversionary routine. They are using the debt ceiling crisis as a smoke screen created to rob the American people of what little they have left. You will see the debt ceiling raised eventually, not without first pulling the rug out from under healthcare and social services as well as old age benefits. They create an emergency to pass bills that would be unconscionable in a normal environment. If you read “The Creature from Jeckyl Island” you would know how this works. The Bankers of 1913 were dead against the creation on the Federal Reserve, so naturally congress assumed it must be good for the American people. This was a ruse to bamboozle congress. It never fails. Look for the deception. Gold is of little consequence to the big boys, they use it perhaps to scare the public for now. Once the debt ceiling is raised it’s anybody’s guess which way gold will go. Mine is up. Beware though, once they bring the US to it’s knees, their eyes will turn north!

We need more tin foil. Quick! — Garth

#171 TurnerNation on 07.21.11 at 6:23 pm

Blog dogs are sweltering – tongues hanging out – here in the GTA (Garth Turner Area). 38c + humidity!!

#172 Toxicosis on 07.21.11 at 6:26 pm

@Brad in Cowtown.
Obviously Brad, Garth’s obliviousness to his own behaviour is something he wishes to deny to extremity. You’re correct in asserting that Garth belittles, mocks, and downright issues disrespectful comments to any who disagree or challenge him on his assumptive assessments. Garth thinks I’m full of much anger…..he’s right, it’s righteous anger at liars and thieves. He attacks Gold holders and those who’ve made unthinking decisions outright but refuse, like a child, not to even accept evidence to the contrary. Has the US dollar gained ground on gold as Garth asserts earlier on in the comments or do the facts not fit “his” theory. Here’s one:
http://www.bmgbullion.com/library_images/x_550/1103.jpg

And here is another factual bit to chew on for Garth and his loyal liege: The traditional view is that three asset classes (stocks, bonds and cash) are sufficient to achieve diversification. only precious metals offer negative correlation to stocks, bonds and cash; a portfolio that consists of only positively correlated asset classes is not balanced or diversified.
http://www.bmgbullion.com/library_images/x_550/1102.jpg

Facts contradict assumptions. Brad in Cowtown gets that Garth, do you?

I get that you need help. — Garth

#173 Dad on 07.21.11 at 6:27 pm

Garth you cannot expect the end of the world fiat currency crowd to ever stop using personal attacks. Their political and economic views are so fundamental to their identity that any disagreement is considered an attack. You cannot disagree with them, because to them, disagreeing is akin to condemnation of everything they are. They have no identity except their beliefs.

#174 TurnerNation on 07.21.11 at 6:28 pm

This report is a joke…1.6% is like a rounding error!!

“In the case of British Columbia, we expect that extremely poor affordability will cause a partial reversal of the recent substantial gains and forecast an absolute decline of 1.6% (on an annual basis) in 2012,” the report says”

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/housing-prices-to-weaken-in-most-markets/article2104893/?utm_medium=feed&utm_source=feedburner&utm_campaign=Feed%3A+TheGlobeAndMail-Business+%28The+Globe+and+Mail+-+Business+News%29

#175 Helicopter Ben on 07.21.11 at 6:47 pm

I still dont understand Garth on why you think people should sell their gold and silver? there isnt enough silver in the world for everyone to even own one ounce each, i think there is only the 2 olympic size swimming pools that gold could fill in all of the world. , its unbelievably rare and both metals have properties that are hard to replace, gold doesnt rust and is an amazing conductor. silver is an anti

bacteria, very conductive, reflective, conducts heat extremely well and is used in everything. there is basically a shortage of everything in todays world that is useful, too many people not enough resources. less then 1% of north americans own any PM, what kinda bubble is that? Garth is getting ripped the last few days pretty harshly, i dont agree with the whole selling PM but not going to be rude about it. The U.S. dollar has lost something like 98.6% of its value in the last 100 years, people who work long hours are getting paid with cheap money. Alot of investments look like they are going up but really its just an inverse chart , credit has gave us perceived wealth but its not real and is making everyone poor. we have lived well in the west at the expense of the poor in the rest of the world , now the gig is up and the wealth is moving east. The U.S. is in the early days of their fleeting empire, and have fallen the exact way so many have before them. the best thing you can do is stay far far away from them as its going to get ugly. Keep your gold and silver and you will be in good shape.

