Just a few quick comments from your editor today before we hand over to assistant editor Shae Smith.
We’re concentrating on the May issue of Australian Small-Cap Investigator for most of this week, but we should still find time to lob a few grenades at mainstream thinking.
So, before Shae takes up the slack, a couple of quick things that took our fancy…
I said yesterday it might be worth waiting for the Aussie dollar to strengthen a little and the gold price to fall. Good luck with that. It’s piled on another few bucks overnight, trading above AUD$1,400.
And the GOLD exchange traded fund (the one your editor owns a few shares in) is trading above $139 per share.
But as the stock market continues to head south – as we feared it might, but hoped it wouldn’t – we think back to the warnings we offered over a year ago about the stock market rally and economic recovery being an illusion.
A government and central bank created illusion. But more on that another day.
Anyway, up in Sydney yesterday Luci Ellis, Head of Financial Stability at the Reserve Bank of Australia (RBA) spoke at an Australian Financial Review sponsored conference on housing. But for a start we’d like to grade her ‘F’ for the job she’s doing on overseeing financial stability considering how quickly the value of the Australian dollar continues to devalue thanks to inflation.
But best of all we liked this comment in her closing “Final Thoughts”:
“Recent data suggest that we do not have a credit-fuelled speculative boom on our hands. It would not be desirable for the current situation to turn into one.”
We have this image of Ms. Ellis standing in front of a large bubble that she’s tried to cover with an overcoat, insisting to passersby that there’s nothing to see.
But what “recent data” would Ms. Ellis be referring to?
I mean, it couldn’t be the data from the Australian Bureau of Statistics (ABS), the chart of which Ms. Ellis used to open her presentation:
Because pardon us for commenting, that’s got bubble written all over it. Well, our version has anyway:
And obviously she hasn’t noticed the numbers contained on the RBA website which provide an insight into the, erm, non-existence of the “credit-fuelled boom”:
Those numbers are in millions. We pointed out last week that residential borrowing had increased 50% in the last two-and-a-bit years.
Clearly that’s not a “credit-fuelled boom.”
But then Ms. Ellis would naturally deny the existence of a credit boom considering it’s her employers that have caused it. You know the rules, gotta tow the company line.
We do like how she used the following chart, which unwittingly should help to dispel the myth that rising population growth is necessarily linked to house price growth:
Prof. Steve Keen pointed out in an article for Business Spectator last week that if population growth running faster than new dwelling growth leads to rising house prices, why didn’t house prices fall between 1955 and 2004 when dwelling growth exceeded population growth?
The simple answer is that the real driver of house prices is easy credit. Plain and simple.
And when that stops – which it hasn’t yet remember… POP!
Finally, before we hand over to Shae, a quick note on a wonderfully dumb comment from Emperor Ken Henry:
“Projects which are earnings super normal profits will continue to earn super normal profits.”
Ha, ha… We’ve had “normal profits”, then “super profits”, and now “super normal profits.”
What’s next? “Super normal extra spicy profits”? “Vindaloo profits”? “My God, What a Profit”?
Not that a coercive sector servant has any idea what a profit is anyway, but that’s another thing.
As our Slipstream Trader Murray Dawes pointed out, the idea of companies making big profits is that it draws new entrants into the market, so that they too can get a slice of this so-called “super profit” action.
But if governments decide to take a big slice of those big profits, guess what, where’s the incentive for new entrants to enter the market, provide competition, and therefore drive those profits down?
By taxing the super profits, or super normal profits, it actually kills several birds with one stone. It punishes the incumbent for making a profit, it reduces their enthusiasm to produce extra, knowing that it will face a higher tax burden, it makes it less attractive for new entrants to come into the market, and finally it puts a handbrake on supply, potentially causing prices to rise.
Anyway, we’ve blathered on enough this morning, over to Shae to wrap things up…
Cheers,
Kris.
{ 50 comments… read them below or add one }
Why can’t they introduce a ’super tax’ on the super salaries being paid to our ’super incompetant’ public servants? They can start at the ’super silly’ RBA.
