Why invest in Gold ?

Valley tackles cooling market

Catherine Reagor, Glen Creno, & Ryan Konig
The Arizona Republic
Mar. 5, 2006 12:00 AM


Metropolitan Phoenix's housing market started 2005 with a bang but ended it amid concerns of a price bubble. Home values soared and houses sold within days in most neighborhoods during the first six months of the year. But then investors began to bail, listings climbed and asking prices stared surpassing home appraisals.

By September, the market was showing signs of cooling. In October, home prices slipped slightly.

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The Arizona Republic's Valley Home Values analysis of housing prices and sales by postal ZIP codes that shows all neighborhoods racked up big gains early in 2005. Increases from 30 to 50 percent were common as metropolitan Phoenix led the country in percentage gain of housing price. But prices began to level or dip during the last three months of the year.

The slowing has continued this year with metropolitan Phoenix's overall median existing home prices inching down again. Resale listings exceeded 30,000 in January, nearly nine times the level of the same month of last year, says the Arizona Regional Multiple Listing Service. Selling time increased from about 5 1/2 days to 49. Sellers are frustrated because they are getting few offers, and many are cutting prices. Buyers seeing the slowing have become much more cautious.

Neil Brooks, a Century 21 agent in northeast Phoenix, said shoppers are trying lowball offers of $30,000 to $50,000 less than asking prices as a starting spot in negotiations.

"Last year, it was the sellers who were being very aggressive, and now it's the buyers," he said. "There's so much inventory, they can sit back and spend their time looking at bazillions of homes."

Most real estate market watchers say the Valley's housing market is only reverting to a stable one after last year's frenzy. Metropolitan Phoenix led the nation for home price increases with an almost 50 percent run-up during 2005. And that price includes a few dips late in the year.

Now sellers need to be more realistic and realize their homes aren't going to be sold in just a few days, or a couple of hours, for thousands more than they are worth.

"The market has done a complete about-face," said Barbara Sage, a northwest Valley and Sun City specialist at ERA Encore Realty. "Last year, 14 offers for a home would come across at once, clogging up the fax machine."

Now, she said, after showing a property the seller's agent will call and tell her the "owner is anxious to sell." She tells them with a "yawn" that her buyer has a few more properties to look at.

"The days of multiple offers made on sight-unseen properties and offers well above list price are gone for now," said Cecil Duarte of Serving Valleywide Realty. "The market has softened. Inventory ballooned, and the days are here again for buyers to negotiate on price, terms and even seller contributions toward closing costs."

"Homes lasting on the market longer will affect prices," he said. "If we get that speculated 'dump and run' by investors, I expect to see prices to get competitive, and sellers offering incentives like they did in the early 1990s."

The slowdown has hit the new-home market as well. Builders that were overwhelmed with demand a year ago now are offering such freebies as thousands off spec homes, free pools or price cuts on upgrades to bring back the buyers. Top players and industry analysts disagree about the prospects for this year after a record 2005 when 63,570 new homes were permitted in the Valley.

Some look for a performance similar to last year as population gains and new jobs keep buyers coming. Others look for a steeper decline. The new-home median price increased nearly $100,000 to $299,000 last year, said analyst RL Brown, publisher of the Phoenix Housing Market Letter. And there is worry across the board that even with demand softening, higher costs for land and for materials, labor and city-approvals are pushing new-home prices beyond the comfort level of the mass-market buyer that volume builders rely on. High prices also remove a key incentive for people to move to Arizona.


Healthy slowdown


"Those kind of price increases cannot be sustained," said Brown, who sees a slowing market as a positive change and predicts a 4 percent price increase for new homes this year.

Doug Fulton, of Tempe-based Fulton Homes, said the slowdown was obvious to him on a recent flying tour of Pinal County. He said the number of new-house slabs in Maricopa was down by a third or more compared with six months ago.
 
Keep working Jose.. Man retirement is Great, I love it.
Eh Jose i don`t want to be Bill Gates or the Richest man in the world.

