Thursday, October 28, 2010

Carney-Speak and Silver-Gate

Yesterday was an interesting day and I would be remiss not to touch on a couple of significant real estate developments.

First off there was a survey by the well respected Economist magazine which shows Canadian real estate overpriced by 23.9%. If that's the national average, how overpriced do you think real estate is in this town? To say at least 50% wouldn't be far off the mark.

Meanwhile, in Ottawa, Bank of Canada Governor Mark Carney was appearing before the Commons finance committee and was asked the following question:

"Do you think the housing market could collapse here, as it did in the States?"

Replied Carney:

"I am not predicting a significant drop in prices, but given how far prices have risen and the high level of Canadians’ household debt, an abrupt drop in the housing market cannot be ruled out."

An abrupt drop in the housing market cannot be ruled out!

Now... if you know anything about the Governor of the Bank of Canada, you know that markets can rise and fall on what this man says. Speeches and statements are very, very carefully worded for just that reason.

This was no slip of the tongue by Carney. It's significant and telling.

A few words on Silver

As you know, one of the topics I speak about regularly on this blog is Quantitative Easing, aka money printing.

I have stated in the past that, with all the money printing and currency devaluing going on, it is a no-brainer that the price of Gold and Silver is going to rise significantly in the years ahead. How far it will rise is a matter of debate.

And within that debate there is a sub debate that rages about price fixing that goes on in the paper Gold and Silver markets.

Now, I'm not going to delve into that debate, but an interesting development surfaced yesterday.

As reported by Reuters, a commissioner of the Commodity Futures Trading Commission made a stunning accusation.

Giving credence to the claims of critics, CFTC Commissioner Bart Chilton said, "there have been fraudulent efforts to persuade and deviously control that price (of silver)." Chilton's prepared remarks were made before a Commodity Futures Trading Commission meeting on Tuesday as events heat up for a full scale investigation into manipulation in the silver markets.

Critics has longed maintained the the metal has been suppressed. Historically silver has always floated at a 16:1 ratio with Gold.

Currently Silver fluctuates between $23 and $24 an ounce (US$). If the historic 16:1 ratio were at play, critics argue Silver should be at $82 an ounce today.

Many claim the dramatic gains Silver has made recently are due, in part, to the heightened scrutiny the manipulation claims have been getting.

Last month Garth Turner suggested Gold could go to $3,000 an ounce. If Silver were to float back to it's 16:1 ratio with Gold, at that level Silver would sit at almost $190 an ounce.

I know I'll be watching the investigation by the CFTC with keen interest.



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  1. Only one quarter of B.C. boomers own their home mortgage-free

    holy snapping denture-cream batman!!!!

    the two old guys will be wearing speedo's and breathing thru a snorkle in the next commercial. Combined with the Northernrock style bank run in the background I will need extra popcorn for this car-crash....