[powayseller]

4plex – I chart gold:euro, and gold:usd. I find that since 3 years ago, the ratio went from 3 to 5.5 for the euro, and went from 3.5 to 8.5 for the USD. What exactly does this tell me? The dollar lost more value, so it took more dollars to buy gold?

How do you find the symbol for other currencies?

[powayseller]

How can our inflation cause higher gas prices on the global futures market?

[powayseller]

The recent spike in gasoline prices seems correlated with reduced spending. Walmart said their shopper is gas-price sensitive, and they make fewer trips to the store, and thus fewer impulse purchases and sales are down a bit. Starbucks is taking a hit attributed, by them, to higher gas prices. I read the high end fast food shopper will downgrade to McDonalds, while the McDonalds customer will stop eating out.

I get your point Rich, and I wonder why people are reacting stronger to this recent rise. Perhaps the magnitude is too large, for people already living on the edge. 75% of Americans say the high price of gas is a hardship. Perhaps the size of the latest jump is psychologically difficult.

Are people avoiding Starbucks bec. they are stretched too thin with this latest jump, or because they’re darn sure not going to spend money on overpriced coffee when gas costs so much? (Actual hardship or psychological)

I expect to see a drop in spending due to MEW slowing, but this would be gradual. This quick impact is due to gas going over $70/barrel.

Pretty soon, the high commodity prices will shop up in more expensive goods. Carpets, food, everything made with oil and transported will be more expensive in a few months. So the higher price will slow consumer spending. Why do we need higher interest rates to curb demand? High oil, in and of itself, is doing the job rather quickly. Higher commodity prices will show up in products make with copper, lead, platinum.

[powayseller]

So the conondrum really is the global demand for our debt, which pays a higher rate than European or Asian debt. More demand raises the price, lowering the yield.

This trend will be reversed somewhat as Japan pulls out $200 billion of our debt between March and June 30, 2006. We should see rates rise a little bit. Unless of course the US has some offshore accounts which step in to buy Treasuries. Isn’t anything possible?

(Kind of like that whistleblower from the Transportation Agency who exposed the lax security still existing in airports…the gov’t is kind of too lazy to fix anything. Did you know they still don’t screen cargo luggage, and the terrorists are still highly interested in US aviation? After Irwin published several internal reports bringing this to the government’s attentino, Bush called Irwin (sp?) into his office and said he needed his loyalty. Irwin refused to tear up his reports and told Bush he works to protect the people, as should Bush. Irwin’s contract was not renewed, and he wrote a whistleblower book. This is typical of government. They want to look good, but not do what is best for the people. I can’t find the book , but saw the interview on cnn.com)

[powayseller]

I’m frustrated with the lack of response to posts like this. A thread about listings are worthless to a realtor gets 74 responses, the 50 year mortgage gets 20, and this gets 2. Opinions are welcome too, but I’m really looking for an understanding of what drives the Fed, on what basis they make their decisions. It sounds like no one really knows.

I disagree about your assessment re. gas and spending. Spending is way down. I’ve talked to people who have spoken w/ manager at Poway Starbucks and Poway’s Home Depot employees. Both report business is way down lately, and attribute it to rising gas prices. The trade deficit was narrowed the last 2 months, and if it is the beginning of a trend, can be due to people consuming less. You will see the reduced spending in the retail and restaurant numbers of May, which won’t be released until June or July? I also noticed people don’t fill up at the pump. Check the pump displays next time you fill up. A Suburban for $40, two sedans at $10 and $15. A woman who told me she only gets $20 each time because it’s too long between pay periods and her husband is thinking of rising his bike to work. A bartender who only puts in $25 because she refuses to pay more than that, so she just goes to the gas station more frequently.

The consumer is running out of steam. I wonder why you say they have kept up the spending? What are you seeing this month? Let’s remember any data out there is dated.

[powayseller]

I don’t believe the Fed serves the people at all. Who the Fed serves is beyond me. If they served banks, why did they set them up for the upcoming mortgage default crisis? I think they try to keep the economy strong, or at least generate the perception it is strong. They don’t care who gets hurt in the process.

[powayseller]

Inflation-adjusted housing is relevant only if wages go up with inflation. It really comes down to what people can afford to buy. Usually you can get a hosue for 3.5 x your wages.

The more accurate indicator to me is a reversal to the mean of per capita income/median housing price. This would give us a 50% correction at today’s wages. I don’t see wages rising much, so I stand by that forecast. Even if wages rise 5%, remember that all excesses overshoot before going to equilibrium.

Good analysis on that inflation stuff though. Housing has gone up 2-3% annually, and people say “with inflation” bec. that’s what inflation was always published to be. Assume the true inflation is 8%, whereas the gov’t says 2%. You could just as easily say that housing has lagged inflation by 6%. So I’m explaining why the inflation correlation to housing prices is not relevant at all. I hope this makes sense.

[powayseller]

Let’s think this through from the supply and demand sides.

