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Anecdotal, my sister finally bought a house. She's sort of intelligent in a functional conventionally university educated sense, but she gives far too much weight to the wisdom displayed by 'experts' in media organizations like the BBC or for that matter anyone whistling a popular economic tune or wearing a suit. Feels bad to say this, but it applies to a sizable proportion of people who regard themselves as housing bears. She is one of the generation that missed out on the bubble and considered herself a bear as a consolation, convincing herself that not buying a house 2003-7 was a smart move because housing was overvalued, but secretly, all the while cursing her decsion not to buy and feeling foolish, in hindsight, for missing out on the paper gains. As the bubble continued to progress she believed the house prices had some basis in reality, and now presented with the opportunity to buy at 2005-7 prices she has jumped at the chance. Houses on the road she has bought were valued at 240k peak, this is a gross overvaluation based on the mortgagees (as oppose to home owners) withdrawing mortgage equity to do up their homes and 'adding value'. In the case of the 240k valued houses this was achieved by building extensions onto the 3 bed semi's and turning them into 4 bed semi's, with the 3 bed semi's selling for around 200k at peak prices. Sister has managed to purchase a 4 bed semi for 120k at auction, now that does seems like a bargain compared to peak prices and it is a fantastic looking house needing very little work, however lets look at this in a little more detail. The previous owner did have the house valued at 240k peak prices, though despite buying the house pre 2000 for around the 60k mark, he had managed to withdraw so much equity in-order to 'add value' by modernizing, plastering, new kitchen, re-wiring, new windows, porch, koi carp pond, conservatory etc as well as building a full size extension to turn it into a 4 bed, the fool could no-longer afford the mortgage repayments. So 120k seems like a bargain, but is it a really a realistic price? is the buyer capable of keeping up the mortgage payments? Sadly I the answer to be a resounding no. I believe that she has put down at least 20k as a deposit, possibly more with the help of my parents, thus leaving her with a mortgage of at least 90-100k which is, at least, four times her income. Her current monthly payments are £500, which is less than she was paying in rent for her previous property, this I expect, is also including a discounted payment rate for the first 2 years. We all know on here that interest rates are ridiculously, unrealistically low compared to any historical measure and are unlikely to remain at these levels for any substantial period of time. When the fixed rate period has ended and interest rates are back up to more realistic levels then her payments could well be around a £1000-2000 a month, which she would be unable to pay, even with parents help. As a single person, this financial commitment for the next 25 years also means she will be unable to have children, unless she meets someone willing to pay the mortgage. Given her obsession to own property and be accepted as part of the herd, I feel that her decision to turn her back on the chance to have children will weigh heavy on her as the years progress. Its sad in an individual fly-on-the-wall sense, but in terms of the big economic picture this sort of lending doesn't make for secure mortgages. The majority of people buying, even at 50% off peak prices, are not in the financial position to be able to keep up repayments over the long term when interest rates return to normal. These mortgages, even with 20-30% deposits are still bad risks especially as the economy continues to contract. House prices will continue to fall for some time.

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The gold is probably unmarked, it may just be a reaction of contaminants in a thin layer on the surface of the gold at an almost microscopic level. Almost all metals have some sort of reaction with oxygen, gold is one of the most resistant. You could possibly clean it off, but I would advise against over-cleaning, the surface layer is possibly one of the factors that helps to protect gold from damage It could be some sort of oligodynamic effect creating a fine surface layer. http://en.wikipedia.org/wiki/Oligodynamic_effect Iron, as we all know rusts, silver blackens, copper forms a green residue on the surface, aluminum and stainless steel form a thin almost invisible surface layer after contact with air. Brass kills bacteria and the buildup darkens the metal. Funny how people think that nice clean looking steel door handles are more hygienic than old hard to clean brass, the brass is much better for hygiene. http://en.wikipedia.org/wiki/Stainless_steel http://en.wikipedia.org/wiki/Aluminium_oxide http://en.wikipedia.org/wiki/Verdigris http://en.wikipedia.org/wiki/Brass Passivation http://en.wikipedia.org/wiki/Passivation Edit: I suppose its possible that a surface level of dirt will increase the weight very slightly on the coins, which, in part, accounts for some of the +- tolerance in weight.

You will have no problem whatsoever with the maples, as long as the size and weight is accurate, 24 carat is impossible to fake unless they use platinum, which is more valuable. The red spots are mainly on the coins that are alloyed with copper, Krugerrands, sovs, early britanias, etc..

The only landlords that did well according to the anecdotes in Guttman's The Great Inflation were landlords who rented out property to foreigners in exchange for hard currency. People would come from all over to take advantage of the depreciating currency in that same way that we do today in places like Thailand. Its also one of the factors that leads to the hatred of foreigners that emerged later in Germany, and most other nations that suffer from hyperinflation.

