While I agree with the horrible fundamentals of the US dollar long term, if you look at this Elliott Wave chart, the US is due for a short term bounce.
Until the fed jacks interest rates up to double digits and rings in all of this "stimulus", the dollar is doomed. But, if you look at all of their actions, they have no intentions. We shall see if they extend the 8k new house bonus. Who are they to try to artificially re inflate a housing bubble? I rather own gold/silver and sell it to buy a house in full down the road when the metals peak and interest rates are through the roof.
All the people I talk with in AZ think the bubble housing prices are coming back and now is the time to buy with the "less worst" #'s. I guess people and the gov want to have hyper inflation. Well, if you print money, people are going to spend it, duh. The slight uptick is artificial.
I tell people to use the money for the down payment for a new house to buy gold instead. Then, use that gold to buy the house outright (post 1012) and hold will be at least 2x what it is now and the price of the house will be at lease another 25% lower.
If not, people can hope for Peter Schiff's theory: The only way that owning real estate may ultimately be a better inflation hedge then other things is going to be a function of leverage, a function of debt. But there is lots of risk there, if you borrow money and house prices drop first.
But if we get real hyperinflation which is what I expect to happen, if you borrow a lot of money and and use to buy a house and you don`t pay all the house, lets say you buy a 200,000 USD house but you use only 20,000 USD of your own money and you borrow the other 180,000 USD. You are not tying up yours 200,000 in an asset. You are only tying up 20,000 USD. You take advantage of the low mortgages today, a 30 year fixed rate mortgage of 5% and you make your payments for a while and all of a sudden there is massive inflation and at some point you may be able to pay your entire mortgage with the money that you might of otherwise use to buy a can of soda.
You end up having your house virtually for free.
- I personally do not have a need to own a house Renting is still cheaper, I do not have to deal with the maintenance headaches of owning and with a 6 month lease, I am not tied down to one area of the valley or even state.
I agree with all of your points. With home prices, the market is so oversupplied with homes that inflation will have a much smaller impact on your house when compared to other assets. Homes have much further to fall, and even if they rise in dollar price, the home/gold ratio will drop. In other words, the price of gold (as you pointed out) will rise faster than the home prices whatever the inflation rate may be.
Nice to hear from you Matty Baby. I hope all is well.
While I agree with the horrible fundamentals of the US dollar long term, if you look at this Elliott Wave chart, the US is due for a short term bounce.
ReplyDeletehttp://www.elliottwave.com/images/futuresfocus/dollar&bullsatnewlowchartEWT.gif
Until the fed jacks interest rates up to double digits and rings in all of this "stimulus", the dollar is doomed. But, if you look at all of their actions, they have no intentions. We shall see if they extend the 8k new house bonus. Who are they to try to artificially re inflate a housing bubble? I rather own gold/silver and sell it to buy a house in full down the road when the metals peak and interest rates are through the roof.
Thanks,
Matty Baby
All the people I talk with in AZ think the bubble housing prices are coming back and now is the time to buy with the "less worst" #'s. I guess people and the gov want to have hyper inflation. Well, if you print money, people are going to spend it, duh. The slight uptick is artificial.
ReplyDeleteI tell people to use the money for the down payment for a new house to buy gold instead. Then, use that gold to buy the house outright (post 1012) and hold will be at least 2x what it is now and the price of the house will be at lease another 25% lower.
If not, people can hope for Peter Schiff's theory:
The only way that owning real estate may ultimately be a better inflation hedge then other things is going to be a function of leverage, a function of debt. But there is lots of risk there, if you borrow money and house prices drop first.
But if we get real hyperinflation which is what I expect to happen, if you borrow a lot of money and and use to buy a house and you don`t pay all the house, lets say you buy a 200,000 USD house but you use only 20,000 USD of your own money and you borrow the other 180,000 USD. You are not tying up yours 200,000 in an asset. You are only tying up 20,000 USD. You take advantage of the low mortgages today, a 30 year fixed rate mortgage of 5% and you make your payments for a while and all of a sudden there is massive inflation and at some point you may be able to pay your entire mortgage with the money that you might of otherwise use to buy a can of soda.
You end up having your house virtually for free.
-
I personally do not have a need to own a house Renting is still cheaper, I do not have to deal with the maintenance headaches of owning and with a 6 month lease, I am not tied down to one area of the valley or even state.
Thanks,
Matty Baby
I agree with all of your points. With home prices, the market is so oversupplied with homes that inflation will have a much smaller impact on your house when compared to other assets. Homes have much further to fall, and even if they rise in dollar price, the home/gold ratio will drop. In other words, the price of gold (as you pointed out) will rise faster than the home prices whatever the inflation rate may be.
ReplyDeleteNice to hear from you Matty Baby. I hope all is well.