Bad times coming

[user 4386]

Chicken Little the sky is falling!

Fearmongering whether justified or not can sometimes elicit a societal response called Chicken Little syndrome, described as "inferring catastrophic conclusions possibly resulting in paralysis". Walt Disney Pictures has made a 1943 animated short released during World War II as one of a series produced at the request of the U.S. government for the purpose of discrediting Nazism. It tells a variant of the parable in which Foxy Loxy takes the advice of a book on psychology (on the original 1943 cut, it is Mein Kampf) by striking the least intelligent first).

"happy and content locals at the local poultry farm: -all well protected. But little do they know, outside the yard Foxy Loxy .... is intent on catching himself a chicken dinner. However, he cannot hop in and help himself due to the high fence, locked gates and a well-armed farmer. But Foxy Loxy is nothing if not cunning for there are other ways to swipe a chicken. So taking advice from his psychology book, he states "Why should I just get one, when I could get 'em all." He reads aloud a passage telling him that the best way to manipulate the whole flock is to begin with "the least intelligent" (identifying Chicken Little after searching the yard). Loxy then ......tells Little that the sky is falling, and a piece of it hit him on the head and then goes on to tell him that he should run for his life. Little panics spreading the word to everyone thus bringing a crowd to where he believes the sky piece hit him.....Loxy refers to his book again .... finding a passage that tells him to "undermine the faith of the masses in their leaders", so ....plants rumors about Locky's intelligence and leadership. This starts another rush of panic among the avians as they spread the rumor......Foxy Loxy whispers to Little to lead them to "the cave" ............(which is actually Loxy's den) and once everyone is inside, Loxy goes in after them and seals up the entrance..........Foxy Loxy smirks evilly and reminds the narrator not to believe everything he reads."

We all know the basics...gold does tend to keep its price in an emergency, and is a good hedge against inflation, and should be part of any investment portfolio (for those who can afford it). One can also speculate on its price, but that is a different activity and far more risky - for long periods holding gold is a good way to earn no interest income. But those who are trying to make a killing out of gold try to create panic, and Chicken Little's tend to take their advice from those with a vested interest in making something out of it.

Take balanced financial advice...and don't believe everything you read.

 

[silver]

What if some big country only pretended it was producing all that gold after 1978... and were in fact only selling off what they were buying all the time to cover up their pretence.
Would make them look like they were worth trading with for lots of things in the long run.
Would help instigate a buisiness empire to trade with the world in every commodity possible...... but I'm only speculating here.... wouldn't really know, and don't want to start rumors.

Timing sort of runs well with bags of toy soldiers and things starting around that time.
lol

 

[user 4386]

What if some big country only pretended it was producing all that gold after 1978... and were in fact only selling off what they were buying all the time to cover up their pretence.
Would make them look like they were worth trading with for lots of things in the long run.
Would help instigate a buisiness empire to trade with the world in every commodity possible...... but I'm only speculating here.... wouldn't really know, and don't want to start rumors.

Timing sort of runs well with bags of toy soldiers and things starting around that time.
lol

It would be obvious in their sales versus imports if that were the case, if they used what they bought (but for example they produced anout 800 tonnes over the last few years and imported 100 tonnes). However it could be done in a very few countries (China) to give the impression of a huge amount of privately-held gold, with production being balanced by internal private consumption - because China absorbs a lot of its own production (I think - would have to check). Very unlikely, but perhaps not impossible, and some have speculated on the possibility.

 

[davsgold]

- for long periods holding gold is a good way to earn no interest income.

Another good way to earn NO interest income it to leave you money in the bank

 

[user 4386]

- for long periods holding gold is a good way to earn no interest income.

Another good way to earn NO interest income it to leave you money in the bank

Of course. Few people do that except very conservative retirees - it goes into mortgages, Super etc. depending on what people can afford to do. At least if you own a house you have somewhere to live if things go bottom up. But look at the risks with gold because you earn no interest.

