01/13/11 Baltimore, Maryland – Home prices have now fallen farther from their peak than happened during the Great Depression.
Sorting through the news this morning, we detect a common thread: IOUs gone bad and the inevitable response – a search for tangible wealth.
Since 2006, the average home price has fallen 26%, according to Zillow.com. That’s a greater percentage than the 25.9% drop registered from the plunge that helped kick off the Great Depression from 1928-1933.
And for the record, home prices have now fallen for 53 straight months. They fell 0.78% in November, the fastest pace since February 2009.
Still, that trend remains in the works. Look for a 20% increase in the number of foreclosure filings this year, says RealtyTrac.
The real estate forecasting firm says 2.87 million homes got a notice of default, auction or repossession last year – up only 2% from 2009. The foreclosure pace slowed briefly during Q4 2010 following the “robo-signing” scandal.
But the pace is already picking up again: Foreclosures grew 4% between November and December. “There are 5 million seriously delinquent loans not yet in foreclosure,” says RealtyTrac’s Rick Sharga. “They’ve got to eventually get in the pipeline unless the homeowners cure the defaults.”
That ultimate in paper promises, the US dollar, is taking a severe hit today. The dollar index has tumbled to 79.1, its lowest level so far in 2011.
Ordinarily, this would put some wind in the sails of gold, but not today. The spot price sits at $1,384. No doubt this will give cheer to the “gold-is-a-bubble” crowd…but overnight Byron King sent us a compelling pie graph that tells us how gold still pales in comparison to other assets:
That’s impressive enough… But when you look at it historically, it’s simply staggering. Here’s a chart sent our way by Gold Switzerland’s Egon von Greyerz, showing gold and gold stocks as a percentage of global assets:
Dare we point out that all four of those larger bars happened to mark major stock market bottoms?
Addison Wiggin
for The Daily Reckoning
Addison Wiggin
Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He’s the creator and editorial director of Agora Financial’s daily 5 Min. Forecast and editorial director of The Daily Reckoning. Wiggin is the founder of Agora Entertainment, executive producer and co-writer of I.O.U.S.A., which was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival, the 2009 Critics Choice Award for Best Documentary Feature, and was also shortlisted for a 2009 Academy Award. He is the author of the companion book of the film I.O.U.S.A.and his second edition of The Demise of the Dollar… and Why it’s Even Better for Your Investments was just fully revised and updated. Wiggin is a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post as well as major network news programs. He also co-authored international bestsellers Financial Reckoning Day and Empire of Debt with Bill Bonner.
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everyone is a bubble expert: in terms of bubble – we can get lazy here with definitions – it is the pace of the gold price increase that is the issue – the gold can continue to trend upwards, but if the price is increasing at a pace greater than exponential growth – then it has bubble attributes – and so the price increase is unsustainable – it can crash or correct slowly over time and still continue its upward path = look at oil in 2007, no-one suggests oil is not in a upward price trend, but it got wawy froma sustainable pace in 2007, corrected and now is going back up
Even if one assumes that the percentage of global assets picture can repeat and match that of the other four 20ish% levels, gold prices don’t necessarilly have to go up if non-gold global assets revalue to extremely lower levels (levels that may allow people to withdraw their remaining money from banks without causing bank failures).
Even if we assume that the percentage of global assets picture can repeat and match those other 20%ish data points, gold prices do not necessarilly have to increase if non-gold assets revalue to an extremely lower level (a level perhaps as low as would allow people to withdraw their remaining money from the banks without causing bank failures).
What were the reserve ratio requirements for most banks at each of those other 4 data points?
If those history can repeat and return to a level greater than 20% of global assets, gold doesn’t have to go up if all non-gold related assets go down… down to a level perhaps at which people would be able to withdraw their remaining wealth from banks and ATMs without causing bank failures.
That’s a pretty impressive pie chart! I get the point that gold is not overvalued in purely dollar terms.
I’m not sure what Financial Assets are but am guessing they are pieces of paper that are meant to represent something real? Weed out financial BS; the derivatives, CDO’s and other leveraged trash and suddenly gold goes up in dollar value.
I’ll take that sliver of gold – any day of the week.
Wiggins said (his last sentence):
Dare we point out that all four of those larger (Gold) bars happened to mark major stock market bottoms?
So, umm, where if the high Gold bar associated with the major stock market bottom of March 2009?
And where was Gold at the market peaks, presumably at a lower percent… but how low? Nothing like its tiny level in 2009 I suspect.