[tube_ee]

You might want to consider spreading your money out across several credit unions. They’re much more tightly regulated in the loans they can make. While this hurt in the boom times, they’re much less exposed to the coming train wreck than the banks are. I’ll bet that they do much better than the banks do in the coming years.

–Shannon

[tube_ee]

You’ve missed the point entirely.

The physical properties of gold make it useful enough to have some value, sure. But are those properties, and the uses they enable, sufficient to account for the current trading value? Not by a long shot. Those properties and uses create a floor for gold’s value, the point at which it makes sense to buy it for what it is, rather than because somebody else will think it’s worth more.

Look at diamonds. Their industrial value is low enough that if that were the only use, they wouldn’t be worth manufacturing, as most industrial diamonds now are. The rest of their value is purely psychological. This is documented. The DeBeers family executed probably the greatest PR campaign in history to make diamonds desirable, paying actors to use them in movies, huge ad campaigns, all to create the idea that diamonds were associated with love. Prior to the 1920’s, that idea did not exist. And without that association, diamonds would be worth a tiny fraction of what they are now.

Really, all forms of exchange above barter are founded on a collective agreement of “value.” In that sense, all currencies are fiats. Gold is simply one of the oldest of these collective delusions. Magic pixie dust, it ain’t.

None of which should encourage or discourage people from buying and selling the stuff. There’s money to be made and lost, go to it. But the trading value of gold is as much psychological as that of paper money. Granted, the floor value is higher, as gold is useful for more things than high-rag-content paper is, but that use-defined floor is far, far lower than any valuation that could support a gold-based currency.

All money is fiat money.

–Shannon

[tube_ee]

You forget that “precious” metals’ trading value is far in excess of their actual value. The actual use value of these metals is pretty low, in that there aren’t many uses for which they are the only option, and the ones that do exist are fairly limited.

Gold is expensive, not because it is gold, but because we have, collectively, decided that it’s valuable. In reality, it’s not. You can’t eat it, or make stuff very many intrinsically valuable things out of it. It’s not even particularly rare, so even if scarcity defined value, which it doesn’t, (there are lots of rare things that are worthless), gold wouldn’t qualify.

Certain metals are valuable because we’ve all decided that they are. Gold is as much a fiat as paper money. It’s an idea that we’ve all agreed to, and in the absence of that agreement, it’s value drops to it’s use value, which isn’t much.

The “value” of precious metals is, like the value of paper money, psychological. If you really wanted to base currency values on something “real”, you should use oil, or wheat, or something else that has some intrinsic value. Gold doesn’t qualify.

–Shannon

[tube_ee]

Ain’t no kitty in world worth $4000 / month.

As to the poor sap named in the post, he’s making his bed, and deserves to sleep in it. If he signs on the dotted line, he’s screwed. It sounds like he knows it. He should put his foot down, but he won’t. This marriage will end in divorce, and this purchase will end in foreclosure.

I’d say call her bluff now, and when she files for divorce, sue for full custody, no visitation, and child support. Because the alternative is finacial suicide, to make a person happy who is willing to use their own children to get their way. Such people can’t be reasoned with, whether they are male or female.

Full disclosure: I’m a guy. But this isn’t sex-based. My advice, such as it is, would be the same if the genders were reversed, and there are just as many spoiled, self-centered men out there as there are women. I’m fortunate in that my wife and I have had this conversation, and until we can buy something that we want, on a traditional loan, at <30% DTI, we'll rent. That model is coming back. I'm sure of it, because every time the RE industry has gotten away from it, it's been a disaster, and they've come back to it, because it's the only sustainable way to finance residential real estate.

[tube_ee]

Well, maybe the developer could get the land for a buck, just like McMillan did… no, only the San Diego City Council is that stupid.

As to these condos, a company I used to work for did the alarms and option home-theater wiring. There’s no freakin’ way I’d pay over half a million dollars for a condo in da hood, with some of the worst floorplans I’ve ever seen. These tall-n-skinny tcondos would be a total pain in the ass to actually live in. And any potential buyer will see that as soon as they walk in the door and climb all those stairs. Without suicide loans, flippers and 30% / year appreciation, these projects make no sense at all.

Resale value in 2012: 200 – 250K. Maybe less, depending on the amount of pain in the SFR market. Just consider the likely buyers, and what they will be able to afford with 20% down, 30-yr fixed, at the higher interest rates we’re going to see in a year or two. That’s what those people will be able to pay, and that’s what these units will be worth.

Hint: the buyers won’t be lawyers, doctors, engineers, etc. They’ll be teachers, city workers (the shovel-wielding kind), mid-level construction guys… blue-collar or low-paid professional types. If you really want to know where any property is going, combine the target market with real financing, and there’s your value.

–Shannon

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