The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

Hey, If You Listened to Glenn Beck …

Posted on | July 27, 2011 | 38 Comments

. . . and bought gold when it was still trading under $1,200 an ounce, you may be asking yourself now: “Should I sell at $1,600+ and cash out the 33% profit I’ve made in the past 14 months?” If you’re in such a mood, Adrian Ash at Forbes says, “Buy real estate!”

After this week’s poor U.S. housing data, might the average home be nearing its low? Priced against gold it might be.
Dropping hard as the gold price doubled and more since 2006, the average U.S. home is now priced at 103 ounces of gold . . .
Housing has only been cheaper against gold . . . in 26 of the last 121 years. It’s currently priced around half the long-run average of 201 ounces.

Look at this chart that Ash provides at Forbes:

There are no guarantees, of course: It may take a couple of years — and the defeat of Obama in 2012 — before we see any meaningful recovery in the housing market. And the gold boom may not be nearly over yet. But if you’ve been reaping gains from gold, and are looking for some place to put your profits, this looks like a great time to start bargain-hunting for cheap real-estate deals.

BTW, the Dow Jones Industrial Average dropped nearly 200 points today at 12,302.55 — that’s about 380 points down from Friday’s close of 12,681.16.

UPDATE: Welcome, Instapundit readers! And while we’re talking economics, let’s look at this headline from Jane Hamsher:

Standard and Poor’s Should Not Be Able
to Play Kingmaker in the 2012 Election

Hamsher writes: “Standard and Poors is evidently meeting with high-stakes gamblers and letting them know where to place their bets as they manipulate the global economy,” and much other laughably misguided gibberish.

Dear Ms. Hamsher: If you don’t know what you’re talking about, would you please at least stop misinforming your readers? Because there is enough economic ignorance in the world already, thank you.

While I have neither the time nor inclination to turn this post into an introductory economics course (“What is the function of the bond market? What do bond rating agencies do? To whom are the rating agencies responsible?”), the least I can is to point out obvious facts, such as: Jane Hamsher doesn’t know jack shit about economics.

UPDATE: Professor William Jacobson says it’s a rare thing when he agrees with Jane Hamsher — and it’s a rare thing when Professor Jacobson is so clearly wrong. Let me quote this part of Hamsher’s argument:

[T]here is a very serious chance that a ratings downgrade will trigger an economic downturn that would cause unemployment to rise dramatically. And everyone on all sides knows that Obama would most certainly pay the price for that in 2012.

Well . . . duh.

But forget the politics. It is the underlying economic reality that would cause the downgrade, not the whim of S&P’s executives. And everything else that Hamsher writes about this subject is premised on the conspiratorial idea that S&P is acting on a political motive, rather than attempting to offer investors an honest assessment of the value of U.S. bonds.

Do we or do we not have a crisis that could affect U.S. creditworthiness? That is the only question, and the people who buy bonds are entitled to an honest answer. I think we can expect more honesty from S&P than we can from President Obama, or Tim Geithner, or Ben Bernanke.


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Comments

  • http://www.redstateeclectic.typepad.com AngelaTC

    Cheap housing is good for poor people, but bad for banks. 

  • http://thatmrgguy.wordpress.com/ Mike

    Hey, if ya can’t afford Gold, there’s always “poor man’s Gold”, Silver. Try to buy an ounce a week., when I’m working and have a paycheck.

    Last year, more Gold was discovered than was found in the gold rush back in 1849…. There are no more Silver discoveries.

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  • http://www.facebook.com/profile.php?id=767286078 Maggie Whitton

    Sure. Buy a cheap house that’s got a clouded title due to fraud.
    There’s only about 60 million of them in the good ol U.S.of A.
    Buy a cheap house, and find out you’re out the house and your money.

  • Tank3535

    Jane Hamster? strange name for a strange person

  • Anonymous

    She figured out the S&P setup? Damn.

    It’s only a matter of time now until she tumbles to that whole “global warming is caused by the Weather  Channel guy” thing. Somebody oughta warn him . . .

  • Anonymous

    Sure. Buy a cheap house that’s got a clouded title due to fraud.

    1. It’s the mortgage lender’s obligation to ensure the title is clear.

    2. If you’re looking for an excuse not to buy, any excuse will do.

    Click the link up top to my May 20, 2010, post about gold. It was under $1,200 an ounce then and yet people in the comments were offering all kinds of excuses not to buy. And so they forfeited a huge opportunity for profit.

    But no one ever asks my advice, and when I offer advice, I’m ignored. Because everybody else knows everything, and I know nothing.