Y’all in trouble! Especially Kris!!
Psychiatrists have been working on the fourth revision of the Diagnostic and Statistical Manual of Mental Disorders (DSM) and, in it, they hope to add a whole slew of new psychiatric disorders. Unfortunately, many of these disorders are merely differences in personality and behavior among people.
The new edition may include “disorders” like “oppositional defiant disorder”, which includes people who have a pattern of “negativistic, defiant, disobedient and hostile behavior toward authority figures.” Some of the “symptoms” of this disorder including losing one’s temper, annoying people and being “touchy”.
Other “disorders” being considered include personality flaws like antisocial behavior, arrogance, cynicism…
http://www.naturalnews.com/028803_psychiatry_disease.html
MF: ya a prophet of doom. We all will be super-taxed one way or the other, doesn’t matter where they start. Already individuals in top bracket pay 48% marginal rate + 10% GST on the rest = 53%.
add to that local rates, parking meters and you are pushing 60%
but its not too bad. Some Germans, as I heard from a friend living there, pay up to 90% marginal tax rate.
Why not super tax the capital gains made from property? If the resources in the ground belong to all Australians then the same tin pot idea can be transferred to the land that property sits on.
KRUDDS idea is to super tax the resources industry because it is booming.
KRUDDS idea is to super tax the property market because it is booming.
The idea works for both markets.
Good point GB.
We may as well go the whole way and become the Union of Australian Socialist States (UASS) lol
With comrade Rudd / Gillard at the helm…
Who knows, if you want to live in a free market country in the future you may need to emigrate someday to China or Russia
Well, aren’t things getting a little interesting over in Europe?
The German Government Has Had Enough
http://market-ticker.denninger.net/archives/2331-The-German-Government-Has-Had-Enough.html
What can I say? Karl Denninger rocks:
To Greece: Nut Up Or Shut Up
http://market-ticker.denninger.net/archives/2334-To-Greece-Nut-Up-Or-Shut-Up.html
Carry Bloodbath Resumes With Full Blown Liquidations Imminent
Submitted by Tyler Durden on 05/18/2010 20:22 -0500
After earlier we saw the decimation of the European currency, it is now Asia’s turn where an impressive bloodbath is now raging. The AUDUSD is in freefall, having moved a massive 300 pips from yesterday’s high to today’s low. At under 50 pips from 0.855, the AUDUSD will likely breach 0.85 at which point the destruction at carry desks will become an epidemic, and full liquidations will soon ensue, coupled with billion dollar margin calls, forcing global asset liquidations at bulge brackets. With the carry collapse pervasive, don’t look to futures to stage any miraculous Fed-inspired ramps tonight: Germany may have well called the Fed’s bluff.
http://www.zerohedge.com/article/carry-bloodbath-resumes-full-blown-liquidations-imminent
cb: As I am about to hit the sack, the AUD/USD has fallen right through the 85c level. In fact, it currently stands around 84.27c. Things are being shaken up a little in la la land.
cb@7
Rarely does so much get conveyed in so few words, Denninger has got my vote.
GB, Sandra, re: super tax – Governments have a track record of fighting yesterday’s fight. KRudd wanting to tax miners is a reliable indicator that the days of the mining boom are numbered.
SV – the markets seem to be telling us that. However that doesn’t mean things wont turn back around but I just cant see where the growth is going to come from to do it
Maybe more stimulus packages in China and Australia? What else can they do?
If pundits are right, that the so-called super profits tax proposal includes a government commitment to put the tax payer on the hook for marginal and misadventuring miners, then, ever suspicious me, not only is the name of the proposed tax a misnomer, but I smell a one, foul smelling rotting rat.
Mining is a cyclical business at best, and given the unpopularity of putting the tax payer on the hook through reckless government borrowing, this would be the next best way of putting us on the hook in the blink of an eye, and at the worst possible time imaginable. If, for example, Asia falls over for a few years, not only will we not be earning the resource buck, but will be keeping the miners on life support at tax payer’s expense. And where, I pray, would come the money for that? You guessed it: Mammoth government borrowings that will make the NBN splurge like a picnic by comparison. Is this the backdoor through which our own politicians are planning to throw us to the wolves?