Supply: Currently, a large number of SFH are for rent because owners are banking on appreciation. Owner moved and kept house (either as investment or to move back to SD some day), owner moved up to larger home and is renting the former home, owner made investment. Most SFH rentals are the last category. These homes were purchased in the last 3 years, and financed with money from the owner’s other investment properties or primary residence. The glut of these homes has depressed rental prices somewhat.

The owners may be cash-flow negative, but obviously can afford to hang on, or they would have sold by now. If the market turns, these owners, will either get cold feet and cash out, or ride it out.

Any owners with an ARM, may not be able to ride it out. Once the payment adjusts up, they may be forced to sell. Let’s assume 1/3 of SFH rentals will go on the market by 2007, because owners are worried about price drops, or they cannot afford the mortgages any longer.

DEMAND: Demand won’t come from new families to the area, because as we already know, SD has a net loss of people (except illegals). Rental demand comes from people who lose their homes to foreclosure. Two categories come to mind: people who lost their RE related income (realtors, title officers, carpet installers, Home Depot salesperson, appraiser, granite fabricator, plumber). When they lose their job, they will leave San Diego for a cheaper area of the country, or one where construction is still going. Perhaps Texas? Then there are those losing jobs because MEW slows down: retail, restaurants.

The second category of foreclosures is people whose mortgages adjust. They still have their jobs, and will stay in San Diego. Most of those folks just will not have the $5K they need to put a deposit and 1st month’s rent on a house. If you had the $5K to put down a deposit and 1st month’s rent, you wouldn’t be in foreclosure. So how can that group possibly get into a house? Or even an apartment? Do any realtors know what happens to people in foreclosure?

Summary: Supply will go down at the same time that demand goes down. I have no clue which goes down more, and thus, where the price balances out.

[powayseller]

I ignore the 500-word limit comment. That was one person’s opinion on it, and that person can keep to that limit if it suits him. I often have more to say, and so did you Chris. Use up as much page space as you need to make a point.

Do you think it’s a good time to go long on a silver ETF? And then we buy with a stop loss of what?

A Chinese economist recommends that China buys 1900 tons of gold, which will raise the gold price a lot, if they follow through on that. How will the producers know what is happening on the secondary market? The gold producers make only about 2000 tons per year, and there is much much more gold than that traded in the market. How do the producers have inside knowledge of that? I can see that they would, but am just wondering. Trying to understand this all. And do appreciate your patience with us in explaining all this.

[powayseller]

I can only get daily or weekly timeframes. How do you get monthly. It’s not an option.

[powayseller]

The only investment advisers I would trust are those who work for a fee. Commission-based advisers will steer you only to load mutual funds. Otherwise, they don’t get paid. Following the general investment advisor advice, has not been too helpful. I missed out on flipping RE, and the commodities bull. Ask you husband’s advisor what his rate of return was the last 10 years, and then decide if even beat the S&P500. If he didn’t put you into CA real estate, you missed out on 30% annual returns. If he didn’t put you into metals last year, you missed out too. As did I, but I don’t have an advisor I’m supposed to trust.

I just signed up for 2 advisor services: Zeal (thanks, leung lewis for that lead), which is $55/year. Their best tip this month is a Candian lead miner, and they tell you how to get on the Canadian stock exchange and get that company. Also the Yamamoto Forecast, for $350/year. He is putting his clients in 100% cash, 0% stocks. He does everything on a typewriter, so nothing online. But the guy has a great track record. You can write to him at The Yamamoto Forecast, P.O. Box 573, Kahului HI 96733. I’m also looking into options with Chris Johnson, the day trader who posts here, if I can figure out some long term plays. Can’t handle the short term stuff.

Everything I read, including Zeal and Chris Johnson, says the parabolic rise in gold prices indicates speculation. So I’m staying out and waiting for a good entry point.

I bet we have thousands of lurkers here. If anyone has any ideas on where to invest, please jump in.

[powayseller]

My landlord really wants to keep me as a tenant. We’re working on a deal now, where he installs A/C, and bumps up the rent. Amount to be determined. I’m even going to start automatic rent payment into his checking account. So from what you say, that gives me leverage? I don’t know if this area is highly desireable…it is to us.

What happened last time to those foreclosed on? Did they leave the area? If they have jobs, they can stay. Yet, they need $4K – $5K cash to pay deposit and 1st months rent. Not everyone has that much cash laying around, esp. those in foreclosure.

[powayseller]

Sorry to offend. It was a funny joke! I know it got tons of laughs. Lighten up, realtors will be the butt of jokes and criticism a lot, esp. on this site, so you can’t take it personally. It was a general joke, and not directed at you.

[powayseller]

Good reminder on locking in the lease. And thanks for starting a thread. I hope to see more threads from insiders.

What do you think about the possibility of lower rents? I’ve read that as housing prices decline, rents go up. Susan Bies, Fed Res governor, said the rising rents will show up in the CPI.

My landlord wants to be in it for the long term. He will rise out any declines in the market. So if rent goes down, I will be better off to go month-to-month. But if he thinks of selling, I’m better off with a lease.

[powayseller]

4plexowner, how long do you think it will take for the dollar to lose all its value? And are you primarily in gold now? Physical gold, I think you said before.

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