#176 Harlee on 07.21.11 at 7:04 pm

ballingsford @ 172
Judging by the quality of the blog comments here today,I think the heat is getting to everyone…I’ve never resented renting and never will. Recently I moved my old mother out of her old house and she too is now renting a very nice apartment and is enjoying it. Life is good. I have no pool here but I have TWO beer in the fridge. What more does a good old Canadian boy need?

#177 Tony on 07.21.11 at 7:30 pm

Problem with the graph to do with the Dow is the long term trend line is missing. Even with all the bias in the Dow 30 all the junk taken out and replaced by seemingly good stocks the long term trend line still cuts through around the 3,500 mark. Now what kind of a total fool would buy stocks after looking at that graph?

#178 Helicopter Ben on 07.21.11 at 7:31 pm

another note on silver …. its getting shorted by JP Morgan to atleast 100 to 1 when it should be sold 1:1 ratio, they can only keep it down for so long till explodes as the chinese has started their own comex. the comex in the states has less then 30 million ounces which is very little. some day soon real silver and paper silver will be selling at very different prices. http://goldsilver.com/video/silver-update-caught-in-the-act-the-comex-is-a-completely-and-utterly-corrupt-market/
I know I know Garth this is a bias site, but everyone is bias in their opinions.

#179 Joseph [original] on 07.21.11 at 8:05 pm

Yes, the last blogger pegged it. The 40% is the maximum return for a 5 year term, but keep in mind that we have been touting returns of 5 percent per annum on this blog as something to celebrate, which is also a purely speculative number (i.e., no guarantees you will ever get the 5). I placed my RRSPs in this vehicle so I have no tax to lose on these gains (at least in the short term), and hope to get a 5 percent yield at a minimum (though an 8 percent return is not out of the realm of possibility), and then later in life take full advantage of income splitting to mitigate the losses on this front as well. I am happy to see that the banks are trying to get us folks who are savers a decent return through these new ideas. That really was my point – that they have begun to venture into Garth’s territory, with guaranteed backing of your principal investment.

#180 Mr. Reality on 07.21.11 at 8:12 pm

#174 The Original Dave on 07.21.11 at 6:13 pm

Can you do us a favor and stop bragging about what you know and your “successes”. I mean really bragging on the internet?

By the way i made 400 quadrillion dollars shorting the US dollar but lost it all because my internet ego far out weighs my intelligence……….

Mr. R.

#181 Behavioral Finance on 07.21.11 at 8:15 pm

Just like a SFH in Vancouver. Can’t you guys understand the concept of selling high? — Garth

No Garth. They don’t understand the concept of selling. They will hold when it’s high and when it will eventually be low.

#182 Behavioral Finance on 07.21.11 at 8:23 pm

Don’t worry metalheads 1980s will be repeated eventually. The higher gold and silver goes the more spectacular sell off will be. Just think of oil in 2008.

#183 Toxicosis on 07.21.11 at 8:24 pm

@DAD———If the value of money as fiat is NOT being destroyed or diluted than provide evidence for it. Belief is not fact nor evidence. Leave “I believe” in a church. Believing that money printing has not been or is not happening virtually worldwide is no different than arguing for the non-existence of gravity. Facts escape the emotionally and intellectually challenged because they refuse to commit to critical thinking as that would be cumbersome to both their ego(emotionally driven foolish pride) and their precious fantasies of the need to always be right. Facts be they monetary, economic, chemical or physical bow to no man nor his ego. Talk is cheap so instead of heady or indefensible statements how bout providing some real work and objective assessment of how the world of peoples arrived at this point in our history and whether the trends are new or just a repeat of it. And yes Garth I truly do need help……making sure people such as yourself never gain a foothold of power in the future since those who disavow facts are not to be trusted.

