Rosco

Anyone have opinion on DML ?

The 3 year chart seems to suggest we are at a trendline and 252 MA

Maybe maybe not, almost impossbile to tell. Is this correction on the back of the G20 meeting? IMF gold sale????

This probably contributed

http://www.ft.com/cms/s/0/01b5f82a-1ef5-11...?nclick_check=1

Since the late 1800s, the ratio between gold and the DOW has been as low as about 1-2:1 three times. Given that the price of gold in dollars was fixed prior to 1971, it's hard to know how relevant two out of those three occasions were?

 

In order for gold to reach $10k, the ratio would have to go to an unprecedented sub-1:1 level, even if the DOW stayed at the level it is now!

 

Goldfinger's Gold/DOW ratio chart looks like most of the 'action' is behind us, and the low point might not be all that far into the future... However, if 1973/4 is anything to go by, there may be quite a reversal (gold dropping/DOW rising from here) before it finally reaches a low point which might drag it out by quite a bit?

 

Another ratio that seems interesting to me is that between gold (and silver) and houses[1]. When I look at a gold/house-price chart, it seems like less of the 'action' has already happened -- the price of houses in gold (in the UK) peaked in 2004[2] (at around 700:1 or so). We're currently at a ratio of about 230:1 (i.e. 230 ounces to buy an average house), and it was hovering around 100:1 (sometimes a bit below, sometimes a bit above) from around 1980 to about 1984 (again in the UK).

 

So... Taking those two ratios -- 100:1 (for houses) and, say, 1.5:1 (against the DOW) -- could gold really go to $10k (maybe £7k)? That's an awfully big number (or so it feels right now). That would make 100:1 grotesquely too high (average house at £700k?)

 

Or is that just high-inflation for you!

 

I must admit to feel a bit lost, like many here are really expecting us to venture off into the white portions of those old maps ('Here be dragons!').

 

At £7k for an ounce of gold, surely we'd see gold/house ratios of sub-20:1?

 

I'd really be interested to hear where others think the two ratios will end up... (perhaps backed up with where the DOW will be and how much an average house must end up being because of those ratios)...

 

I'll have to stop now -- I'm getting dizzy!

 

[1] I wonder why?

 

[2] Compared to the gold/DOW ration peaking around 2000 (as in the year).

When you say most of the action is behind us it really depends on how you expect the two markets to move.

Moves since ratio at high in 2000,

Gold $250 / Dow 10000 (not sure if these are exact?) , this represents a 277% increase in Gold and only a 34% decrease in Dow to todays levels ie a net profit of 243% if you were long equal amounts of both

Let's say you expect the Gold/Dow ratio to move to 1:1 at some point. From todays two levels that ratio can be acheived with many permutations, but jsu looking at two;

Gold $5000 / Dow 5000 , this represents a 432% increase in Gold and a 23% decrease in Dow

ie a net profit of 409% if you were long equal amounts of both

Gold $2500 / Dow 2500 , this represents a 166% increase in Gold and a 62% decrease in Dow

ie a net profit of 104% if you were long equal amounts of both.

Friend of mine runs PM option trading for one of the bigger bullion banks in the city. I asked him his opinion on gold..

"as for gold...it's had a good run up for sure, longs got excited and addded to positions thru 931 and 950, so there is where the puke will happen. personally i gonna get myself lined up with some gamma puts with 4-6wks maturity...that where the risk lies at the moment..too many retail people gettign excited and buying it now at 975-980....all traders i know are saying that we need to consolidate so very hard to see it rage too much higher too soon, but i not gonna go short as there is just fresh air between here and the mar08 high at 1032!!!!"

Only thing I'm sure about is that whichever way it goes, its gonna be volatile......

2.7% max buying charge for gold on GM - you won't get it in your hands for anywhere near that amount...

GM charge 2.7% for buying between £6k-£60k , but remember you also are crossing approx 1.5% spread versus spot. Thats why I said you are down 4.2% on the trade

I have a Goldmoney account but am now baulking at the cost involved of buying digital gold.

Looks like to buy between £6k - £60k worth I have to pay approx 4.2% (fees and spread combined) or approx 3.7% if I pay in Usd.

Typically how much over spot would you pay to buy physical bars?

Interesting FT article

http://www.ft.com/cms/s/0/a39f68a6-ddf0-11...?nclick_check=1

Whats a good page for long term charts GbpXau and JpyXau ?

Soros article in todays FT

http://www.ft.com/cms/s/0/5dbd0ffe-30ef-11...0077b07658.html

That is an unbelievable decline in Barratt. I kep looking at it thinking this can't go much lower and leaving it. I've not traded it nearly as well as I should have. But what is it saying about UK housing.

 

I remember sitting next to Bubb in an internet cafe in late 2006 looking at a chart and him saying, 'That thing could go to zero'. Well, well, well.

Yeah, you may be right but I think there is a case for a bounce here ;

- 1995 and 1999 lows were around these levels

- PE of 2.3% to June 2008 (lowest in FTSE 250)

- Doom and gloom (housing sales, potential debt downgrade / rights issue etc ) all well known now.

Undecided but I may pick some up below 200

Looking at the UK builders here versus what happened to US builders.

US peaked around Aug 2005 and bottomed Jan 2008 ~ 29 mth decline.

Pulte dropped around 83% and DR Horton about 74% high to low.

UK peaked Jan/Feb 2007 ~ 16 mth decline so far

Persimmon has dropped ~ 67%, Taylor Wimpey around 82% and Barratts around 84% so far..

Any thoughts ?

