patrick.net

Had I know about it, I probably would have bought the $60 bottle just for “investment”.

BSC Puts would have been good investment too. :)

oh i see. thanks Peter.

OO,

You got it. Ridge "Montebello" cabs are wonderful but too pricey for mere mortals like me.

One of the guys I worked with at Lockheed played in a string quartet with Paul Draper so during the 1980's I got lots of Ridge Montebello cab at music parties I was invited to.

HK, isn't this the place where we forest fires every other year? I still remember driving around there in 03-04 with burning bushes on either side of the freeway.

It's odd and ironic that the Santa Clara county town of Cupertino was named by its Italian settlers after the Copertino wine area in Italy.

www.laterradipuglia.it/ing/wines/copertino.htm

yeah you could all of SoCal gets the brush fires.

remember the 4 seasons of CA: Fire,Mudslide,Earthquake, Riot.

Currently its earthquake season but fire is around the corner. Always something to look forward to!

Speaking of fires, in some places it is illegal to overinsure a house. I wonder if insurance companies anywhere are lowering the payout to match the declining value of the insured house. If so, I presume many houses have mortgage balances that exceed the insured amount.

Check out the latest H.4.1 release. BEN HOLDS THE LINE! Previous week saw an increase in credit of around $9 billion; well, this week credit contracted by $9 billion. Oh, and the "discount window to non-depositories" aka Primary dealer credit facility (first time since the Great Depression!) increased by almost $20 billion. How could Ben be trying to hold the line against inflation you ask? The Fed sold $47 billion worth of Treauries. Approximately $629 billion of ammo (excuse me, Treasuries) are now left. Did I miss anything? Oh, repos increase by $23 billion and JPM paid off their non-recourse line ($5.5 billion).

EBGuy Says:

> If I ever go to a BA blog party (anybody know of any high
> end foreclosures where we can have a “no host” party) ,

I wonder if this was a blog party?

“Bakersfield police broke up a party at another vacant home in south Bakersfield, and concerned neighbors hope it was the last… Officers took two untapped kegs of beer, DJ equipment, cups and a folding table”

http://www.kget.com/news/local/story.aspx?content_id=f3b1fd20-82d2-4b98-a25d-e089671464e5

I wonder if this was a blog party?

LOL!

HeadSet Says:

> I wonder if insurance companies anywhere are lowering the
> payout to match the declining value of the insured house.
> If so, I presume many houses have mortgage balances that
> exceed the insured amount.

Home “value” does not have much to do with insurance pay out.

If a $1 million 2,000 sf home burns to the ground in Burlingame the insurance will only pay a little bit more (due to higher contractor pay) to build a new one than the insurance company will pay if a $350K 2,000 sf home burns to the ground in Phoenix…

EBGuy,

check out the latest H3 report on non-borrowed reserve, OUCH, very very big OUCH
http://www.federalreserve.gov/releases/h3/Current/

-61B, exponential growth man.

Hold the line, what line? The Maginot Line?

FAB,

that's right, my current home insurance policy will only pay out something around $300Ks if the house is burnt to the ground, and I don't even have an earthquake insurance because it is really not worth it. When the last big one happened, many homeowners were left with little payout because insurance policies were not set up to handle such a catastrophic scenario. My neighbor only got her claim on the swimming pool repair and had to foot the bill for the home repair completely out of her pocket.

It really discourages me from wanting a big mansion because if there is a big one, or a fire breaks out, there is almost no chance in hell I can fully recoup my $250/sf building cost on a house that is larger than 1500 sf.

I think the best earthquake-proof house is a boat house. It is not tsunami-proof though.

FAB says:

If a $1 million 2,000 sf home burns to the ground in Burlingame the insurance will only pay a little bit more (due to higher contractor pay) to build a new one than the insurance company will pay if a $350K 2,000 sf home burns to the ground in Phoenix…

I see. Do all areas required a burned house to be rebuilt? The insured cannot just elect to take the money and leave at most, cleared lot?

I think the best earthquake-proof house is a boat house

Or a rental

HeadSet,

hold that thought. Arson has already been tried by many desperate Californian homeowners.

Hopefully arson investigators will follow the money and catch all of them.

The good will prevail.

I was thinking that the Insurance Industry would have taken some preventative measures, such as pushing legislation to allow Insurers to unilaterally lower coverage/premiums in areas where house prices have plunged. After all, if they can push mortgage companies to forgive principle.....

I wonder if this was a blog party?
Actually, that WAS my inspiration. The idea being, though, that if the police did get called they would be less likely to arrest a bunch of sedate thirty or forty somethings sipping wine and "evaluating" the property. I suppose it would also be helpful to have you around with your RE license.

@OO, TAF (increase of $20 billion, no surprise) plus primary dealer credit, that'll leave a mark. The fact that it all shows about in nonborrowed reserves in H3 is a bit disquieting; I've always had this theory that this is where deleveraging occurs. When the money evaporates (loan is written off), a small percentage of it essentially disappears from the reserves. Not totally straight forward, but my naive interpretation is that banks rely on principal and interest to keep up the reserves as part of ordinary operations. When enough loans go bad, the reserves need to be replenished. And of course interbank lending has gone to pot...
The Maginot Line? Oh, give him some credit. Let's see though, this year the Fed sold off $138 billion ($740 - $612) of Treasures. At that rate, we have a little more than a year before the Fed has to start selling off its gold (and still be "sterilizing" the credit supply).