And, notwithstanding the sharp sell off, the AUD price of the metals seem determined to hang onto their recent gains, confirming that all is not well in the land.
http://www.perthmint.com.au/metalPrices.aspx
cb – you often roast Kris for his ’simplistic’ analysis, yet he has produced a very simple graph that shows why Australia’s housing boom was not caused by the shortage of housing myth.
How about you pay him some credit for once and for all (along with Keen) demolising the idea that our housing boom was caused by supply factors.
Kris – you are a legend and I love the persistance on the housing topic. Its all that matters at the moment…Euro will splutter along and may recover a little bit in recent weeks, US and UK will keep printing for a little while longer and CHina will fake economy growth…but this housing bubble is OVER!
Lets see the Bulls run for cover, it shall be funny, painful and annoying all at once.
GB and Sandra, I totally agree that Capitcal Gains made by property flippers should be super taxed – I said so a few days ago – but not only are they not taxed in this housing crazy country, they are given tax breaks and financial subsidies…all of which makes housing more expensive!
And the mining tax is justified as being ‘fair’????!!!!!
That is dodgy cb, Perth Mint Ask price +$10 to mid point in US$
$1196 v $1205
http://www.azcentral.com/business/articles/2010/05/19/20100519arizona-immigration-electricity-regulator-threatens-power-supply-los-angeles.html
Topic over these here parts… read the actual letter response (link in the story) to the city of LA’s threat to stop doing business with the state of Arizona over a new “racist” law…
Lol, Wolf – that is the fate of us back here, Downunder. Not only do we get skinned on rates, all manners of government fees and charges, higher and higher electricity bills, etc., but also on dealer margins.
For example, the margin on the popular 10 ounce gold bars right now is:
PM Sells: $14,375.97 and PM Buys: $13,868.55 = Spread: $507.42 = 3.53%, which is not that bad, really, considering that fabrication is included in the price.
You gotta pay for delivery and insurance in transit, which can bump up the cost to perhaps around 5%, half of which you pay upon purchase and half of it when you sell. These additional charges are in most cases avoidable, however. I always suggest that people try to shop around a little, and bargain with the local dealer for the best possible price, and then walk though their front door to pick their forty pieces of silver in person.
PuntPal – there are all manners of things that influence housing prices, including the availability of credit, peopluation growth and the relative rate of new dwelling constructions, policies that affect overseas buyer access, etc., and who knows, maybe even the mood cycles espoused by Elliot Wave Theory, and maybe even the stars.
Sayce hasn’t got a clue, and he has until the end of this year to come up with at least a 20% property price crash, or you will be denouncing him as a charlatan, instead of congratulating him as a legend, as per our previous agreement. Only seven more months to go.
Oh, PuntPal, I don’t want to crow before the break of dawn, but you might start considering how you are going to make that backflip.
http://www.tulving.com/goldbull.html
Embarrasing to still know my Perth Mint can do that… reminds me of an Alan Jackson song about a guy who owned a goldmine and was getting divorced….”she got the gold & I got the shaft”…
I can buy the Perth Mint 10oz bars, 2 bar min. for $13oz…he pushes normally a $5 premium over the midpoint…so $180 a bar over “spot”
It is hard enough in Australia to get it close to spot without getting ripped by those monkeys… in fact we are off to our local dealer tomorrow to mop up his kibbles and bits…spot +1% typically an assortment of old french 20 frances, some modern fractionals, etc…
francs… tulving ships and insures for free too… one of the benefits of being in the US of A…
Wolf, cb…don’t quibble over the tit bits, when gold goes to $2,000/oz and over you will not even remember the commission you paid….and don’t say “will it??” I’ve heard all that before when I was buying from AU$450, etc…. Now its AU$1,400.
