housing mania VS' PM mania

[97guns]

just wondering if we can expect to see the same type of mania in PM's as we saw in the busted housing mania. in my parts of the woods i remember flipping on the news to see family's waiting days outside model homes for the seller to open. i remember new home sellers doing up a lottory system for the outnumbered potential buyers. i remember bidding wars where sellers were getting 25% and more than their asking price. i remember people at work refinancing their homes to buy a new car, RV, outlandish trips, and the lifestyle of the rich and famous.

just wondering if the potential metal mania that we keep hearing of and that "we are not there yet" will show the same characteristics of the housing mania?

[slvrbck]

IMO the housing mania of the 90's - 2000's was of magnificent proportions and we have yet to feel the total ramifications of this clusterf$%@. I think one of the positive reinforcement pressures on that market was shelter being a basic necessity of life and the powers that be exploiting that fact (along with the notion that we as americans have no clue about living within our means). Metals are NOT a basic necessity of life but have come to play a vital role in american life as we know it. I dont believe the metals bull will be as detrimental to our monetary policies, but then again this bull still has legs.

[stateofmind]

The mania in metals will not be as far reaching as the one in housing had been, but we are beginning to see a "mania" developing in this market, and it could have major implications in the asset prices of metals(namely silver and gold.)

[beauanderos]

When the common folk totally lose faith in the dollar, it will be interesting to see what happens. Will the lines at the coin shops start forming before the prices rise, or will they develop because of the price rises? If the prices reach crazy heights, will it be safe to stand in line with silver you're hoping to sell? Will people come out of the woodwork to sell family heirlooms, or will they hang on for dear life, with greed glittering in their eyes, imagining much higher prices? I think it all depends if silver takes off on it's own, or is dependent upon hyperinflation for a price boost. The longer it takes for silver to launch, the less likely people will be able to afford it as inflation eats up their discretionary income. I'm uncertain which scenario will take place, but I imagine it will be one of two 1) Silver moves up to $35-40 for six months and then nears $50 by end of 2011 2) TSHTF, COMEX collapses, SLV defaults, JPMorgan eats their shorts... and silver explodes past $100 then starts jumping in $5-7 daily increments until it reaches first $200, then $300, and eventually (by 2015) $500 an ounce. Believe it or not, I think either scenario is equally likely.

[HelloMeteor]

When the common folk totally lose faith in the dollar, it will be interesting to see what happens. Will the lines at the coin shops start forming before the prices rise, or will they develop because of the price rises? If the prices reach crazy heights, will it be safe to stand in line with silver you're hoping to sell? Will people come out of the woodwork to sell family heirlooms, or will they hang on for dear life, with greed glittering in their eyes, imagining much higher prices? I think it all depends if silver takes off on it's own, or is dependent upon hyperinflation for a price boost. The longer it takes for silver to launch, the less likely people will be able to afford it as inflation eats up their discretionary income. I'm uncertain which scenario will take place, but I imagine it will be one of two 1) Silver moves up to $35-40 for six months and then nears $50 by end of 2011 2) TSHTF, COMEX collapses, SLV defaults, JPMorgan eats their shorts... and silver explodes past $100 then starts jumping in $5-7 daily increments until it reaches first $200, then $300, and eventually (by 2015) $500 an ounce. Believe it or not, I think either scenario is equally likely.

What justification is there for a $500 price. Don't get me wrong, I like silver, but I read stuff like this and think people must be dreaming. You really think in 5 years silver will return 1000%+ nominally?

[BamaJoe]

When the common folk totally lose faith in the dollar, it will be interesting to see what happens. Will the lines at the coin shops start forming before the prices rise, or will they develop because of the price rises? If the prices reach crazy heights, will it be safe to stand in line with silver you're hoping to sell? Will people come out of the woodwork to sell family heirlooms, or will they hang on for dear life, with greed glittering in their eyes, imagining much higher prices? I think it all depends if silver takes off on it's own, or is dependent upon hyperinflation for a price boost. The longer it takes for silver to launch, the less likely people will be able to afford it as inflation eats up their discretionary income. I'm uncertain which scenario will take place, but I imagine it will be one of two 1) Silver moves up to $35-40 for six months and then nears $50 by end of 2011 2) TSHTF, COMEX collapses, SLV defaults, JPMorgan eats their shorts... and silver explodes past $100 then starts jumping in $5-7 daily increments until it reaches first $200, then $300, and eventually (by 2015) $500 an ounce. Believe it or not, I think either scenario is equally likely.

What justification is there for a $500 price. Don't get me wrong, I like silver, but I read stuff like this and think people must be dreaming. You really think in 5 years silver will return 1000%+ nominally?