I retired at age 40 [disability] and have subsidized my retirement with good investments.. [ you should have bought "crispy creme" when it went public]:)
then sell when it peaked... Hoser i would`nt buy Auto stocks in the next few years... but thats you..:eek: .Lets compare your GM to gold over the next 6 months or 2 years.hump
 
CJ,
With all your whining about Illegal Aliens, it sure seems like lots of people want to live in Phoenix despite all your dire complaints about the quality of life being ruined by Illegals. It looks like you should than Illegals for the value in real estate increasing.
 
JoseCuervo said:
CJ,
With all your whining about Illegal Aliens, it sure seems like lots of people want to live in Phoenix despite all your dire complaints about the quality of life being ruined by Illegals. It looks like you should than Illegals for the value in real estate increasing.

W.T.F. Are you drunk?... put down the Bong! or pass that Dubie.. i need some by now.:cool:
 
cjcj said:
Keep working Jose.. Man retirement is Great, I love it.
Eh Jose i don`t want to be Bill Gates or the Richest man in the world.

I retired at age 40 [disability] and have subsidized my retirement with good investments.. [ you should have bought "crispy creme" when it went public]
then sell when it peaked... Hoser i would`nt buy Auto stocks in the next few years... but that you...Lets compare your GM to gold over the next 6 months or 2 years.

CJ,
Do you even know what Shorting means???? Where did I say to buy GM? I said if you were against it, you should Short it. I won't even buy GM products, why would I buy the stock?

As for the two richest guys, neither one of them got there buy buying gold. One got there buy selling Software of questionable merit, and the other got there buy investing in the Stock Market and doing a pretty good job of it.

After you get past the entrepenuers and the Investors, the next group of guys who built large fortunes in wealth used Real Estate (think Trump and the other NYC developers....).
 
My biggest kill [ making money] will be when i sell my land [5 acres]or another property [also land.] but the fastest, large amount of money i made was in houses. but that trend is over for now. [for me].. why would we argue about real estate? I love it!:confused:
 
Once in a while I tune into AM radio and listen to various right-wing nut jobs like Rush Limbaugh.

They advertise about investing in gold....

I see a direct correlation to hunttalk. Based on the fact that cjcj and Rush both think gold is a good investment, I'll shy away and keep my money invested elsewhere.

I dont trust pirates either.
 
So Buzz investing in hard assets[Gold] is a right wing thing?
And you listen to Rush Limburger?

Buzz i heard Al Fraken and Ed Shultz pushing gold too, i`m surprised you didn`t run out and but $50.oo worth.

At least go buy your wife a nice herring bone Gold Necklace... you might get lucky., plus it will look great on her.:)

Yep i agree "YOU" should never ever invest in anything, except safe government holdings.....your house went up less than 20% last year... Thats pathetic! I guess you can`t move to Phx. unless its south phx.
 
cjcj,

You're right, I'm not a big risk taker. I like the "secure" government investment I make. Kind of tough to find anything else that pays 115% return on 3% of my gross income and 65% return on another 2% of my gross income.

I'll watch closely to see if gold increases 115% in the next couple months.

I wouldnt want to live in Phoenix, been down here the last 6 weeks and its not for me, so I guess its OK that my property value has only averaged 11.5% over the last 6 years. Not bad for Wyoming though.
 
Gold is a vanity metal with little industrial use. Sure you can make bullets out of it, or fishing weights, but lead is much more economical. If gold is such a great investment, why do they have to pump it so hard? Enough said.
 
BigHornRam said:
Gold is a vanity metal with little industrial use. Sure you can make bullets out of it, or fishing weights, but lead is much more economical. If gold is such a great investment, why do they have to pump it so hard? Enough said.

BHR,
Gold has some physical properties that make it THE superior industrial metal for many uses. Tear apart your computer and you will find gold plated connectors and cables all over inside.
 
Wyodeerhunter said:
i heard all the illegals are coming to america and buying up all the gold......

Hey my old buddy Ernesto... gee and you were always ranting about how poor those illegals were! now their buying precious metals... and taking big game tags too.. Glad that you have Seen the light.:)
 
BuzzH said:
cjcj,

You're right, I'm not a big risk taker. I like the "secure" government investment I make. Kind of tough to find anything else that pays 115% return on 3% of my gross income and 65% return on another 2% of my gross income.

I'll watch closely to see if gold increases 115% in the next couple months.

