Heinz on Housing, gold, amd markets
Date: Fri Apr 02 2004 12:30
trotsky (Mooney, 8:56) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
US housing price inflation over the past decade has exceeded general price inflation by a huge margin - and sports many of the typical hallmarks of a bubble. for instance, housing prices are at an all time high vs. disposable income, rental yields meanwhile are at an all time low ( i.e. housing's p/e ratio is at an all time high ) . US home EQUITY ownership is at a 50 year low ( down from 81% in 1952 to 55% now ) , and mortgage credit has most recently grown at about 2 trillion dollars annually.
aggregate median home prices have increased by about 1000% since the mid 70's, whereby the bulk of the parabolic price increase has occurred since the mid 1990's ( i.e., 500 of those 1000% in price appreciation can be traced to the beginning of the Greenspan bubble ) . last year alone, the 'value' of residential real estate in the US has increased by $1.4 trillion ( the mortgage credit bubble of course grew even faster ) , an annualized rate of change of 15% - a fresh bubble peak in this ROC.
meanwhile, household mortgage debt as a percentage of GDP has shot up to 60%, from 42% as recently as 1995, and 27% in the mid 70's.
the fact that this bubble hasn't burst YET is not an indication that it never will. Japan's housing bubble grew uninterrupted for 44 years - and similar to the US, the bulk of the price increases occurred in the final decade of the bubble. after it had peaked, average prices plunged by 80%. to give you a different analogy: participants in the Nasdaq bubble argued in early 2000 that the proponents of a bubble burst must be all wet. after all, the Nasdaq had gone up for 25 years running. so it was argued, well, it hasn't burst for years, in spite of many warnings, so it never will. this is exactly the position the US housing bubble finds itself in ( and for that matter , similar bubbles in the UK, Ireland, the Netherlands, etc. etc. ) . it has gone on for years without interruption...price gains have accelerated in the past decade, and gone parabolic in the past 2 to 3 years...the debt supporting the bubble has grown to unprecedented size...and nobody believes it can burst.
Date: Fri Apr 02 2004 10:45
trotsky (@NEM/ABX/PDG rumors) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
there is one aspect of PDG that suggests it might not be a target for NEM: half of its reported gold reserves are in South Africa. ever since the failed Franco-GFI deal, Shulich and Lassonde are on the record regarding not wanting to invest one red cent in SA. iow, if NEM were to take over PDG, it would have to sell half of PDG's reserves to Harmony or another SA suitor - all of whom are not exactly known for their propensity to shell out absurd sums for gold deposits ( read: they're very stingy ) .
from a strategic perspective ABX would probably be the better fit, although it's true that PDG has more potential - in the form of ounces in the ground that have only recently become economical due to the higher PoG. so PDG would be the gold bull's choice, but ABX would be the long term strategist's choice.
as for their respective hedge books, clearly PDG's book is in far better shape...but everyone should be aware that after the Normandy experience NEM is probably not afraid to take on an underwater hedge book. i'm actually rooting for an ABX takeover, since that would mean instant demand for 16 million ounces of gold and umpteen million ounces of silver.
btw., no-one has recently mentioned Barrick's silver exposure ( lots of calls sold at far lower strikes ) , but they have to be hurting big time with their silver hedges.
Date: Fri Apr 02 2004 10:12
trotsky (believe it or not dept.) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
what has happened so far today is actually more bullish than the entire past week was...w.r.t. the pm stocks, the down days are often more revealing than the up days.
this is not to say that we won't get a weak close...we might or might not. but this dip has clearly elicited some buying.
it is probably reasonable to assume that most of today's knee-jerk market moves after the jobs report will be reversed. the devil is in the detail, or put another way, it's in the 'quality' of the report. 230,000 jobs added in health care and education, but ZERO in manufacturing? this sounds almost like a net negative for the economy at large ( i.e. no wealth creation ) .
on a more general note, every government report is suspect anyway, especially when emanating from BLS ( e.g. the last PPI release sounded like an insider joke ) . what's more, even if one presumes that the reports are telling one something, they only illuminate the past. markets however care only about the future. |