Wolf – Yes, the US is much better in this respect. Also, there are the countless rounds and silver eagles that you can buy as small change. The premiums on small amounts over here are exorbitant. We easily pay 3 – 5 times more than you would in the US, although many states have varying amounts of sales taxes slapped on bullion, so those are always extra. Is there one in Texas?
All the same, Nick has a very good point. In a serious bull run, all this will turn out chump change. Besides, if the choice was between a bullion dealer on the expensive side and none at all, the choice would still be clear.
You are right Nick…I don’t quibble…but drive for the best deal I can get…which in the US isn’t that hard to get… I am empathising with cb and the stitch up you guys get on the front end…
Loving the AUD falling thru the fall at the moment too…
PS. I only post the Perth Mint prices because they are updated throughout the day. It is not a recommendation or suggestion that anyone should use them in preference to other dealers. The general rule applies here as well: If you don’t shop around, chances are that you are going to be paying more than you have to.
Wolf …fair enough, my comment was to emphasise that this story ain’t over yet.
Yep. the AUD is getting a pounding and gold is still hanging in there in USD. So if what they are saying about the future of the USD being a dive, plus the panic sets in for the Europeans, we will certainly be in for a wild ride of spiritual levels!
Nick, Wolf – I notice that you are both posting. Have a look at the ASX 200 — it is another day dripping with blood on the ASX. The more of this volatility, the more the average punter is going to lose through their holdings, trading, managed funds and super. And if that is right, then we can expect that growing numbers are going to go conservative. You can only take so much punishment before you say, enough is enough, I have must now go to ground, save like mad, and preserve what is left. And if that is also correct, then this is still barely the morning of a most promising golden day, indeed.
http://www.igmarkets.com.au/
cb…what do you think the rest of the “prudent” world has been doing in recent times. I have kept saying that we are still down the queue and the last to wake up to the “trend”.
People just don’t realise the speed with which this change can happen. Unfortunately it takes a long time and much effort to build something, but it only takes seconds to destroy it. Take heed, be prepared and hang on.
Remind me cb of the bet, and why I will be backflipping. Like I said to PF in the other thread, I cant see how Kris and the DR crew arent getting apologies from you and PF for totally underestimating their complete grasp of what is going on…if you think I am worried about whether the impending housing price crash is still coming, think again. The writing is on the wall. Loans are plummeting and rates are rising, just like I (and Kris) said they would. And now with the AUD crashing, look for rates to keep rising even if defaults continue to rise.
And all you guys can do is think of ways to pile into gold…its like the 1920’s when the shoe shine boys were giving stock tips.
I suppose I get why you do it, if you can convince people to pile into gold, then it becomes self-fulfilling, but make sure you get out before it crashes…
If you are so worried about the value of your cash depreciating, but yourself a new car, a new home entertainment system, a dog, a lifetime supply of dog food, a lifetime supply of food….at least you can use those things while you wait for the financial armagedon and fiat currency destruction.
I am with you Nick..the gold story is long term for me…I just can’t help myself picking up supplemental bits and pieces at spot or even below on a few items on Ebay (not recommended to build bulk…but a little snack on the way through and kills the time during my weekly stay down in deep dark east Texas during the week).
I recently took James Turks fear index methodology and applied it to Australia… interestingly enough, it showed that Australia LOVE the paper (plastic) stuff… only an enlightened few seem to get it…
US market doesn’t know what to do at the moment…the irony is that the US$ and markets here are pretty well farked in my view, but the Euro market is utterly farked, which pushes the US forward as the pick of the litter…very scary… I was reading in one of the links that the 85c mark is the AUD pressure point (zerohedge I think)…and that if it drops through their for a sustained period then the sh!t will hit the fan on these short term gamers…
Haven’t had a chance to read why gold dropped US$30 today, but would surmise it had to do with some of these clowns trading out to cover AUD positions…
Makes me want to get enough reddies together, get a nice home on a Carribbean island with elevated ocean views, and enjoy a pace and style of life that avoids this mess…run a little bar down by a beach…
puntpal…..”I suppose I get why you do it, if you can convince people to pile into gold, then it becomes self-fulfilling, but make sure you get out before it crashes…”
I wish I had such power!!!
