BALTIMORE – Another indecisive week in the markets…

China did not blow up. Energy company debt did not melt down. And investors did not panic in the face of a slowing world economy, falling corporate earnings, and central bank absurdities.

This morning, all is well.

But nothing fails like success. Throw a lot of money at any market, and you are asking for trouble.

Today, readers are urged to check their real estate holdings.

Tide of Money

Last year, more than one-third of the houses sold in Vancouver went to Chinese buyers.

All over Canada, the story was similar… though not as extreme. Houses are being sold to people who may or may not intend to live in them.

That was great, if you were selling a house. A tide of money rushed in… House prices rose.

But tides go both ways. They come in… and go out. And if you are counting on your house to hold its value… watch out.

Housing is normally more stable than the stock market because tides in the housing market are slow and relatively weak.

As Nobel Prize winner Robert Shiller explained in his book Irrational Exuberance, contrary to popular belief, there is no continuous long-term uptrend in house prices.

As Shiller puts it, most of the evidence “points to disappointingly low average rates of real [inflation-adjusted] appreciation of most homes.”

This makes sense. People do not readily “flip” or speculate with their homes.

You can sell a stock with the push of a few buttons. But moving a household is a pain in the neck. It involves packing up, organizing a mover, settling up on utilities, saying goodbye to neighbors, and so forth.

But when the guy next door is not really next door, his house is not really a home. It’s a floating, speculative hedge. And if you never move in… moving out is a breeze. All it takes is a change in taxes, regulation, or the markets… and you’re outta there.

Super Luxury

Real estate hotspots have seen a lot of phantom buying over the last 10 years.

In London and New York, for example, you find entire apartment buildings where no one is home. You can tell. Just look at them in the evening. Often, only the elevator shafts and hallways are lit. The apartments are all dark.

Both cities are now seeing softness in upper-end property prices; perhaps the tide has turned.

Top Manhattan apartments sell for more than $4,000 a square foot. At this level, a 1,200-sq-ft two-bedroom apartment sports a $4.8 million price tag.

“Super-luxury” space… one small step down from the top… sells for nearly $3,000 a square foot.

The law of supply and demand works in real estate as in other markets. But it is slower to express itself in bricks and mortar.

As prices rise, developers (who were burned badly in the last building spree) keep their eyes warily on the market.

First, they don’t believe the higher prices will last. Then, prices go higher… and memories fade. Eventually, builders become confident again.

It takes years between the time a decision is made on a major new apartment building and the time the doors open – time in which prices can rise even further.

But when the new product is put on the market, the tide goes out like a crowd leaving a football game. The exits jam up with eager sellers.

That appears to be happening now in New York and London. Sales are slow. Markets are crowded with empty units, advertised at fulsome prices.

Bargain or Bomb?

Meanwhile, over on the other side of the country, in Silicon Valley, the poor wizards of the Internet are having a hard time making ends meet.  

Palo Alto is proposing giving housing subsidies to people who, almost anywhere else, would be considered rich. Here’s the report from London’s Daily Mail:

People earning $250,000 a year should qualify for subsidized housing in Palo Alto, according to a new proposal.

City officials have outlined an eight-year affordable housing plan – with 587 units for reserved for the area’s uniquely wealthy middle class as real estate prices balloon…

With house price averages an eye-watering $3 million, even those earning $250,000 a year are spending two-thirds of their monthly salary (about $14,000) paying off their mortgage.

If the newspaper was trying to impress its readers with a lurid picture of urban excess – a photo the “tear down” house sold recently for $2.7 million – it probably missed its mark.

Londoners are used to excess in their property market. In 2014, one apartment overlooking Hyde Park was reportedly sold to an unnamed Russian for $237 million.

At 16,000 square feet, that is perhaps the most expensive ever: Each square foot cost nearly $15,000.

A bargain? Or a bomb?  

We don’t know. But we offer the same advice we gave readers 10 years ago: If you were planning to sell an appreciated property “sometime in the future,” this might be the future you were waiting for.  

Sell it. Buy something cheaper. Put the difference in gold.



Bill Bonner

Further Reading: Bill’s old friend and commodities expert Doug Casey says now is the time to buy gold stocks. He and his team of researchers just came across something that’s only occurred a handful of times in the last 40 years.

But this is a short-lived gold investment opportunity. When this window closes, we may not see conditions this ripe for another five years or more. To learn more, read on here before market conditions change again.

Market Insight


From the start of the year to its peak on March 10, gold bullion has risen 20% in U.S. dollars.

But as you can see from today’s chart, since March 10, the gold market has started to sag.

It’s down 4% over the past 11 trading days.

But the dip is not a complete surprise.

March is historically bad for the yellow metal. Since gold again became legal to own in 1975, its price has dropped an average of more than 1% in March – worse than any other month.

Featured Reads

Star Manager: The Market Has Become a “Battlefield”
Crispin Odey, who runs $11 billion in assets, has slammed central banks for continuing to lower interest rates… causing huge volatility… and turning investment markets into a battlefield.

Should You Steer Clear of Overseas Stocks?
The founder of the Vanguard Group, Jack Bogle, says investors shouldn’t bother to invest in overseas stocks… and should put their faith in U.S. stocks instead. Here’s why he’s dead wrong.

Ted Cruz’s “Gold Standard” Promise Poses Threat…
Ted Cruz promised a “return to the gold standard.” And many are excited about it. But it could be the death knell for this one group of cronies…


In today’s Mailbag… a Diary reader compares Bill with ISIS.

It’s in response to Friday’s controversial Diary about Republican presidential hopeful Ted Cruz… and his proposal to return the U.S. to the gold standard.

The stopped clock may be right twice a day, but still doesn’t know what’s going on.

– Mario Z.

Cruz is never going to make America go back to gold standard. The U.S. can never come up that much gold. You know better than that, what are you saying? Get real!

– Charles P.

Many of Bill’s letters contain the premise that “you can’t increase the quantity of gold at will.” I disagree. There is still plenty of gold to be mined in the Rocky Mountains and elsewhere. All it takes, is the will to mine it – that and cooperation from the Deep State… specifically the EPA [Environmental Protection Agency].

– Forrest M.

I agree with everything in this article. I particularly liked the part about gold.

The powers that be want to go cashless for one reason only. And it is not to foil terrorists and drug kingpins. It is about power and control of the lambs. It is about taking away our freedom.

– Tom B.

Bill, you are really like ISIS. The only difference is you only want to go back three centuries… while they want to go back six centuries. Maybe someday you will reach the 21st century.

– Robert J.

Cruz is for the gold standard. At least, put your support behind the only real conservative out there… even though he probably doesn’t have a chance in hell.

– Tony F.

The tedious gold standard yet again being idolized as the saving grace of our national economic system…

Our government is not going to give up its power to “manage” our economy. If it needs more value under a gold-based system, it will find a way to run up gold market values. Other governments will go along with it because they suddenly have more “wealth” from their own stockpiles.

Things won’t change. The Deep State can’t allow that to happen. Gold-standard or no gold-standard, world economies will find a way to screw themselves up… and the back-room Deep State manipulations will continue.

Gold or paper dollars. Is there really a difference?

A “cashless” society is what should really scare us. If that happens the ultimate government control really begins.

– John V.

In Case You Missed it…

The publisher at Agora Financial took to the streets of Baltimore to demonstrate how easy his newest investment strategy is.

In this entertaining video, he shows two people with absolutely no investing experience how to make $127 in the market in less than three minutes.

Watch it here.