Too late. I’m omnipotent. — Garth

#184 Willie wonk on 07.21.11 at 8:35 pm

“My meaning: no purposeful hyperinflation through currency devaluation. — Garth”

Ho ho, that is what they said during the Wiemar Republic, isn’t it? Those republics are just so puerile, aren’t they?

#185 jess on 07.21.11 at 8:36 pm

fake Apple stores in china?
http://birdabroad.wordpress.com/2011/07/20/are-you-listening-steve-jobs/

A fascinating discovery by 27-year-old American abirdabroad, who works for a public health organisation in the rapidly developing city of Kunming, southern China.

#186 Bottoms_Up on 07.21.11 at 8:45 pm

gold is the biggest bubble (i.e. longest) in humankind’s history.

#187 TurnerNation on 07.21.11 at 8:50 pm

Oops I meant to post on today’s posting, not yesterday’s:

Could solar and wind power keep up with our demand for A/C during this heat wave? I doubt it. The Greenwashing movement just another form of population control. Many young and elderly would perish if A/C were unavailable.

The kids have got it now: humans = bad. Hydro = bad. They got to the kids. Supermarkets throw out a ton of food each night and we have enough money to invade all kinds of countries, but cheap power has got to go, they say. They are taking us back to the stone ages.
Wind up your battery car, pay carbon and emissions taxes, pay road tolls, or better yet use horse or bike to get to the store (just like in 3rd world countries!).

Turn off your lights for Earth hour, use candles, get used to it the new normal; meanwhile our war planes/ships/subs guzzle gas and spew uncontained emissions. War ! The perfect business model.

We have more than enough food and power for the entire world but violence is used to keep it in the hand of a select few. Democracy is but a myth, a fable. Look at the back of your coin. Whose face do you see? Your elected leader or a face from an unelected, violent, inbred, elite family linage? Yep, who’s the boss indeed.

#188 Basil Fawlty on 07.21.11 at 8:51 pm

“Dumbest comment of the day, and from a smart guy that’s surprising. The context was devaluation of US dollars which metalheads are always harping about. If you live in America, and in American dollars, the currency has appreciated when it comes to the most significant asset citizens own. Your argument – expressing the value of housing in bullion – fails. — Garth”
My one sentence was not clear, however my point was that while house prices have collapsed, many goods and services are increasing in price. I could say more, but you have probably had enough BS for one day.

#189 rental monkey on 07.21.11 at 8:52 pm

@156 Swamp Lily: Your statement is what is not true. People (landlords) in Victoria have been ruthless with the no pet policy. Especially dogs, nevermind larger ones that are well cared for. It has only been in the last few months that owners are opening up to cats and the occasional person is allowing a dog. But it’s certainly hard to find a place (read~ nearly impossible) that allows larger breeds~unless you want to live in substandard housing. And I can attest that this is indeed FACT in Victoria. In 2008 I moved out of the province to keep my dog. It was that difficult.

People are starting to feel the squeeze and ARE becoming more flexible on their pet policies, but you are still renting dumps. Unless you think 1600.00 for a main floor suite with tenants below is “average” price for an “average” place.

#190 mid-Ontario on 07.21.11 at 9:04 pm

Many excellent comments.
#42 – Nonplused -harsh but bang on!
#57 Blacksheep -well stated
I will monitor Garth’s progress in the coming months.
By Christmas, he will be correct on RE or many will move on. (I bet he is correct)
By Christmas, the PM’s will define the extent of PM comments on this blog. ( I bet the PM’s are up big time)

#191 garrulous squirrel on 07.21.11 at 9:17 pm

It really depends on your definition of ‘hyper-inflation’. If you’re a senior on a fixed income you are experiancing hyper-inflation because you’re purchasing power and cost of living is going down by 20% per annum while at the same food and service inflation is rising by 20% p/a.

If you’re a middle class ‘earner’…you are borrowing 50% more every year in order to pretend that your ‘lifestyle’ is similar to the previous year….which according to the personal debt stats it is hard to believe that equilibrium is being achieved because people are borrowing heavily on credit for food and standard items.

If you’re a government with a national debt sitting above 100% of GDP and tax revenue of shrinking then the rate of bond issuance to ‘make the payroll’ is huyer-inflating.

