Thursday, 24 April 2008

Nothing much, except the housing crash! 2008-04-09

Wednesday 9th April 2008: What to report? Nothing much, except the housing crash?

Well, today I am reporting that there is nothing to report. The gold price appears to be in some sort of a consolidation in the $910-935 area in the last week or so and no large move has happened since the big selloff of late March. Goldbug rumours abound that the US Government and Fed engineered the selloff, perhaps closing off a large long position held by a leading investment bank that has to be rescued lately. However, this is only conjecture.

There were also big down moves in silver, platinum, palladium and some other commodities at the time, in tandem with gold, so what about the cause of those moves?

Anyway, we are early for the major seasonal correction in gold that usually takes place in May (see the charts for year 2006 and possibly 2004 as possible parallels). Maybe there is time for one more leg up before mid-May but the window is narrow and getting narrower. Instead, the price action may depend more upon the timing of events in the grand credit crunch. It is reported that housing prices in the UK took a 2.5% monthly dip in March, the biggest drop since 1992, reported here UK house prices tumble most since 1992 and here House prices plummet in U.K.

Aren't the news media splendid? First they sucked the public in to the largest investment speculative mania in history with a TV programme every day on some aspect of property, property, property, then as soon as it starts to crumble, they come up with titles like this! Tide turns on ludicrous boom in house prices.

The chart accompanying the article is interesting. House price to income ratio peaked at about 6.25 against a long term average of about 3.5. To revert to the mean would therefore need a price drop of 44%. However, previous swings always go past the mean to the other side. If the ratio drops to where it went in the last downturn (about 2.8 in the mid-1990s), that would imply a decline of 55% from the peak is coming.

This was a media fed boom if anything ever was! The sucker public have been left holding the baby, with monstrous debts and soon to be plummeting equity.

Meanwhile, the TV networks are busy covering the ongoing attempts to sabotage the 2008 Chinese Olympics to distract the masses from this enormous credit/debt disaster that is already at hand. What is the point of worrying about China's human rights record now? None whatsoever, of course. It was relevant only before China's bid was accepted, which was years ago. The bid should have been conditional upon changes being made by China to improve human rights before the decision was made, not after. All this 'concern' over Tibet is just establishment media mischief-making. They don't give a flying f*** about Tibet. China has been doing to well for their liking, as we enter a crisis in the Western world.

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