Do you really think that a bunch of bloggers can influence the world into buying gold or even an ipod??
No puntpal, I’m with you all the way in real estate, but don’t underestimate the power of the REAL movers and shakers that are (and have been) destroying currency on a global basis.
My parents were a little younger than you when they had a lesson in the reality of the financial world in the 30’s. Think yourself just as privileged as you are witnessing history and may you live a long life to pass on your experiences to future generations.
Lol wolf that sounds great. Ever watched the movie “Shawshank Redemption”? If so I refer to the part right at the end were the black guy is guided to where his old cell mate has set up a little business south of the border and they lived happily ever after. Well, mate I may come and visit you in your Carribbean “fortress of solitude” one day and watch the world float by (probably the bodies of dead bankers).
Great film…that was the “tin under the oak tree” as well wasn’t it… have you The Miracle at Santa Anna ? A quality film too…
You and family will be most welcome to come put your feet up and live for a month without ever having to put on SOCKS !!!
Yeah, that’s the one!
The Miracle at Santa Anna? No haven’t seen it but now that you recommend it I’ll track it down.
There’s an old Greek saying, it rhymes in greek but not in English. It basically says that only mountains don’t ever “meet”. It implies that although mountains can never “meet”, people can. I look forward to that day.
By the way, while we have been typing, have you noticed the AUD???
.8315!!!!
Nick – I wasnt just talking about money morning bloggers – the ‘Get Into Gold’ buzz is everywhere, every subway in NY had adds for investing in gold. TV adds on bloomberg and Fox Business had people with vaults full of gold smiling and sitting on a beach – maybe that was just the Wolf ; )
…And now in Australia I have heard people talking in pubs about investing in gold. They dont understand why…they just see the price of it going up and want to get on board now that property and stocks seemed to have run out of steam. Everyone wants to make an easy buck, no one wants to invest in IT and Energy, in research and development, in medical science, in food and agriculture…these are what will CREATE wealth…not just preserve it
I think Sandra has played it better – silver seems to allude a lot of the dumb money, and is less vulnerable to a crash. I also think Governments could dump gold to cover up the currency depreication for a while.
I just dont like the recent gold fad, but I am not at all sure if I am right on my doubts. Maybe gold go to $2000 an ounce by 2012 and Oz property will never crash…geez, if that happens I doubt I will be posting here anymore ; )
puntpal…I hear what you are saying but don’t forget that these Bloomburgs and other talking heads were laughing at the very mention of gold only a year ago, now they are stating the obvious, that “gold has gone up”. Wow! how prophetic.
The trick is to have enough nouse to predict where it is heading and why. This can only be achieved by understanding “the trend”. Gold is not a “get rich quick scheme”. It’s a preservation of wealth, at a time when the vultures have your savings in their sights.
This has been covered here many times and cb has put it far more eloquently, and detailed terms, than I have the time, or capability, to do.
Although many are talking about gold, it doesn’t take much of an IQ to watch charts, very few have grasped the concept of what is really going on. So don’t be shock at what price gold will be in 12 months time. Learn from it.
As for money into R&D? puntpl, you rtalking to a guy who has been beating the wall of bureaucracy for years just to develop leading edge Australian products. Plus has had firsthand experience with the raw deal, the many friends on the land have been suffering. This must come from government and when people realise they have the power to pressure these clowns then something may change. However, until that time comes nothing will change.
As for real estate, I agree with you. I have kids that will be in the market in a few years and they will be saying the same as you if the situation doesn’t change. I have been selling because I feel there is no more “meat on the bone” for real estate. I believe that it has run it’s course.
Sure, I’m one of those “bastard” that made money out of it. I accept that. I just don’t want to be one of those “bastard” that loses money from it.
I admire you guts for wanting to take these clowns head on. I just say to you, don’t go at them with all guns blazing because they are too big and too cunning and you could get hurt. Rather, take the tact of a sniper and weaken them in your quest, one by one. It takes time, but you have plenty of it.
