Posts
1928
No Glut in Diamond Market Or Lower Prices Expected
1932
Diamond Glut
The diamond kings of the world are facing a crisis caused by the almost complete lack of demand for their wares.
2004
Diamond prices forced up as demand soars
It is the third rise this year and prices are now rising faster than at any time since the 1980s.
2009
Slump proves that diamonds aren't forever
Like housing in the US, diamonds spawned a bubble in which easy-to-obtain credit made buyers willing to pay higher prices and created a false sense that these polished rocks were perpetually rising stores of value, said Christopher Ellis, president of Consensus Advisory Services LLC, a Boston investment bank that advises companies on restructuring.
There is an ongoing debate on whether or not gold is a want or a need. I see it as a want. Others see it as a need. I can say that precious stones failed the test. Perhaps precious metals won't. Only time will tell.
From February...
Inland pawnshops report seeing more high-quality items
As more people are losing their jobs, some Inland pawnbrokers are attracting a new Mercedes- and BMW-driving clientele that, like everyone else, is seeking quick cash to make ends meet.
"I'm seeing more gold, diamond rings, watches -- higher ticket items," said George Boullon, owner of Wimpey's Jewelry and Loan in Murrieta. "You see people pulling up in $80,000 Mercedes. And they're in Hummers."
...
Another bright spot for the shops -- the gold market is hot. When they can't sell gold jewelry, they can always melt it down for scrap gold, pawnbrokers said.
Language of Selling and the Science of Persuasion (pdf)
During a hot market, properties “sell themselves” so there is less need for strained descriptions. This theory suggests that we should anticipate the incidence of effusive language to fall during a boom and rise during a slump.
Let's temporarily put all that aside for now. To me, it might just come down to the following two videos.
The case for gold...
The case against gold...
Nothing is ever easy, is it?
Real Estate Newsletter Articles this Week: Existing-Home Sales Increased to
4.15 million SAAR in November
-
At the Calculated Risk Real Estate Newsletter this week:
[image: Existing Home Sales]*Click on graph for larger image.*
• NAR: Existing-Home Sales Increase...
11 hours ago
6 comments:
Mark,
All right, I am not long for bed time, so only one thought.
When did central banks ever settle accounts with diamonds, after the 14th century?
Why, in this day and age of fiat extravaganza, are major movements of accounts between central banks settled in gold?
You may say "but its all on computer trading of currencies now!" but that is just our (small fry) money. Central banks (especially asian ones, more every day) take settlement in gold.
If gold was useless as a monetary store than no central bank would hold any, they would sell it to "cash for gold" for pennies and be done with it (actually the UK did, and note my post from a while back on GDP/debt ratio...they lead all developed nations by a ton!)
Look, I hear you loud and clear, and I love all your posts, but maybe there is more to all this?
Besides, if you live near white birch trees ( I have a whole grove in the back woods) toilet paper is free, abundant, and just as good as charmin. Plus its good for the environment!
GYSC,
"Why, in this day and age of fiat extravaganza, are major movements of accounts between central banks settled in gold?"
Fair enough. But just keep in mind that the gold is used as a store of value to buy OTHER stuff.
Gold is not immune to being in a bubble any more than that OTHER stuff is, as was seen very clearly in the late 1970s.
Further, when the price of gold can buy too much OTHER stuff, then the real bargain is in backing up the truck to buy the OTHER stuff directly and bypassing gold entirely.
In other words, no asset is a safe store of value at any price. It's only a good store of value if it is bought at a decent price.
The only thing we know with 100% certainty is that gold was 4 times the bargain when it was $250 than it is now at $1000. It has also risen well above its long-term inflation adjusted price. Should it continue, I can also say with 100% certainty that it will cease to be a bargain. Can I say it is or is not a bargain right now? No, not with 100% certainty.
I can simply offer my opinion that it is not a relative bargain right now, and that as far as I am concerned that implies that it is not an absolute bargain either. My money would be better spent buying the things that gold can now buy. It is just an opinion though of course.
GYSC,
I know you are a football fan so you might get a kick out of this.
http://sports.espn.go.com/espn/page2/story?page=easterbrook/090901&sportCat=nfl
The next bubble has been identified. It's cupcakes.
Here's the thing with gold. It is pricing in a lot of future inflation. If future inflation is tame, gold is going to loose a lot of value.
Taking a stab, if the inflation adjusted value of gold is $400, and it's currently at $1000, if we don't get twice as much inflation as the historical average gold is going to drop in price.
I reckon the historical average is about 2-3%. What would it take to get us to 5-6% inflation? I don't know. There's no wage pressure. There's no commodity shortages. Assets are deleveraging.
Now, I can envision a set of events to cause hyper-inflation: a failed Treasury bond sale (I think a lot of people can envision this). Yet, I can't envision a set of events to get inflation up to 5-6%, and only 5-6%. It's all or nothing for me. I think I'm not alone in that. I think, though, people being unable to envision what makes 5-6% happen assume it therefore is less probable than the hyperinflation which they can envision. I'm not sure that is valid reasoning. It seems people are confusing probabilities of events happening with their ability to come up with scenarios which would cause those events to happen. (I hope that last sentence makes sense.)
AllanF,
I think you bring up great points. I can see 5%but like you I don't see how it can just hover there. I would bet it all that it would become massively volatile. There's just so much leverage and investors, China, AND the Fed would all panic.
In 2004, another bear told me that he was waiting for 15% interest rates before he'd sell his gold and buy bonds. I guess he was expecting an exact repeat of the 1970s. I didn't think it would take 1/2 that for things to fall apart since we were so much more leveraged. Turns out 5% was plenty. Everyone panicked.
Let's say the risk of hyperinflation is 5%. What should we do? I suggest finger crossing and stocking up on basic necessities that are still relatively cheap. If I'm down to my last bag of rice, I'm not going to be all that inclined to trade it for gold. I'll tell you that. Further, there's a 95% chance that I braced for something that doesn't happen. Fortunately, it is no big deal. I'm going to eat the rice anyway.
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