The History of Gold, Bonds, and Real Estate

[Anonymous]

http://youtu.be/O2TJHHR7Gc8



Gold is money. Gold has no interest rate, it simply sits and acts as a store of wealth. Fiat currency, however, because it is created as debt, naturally collects an interest rate. However, as more and more debt is created (especially in times of low interest rate environment), the currency supply becomes inflated, and causes the price of physical goods to rise. As interest rates get lower and lower, and more debt based currency is created, the value of gold goes up, and eventually becomes a more attractive choice than a savings account or holding bonds, and eventually, becomes even more attractive than stocks and real estate. By this time, gold has usually broken out, and what central banks must to, is smash down gold prices, by selling paper naked shorts, and raise interest rates, thus, crashing the bond, stock, and real estate market, in tandem. All assets follow each other, and because of government manipulation of currency and interest rates, they can ultimately control a market outside of its regular fundamentals. Gold is starting to bottom. Bonds and real estate are definitely at a top, here in Canada and Vancouver, British Columbia. Also Toronto, Ontario, and other major metropolitan city centers. I highly recommend you get out of your Vancouver property, while the market is at a top, and get back in at bargain basement prices.

 

[Thomas Beyer]

[quote user=patrick_gunville]the currency supply becomes inflated, and causes the price of physical goods to rise


Indeed.



That is why I buy income producing real estate. Let me re-write it: REAL estate. REAL stuff. REAL buildings where REAL people pay REAL money so I can pay REAL people REAL wages so they paint REAL walls, fix REAL toilets, clean REAL carpets .. every month. And on top: I can borrow up to 70% sometimes up to 80% from a bank at 2.5 to 4% so the debt carries itself. So I can buy 3-5 times as much physical goods per $ invested as gold. So if gold and REAL estate go up with inflation, more or less, say 3% a year, I make 3-5 times as much money in REAL estate with sensible leverage than with unlevered, non income producing gold.



Real estate beats gold in my (humble?) opinion !



Q.E.D.

 

[Thomas Beyer]

[quote user=patrick_gunville]I highly recommend you get out of your Vancouver property, while the market is at a top, and get back in at bargain basement prices.


I hear that over 25 years when I lived in Vancouver, when gold was around $400 (between $370 and $420 actually).



An average bungalow in Burnaby (the second largest city in BC then, right besides Vancouver, across Boundary) where I used to live was about $200,000. Imagine said, people said, $200,000 for a simple bungalow in Burnaby. Surely the market is at the top. There is a real estate bubble. It must go down.



Fast forward to 2013: Gold is about $1300 .. say triple to quadruple to the late 80's . That same bungalow is about $800,000, again, also triple to quadruple.



So, similar return, cash on cash. More or less.



But I could have bought that bungalow with 5% down, as a home, or 10% down as a rental property. Let's use $20,000. That $20,000 today is worth $800,000 - a 40 fold increase. Or use less leverage, say $40,000 down, surely I could have rented that bungalow for 25 years, paid my mortgage down to 0, and today I would have 20 times the investment.



Gold beats real estate ? Yes, sometimes, if I buy in cash and the market corrects for a year or 3 as it does from time to time. But on average, because real estate has income producing qualities, and gold doesn't, it is a FAR better investment if it is sensibly levered, over the long term, say 10, 25 or 50 years !



Q.E.D.