So….by denying that hyper – inflation exists only in someones mind is really a game of semantics. Hyper-inflation IS here and that is why your house prices have doubled and your rice bowl has also more than doubled in the same period.

Carney and the clowns are ‘jawboning’ the people….they are trying to ‘manage perception’……none of that means that hyper-inflation is not already here.

As this relates to gold and all commodities….you need only to follow the money…..M1…M2…and ( the now shadowy) M3 have all been ramping along at above 15% in the US. We know that the US economy is mirrored by the Canadian economists as we are so closely aligned in policy. Canada does not allow the public to know the Canadian M3 but is calculated to read at the approx level of US M3…it has to keep pace in order to facilitate the movement of goods across the border.

Ergo……..all commodities….hard and soft…will continue to inflate at the same rate as the money supply……it has to do with input costs silly. As cash gets less valuable…….things will get more ‘valuable’…..unless you can add abd subtract……then you’ll realize that cash and houses are really value traps.

I bought more ZJG…….just for the fun of it.

#192 Utopia on 07.21.11 at 10:10 pm

Whew! That Toxicosis guy at post #25 is poisonous. I honestly don’t know if I want to keep reading anymore today. The Gold Loonies seem to be out in force judging by the comments I have seen so far.

Hey Lebowski….stop puffing it up so much. I have not been wrong about Gold and Silver for ten years at all. Not even close pal. Bought and sold plenty over the decades. Lived through the last bubble too and have more experience under my belt than you do, guaranteed. I just don’t treat it as a cult or a religeon and I do know when to get out as times change. You guys who pump metal are just a slim majority of the population and most of you are extremists in my experience. One percent of you own it or invest in it seriously but account for 95% of the negative gloom and doom hype all over the web these days. If you are anything like most of the other gold-huggers I have met you are also the type who is inclined to hoard ammo and guns too. Like I said…. just a pack of whacko extremist outsiders hoping for the end of the world to prove they were right about PM ownership and pray for the day they can lord it over all the non-metal holders.

Give it up will you.

#193 Devore on 07.21.11 at 10:12 pm

#197 garrulous squirrel

It really depends on your definition of ‘hyper-inflation’.

No it doesn’t.

Hyperinflation is not merely high inflation.

The entire blog today has given me a headache.

#194 Utopia on 07.21.11 at 10:40 pm

#108 squidly77 on 07.21.11 at 10:21 am

Those were very interesting comparisons Squidly. Good work. I recall that Daystar had also made some similar comparisons not long ago showing Corn, Sugar and host of other commodities outperforming Gold by wide margins too which helped keep everything in perspective (where is he lately by the way, I kind of miss him). But buyers of those products or those who invested in rising star stocks never struck me as outsider renegade lunatics. Just plain investors trying to make as buck.

What bothers me most about the Gold camp is their “last man in the lifeboat” philosophy. I said I felt they were anarchists and perhaps that was a bit harsh but the ones I have known personally were almost all gun-toting head-for-the-hills lunatics hell-bent on personal survival against a civilization they were sure would implode at any given moment. They would be ready. Metals were the answer. Screw government and society of course…..

So yes, gold acquisitors should probably be monitored.

#195 Utopia on 07.21.11 at 10:54 pm

#199 Devore wrote…….

“The entire blog today has given me a headache”.
——————————————————-

Actually, it is giving me a headache too. I have read enough. I never felt so anti-gold in my life but the line is drawn now and I won’t be going back. If any Central Bankers are reading this…….

then kill the Gold trade.

#196 Toxicosis on 07.21.11 at 11:10 pm

@UTOPIA—
Fitting name, as you also probably see mine as. Do you really think “us” gold bugs truly want this end of the world “armageddon” scenario? No were not religious fanatics just realists who perhaps have a knack for seeing the world through clearer eyes than daydream believers. However, utopian or cornucopian thinkers and feelers are usually cultic hyper-optimists stuck in infantile new age thinking. Is it poisonous to tell the truth or relay brutal honesty? Apparently in your world it is, as is the utopian escape. Us gold and silver bugs are big picture thinkers who do NOT trust the governments or the private central banks and look to gold not to make oodles and oodles of wealth or money, but just to protect ourselves from hyperinflation and fiat devaluation. If you wish not to do the same then that’s your pererogative. The truth always comes out in the end, so place your bets and hope you don’t miss the big picture.