We've seen over a 500% increase in the price of pm's in the last decade with a relatively stable dollar and just minor to moderate financial troubles. In a major TSHTF situation such as Beauanderos describes a 1000% (or more) increase would be very likely. Of course, don't plan on paying the same for gas, milk, etc. as you are today.

[misteroman]

The rapture will come long before $500 Silver. I think what is driving the price of silver up now is a few major private billionaires buying secretly and under the radar. Who knows there could be a few of the bigger buyers on here that might be the same person or a couple of friends. There are MANY people in the world who could spend 50 million and not even really think about it. 10K a day is 3.6 million in a yr. 1 1K oz a week is 28K a week. There are many places you could buy a 1K oz bar in the worl. Just buy 1 a week from a bunch of different places and you could make your own dent after awhile.

[silverflake]

In regard to price of silver, if you haven't read any of Ted Butlers stuff over the last ten years READ IT! But if you are talking about the price of any kind of asset like the tech stocks of the 1990s or housing in the 2000s, the price never starts it's parabolic rise until the 'public' gets in on it. Well I can tell you, judging from the chatter at my water cooler/coffe maker at work that the public is definitely NOT in on silver (or gold for that matter). They still talk about owning equities even after watching their savings get whacked 60% in 2007-2008 then re-inflated by 70% in 2009-2010. Silver has had a 500+ percent rise over the last 8 years but it's been a slow steady rise (though this year was extra bullish- weak dollar and the whole JP Morgan investigation probably). So it may be a bumpy ride for silver the next year or 2 but I do believe higher prices are on the horizon. You want a prediction from this average Joe (with no business degree or economics degree)? I say we head back up to $50/ounce where we hit major psychological resistance because of the high from January 1980. From there I say it's fifty-fifty. It either breaks above where there's nothing holding it back from the moon (I read that $180/ounce is the inflation adjusted equivalent of $50/ounce in 1980) or it sinks back to some new supportive level where it stays for another generation (it's all cyclical isn't it?). One last thing, for about 5000 years the gold to silver ratio was 17:1 thus gold was priced at 17 times the price of silver (based on it's availability in the ground). If this resets itself (with JP Morgan out of the way now) that would mean silver would have to increase CONSIDERABLY or gold decrease considerably or they meet in the middle. It seems theres more argument for a further rise in silver. My two cents worth (copper, of course).

[Beau]

In regard to price of silver, if you haven't read any of Ted Butlers stuff over the last ten years READ IT! But if you are talking about the price of any kind of asset like the tech stocks of the 1990s or housing in the 2000s, the price never starts it's parabolic rise until the 'public' gets in on it. Well I can tell you, judging from the chatter at my water cooler/coffe maker at work that the public is definitely NOT in on silver (or gold for that matter). They still talk about owning equities even after watching their savings get whacked 60% in 2007-2008 then re-inflated by 70% in 2009-2010. Silver has had a 500+ percent rise over the last 8 years but it's been a slow steady rise (though this year was extra bullish- weak dollar and the whole JP Morgan investigation probably). So it may be a bumpy ride for silver the next year or 2 but I do believe higher prices are on the horizon. You want a prediction from this average Joe (with no business degree or economics degree)? I say we head back up to $50/ounce where we hit major psychological resistance because of the high from January 1980. From there I say it's fifty-fifty. It either breaks above where there's nothing holding it back from the moon (I read that $180/ounce is the inflation adjusted equivalent of $50/ounce in 1980) or it sinks back to some new supportive level where it stays for another generation (it's all cyclical isn't it?). One last thing, for about 5000 years the gold to silver ratio was 17:1 thus gold was priced at 17 times the price of silver (based on it's availability in the ground). If this resets itself (with JP Morgan out of the way now) that would mean silver would have to increase CONSIDERABLY or gold decrease considerably or they meet in the middle. It seems theres more argument for a further rise in silver. My two cents worth (copper, of course).

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silver flake sounds like a real plan.
only your 7th post and you are up on it.
keep up the good work!


.

[Market Harmony]

Mania? We are nowhere near it... Barely any American of common means and average intelligence knows anything close to what they should know about PM's

When they *think* they know what they are doing, you will see them first buying into PM's at any price, and then using their positions as collateral for loans to get something else. So many common Americans of average intelligence are addicted to debt and their behavior will not change just because they found PM's...

The days when you see many companies catering to people who want to use their 500 oz of silver to back a loan to improve their house, is when you need to begin selling all of your PM's, build cash, and wait for the second housing crash so you can scoop up quality assets on the ultra cheap as a round of deflation hits us. I can't wait to see the TV commercials... "Send us your gold and get a great loan!!!"