If you bought gold in about 1982 you would have made a loss if you sold it at any time up to about 2006 - 24 years! Not many investments return you nothing over a quarter of a century. In fact, you would have to have waited until around 2010 to have made the same as if you had simply invested it in the All Ordinaries Index (ASX) back in 1982, not only because it has earned no interest but because the dollar cannot purchase as much in 2010 as in 1982 (the time value of money). But if you bought in 2006 and sold in 2011, you would have made a killing (perhaps nearly as much as if you had invested in the housing market instead).

Which is why you have to decide WHY you are buying gold - to speculate on the price (it becomes one of many things that you could speculate on), or to hedge against catastrophes and inflation. Chances are that if you do the latter, most people will simply feel better through the bad or inflationary times, because they will hold onto it for too long when things get better, only selling it slowly when they need the money when things are bad. Only with real hyperinflation would you come out a real winner - but then you are speculating that there will be hyperinflation, and even then you can only sell slowly until the hyperinflationary period ends. A number of people here talk as if hyperinflation is inevitable, when it is actually a bit unlikely. Printing money (quantitative easing) is something that governments do from time to time. But it is unlikely that the Fed would be so silly to do it to such a degree (so rapidly) that hyperinflation results. It is possible, but we can all survive significantly higher inflation (my home loan was at 17% under Keating, but I had a job and did not feel much pain). People point to 1930s Germany - a country economically crippled by WW1 war reparations, and Zimbabwe - a country run by a mad Marxist dictator, when they want to illustrate hyperinflation at its worst. While not impossible, very unlikely.

 

[davsgold]

Yes can see how bad it's been to have been holding gold

 

[user 4386]

Yes can see how bad it's been to have been holding gold

https://www.prospectingaustralia.co.../6570/1608515614_gold_chart_21st_dec_2020.jpg

Depends when you bought as I said - my graph shows that for quarter of a century it was as bad an investment as you could get. Your graph only shows from 2015 - which is the memory span of many and the total investment experience of others (my graph is from 1980 -people born then are only 40 now).

If you bought in August 2011, it would have taken 9 years (now) before you would recover your money on a sale (at no profit). It is speculative, and all in the timing. You can make money or lose money.

Likewise it depends on the currency - Australians buying over most of the last six months will have to wait to recover their money. There are n ot many investments where you can lose 17.5% of your money in a few months (as I said, speculative).

 

[user 4386]

And why doesn't gold behave like a commodity, with the price going up and down with variation in demand and mine production? The amount of "above-ground stocks of gold is enormous relative to the supply flow from mines [it does not get discarded or lost in quantity during use, as other metals do - most gold ever mined still exists]. This last attribute means that a sudden surge in gold demand can be quickly and easily met through sales of existing holdings of gold jewellery or other products (either to fund new purchases or for cash)" So although mines only produce about 75% of the annual demand, variation in this does not affect price - mines always under-supply relative to demand.Likewise the gold price does not follow variation in the business cycle - price variation is mostly related to its value as a hedge against inflation and as a safe-haven in turbulent times, but it tends to inversely follow the value of the US dollar. So I doubt that we will see any huge drop in its price, perhaps further growth at present.

 

[thedigger]

China is short on money.

https://www.youtube.com/watch?v=BY0Hzwz8ILw

 

[Outback]

And here we are sitting on 67 tons

That 67 tons was sent to UK ages ago & is now leased off

We will never see it again

Protect yourselves Now ! turn your Aussie dollars into real money , use it to buy gold or silver before it loses all it's value .

I bullshit you not !

Jack :beer:

67 tonnes is neither here no there - one little gold mine in Victoria produces about that much every year -

Can you tell me the name of a little gold mine in Victoria that produces near that amount ?
You have been polite so I will try also layful:

Jack .