  • thefosterdad

    Better idea.  Buy MY house that I’m trying to sell.  Crystal clear title, bought it on a 20% down, 30-year straight-up mortgage about 7 years ago, paid $165,000, 4 huge bedroom, 4 bath, 1 acre lot, shared ownership of a lake lot on a beautiful MN lake, 2 miles from town.

    We originally listed this thing a year ago or so at 209,000…we bought it as a repo and have done MAJOR updates to it.  We dropped it to 199.  Then 192.  Now it’s at 185.  Can’t go any lower without breaking ourselves.  And yet the county has the valuation for tax purposes at about 230.  Liars.

  • Mark In FLorida

    Prices on houses here in Florida are really low. Banks are taking 50%, 25% of their mortgage balance just to get them off the books. I’m talking $30,000, $50,000 houses. These are the good old days!

  • Anonymous

    This is what I’m doing: getting a house, if I can clear the amount for a down payment before the entire financial system potentially collapses in the next month.

    I figure, sure, real estate is a shaky investment…but compared to *dollars*? It’s practically German bullion in a Swiss vault.

    I mean, if real estate has another “meltdown,” I’m out what, 20%? 25%?

  • Frodo

    Wisdom for the Ages: You can live in a house. You can’t live in gold.
    Unless you build the house with gold bricks.

  • Anonymous

    Tough being a seller in a buyer’s market. I feel your pain.

  • headrock

    except there’s a lot better reasons than that to forget buying a house now.  80M baby boomers are looking to downsize or get liquid on what they thought was their retirement money (and they haven’t even started panic-selling yet — they will).  they’re selling into a younger generation of 65M who have record debt, no job security, declining salaries, and who now look at housing as an investment that carries risk (and has other liabilities, like not being able to get up and move for a new job).  jumbo loans are non-existent, normal loans now require pristine credit (btw, how much do you think your house is worth if a 30-yr fixed rate mortgage ceases to exist?).  interest rates can only go up from here.   no ones really knows how much shadow inventory exists.  we’re still nowhere near the historical norm for housing prices (adjusted for inflation) which went parabolic starting in 1999, but had been nearly a flat line for 50 years prior.

    gold has a long way to go before it tops, housing has a long way to go before it bottoms.

  • http://profiles.yahoo.com/u/N6KW3FJR2ERX2QHDLTECY2MRE4 mark

    timing…
    housing hasn’t even touched bottom.
    gold hasn’t even come close to peak, unless there is a secret plan to keep from devaluing currencies further, that i missed.

    still, the perfect timing?
    buying a house with current interest rates, right before the interest rates get jacked to cool off inflation.  they won’t touch the rates, that much, until we have significant growth that can help weather the drop off in cheap/free money.

    if one is getting edgy to buy a house, wait for quarterly growth to notch better than 3.5%, and then wait for the number to be confirmed, along with the next quarter breaking the previous.

    projected growth, by one estimate has 2011 at 2.1%, 2012 at 1.9%, 2013 at 2.8%…

    anytime the projection predicts a worse rate of growth than the previous year, you get the idea that there is substantial pessimism.

    funny that the best growth comes in 2013, when obama is no longer in office.
    repeal obamacare, and the powderkeg of our economy delivers 4% or better in 2013, or within a year of the repeal.

  • http://profiles.yahoo.com/u/N6KW3FJR2ERX2QHDLTECY2MRE4 mark

    everyone who is whining about gold isn’t making money off it.  they are just trying to live with it…

    any individual who dispenses the wisdom that gold is overvalued is no better a financial adviser than an individual who is hawking it.

    keep hearing “bubble”, but the graph of gold is anything but.

    the past month, gold is only up about 8%…if a bubble comes, you will see the spike.  i’ll worry when it jumps 50% in less than 6 months.  at present there ISN’T panic buying, which bodes well for gold as a consistent investment.

    it has made money for the past ten years.
    never bet against a streak.

     

  • http://profiles.yahoo.com/u/EU5DQWQTTHTPO4A4ZYSL3AAV2U Adjoran

    We do have this new invention called “title insurance” which covers that risk, it’s worked pretty well for 150 years or so – so far.

    But the robo-signed mortgages aren’t clouds on a title.  The mortgage is still a legitimate lien, the title remains clear as the day it was searched;  the only question is who owns the mortgage and has the right to foreclose.

  • http://profiles.yahoo.com/u/EU5DQWQTTHTPO4A4ZYSL3AAV2U Adjoran

    Not sure about Beck’s ads, but most of the “buy gold” ads I see on television, and retail gold sellers, charge a hefty premium to buy and sell.  Depending on which one, you might find yourself paying up to 20% over spot price to buy, be charged for shipping and insurance at an inflated rate, and pay a similar premium when you try to sell.

