Gold and Silver or Property?

Discussion in 'Markets & Economies' started by browski, Sep 13, 2012.

  1. browski

    browski Member

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    In the increasingly likely event that world currencies are becoming worthless, I'm wondering if members might give some thought to better stores of wealth.

    Although PMs are the obvious wealth preserver of last resort, in the event of a currency crisis, does anybody believe that Property would be equally resilient?

    Is property owned outright a good store of wealth and are properties with significant mortgages (and exposure to high interest rates) hazardous? Or are they both suspect?

    Any thoughts out there?
    Apologies if I've post in the wrong section.
     
  2. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    I think along the lines of ounces of Au (as that is my main exposure) to house prices. It's ratio browski, like the Dow/gold, gold/silver etc. You buy and hold until the ratio swings in favour of the next asset you wish to purchase. I'm not sure what thye house price/gold or silver ratio is but you could figure it out for youreself and no doubt it would be possible to do a historical search to determine whic asset is valued or undervalued when compared to the other. I'm working on slightly outdated figures of 240oz of gold buys an average house. Am looking at swapping when it gets to the 100oz mark.
     
  3. Dogmatix

    Dogmatix Active Member

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    Depends I guess. Do you need divisibility?

    "I'll trade you two bedroom doors and a kitchen draw for my groceries today"

    Do you need cashflow? What if your renters stop paying? What if you can't get any renters? How do you pay for maintenance, rates, etc, if you don't have cashflow?

    Will property value go to zero - no. Will it maintain current equivalent value (when compared to other general things - eg, I can buy one median priced house vs 250 tonnes of apples) - no it won't.

    The reason is leverage. Who can buy '250 tonnes of apples' worth of property, without debt? Who can even get hold of that kind of cash in the future? (taking into account inflation).

    I am a firm believer that when the SHTF, even if only mildly, then property will revert back towards its utility value, rather than its speculative value.

    I'm not doubt jumping to an unfair conclusion here, but I believe most people that pose these kinds of questions have already made up their mind to play with property, and are just looking for reasons to justify the decision they've already made.
     
  4. boston

    boston Active Member Silver Stacker

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    During the 1930's depression, properties in Rose Bay (Sydney), were selling for 5 each. Obviously, they were distressed sales, but nevertheless they were still sales.
     
  5. Dogmatix

    Dogmatix Active Member

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    Shiney - your figures do seem outdated. I think it is closer to 340oz instead of 240oz.

    In the cities/suburbs anyway, but not in a flood zone.
     
  6. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Thanks doggie, I'm working on average qld regional figures because that is the market I'm most comfortable with. Lowset, brick, 4 bed/ensuite, east coast. It's probably closer to 250. :)

    Flood zones? Didn't Bligh sort all that out?
     
  7. radiobirdman

    radiobirdman Active Member Silver Stacker

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    Thought you wanted to be a farmer Shiney
     
  8. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    I do, but I gotta put something into my SMSF Trust Deed and minutes that sounds like I know what I'm talking about. :p
     
  9. browski

    browski Member

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    Thanks for the replies so far.
    Actually I'm a bit the opposite, I was looking to move away from mortgaged property to PMs and just keep the unencumbered properties.

    Surely continual rounds of international money printing will cause enough inflation which will impact upwardly on interest rates; even in Australia?
     
  10. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Well we already have one of the highest cash rates of any developed country in the world.

    My main "P-A-N-I-C" :eek: indicator is when we have "toy dogs" in the back of utes.
     
  11. Dogmatix

    Dogmatix Active Member

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    That would be the theory - bank interest rates that is, not central bank ones.

    Under Volcker in the 80's the US did lift interest rates, as you and/or many people would be aware. That's the only thing that saved the USD as the world reserve currency. It didn't fix sh#t though, and it was really the beginnings of giant inflationary expansion (and bubbles) across the world.

    If you think that the US can do the same thing again, I would argue that it cannot, as it would destroy itself in the process. What the US wants is a lower valued USD to remain competitive and create jobs, not a higher one to boost imports and debt.

    As for Australia - if the world is in the midst of 'currency wars', a race to the bottom essentially, then we'd be super foolish to lift central bank rates. Plus, if the SHTF, lifting central bank rates in Australia would be a killing blow to property and the rest of the (debt-based) economy.
     
  12. radiobirdman

    radiobirdman Active Member Silver Stacker

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    Lol, doing the same thing at the moment ,a lot more bull than I thought , but more than one way to skin a cat:)
     
  13. browski

    browski Member

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    This SHTF scenario is the one that concerns me and was the reason for posting this topic:)
    .........and if inflation hits the US, won't they have to raise their interest rates even if it destroys them in the process?
     
  14. Dogmatix

    Dogmatix Active Member

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    Well, that's the question that many people are pondering.

    From my readings so far, there are two arguments:

    Raise rates - The US would never let its currency die, so it will raise rates

    Inflation - The US will print money like crazy to pay the bills, even in the midst of inflation

    I'm going with inflation. I don't think anyone in the USA has the political balls (not even Ron Paul) to raise interest rates in the middle of a depression. I think they will seek out handy central bankers and economists with group-think to tell them things they want to hear like "if we print money, we'll create jobs and it will lead us to prosperity".

    It looks a bit like an ultra slow-mo train wreck IMO.
     
  15. Nukz

    Nukz New Member

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    I like property but i don't believe now is the time especially where i am in Melbourne. There is huge oversupply here. In a environment of endless QE precious metals and even some shares will do very well far outpacing property.

    I mean seriously even Telstra did 50% gain last year.

    I think property is just at the start of a downward cycle which occurs every now and then with people starting to De-leverage and pay down debt.

    I suspect though if you can get a hold of a cheap producing dairy farm or something that would be extremely valuable :)
     
  16. Peter

    Peter Well-Known Member

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    Buy a dilapidated house if your going to buy one,and do it up cheaply yourself (all the work yourself),so if property values fall you still break even.It's what I'm doing.Cash.

    Incidentally:renting vrs owning.
    I remember my very old dad telling me that during the last depression some people were even paid too live in houses;to stop the vandals wreaking them
     
  17. Guest

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    Considering the number of pro-property investors on SS, I think it's fairly obvious what the responses here will be.

    Give it another 2 years and the forum will have to be renamed Property Stackers.

    SS has a very strong pro-property clique here nowadays.
     
  18. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    There's a lot of pro-share, pro-PM and even some pro-forex traders too. It's a diverse group as you would expect.
     
  19. Ilikemetals

    Ilikemetals Member

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    Just mulling the idea of purchasing into agricultural land should the ratios swing favourably towards PMs. If any other young lads (or old too) wanna consider going in a share post transition, hit me up.
     
  20. grinners

    grinners Active Member Silver Stacker

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    It is a nice balance to the $400-silver-by-christmas-crew in my opinion.
     

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