 

[pinfire opals]

And here we are sitting on 67 tons

That 67 tons was sent to UK ages ago & is now leased off

We will never see it again

Protect yourselves Now ! turn your Aussie dollars into real money , use it to buy gold or silver before it loses all it's value .

I bullshit you not !

Jack :beer:

67 tonnes is neither here no there - one little gold mine in Victoria produces about that much every year -

Can you tell me the name of a little gold mine in Victoria that produces near that amount ?
You have been polite so I will try also layful:

Jack .

Fosterville.

 

[user 4386]

And here we are sitting on 67 tons

That 67 tons was sent to UK ages ago & is now leased off

We will never see it again

Protect yourselves Now ! turn your Aussie dollars into real money , use it to buy gold or silver before it loses all it's value .

I bullshit you not !

Jack :beer:

67 tonnes is neither here no there - one little gold mine in Victoria produces about that much every year -

Can you tell me the name of a little gold mine in Victoria that produces near that amount ?
You have been polite so I will try also layful:

Jack .

Fosterville.

It was Fosterville but my back of the envelope maths converting back from dollars to tonnes is quite wrong (out by a major factor) - it only produces $2 billion per year. However more to the point, Australia steadily produces more than 300 tonnes per year, so equivalent to the 67 tonnes every 2 to 3 months.

Why wouldn't I be polite about it - I am simply providing actual figures in reply to people's misconceptions gathered from blogs where people mostly don't check figures? These sorts of stats are readily available. My concern is that some beginner will go and sell up many other assets and put them into gold, not realising that betting on the price is highly speculative. Anyone who can afford some gold should have it in their investment portfolio (I certainly do) - but many people dont really have an investment portfolio. But the reason is hedging against inflation and catastrophes, otherwise you might as well bet on the gee-gees. Gold always seem to climb in the long-term, but as I have shown that term can be decades and can give a poor return relative to other forms of investment.

And there is also a lot of confusion about the amount of gold that central banks buy to support their currencies, versus the gold bought privately by the populations of those countries. For example, Indian families would appear to hold around one eighth of the gold ever mined on earth, yet who ever mentions India when propounding catastrophe theories for currency collapse? Of course that is only an estimate, since much of that gold was acquired before gold trading statistics were kept, and no-one knows accurately how much private gold is held by the citizens of each country. And China itself is a modest buyer, but its population seem to have been buying up. And the gold price would have to go up tenfold to cover the world economy, and there are sound practical reasons why that is unlikely (it would be catastrophic for countries' economies if it did). But it will always climb over time because it is a function of inflation to some degree. And people also tend to ignore that its price is in US dollars and Australians who buy in Australian dollars are often betting on the dollar price not the gold price.

 

[AnzacJase]

That 67 tons was sent to UK ages ago & is now leased off

We will never see it again

Protect yourselves Now ! turn your Aussie dollars into real money , use it to buy gold or silver before it loses all it's value .

I bullshit you not !

Jack :beer:

67 tonnes is neither here no there - one little gold mine in Victoria produces about that much every year -

Can you tell me the name of a little gold mine in Victoria that produces near that amount ?
You have been polite so I will try also layful:

Jack .

Fosterville.

It was Fosterville but my back of the envelope maths converting back from dollars to tonnes is quite wrong (out by a major factor) - it only produces $2 billion per year. However more to the point, Australia steadily produces more than 300 tonnes per year, so equivalent to the 67 tonnes every 2 to 3 months.

Why wouldn't I be polite about it - I am simply providing actual figures in reply to people's misconceptions gathered from blogs where people mostly don't check figures? These sorts of stats are readily available. My concern is that some beginner will go and sell up many other assets and put them into gold, not realising that betting on the price is highly speculative. Anyone who can afford some gold should have it in their investment portfolio (I certainly do) - but many people dont really have an investment portfolio. But the reason is hedging against inflation and catastrophes, otherwise you might as well bet on the gee-gees. Gold always seem to climb in the long-term, but as I have shown that term can be decades and can give a poor return relative to other forms of investment.

