Mover Mike

I subscribe to Le Metropole Cafe.

The Cafe is a place where investors from all over the world can meet to discuss the vibrant economic and financial issues of the day. The specialties of the house are the precious metals markets and commentary which appeals to contrarians.

Sometimes what I read sends me off in all sorts of directions. Today I learned that a National Association of Realtors study released March 1, 2005 says that second home purchases surged and that about one in three homes purchased in 2004 were either for investment (23%) or vacation homes (13%).

For properties purchased between mid-2003 and mid-2004, the median price of a vacation home was $190,000 compared with $148,000 for investment homes. In contrast with the last available full-year price data in 2001, vacation homes have appreciated 12.8 percent from $168,500, and investment homes have risen 25.4 percent from $118,000.(emphasis added)

That article led me to this article Put 10% of your assets in gold and pray it doesn’t work. written by Richard J. Greene of Thunder Capital Management Among the major reasons why gold should be an important part of all portfolios are:

1. Out of control government spending with budget and trade deficits;
2. Negative real interest rates;
3. Tremendous leverage coupled with misallocated capital;
4. Continual importation of deflation, killing pricing power and jobs;
5. Demand is rising while production is declining;
6. Gold has a negative beta which should offset times when stocks decline;
7. We are in a war environment which has historically been very inflationary;
8. Financial derivatives are out of control and hiding huge financial failures;
9. Energy prices are hitting all time highs as well as many other commodities;
10. The relative size of the gold market is tiny with the bulk of inflows yet to come;
11. The biggest growers and savers (Asians) are already moving into gold;
12. Huge short positions in gold and silver that may not be possible to cover; and
13. Foreign buying of US debt is waning which should exacerbate money printing.

Which led me to this article written in March of 2004: Fiat Money Systems

A brief perusal of history will show that when a nation went on a gold standard it was the beginning of a very long period of that nation thriving. When a country went to a fiat currency there was a period, as long or longer than 30 years, in which it thrived even more. However, during that period of prosperity on a fiat currency, excesses began to build. Once they have built up to extreme levels, it is a very dangerous time. When levels of debt become too excessive, an increasing amount of the rewards of production; profits, must go to servicing debt. When the servicing of debt consumes all of the profits of production, it finally consumes production itself.

1971 - President Nixon closed the gold window, ending convertibility of dollars to gold and committed the US to a Fiat Currency.