PuntPal – There is no bet, but we disagreed as to whether Sayce knows any better than anybody else whether there is going to be a property crash or not. In response to my challenge to nominate a deadline for proving himself right, you said that if by the end of this year prices do not fall by 20% from the high of 2007, then Sayce’s alarmism about an imminent property price crash will have had no predictive value, and that, in spite of being cock sure, his ignorance is no better than yours or mine.
CB: I do think Sayce and Keen know better than somebody else, yes.
They neglected to take into account the govt action, sure, and both copped a pasting. But the scenario now unfolding is eerily similar to what they forecast.
PP: Unfortunately investors would only invest in R&D if a) there are no “easy money” or simple speculation opportunities and b) there is stability in the rest of the economy. R&D is a high-risk thing.
This excludes Nick who is obviously acting in capacity of a business owner/manager, not a passive investor.
SV…R&D is only a “high risk thing” because of the bloody minded bureaucracy in Australia. Local innovation is stifled by Government, not encouraged but rather destroyed. If it was the reverse, I can guarantee you that the investment in Oz R&D would produce huge dividends in many arenas.
Time and time again, I have been a witness to seeing great minds, who own companies, give up the fight with bureaucracy in Oz and opted to go off-shore where their developments ultimately prosper. I have been offered similar” opportunities” abroad, but my stubborn streak always kicks in.
SV – I would say that they have worthwhile theories, which are brilliant in explaining post hoc, past events. But they all fall flat on their faces where reliable and accurate predictions are called for. They always overlook something, or discount it, or do not believe that it is possible, or whatever.
Keen, for example, expected the RBA to cut rates, and expected the government to kick in with stimulus, so it is quite wrong to say that he overlooked it, or that he did not expect it. He simply did not believe that these actions could have the intended effect, because his theory told him that, once an economy rolls over into a deleveraging mode, there is nothing anybody can do to arrest and reverse the process. The short and long of it is that he got it wrong. Moreover, no amount of tinkering and fiddling with his theory is going to make it any more reliable for future predictions. It is a good device for explaining things once they happened, but predicting the future with any degree of reliability is quite a different kettle of fish.
Same goes for Sayce, who jumped onto the Keen bandwagon. They are as brilliant about the past, as they are clueless about the future. What they are doing is making educated guesses, but like everybody else, when they claim to know what will happen, they are taking a punt, and no amount of bluff and bluster, or unshakable confidence will make up for the fact that they do not know any better than anybody else.
Erm.. CB, what degree of accuracy do you require of Sayce’s forecast?
Keen, for example, said the crash will occur within 5 years from the date of the bet (source: businessspectator by Rob Burgess), of which there is still 2-3 years to run.
If you are considering a long-term purchase, such as property, no matter if to live in or to invest, is 5 years not specific enough for you?
And look, RBA will drop interest rate again all right. Only by then people won’t queue up for real estate, because there will be a sea of it.
Here is a quote from Garth Turner’s greaterfool.ca: “They’re learning that these days in Australia. After yet another interest rate hike to try and cool off the housing bubble (it’s a tad worse than ours), consumer confidence has plunged, as VRMs start to head back into nosebleed territory. So, after purposefully creating a runaway real estate market with generous incentives, the Aussie government is, like most others on the planet right now, screwing it all up.”
Good points cb and Nick.
We will see what happens, I think the correction has well and truly begun. In 2007 US was broke, now we are adding Europ in 2010…sometime in next months Asia will suffer from financial problems (collapse in their export markets and bubbles bursting of their own)….then things will rebuild slowly.
Maybe gold is a good bet, just seems too unclear what could happen with gold
The DR has been talking about gold as long as I remember, so I don’t know why certain people seem to think this is a recent phenomenon. The fundamental reasons for buying gold haven’t changed; they have only become more illuminated. So every Tom, Dick, and Harry is talking about gold, so what? They probably are most likely not buying it. I have seen some of my GOLD ETF positions fall back close to 30% after GFC I. As for physical, I rarely think about what it’s worth.