And there is also a lot of confusion about the amount of gold that central banks buy to support their currencies, versus the gold bought privately by the populations of those countries. For example, Indian families would appear to hold around one eighth of the gold ever mined on earth, yet who ever mentions India when propounding catastrophe theories for currency collapse? Of course that is only an estimate, since much of that gold was acquired before gold trading statistics were kept, and no-one knows accurately how much private gold is held by the citizens of each country. And China itself is a modest buyer, but its population seem to have been buying up. And the gold price would have to go up tenfold to cover the world economy, and there are sound practical reasons why that is unlikely (it would be catastrophic for countries' economies if it did). But it will always climb over time because it is a function of inflation to some degree. And people also tend to ignore that its price is in US dollars and Australians who buy in Australian dollars are often betting on the dollar price not the gold price.

Actually, mate, the graphs I have seen show that over the last 10 years, gold has outperformed real estate and shares. Second was silver from memory. It may have been as far back as the 2008 GFC. And physical gold is not so much an investment as it is a hedge against inflation as you stated so rightly. Plus ideally it is a legacy or dynasty that can be handed down to your children. And it should be set up to last 300 years. Property is dodgy as its not owned thats proven by fee simple in the title. In fact I know this and mentioned it at the lands title office recently and they confirmed it. Unless its a very old title like pre 1920, youll never own it. And shares are a contract only as good as the other party honouring it. Youve seen how they can be manipulated. Look at Tesla, its worth more than all the physical silver above the ground. Same with Amazon. Youll see the shares boom for a while longer, then will come the great crash as part of the Great Depression that we are actually in right now. The CBA has predicted 32.5% drop in property next year, whereas the RBA has stated 40%. Plus you cant put your house in your backpack and take it with you. I like physical precious metals for that reason. Plus its outside of the system. The one they are about to tank. I guess this conversation will be in a different light in 1-5 years time. History repeats itself because we fail to learn from our mistakes. Peace out

 

[user 4386]

We will have to disagree - for example, the family home is a steadier investment in this USA graph - and of course real estate did far, far better in Australian capitals than the USA over the period. "It is fair to say Australian property prices have the rest of the world somewhat perplexed. Our prices as a ratio of income are incredibly high by world standards. Courtesy of the China induced mining boom we relatively cruised through the GFC and didnt see the property price correction experienced around the world"

And I would hardly say that about gold and silver!:

And I have no idea how you could think that about gold and the share market (gold is the lower graph) - it shows why gold is NOT a goosd source of investment returns.

When you read these things such as you mention, the rosy story for an asset is usually being presented by someone selling the asset, and is often chosen for an unrepresentative period of time, or country or currency. One should always check the facts, especially in the context of the period of time over which you intend to hold property, shares or gold.

Gold is a long-term safe haven (against high inflation or catastrophe) or alternatively a possible commodity for short-term speculation, but one has to decide which of these is your aim. Mine is the former. But keep in mind that one can confuse the two. For example, at the moment people are pushing currency loss of value and hyperinflation - but that is simply speculation (it might be right, but I would say the odds are against hyperinflation). But some moderate inflation is likely at least with quantitative easing. But it is better if you already hold it for that purpose - in other words have it as a long-term hedge rather than buy in every time there is panic. As a long-term asset it will pull your returns down in your portfolio, but it will ensure that any loss due to catastrophe is far less than you would suffer otherwise (we balance cash versus shares in our Super for much the same reason). I cannot afford decades of recovery from a crash at my age, so I keep some gold.

 

[user 4386]

Here is the Sydney house price graph - compare it with the gold price on the graph above over the last ten years! If you bought gold ten years ago it would only now be worth about the same (a zero return) - whereas you would have approximately doubled your money with Sydney real estate.

But of course if one buys a second Sydney house, one is also speculating. I am not for one moment suggesting that people should not buy gold - just that they should be clear about the purpose of their purchase and consider how long they will hold it etc.