Time to cash in your gold? http://news.bbc.co.uk/1/hi/uk/8104479.stm

News reports are talking about the huge surge in stocks like its VE day or something, going from 7 ounces to the dow up to 7.7 ounces to the dow shows just how low expectations are in the markets.

It was about 40/1 in 2000 when the Dow was around 10,000 and gold was 250ish, I can't remember the exact figures. When the dow hit its nominal peak over 14,000 the ratio was 20/1, six months ago it was 15/1 and now we are 7/1. There are some good charts around somewhere, I'll try to find them. http://bigpicture.typepad.com/.shared/imag...ative_ratio.PNG

The Dow Jones is now worth 7 ounces

Despite the fall in the spot price of gold, its been a good day. Its 7.3 ounces to the dow now.

Good video, I like the point he makes about the bailouts So does anyone have any limit in mind for the amount of money the government are going to throw into the hole? It may be a good question to ask those who put forth the deflationary argument. What would happen if the government said no more? I think Sinclair's figure of 17-20 trillion seems realistic, I personally don't see a limit to the amount of cash they are going to throw at this problem. Its also important to think about how a figure like a trillion (which seems a huge amount now) will be seen in say 10 years time. A decade ago a billion seemed like a huge amount of money, earlier in the century the super wealthy were millionaires, now they give that away in quiz shows. So, who wants to be a billionaire? How long until the first billion pound football player? assuming the pound is still around then.

The dow was $12-12,500 in March 2008 when gold was over $1000 an ounce.

Its a good measure of value, because it takes the fiat paper out of the equation. It shows how despite new nominal all time dollar highs for the dow the price of stocks against gold has been falling since 2000. The gold/oil ratio is another useful stat. In 2000 it took 44 ounces to buy the dow, in 2007 when the dow was at its nominal peak the ratio was something like 20-1 and at the beginning of 2008 it took 15 ounces to buy the dow. I think it was 10 - 1 at the start of 2009. Some people predict the dow will be worth one ounce of gold before this is through, I would be happy to buy it for two.

It takes less than 8 ounces to buy the Dow Jones now. When gold was over $1000 in March the Dow was still around $12000.

Yep its a weird situation, the way credit scoring works filters out people who are low debt/low risk, whereas morons who borrow to buy things are considered a good credit risk. The market signals are broken, hence the financial crisis. Its like if a religion were determining who is a sinner, if you have committed no sins then you do not need to confess, but because you have not confessed you are a sinner. If you go to confess on a regular basis you are considered absolved of your sins because you have asked for forgiveness. When I was a child I attended a catholic school, it was OK but there came a point where we had to go to confession, being only young and reasonably well behaved I had nothing to confess to, but I felt obliged to confess to something after being put in one of those confession boxes. I made some minor offenses up (stole a biscuit, swore, etc..) and then also confessed to lying, which I wouldn't have had to do if I had not been made to go to confession.

BBC news clip from june 08. http://news.bbc.co.uk/1/hi/england/7469961.stm Pair victim of 'cheap houses' A couple say that they have been forced out of the housing market because prices are getting lower. Yes you read it right, looking back at this moment in time, these could well have been the dumbest people on the face of the planet.

Once upon a time there were three little pigs. Each of the little pigs had their own ideas but two of them went to public schools where they were trained in Keynesian idealism while the third little pig won a scholarship to Hillsdale and learned the Austrian economic theory.... http://johngaltfla.com/blog2/2008/02/06/th...-for-inflation/

Where to Invest in Times of Distress? "It is action well taken by the British government," Clive Hyman from Hyman Capital Services Limited said Monday. He sees "one or two US institutions to go to the wall this week." Puru Saxena from Puru Saxena Limited sees opportunity in copper, silver and platinum. http://www.cnbc.com/id/15840232/?video=1004555064&play=1

A short interview with Sean Boyd, CEO of Agnico-Eagle Mines and CNBC's Maria Bartiromo. http://www.cnbc.com/id/15840232?video=999822152&play=1 GFMS press release predicts new all time high in the first half of 2009 http://www.gfms.co.uk/Press%20Releases/UP208_overview.pdf http://www.gfms.co.uk/

Super-rich reel as fortunes cut in half The Sunday Times December 28, 2008 http://business.timesonline.co.uk/tol/busi...icle5404353.ece Britain's super-rich have seen their fortunes collapse by half in the economic downturn, with more than £200 billion of their money just melting away. Research for the 2009 Sunday Times Rich List, to be published in the spring, suggests that the fortunes of the 1,000 wealthiest people in the UK have fallen more than 50% from £412.8 billion in the list for 2008 to about £200 billion. The value of some assets, including hedge funds and property firms, has been shattered by as much as 90%. The destruction of the wealth of Britain’s richest is so great and sudden that it has been likened to the bursting of the South Sea bubble in 1720 or the depression of the early 1930s. If some of these super rich had kept some assets in gold then they wouldn't have lost so much wealth, people always want to buy while its going up and never when the price is low. Still at least with the price rising we don't have to listen to those arguments about why gold isn't worth anything, though I am sure they will reappear when the price falls back.