But we are years and years away from this.

[commoncents]

The mania will be here when
1. much or most of the mania item (houses,metals,tulip bulbs, whatever) is being bought with borrowed money (leverage)
2. people that have little financial depth or financial education are buying the mania item
3. the buyers of the mania item call it an investment when actually it is a speculation
(it's an investment when the risks are calculateable. it's a speculation when the risks are a wild guess)

[Lemon Thrower]

if you look at the run up in the 70s, gold went up to 850 which is about 24x. 24 times 250 gets you to 6,000 gold, and at 15 GSR is 400 silver. those were peak numbers but you get the idea. of course those were peaks because confidence in paper money was restored. this time, there is an increasing decline in the confidence of papermoney, and its almost universal. so all bets are off.

you are on pretty thin ground forecasting 6000 gold and 400 silver, one just can't know what is going to happen, but there is precedent for that much of an increase. if all paper money fails, then what some analysts do is divided say all us govt bonds by gold owned by the us govt and they get a figure of about $37,000 gold. so there is a method to the madness, so to speak, just not a clear path regarding what is going to happen.

[beauanderos]

LT is correct. No one, regardless of the number of acronymed credentials behind their names, nor the years they have spent toiling in the precious metals markets as geological experts, can accurately foretell what will occur... but that doesn't mean their predictions are way off base. Considering what happened to palladium when Ford panicked years ago, an example of price runups based on perceived scarcity of resource supply exists. But what happens when the scarcity is not just perception, but actuality? And demand for that resource is building daily in part due to investors eager to both utilize the safe haven function of the commodity as money preserving purchasing power and/or to attempt to profit from an anticipated rapid upward acceleration in nominal value when priced in the plummeting currencies wherever these individuals reside? All fiat currencies are in a race to devalue, so a portion of silver's increase will be due just to repricing, though it's unlikely it will be a precise linear correlation. But as more and more individuals awaken to the opportunity presented by silver, this tiny market will explode, despite attempts to keep price suppressed by entities keen to do so. And if, indeed, the above-ground silver stores are within mere months of being exhausted, and foreward supply demand equations correct that we are actually in as much as a 200 million ounce per year deficit (rather than the numbers presented by GMFS) as a result of ever-increasing investment market demand, then a scenario which paints a rapidly-increasing silver price, perhaps not unlike 1979-1980... or possibly surpassing that example, is not impossible. Unexpected? Sure, I'll give you that... due to normalcy bias. Improbable? Not if what I've predicated develops to be real. Possible? Yes... but the time frame is impossible to foretell. Probable? Without a doubt, although the timetable might approach a decade, as the longer such a repricing takes to occur, the quicker the runup will be when it finally does, since REAL resource depletion is actual and ongoing. Got Silver?

[Treetop]

My prediction----I think by the time there is a REAL run-up in silver most of you will be trading it for food. Although it might be much higher by then as I see this as a few years off at least. By this point what it is worth in paper will be meaningless. It would be wise to be able to produce your own food, and OWN your home by this point imo. then as things start normalizing somewhat, if you didnt all ready trade your stack for food, you will e in a position to use it for wealth generation. Though i dont know the fundamentals to investing as well as many here, i dont believe you all are fully acknowledging many other things going on in the geo political sphere, not that I intend to get into it.

[AGgressive Metal]

No one is taking out 30 year $500,000 loans to buy silver. Nuff said.

[camtender]

One thing to remember is that the number one factor in determining real estate prices is the availability of credit, period......... If historical underwriting standards had been in place the last 10 to 15 years, the housing bubble would not have been so inflated by people that were not credit worthy........or had jobs........or any assets/reserves..........................

So, from the demand side, the US consumer will be not have access to credit like they did during the housing boom. However, save FMN, Big Mac and MBS purchases, the government does not usually purchase real estate, but most central banks are.

I think the demand side will come from Asia consumers and all cental banks around the globe. You might not hear of people talk about buying PM around the water cooler because they have no money - focus away from the US consumber and look for the demand from the global perspective.

Point, look for your contacts here in US to miss the whole boat because they are cash straped even before the boom really starts.

[beauanderos]

Nearly all of the staff in the dialysis clinic where I work as an RN are working two, some three jobs, just to survive. They are barely making it and some have lost homes to foreclosures, others are taking out payday loans at usurious rates. They have no money for investments so I don't even try to convert them from fiat. I think that, at most, perhaps five to ten percent of Americans might be thinking of buying some precious metals, but how many will actually do so? 1% of that cohort? Anyone earning under $80,000 a year will not be able to apportion enough to dramatically alter their lives due to sudden windfalls via PM's price rise. The increase in investment demand will definitely come predominantly from elsewhere than the American public.