JC you are right, the DR crew are not the ones spruiking gold recently – but this is the thing about Gold compared to Fiat currency.
The reason gold bugs bur gold is because they see Gold as a way of preserving your wealth in times of inflation and currency depreciation. But I believe gold could become a fad and its price could be inflated by an exagerated belief in the chance of currencies depreciating.
JC, PuntPal – Yes, that is correct. Gold has been Bonner’s trade of the decade, and it indeed worked out well for him. He gets loads of credibility from me on that front. Yes, it is almost certain that gold will eventually end up in a bubble. I say this on the strength of historical evidence. We, people, always push a good thing too far, and as we know, there is no fever like gold fever. And that, I would guess, is also no coincidence, because gold is money, and money talks, and it can buy you most of life’s needs and wants. But I would guess that we are still a very long way away from a bubble. If the current printing mania continues, as Marc Faber often says, it is impossible to say how high gold and silver are going to go, but just in order to reach its previous high in USD terms, when adjusted for inflation, gold would have to hit upwards of $6K. This is a moving target, of course, and the more time elapses, and the more printing gets done in the meantime, the target will keep going higher and higher. How much would gold cost in Zimbabwe dollars towards the end? It must have been in the gazzilions.
SV – Keen said over ten or so years, expecting it to be a slow, relentless grind ever further down, similar to Japan. Robertson, however, gave him only 5. What is overlooked in this is rather significant. Keen’s expectation and prediction was not that at some point in the next 10 years prices will correct by at least 40%, but that the 2008 correction that was already underway at the time would continue, and that his 40% fall would slowly and relentlessly materialise over the next 10 years, before prices stabilised and eventually turned around. Also, and by implication, the 40% fall was to be meausred from the previous high of 2007, not from any new highs the index would achieve in the interim, before prices crashed.
This much is pretty clear. And the reason why he lost the bet, to my mind, is precisely the fact that he miscalculated and was proven wrong by the index turning around to hit new highs, instead of continuing its slow grind down. To my mind, any other interpretation is less than compelling, and would expose Keen to a charge rightly made against Sayce, that his housing price crash prediction is no better than a broken clock, which just so happens to show the correct time twice a day.
The standard of commitment and the specificity required for any meaningful prediction certainly has to be higher than Sayce is currently willing to provide. As things stand, his alarmism has scantly more solid footings than me warning the good people of Alice Springs that it is going to rain, and that they should prepare for a flood.
The fact that my warnings are going to come good one day merits little credit, I suggest. Worse, it would be foolish of the town to stop going about their daily lives and start raising all their furniture off the ground.
guys – the cumulative average gold price in USD’s was 972.35 in 2009. In 2010 so far it is 1130.79. An increase of just over 16%. The recent increase in AUD is basically the AUD going from 0.9305 to 0.81255 in a month. If the AUD held its 1215 compared to 1391 based on the 2010 ytd cumulative average. So all good on the gold front. This tanking of the AUD is GREAT! 14% IN A MONTH!
See what can be done with numbers, I have almost convinced myself.
Keep up the good work KRUDD. 2000 USD gold / 0.7186 AUD = 2783 AUD Gold. The 0.7186 is the average over the past 24 years. The 2000 gold is the question!
tel – Quite right. My thinking is that, just like you are not going to get out of debt by taking on even more debt, politicians and bankers are not going to destroy the gold price by printing more and more fiat money. The reasoning is simplistic, but nevertheless quite valid at that simplistic level of generality.
cb-are we simplifying something that is too simple? print – borrow – spend! at some stage somebody has to pay for something? its like a race between bolt and lewis, ie who starts first wins, who do you back, if they can run at the same speed, the one who starts first, (unless he is on PED’s) will win? see the ironry, there is no answer – but you can win a bet!
Looks as though it is going to be a rough start to the month following on from the mayhem in May.
http://www.igmarkets.com.au/cfd/market-commentary.html
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