 

[user 4386]

And I do not understand your comments about fee simple and property:

"Fee simple is the most desirable form of real estate ownership. A fee simple title to land is a title described in common law as being, good against all the world. Fee simple ownership of real property has four characteristics, all of which relate to the owners right and interest in land.

If you have fee simple ownership, this means you have absolute ownership of a property with no restrictions placed on improving, selling or bequeathing it (other than restrictions that violate the law or local regulations).

Absolute Ownership
Anyone who owns property in fee simple has absolute ownership of the property. Unlike fee simple, a life estate gives one owner of the life estate the right to occupy property for life but not to sell or materially alter the property. Equitable ownership doesnt affect the fee simple ownership of property, because equitable ownership is the result of the decision of a court of equity, such as a probate court.

Fee simple ownership is unqualified; that is, there are no restrictions on what the owner can do with or on the property, other than the constraints of law or regulation, such as easements, zoning ordinances or fire regulations. This quality of absolute ownership is the key to the other characteristics of a fee simple.

Sale Without Restrictions
Because the property owners right to the property is absolute, the property owner can sell the property to any person or organization without restriction. Other forms of ownership, such as a life estate, do not. The occupant of a property held in a life estate can sell only his interest in the life estate; he cannot sell the property and, unless his heirs are the other participants in the life estate, he cannot leave the property to them.

Passes to Heirs
The person who owns property in fee simple can include the property in his estate. With the absolute ownership of fee simple comes absolute authority to leave the property to heirs without restriction. While heirs may challenge each other in court for an equitable interest in the property, the owners right to dispose of the property at will -- even after death -- remains inviolate.

Sole or Joint Ownership
Whether property is owned by one person or jointly between two or more persons doesnt affect the fee simple nature of the ownership. If a property owner dies intestate -- without a will -- state laws governing inheritance can preclude questions of the ownership of the interest in property. The owners can sell the property at will or leave it to their heirs."

 

[nucopia]

Very interesting comments thanks :Y:

 

[grubstake]

And I do not understand your comments about fee simple and property:

"Fee simple is the most desirable form of real estate ownership. A fee simple title to land is a title described in common law as being, good against all the world. Fee simple ownership of real property has four characteristics, all of which relate to the owners right and interest in land.

If you have fee simple ownership, this means you have absolute ownership of a property with no restrictions placed on improving, selling or bequeathing it (other than restrictions that violate the law or local regulations).

I don't have much time for poster AJ (I won't repeat his possibly illegal and probably undeserved pseudonym), but I think I understand his point here.
The recent case of a successful claim for 'squatters rights' in Sydney shows just one of the flaws in the "absolute ownership" statement. Another is unpaid local body rates - property ownership can be lost if the rates debt mounts up. Yet another flaw is the ability of governments to compulsorily 'resume' land if it is required for other purposes (road extension, airport, etc) and to determine its value when they do so.

Use of the term 'resume' is very important to understand in this context. In reality, all land is forever owned by the Crown and we the public/citizens occupy it on sufferance, subject always to the whims of authority and the actions of others who might successfully make claim against it. This is NOT at all the same thing as "absolute ownership".

 

[Deepseeker]

The graphs don't actually show how some people can make the most out of real estate. My partner and I, and my ex-wife and myself have done far better out of it than the average person could ever hope to do with investing in gold.

