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:
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.