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by 300bps
4111 days ago
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This was addressed in the first page of the article. Gold in the form of coins or bullion is a commodity with high resale value. Gold in the form of jewelry is a luxury item with extremely low resale value. You can't compare the two. You can even hoard gold under your bed and buy gold coins and bullion (albeit at a ~10% premium to market rates). If you want to hoard gold jewelry however, there is typically a 100-400% retail markup so that’s probably not a wise investment. Your comments on land are closer to accurate but neglect to point out the massive leverage common in such an investment. You can effectively buy a $200,000 asset with only putting $40,000 (or even less) down. If you get a 20% appreciation in the asset over a period of time you've doubled your money. You also get a tax deduction on the interest from the loan and rates are ridiculously low right now. |
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If the price goes down 20% over a period of time, you've wiped out your investment. Free leverage is neutral to expected value, and leverage with interest has a negative impact on expected value.
The real value in residential real estate is the fact that the US government is prepared to spend unlimited amounts of money to make sure you don't lose your shirt. Because something something yeoman farmers. However, that means there's also a unique risk to bear. Just as the goldbug needs a greater fool to want his shiny, so to the real estate owner needs a government in place that will continue to massively subsidize the individual ownership of residential real estate. The US government, today and for the last 7 years, has issued, bought, or guaranteed the lion's share of residential mortgages. Take that away and prices fall dramatically.