I'm confused on this Fed rate cut.

I'm not the only one who thought they'd cut on Sunday by 0.25%.

On top of the recent one of 0.75%, that would have made a full 1%.

 

But, according to this: http://www.federalreserve.gov/fomc/fundsrate.htm

 

2008

 

March 18 ... 75 2.25

January 30 ... 50 3.00

January 22 ... 75 3.50

 

Not

 

Am I wrong about the Sunday one then ?

Sunday & Tuesday they cut the Discount rate by 0.25 & 0.50% respectively

Tuesday the cut the Fed Funds by 0.75%

MYTH EXPLODING ... so Central London is different, is it??

 

Whodathunkit?:

the wealthy are losing confidence in bricks and mortar as an investment. There has been a big drop in City bonuses...

 

<a href="http://business.timesonline.co.uk/tol/busi...icle2759795.ece" target="_blank">http://business.timesonline.co.uk/tol/busi...icle2759795.ece</a>

 

QUOTE

House prices fell for the first time in two years this month, sending a shudder through millions of homeowners already hit by rising mortgage repayments and more expensive borrowing.

 

The outlook for homeowners is likely to worsen with news that the wealthy have lost confidence in bricks and mortar as an investment. There has been a big drop in City bonuses being used to purchase prime property in Central London and in the popular second-homes areas, triggering fears of price falls in the South West, East Anglia and the Cotswolds.

 

Today’s figures will increase the anxiety of millions who have banked on ever-rising prices to fund their old age and pay off mortgages. To add to their misery came a new warning from America that Britain would not escape the fallout from US as the property market there went through its worst recession in 16 years. Robert Shiller, professor of economics at Yale University, who forecast the end of the dot.com bubble in March 2000, told The Times that the slow-down would start in London.

. .

The amount of City bonus cash flowing into prime London property and into second and third homes will fall by 60 per cent to £2 billion in the coming year, according to one of the country’s largest property agents. This will lead to at least six months of falling prices in Central London, predicted Savills, the estate agency, which specialises in selling houses worth £1 million and more. Also at risk are the Cotswolds, the South Westand parts of Norfolk, Suffolk and Kent.

 

Savills gave a warning that the top end of the property ladder and the second-home market could be hit hardest because financiers, accountants and lawyers no longer saw property as a good buy and were more likely to put money into hedge funds.

 

Meanwhile, the Centre for Economics and Business Research predicted that the credit crunch, combined with five interest rate rises in just over a year, would cause prices to fall for the rest of this year and into early 2008. But it suggested that the housing market would shrug off the difficulties within a year and that by 2010 annual growth would be back at up to 7 per cent because of an imbalance of supply and demand.

 

= =

 

Now where are those exaggerating sacks of VI spin when the reality comes spilling out??

Some EA's should now be chewing some tough crusts of humble pie on this news.

Aarghh ! this kinda news hitting the broadsheets is bad timing for me as am still waiting to exchange contracts on the sale of my flat..... hopefully the buyer is out of the country for a few weeks !!

LandRegistry prices are THE MOST DELAYED.

Chances are, those are transactions where prices were agreed in June or July.

I did also mention that fact in my post but my point is that the Land Registry report for say November/December is not going to show London prices down 15% against this Septemebr survey.

From what you described, the actual price was agreed some time ago,

so the valuation is not up-to-date

Interesting to see the latest Land Registry report for September (released yesterday).

http://www.landreg.gov.uk/houseprices/

States that London prices rose 1.3% last month with 32 of the 33 boroughs increasing. Kensington & Chelsea higher by 1.7% and 30.5% mtd & ytd respectively. These numbers are on actual completed sales so lag the market by a few months but even so hard to reconcile with 'Toby Serter ' article above.

Some foreigners are too rich, and too late...

so they spend their money based on out-of-date assumptions.

 

But dumb-rich investors will not go on buying blindly for much longer IMHO

You are not the only one trying to cash in on their naiveity

Ego is a very powerful force. These guys are not buying investments , they are buying lifestyle, and at the moment in many cases their personal wealth is growing at a much faster rate than London property. A London residence is a must have these days for a lot of wealthy people and consequently there is still a shortage of very high quality places in the "right" areas. In many cases the odd 10-20% in price is a rounding error.

Interestingly we have seen a similar (though less extreme) example of this in NewYork where top Manhattan real estate is still up year to date, even though other urban areas are crushed.

I'm not saying I disagree wth you just that I think the spreads between prime areas and some regional UK markets will widen considerably.

Look at the charts of the UK builders.

and it will be clear this present drop is the deepest in over 10 years.

Their charts are much more predictive than the indicators you have mentioned.

Just look at the same indicators in the US, and it will be perfectly obvious which work.

 

If you are still bullish on UK property, you are probably in denial (of present reality)

I tend to agree with you that in aggregate UK property will follow the builders lower. There can be no mistaking the clear signs that demand will be weak in Q4 and during 2008 and we are starting to see that now with the HPI's tailing off a good nine months after the peaks of the UK builders. What I would say though is that the correlations are breaking down more than usual between various regions of the country ie the lead times (versus the UK builders) vary considerably depending on which part of the country you live in.

I live in central London (Mayfair) and I can tell you that £ persqft levels are still rising for prime residences. Personnaly I think this is suprising, and indeed I am in the process of tryng to offload my place to try and lock in these prices, but for sure the market in my neck of the woods is still extremely well bid. It's worth remembering that something like 50% of real top end property in London is purchased by non residents ( Middle East, Russian, Far East etc) and these guys are all doing very nicely thank you ytd.