[TXBullion]

A lot of real estate is local. In general, I believe that there will be a decline in prices before stabilization occurs. Certain economic fundamentals still dont make sense in my opinion . But that isn't really part of this topic....

[camtender]

I have always heard (but don't have any direct knowledge) that citizens of China save around 40% to 50% of thier pay. I think that would really be the game changer if 1.4 billion people (no matter how small a savings per household) started to invest in PMs.

[aristobolus]

I bet my wife and I could save at a much higher rate if we were forced (at threat of an abortion) to have only one child per family.

[misteroman]

More people need to read dave ramseys book. I wish I would've started being smarter about 10 yrs ago. Was making close to $75K a yr take home with NO BILLS!!!!!!! But at age 24 you start doing stupid thing if you aren't disciplined. Thank God I had pretty good financial sense and wasnt "too stupid" or it could've been bad. but man I miss buying mercs at the coin shop for $.35!!!!!!!!!!!!!

[camtender]

Dave Ramsey, where do I start..................

First, he has the best message regarding living within you means, common knowledge for many – but many come from families where they were taught at young age to buy new Caddy every two years and so on………... Spend less than you make, don’t purchase new vehicles and invest in assets and not liabilities. Some of the ideas and medium of delivery I have heard.

However, then there is the investment Dave Ramsey. I saw a video circa 2006 and told people to diversity their stock holdings. His suggesting, BofA , Citigroup, AIG………….. I guess he does not understand the terms diversify and sector investing is not compatible.
He has also stated that “gold was the weirdest investment” he has ever heard, just look up "Dave Ramsey and gold" in youtube.

If you wanted to become wealthy via equities, real estate and commodities, would ask as a wealthy person who made good investments, or someone one who went bankrupt investing in real estate and then became wealthy selling people materials on how to invest?

Also, anyone who does not know 1) what the term “Bretton Woods”, 2) does not know that it was a felony for US citizen in the US to hold 5+ ounces of gold coin bullion from 1933 to 1974, 3) says gold has been a poor investment over the “long term” is clearly lacking in understanding of monetary history and should not speak to others about what they should invest in.

In addition, can you be a competent investor if you do know what money is? Should you be talking to other people on how they should invest.

And finally, many people follow Dave because he is a Christian, I am too. However, if you listen to the interview (on youtube too) with Peter Schiff, and how Dave handled himself, I am embarrassed for Dave and now distance myself from him anytime I can.

[Pennysaved]

Part of the problem with real estate was there was so much easy money out there; people were lying on their mortgage applications and moving into homes with nothing down.

How many bankers would lend someone $10k to buy silver or gold? Probably none. So, I don't think the precious metal market will have the same boom & bust cycle as real estate did.

***
Personally, I do think investing in real estate is a good idea if you can do it smartly.

When inflation hits, everything will go up in value including real estate.

Being a renter in an inflationary environment will not be a good thing, rents can be increased; at least when you have a mortgage, the mortgage is usually a fixed payment.

[camtender]

***
Personally, I do think investing in real estate is a good idea if you can do it smartly.

When inflation hits, everything will go up in value including real estate.

Being a renter in an inflationary environment will not be a good thing, rents can be increased; at least when you have a mortgage, the mortgage is usually a fixed payment.

Maybe…… What if the costs of life’s necessities are so much of people’s incomes that they can only afford minimal housing costs? I realize that housing is a necessity, however, at some point a large house - say 3,500sf for a family of three - is discretionary – because food and other things will always come first.

Also, there is a lot of consolidation of families right now. Some forced - some by choice.

It’s hard to say where residential real estate is headed the next 2 to 10 years out, however, if history is any indicator, the RE market will way over correct – just look how hard it is to get a loan now– and homes should l become way too cheap and then a good investment.

[Pennysaved]

Well, I have just seen some quotes on zillow. There are some nice condos in AZ that are selling for $70k. Even before the big boom, they were selling for $110k.

They had one of those mortgage calculators that estimated the cost per month to be $358 for a 30 year fixed.

Rental condos in that same complex are going for around $800 per month.

Granted I know you have to take into consideration taxes, repairs, etc.

But locking in a price now, may be better than renting and rents continue to go up.

I am a landlord and the rental market is definitely stronger this year vs '08 and '09.

People are scared to buy or they have such bad credit that they can't buy.

Some people say rich people invest in things that the general public are too scared to invest in.

Maybe real estate would be one of those investments?

Granted I would much rather invest in precious metals than real estate right now.

But I would prefer any hard asset (real estate and precious metals) vs stocks, bonds, and other worthless paper.