I wouldnt want to live in Phoenix, been down here the last 6 weeks and its not for me, so I guess its OK that my property value has only averaged 11.5% over the last 6 years. Not bad for Wyoming though.

Buzz i don`t blame you i wouldn`t want to live in Phx. either

And you know i don`t fault you for your lifestyle [tags every year etc,etc,] or where you live.

But please, i`m begging you tell me how to get a 115% return on any investment in a couple of months. your logic is a little skewered. [ bad comparison]

I had a similar retirement plan with Sperry/ Honeywell they matched 50 cents on the dollar up to 7%. Good deal.. but it never made the money that i did on my own [investing]...and the best thing about it [T.Rowe Price] you could borrow against your retirement. and you got to keep all the interest as you payed it back....As long as Gold keeps rising i will stay in.
 
JoseCuervo said:
I always feel bad for the old people that have to sell their home/land for their retirement. Kinda sad. :(

Don`t feel sorry for me Jose... I know for a fact that i have more money in my wallet than you do.:D
 
I don't invest in gold but I found this and thought it might fit into the discussion

Ten Rules For Investing In Gold

1. An investment in gold should be based on macroeconomic considerations. If one expects or fears rising inflation, destabilizing deflation, a bear market in stocks or bonds, or financial turmoil, gold should do well and exposure is warranted.

2. Understanding the internal dynamics of the gold market can be helpful as to investment timing issues. For example, the weekly position reports of commodity trading funds or sentiment indicators offer useful clues as to entry or exit points for active trading strategies. Reports on physical demand for jewelry, industrial, and other uses compiled by various sources also provide some perspective. However, none of these considerations, non monetary in nature, yield any insight as to the broad market trend. The same can be said for reports of central bank selling and lending activity. Central banks are bureaucratic institutions and in their judgements they are essentially market trend followers.

3. Excessive reliance on trading strategies to generate returns can be dangerous and counterproductive. Returns from a "buy and hold" strategy should be more than sufficient to compensate for the inherent volatility. Many who have tried to outsmart this market by hyperactive trading have under performed. Success is dependent in large part on the occurrence of "fat tail" events that lie outside the parameters of trading models.

4. A reasonable allocation in a conservative, diversified portfolio is 0 to 3% during a gold bear market and 5% to10% during a bull market.

5. Equities of gold mining companies offer greater leverage than direct ownership of the metal itself. Gold equities tend to appear expensive in comparison to those of conventional companies because they contain an imbedded option component for a possible rise in the gold price. The share price sensitivity to a hypothetical rise in metal price is related to the cash flow from current production as well as the valuation impact on proven and probable reserves.

6. The carnage of the last twenty years has simplified the task of individual stock selection because so few have survived the gold bear market. Although a rising tide may lift most boats, financial statements should be reviewed with special attention to hedging arrangements that could undermine participation in higher gold prices or even jeopardize financial stability. Individual stock selection is less important than identification of the primary trend.

7. Even though gold itself is a conservative investment, "gold fever" attracts a crowd of speculators, promoters, and charlatans who only want to separate investors from their money. Avoid offbeat "exploration" companies with little or no current production and gargantuan appetites for new money.
8. Bullion or coins are a more conservative way to invest in gold than through the equities. In addition, there is greater liquidity for large pools of capital. Investing in the physical metal requires scrutinizing the custodial arrangements and the creditworthiness of the financial institution. Do not mistake the promise of a financial institution to settle based on the gold price, for example, a "gold certificate" or a "structured note", (i.e. derivative), for the actual physical possession of the metal. Insist on possession in a segregated vault, subject to unscheduled audits, and inaccessible to the trading arrangements or financial interest of the financial institution.

9. Gold is a controversial, anti establishment investment. Therefore, do not rely on conventional financial media and brokerage house commentary. In this area, such commentary is even more misleading and ill informed than usual.

10. Don't settle for too little. Should outlier events now deemed unimaginable by consensus thinking actually occur, the price target for gold would be several multiples of its current depressed price. Gold represents insurance against some sort of financial catastrophe. The magnitude of the upside is a function of the amount of paper assets that would be converted to gold irrespective of price.
 
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