I was not really thinking of the arson angle. I was thinking that lower insurance coverage may help unstick prices.

1. The fact that the insurance company "devalues" his house may be the straw that convinces a seller to lower his price

2. A buyer will not be able to get a loan for more than the insurance company will cover on the house (may be considered along with appraisal)

If that anti-market mechanism called Prop 13 did not exist people would be rushing to get their assessed values reduced.

Instead of Prop 13, I propose the abolishment of property tax. It is outrageous that taxes can be levied against properties.

At that rate, we have a little more than a year before the Fed has to start selling off its gold (and still be “sterilizing” the credit supply).

LOL!!

After the Fed burns $740 billion, it will save the day with its "reserve" of less than $20 billion in gold.

A data point on the silver shortage situation.

I placed an order with Perth Mint before Easter on x ounces of silver. I was told by the dealer that the transaction went through but I never got a confirmation, which is very unusual. He was always very prompt with confirmation. So I went through the Easter Holiday without knowing whether my silver transaction went through. Then market opens, I called my dealer again, who told me that he just pulled an all-nighty, and still couldn't give me a confirmation on my silver. He promised he would do his best to confirm before the end of day. Then I kept calling for the next 2 days because I still didn't see my confirmation. My dealer sounded very apologetic and tired, told me that they were dealing with unusually high volume so my confirmation would have to wait until they execute other clients' orders.

Eventually TODAY, I got a confirmation of my order, which I placed on 20th, with an execution date of 3/28 (they are a day ahead of us). Of course I am to pay the spot price of ~$18 USD today as opposed to the ~$16 SLV when silver was still beaten down.

So I don't know if Perth Mint did run out of physical silver at some point, but my experience suggests that they were having troubles filling order in the last week. It is also comforting to know that they did have the trouble, because that means my order is truly backed by physical supply. If they were just filling SLV orders, they could fill it any time.

Of course I am to pay the spot price of ~$18 USD today as opposed to the ~$16 SLV when silver was still beaten down.

OO, couldn't you have used COMEX silver contracts to hedge temporarily before the confirmation?

Gold seems to be hitting a little roadblock at around $950.

Strange, gold is down today but silver is up a little bit.

Peter P,

It would be too much of a hassle, and I just got out of SLV, so I was hoping for a quick straight swap. This has actually never happened before, I was always able to get confirmation within 2 hours of each trade prior to that.

The Mint never lets you set a limit price, you just buy at spot hoping that your order get executed at the right time of the day. That's why it is not a great place to start building a position. GLD, IAU and SLV are great tools for building a position, and you can always swap out later.

GLD, IAU and SLV are great tools for building a position, and you can always swap out later.

True.

May I ask how much Perth is charging you for storing silver? I guess it must be a non-trivial amount.

I afraid gold is not completely out of the woods yet. The uptrend seems to slowing down at the 38% retracement level of that big drop. It is entirely possible that it may still go down for the short term.

Not investment advice.

Even the top-of-the-top-end suffers from price declines:

Ellison's home decline in value is shocking in an area that boasts very expensive real estate thanks to the Googleaires, people who made their fortune at Google and invested in big homes locally. The reason for the dip in value is essentially that Ellison created a home that no one else would want to buy

http://www.luxist.com/2008/03/27/larry-ellisons-3-million-tax-rebate/

I went for the unallocated pool, which is nothing if your account is above $250K. If your account value is lower than that, then they charge you 2% entry and 1% exit.

If you go for allocated, they charge you storage which is about 1.5% a year for gold and 2.5% for silver, that also includes insurance. They also slap a small fabrication charge on bars, which is about $50-200 per bar depending on how big it is.

The difference between unallocated and allocated is, the former allows Perth Mint to act as if it were the owner of my PM to fund its work-in-progress. It specifies very clearly that it does not support leasing/lending of its physical inventory for derivatives or short selling. The catch is of course, when we are in a huge crisis mode, it will take some time for me to take delivery and that is a big uncertainty. But for the cost savings, I am willing to deal with that uncertainty for now. Plus, it will be really hard for a silver investor to take delivery :-)

Plus, it will be really hard for a silver investor to take delivery

Silver is still easier than copper to handle. :)

I have a question for Fed's gold certificate account value.

How come its value stays stagnant at 11,037 throughout the years, even though gold price has quadrupled in the last 7 years. This number never changed.

How did they do that?

May be the certificate indicates ownership of 11037 Krugerrands. :lol:

This number never changed.
Pretty funny. I remember looking at that number when I first posted the H.4.1 historic data and going, oh, so the Fed hasn't sold any gold over this time period. WTF was I thinking. Hey Headset, maybe they hold $40 billion of gold, we're saved! Yes :-) , I do think that "sterilization" of credit will cease much before the Fed is down to its last Krugerrand. And as our resident deflationista, I would think that may worry you! Well, the point of looking at the Fed's Treasury redemption/sell off "run rate" was to see how long we could last. If it continues, they'll obviously have to fire up the printing presses soon. Will be interesting to see how popular the TSLF is and if it takes the pressure off other lines of credit.

Peter P,

I have to say it, your view of global warming appears to be nothing other than a weak excuse for *wanting* to do nothing. Dismissing solid science out of hand just is not a rational argument.

DinOR,

Curbing totally unnecessary waste of any resource is so exactly my cup of tea.

I'm so NOT willing to wait for the free market to decide that it can suddenly "preserve" a "suddenly" scarce resource by squeezing me for obscene profits, after first wasting same resource to high heaven, also in the name of profit.