    So in Stacy’s example, if the premium were 20% it would have cost you $1440 per ounce to buy gold @  $1200 an ounce, and selling now at $1600 less the same commission nets you $1280 per ounce, not counting any shipping and “handling” and insurance costs coming and going.  But I’m sure you could have made it up in volume.

    It’s far safer to invest in gold mining stocks.  Established ones move in tandem with the metal spot price.  There are also funds that own diverse mining stocks, and an index contract available. And you only pay a few bucks to buy and sell if you use a discount broker.

    Now, that’s the sane thing to do if you want to buy gold as a hedge investment.  If you are buying it because you think society is on the verge of collapse, you are dreaming.  If society breaks down, someone will take your gold and your women.  If that’s your concern, don’t buy gold, buy guns and ammo and canning equipment.

  • http://profiles.yahoo.com/u/EU5DQWQTTHTPO4A4ZYSL3AAV2U Adjoran

    As far as a ratings downgrade goes, we are already being treated differently than every other country.  The austerity requirements made of Ireland and Greece and soon Portugal and Spain and possibly Italy are all based on current and next year cuts, not a ten year budget window to get it done. 

    Hamsher’s just mad her Dream Lover has screwed up so badly that someone may be forced into calling him on it.

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  • http://profiles.google.com/chazhammond Charles Hammond Jr

    Socrates was considered the wisest man in greece, yet no one listened to him.  The Oracle declared him the wisest in all greece because he–unlike the haughty and proud–was willing to admit he knew nothing.

    All you need is a good pair of eyes and ears and a mouth strong enough to call it like you see it.

  • http://moneyrunner.blogspot.com/ Moneyrunner

    The easiest and least costly way to buy gold is to open a brokerage account and buy an ETF (exchange traded fund) like GLD which is priced to reflect the value of 1/10th of an ounce of gold.   

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  • http://thecampofthesaints.org Bob Belvedere

    Well…hey…everybody knows that, in addition to having no feelings, chopped liver is on the downside of The Bell Curve.  Of course, I wouldn’t expect you to know that, well, because…

  • http://thecampofthesaints.org Bob Belvedere

    I can’t speak to everything you wrote before the last paragraph, Adj [I'm just not that well-educated on the subject], but I think you’re dead solid perfect in the last statement.  Self-defense and the ability to barter are going to me the most important things to possess if the sharia hits the fan.

  • http://thecampofthesaints.org Bob Belvedere

    I can’t speak to everything you wrote before the last paragraph, Adj [I'm just not that well-educated on the subject], but I think you’re dead solid perfect in the last statement.  Self-defense and the ability to barter are going to me the most important things to possess if the sharia hits the fan.

  • http://thecampofthesaints.org Bob Belvedere

    I can’t speak to everything you wrote before the last paragraph, Adj [I'm just not that well-educated on the subject], but I think you’re dead solid perfect in the last statement.  Self-defense and the ability to barter are going to me the most important things to possess if the sharia hits the fan.

  • http://thecampofthesaints.org Bob Belvedere

    I can’t speak to everything you wrote before the last paragraph, Adj [I'm just not that well-educated on the subject], but I think you’re dead solid perfect in the last statement.  Self-defense and the ability to barter are going to me the most important things to possess if the sharia hits the fan.

  • Matthew Crandall

    Here’s a thought for Jane Hamsher:  how much influence would the “high-stakes gamblers” at Standard & Poors have, if our Federal  Government wasn’t in DEBT UP TO ITS EYEBALLS? 

    Sweet Jane, this is what happens when your beloved big-government spends us into a debtor nation— the lenders get leverage!  Like, Duh.

  • http://profiles.google.com/leoncaruthers Leon Caruthers

    Buy a house with enough land to farm, and you really make out.  Small farms are just as depressed a market as big houses.  “You can’t eat gold”, well, no, but you can buy land with it and that’s almost like eating it.

  • Lee Harvey McCain

    As opposed to someone who carries the sort of trimoniker usually reserved for notorious murderers.

  • Another Anon

    “No responsibility for advice not taken.”
      – Larry Niven

  • Joe

    Given how confused the GOP plan is, Boehner should be smelling his pits right now like Otto in a Fish Called Wanda.  Or maybe he is more like Ken Pile…

    But this whole mess can be summed up with…

     DISAPPOINTED

    My 401k does not have a gold option, but I am heavy in commodities like oil. 

  • Joe

    If the shit really hits the fan, gold and silver will be definitely worth something…

    But steel, lead and powder will be priceless! 

  • Joe

    Stacy’s right.  Get a title insurance policy if you are worried.  But there are definite real estate bargains out there.  Smart money is buying.  Not crazy buying, carefully looking things over and gleaning out the good stuff. 

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  • http://thatmrgguy.wordpress.com/ Mike

    Got that too. ;)