Welcome Paddles, its good to see poster of your caliber here. I think that part of the reason that banks and building societies no longer want to report house price falls are that most of their assets are still tied up with the value of housing. Giving out predictions of realistic house price falls would be an admission of their own insolvency, with all the implications that has for the share prices and economy.

Glad to see your back in the game Steve, I think since last year, we are all probably much better informed and confident of our economic opinions having seen the first stages of the economic collapse that has long been predicted. Don't let the volatility shake you out, accept the day to day ups and down as waves in the ebb and flow of the tide. Over the longer term the pound is sinking and so too will the dollar. On the subject of todays spike, perhaps it has something to do with this news from Pakistan. Pakistan cancels military leave Friday, December 26, 2008 13:25 GMT http://english.aljazeera.net/news/asia/200...5230859853.html Pakistan has cancelled leave for members of its military due to fears of a confrontation with India following last month's Mumbai attacks. The decision on Friday comes after Pakistan's armed forces were placed on high alert. "Leave has been cancelled because of the situation. All soldiers have been asked to report to duty," an official speaking anonymously said. The Pakistani military did not immediately comment, but several soldiers confirmed the story. India says it has not cancelled leave for its armed forces. "People are taking leave, no problem," said Sitanshu Kar, the Indian defence ministry spokesman. "We have an optimum number, which is always maintained."

Realist Bear had this prediction! 24/10/08 RB Gold will be sub $300 by the end of the year.

Goldline are out of most of the main 1 oz bullion coins again Australia Nugget 1oz - out of stock £ 578.75 Austria 1oz Philharmoniker - out of stock £ 578.75 Canada Maple Leaf 1oz - out of stock £ 591.75 China Panda 1oz £ 589.25 South Africa Krugerrand 1oz - 2 weeks wait £ 597.25 United Kingdom Sovereign's £ 149.00 United Kingdom Britannia 1 oz - out of stock £ 602.50 USA Eagle 1oz - out of stock £ 578.75 I also rang Chards the other day, and they were out of Sovereigns, though they did have Krugerrands available.

US treasury bonds 'still the best option' By Xin Zhiming (China Daily) Updated: 2008-11-20 07:03 http://www.chinadaily.com.cn/china/2008-11...ent_7221498.htm China is likely to continue increasing holdings of US treasury bonds even after becoming the No 1 holder because it is the best way to deploy its $1.9 trillion foreign exchange reserves, economists say. On Monday, US Treasury data showed that China had replaced Japan to become the top holder of US treasury debt in September. With a $43.6 billion increase in holdings of US treasury securities in September, China's overall holdings amounted to $585 billion. Japan cut its holdings to $573 billion from $586 billion in August. Net foreign purchases of long-term US securities totaled $66.2 billion in September, up from $21 billion in August and $18.4 billion in July. Treasury data suggests that foreign investors still regard the US as a relatively better place to invest when markets worldwide are crumbling, analysts said. "That's why China has increased its holdings," said Dong Yuping, senior economist at the Institute of Finance and Banking affiliated to the Chinese Academy of Social Sciences. As the US financial crisis worsens, Washington is in dire need of capital to fund its massive market rescue plan; but some domestic economists argue that China should not use its foreign exchange reserves to purchase US bonds for fear that it may incur huge losses. "But China may not have many options," Dong said. The US economy, though hemorrhaging from the crisis, remains the largest and strongest; and the EU and Japan are not yet a serious challenge to US pre-eminence. Investment in dollar assets, therefore, carries the least risk, he said. If China reduces its holdings of US debt, others may follow suit, which will lead to a weakening of the dollar and depreciation of dollar-denominated assets, thus severely hurting China's interests. "China and the US are in the same boat," he said. "You may not like it, but China has to move along this path," said Yan Qifa, senior economist with the Export-Import Bank of China. And now that many countries are increasing holdings of US treasury bonds, China's potential returns from the bonds will increase, said Chen Gong, chief economist and chairman of Anbound Group, a Beijing-based consulting firm. "So China may continue to increase its holdings," he said. However, some experts argue that Beijing use its considerable financial leverage to set conditions such as the US opening its financial markets more to Chinese funds, and allowing exports of high-tech products to China.