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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 476.00+2.4%Jan 27 4:00 PM EST
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SirWalterRalegh
To: TobagoJack who wrote (163515)10/10/2020 8:58:27 AM
From: THE ANT1 Recommendation  Read Replies (1) of 219818
 
TJ, my brain has remembered and played with numbers since I was 8 years old. As I moved to a new city every 2 years until age 25 I know the dates of the price of things. Our 3 bedroom 2 bath apt on the second floor on Ipanema beach in 1966 was 60K, 3 bedroom 2 bath house in Brasilia 60K in 1972 (Brazilian currency was strong, that was the cheapest house in Brasilia-owner liked my dad and dropped the rent so he could live in a house and not an apartment as government stipend would not allow a rental to be over a fixed value in dollars). Or cheapest house in Coral Gables 1968 was 40K and the cheapest house on the water in Coral gables 1969 was 80K. In 1969 the hamburgers at McDonald next to Ponce Deleon middle school were 20 cents and cheeseburgers 22cents

As a quick and dirty estimate of future value one must guess at income stream which will vary over the next 20 years ,and assume a 30% increase or decrease in value for each percentage change in interest rates. In the long run an asset class will not be influenced by this moments herd positivity or negativity towards an asset class but you and I live calculating this speculative froth or great value out of an out of fashion asset class (reversion to the mean)

So lets assume golds low was 30 years ago at a price of $200. Next lets assume that the low included speculative negativity and a discount. So I assume golds real value at that point was $400. Now interest rates drop slowly over 30 years by 6%. At each 1% fall in rates we raise its value by 30% (about 300% cumulative)) or $1200 an ounce. Now inflation was almost exactly 100% in dollars over the last 30 years so $2400 is a good current price. This assumes that at this point in time gold is a neutral asset amongst investors. Should it become a popular asset class it could double over the short run but in the long run it will lose this premium. Now if electric cars need gold or we return to the gold standard then we could have a permanent change in the above estimate. No such change has happened in the last 30 years

Now is the above a good model? No it is just one piece of data. My statistics professor once asked: "If a truck of apples drives up to the plant and I reach up and pull one apple out and it is rotten. I reject the shipment. Is this good statistics? The class said NO! He said "you are right, but its better than nothing"

By the way if I do the calculation on my current house in the DC area without looking at rates my house has doubled in 30 years which is exactly inflation. Only thing is in 1991 my mortgage rate was 7.25% and a 30 year mortgage is now below 3%. When I bought in 1991 we were just entering a down phase so I will assume no speculative froth or negative discount. We are now entering an early mania but I will assume no premium or discount at this time. USA housing will boom. Friends come to visit me for answers. I have been saying buy,buy.buy for 3 years now
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