#197 TurnerNation on 07.22.11 at 8:04 am

Gold bugs are like the .com gamblers of yesteryear.
Me(n)talhead will not sell gold at 1700, nor 1900, nor 2100 because “it’s going to $5000, E. Splott the pumper of gold paper derivatives funds said so”. Then, they will not sell at 1400, 1250, 1000, 950…every maina has its end.

“It’s different this time?!!?!”

#198 Steven Rowlandson on 07.22.11 at 10:32 am

Garth I think I saw something like the dude with the sign in the movie “Bruce Almighty”.
It was god in disguise sending a message.

#199 Steven Rowlandson on 07.22.11 at 10:43 am

To the gold and silver bug critics. It is my experience that interms of value appreciation metal earns and paper burns. So far it works for me and that is a good thing. Why do you fear the increase in price of valuable inanimate substances that does not back or limit the production of fiat? Such fear is irrational and solves nothing.

Because you can’t spend gold. It is only worth something when converted to real money. — Garth

#200 Steady Eddoe on 07.22.11 at 2:38 pm

Garth… gold is money…. money has a key attribute which paper money does not… one of them is being a store of value…

“Paper money eventually returns to its intrinsic value — zero.” – Voltaire

You are suffering from Stockholm syndrome and you’ve fallen in love with your paper captors…

You are not factoring in economic history given the current situation. Your view is more boom/bust cycle vs systemic risk.

I’ve known traders who had seen the writing on the wall in 1999 and I thought they were insane to buy gold. Nobody I know owns gold, so how can it be worth anything?

* Sigh * Money is currency and a universal medium of exchange. Gold is a commodity. Rocks actually. It cannot be exchanged universally for anything except… money. Put your brain back in gear. — Garth

#201 AKatz-Oaville on 07.22.11 at 4:54 pm

I did not have time to read all comments for this posting, but the lady is comparing a basement with a 500k house?

#202 Steady Eddie on 07.22.11 at 6:54 pm

Sorry Garth, but I don’t think you understood my argument. In order for something to qualify as medium of exchange it has to have a certain set of principles. I mentioned store of value. Others are that it must be divisible, resistant to counterfeiting, transportable etc.. Where currencies fail is as a store of value. History has shown us this countless times. For example French Assignats, U.S Continental, German Mark etc.. are all resting in the paper currency graveyard.

Although paper currencies are used as a medium of exchange they fail to meet the criteria. Technically, it is not a valid medium of exchange as it is not a store of value. It is responsible for the ongoing economic crises because of it’s ease to defraud and manipulate.

Is it fair to work for 25 years and over that time have the purchasing power of your money eroded? Why do people have to be forced into so many financial vehicles which risks their wealth? Governments love paper money because it can be made out of nothing to finance wars and other debt expenditures.

USA will never pay back $14 trillion. It will erode the value of currency. Governments, our biggest debtors love inflation. They get to spend the money first.

I think you should spend sometime understanding the nature of money and I don’t mean that to be belittling. I have almost grasped it.

BTW, Dow Jones is actually down in terms of gold and oil so….. All I can say is… I guess I’ll see you at gold $1800. Oh and my brain is in high gear…

Cheers…

People work for money. The money stores the value of their work. They buy gas and food with it and pay mortgages. That is currency. Gold is not money, currency or a medium of exchange. It is only worth the money it can be converted into. That will change when gold buys food, gas and handles mortgage payments. Which is never. — Garth

#203 Steady Eddie on 07.22.11 at 7:45 pm

You failed to understand the technical merits of my argument.

Money is money. Gold is a commodity. Currency is a medium of exchange. Gold can only buy things when it is exchanged for money. Am I getting too technical? — Garth

#204 Steady Eddie on 07.22.11 at 8:14 pm

One would have to be technical to start with.