What those graphs don't show you is the steep, difficult block my ex-wife and I bought in Olinda in the Dandenongs in Vic for peanuts, put a quality kit home on it and trebled our money in 3 years. No capital gains tax as it was our primary residence for tax purposes. While we were doing that she had a well paid full time management job, and I was running a training business from home with just a suite address in Melbourne (nothing more than a PO Box) on my card and letterhead, that cost me a couple of hundred bucks a year to rent. I fitted my clients in, in-between organizing trades and doing the jobs that I could do myself, making Melbourne appointments for just one to two 1/2 days during the week, booking them back to back. While we were owner-building that, we bought another grand old dame in Sassafras just up the road (that was a classic case of "The worst house, in the best street") to do up and put tenants in it until we were ready to start on that, negatively gearing it as we used trades to fix up many of the things needed doing while the tenants were in it. I only came unstuck once, when a law firm in Melbourne thought they were speaking to me at a Queen Street address, and the family of Kookaburra's outside the window let rip and drowned me out. :8

Or, the small run-down two bedroom ex-commission house in Reservoir that my current partner and I bought for 310k, converted the dining room into a 3rd bedroom, and renovated on a 15K budget, put plans through the council for a three unit subdivision behind it, and sold for $565,000 to a builder 3 1/2 years later. Again, no Capital gains as we lived in it while we did it. All the while working jobs and making a good income.

Among our current properties, we own an old run-down former farmhouse on an approx 2 acre property on the outskirts of Melbourne, with panoramic views of Mt Disappointment from the back of the house, that we bought for $410,000 in 2009 and lived in for about 7 years while we renovated it, and converted the bungalow in the garden into a fully self contained unit. We've put tenants in it and bought a business about 1 1/2 hours from the GT, that comes with a residence behind it that is included in the peppercorn rent. The tenants are paying off the small amount left owing on the Melbourne acreage, while we are building the business up to sell in a couple of years and then move back to the Melbourne house in a time frame that will limit or avoid any future Capital gains tax. That 400k property that we have spent around 20k on, is now valued in the 800's.

I think, depending on each persons own individual unique financial situation, skill set, and attitude to risk, it's a broad statement to say that any form of investment is better than another. If that were the case there wouldn't be a need for qualified financial advisers.

 

[user 4386]

Anzacjase, you say "The CBA has predicted 32.5% drop in property next year, whereas the RBA has stated 40%".

If you actually read the full prediction, they do not predict that at all - a relatively small downturn. What they said was that if the recovery was much slower than predicted, that would be the worse-case scenario. In fact the recovery is looking much better than predicted. In its November statement RBA said "In the baseline forecasts, GDP is expected to recover over coming quarters at a faster pace than expected at the time of the August Statement".

And of course the big 4 banks are now predicting rises in 2021:

https://www.savings.com.au/home-loans/anz-house-prices-to-rise-9-in-2021

https://www.msn.com/en-au/news/aust...australian-house-prices-from-2021/ar-BB19hqHP

However your statement is very glass half full - having made 100% return on Sydney housing over the last ten years, the RBA predicted that you might lose 40% in a worst-case scenario that no longer appears to be occurring. So gee wiz, I only made 60% over 10 years versus zero with gold. 8.(

And you are discussing speculation not long-term investment - with emigration down and household budgets strained, I would not buy into property at this moment - but with a reasonable property portfolio I would have done very well (300% over 20 years, double my money if I bought in only ten years ago).

Always check the data, don't just read the headlines.

Deepseeker, obviously graphs do not reflect any one individuals returns, but what they reflect is what the AVERAGE punter would have got. And that is the best indicator of what people should have invested in (we are making comparisons between the average returns). They show the average increase in things like house prices and shares (whereas gold is a defined increase but watch out for currency variations).

Moderate inflation and a flat property market and perhaps a bit of a gold price increase have a fairly high chance, a serious housing crash is a bit less likely, an international currency crash is far less likely, another pandemic is even less likely, gold going up tenfold in price is probably even less unlikely, and a mega-volcano or an asteroid hitting Earth are an even lower probability. But with all disaster predictions, if you always assume the worst case then on average you will not do well (conversely if you pick the moment correctly it might save you). If a deity warned you privately ten years ago that there would be a massive worldwide pandemic in 2020 you probably would have predicted that you would make a killing on gold by the end of 2020 if you bought then. But in fact you would not have made a cent so far.....