Europe's economic meltdown

Can't shop for a new place while I'm planning my European summer vacation!

Continental stocks are down 16% year-to-date in euro terms and down 25% in dollar terms. UK stocks are down a more modest 5% in sterling terms and 13% in dollar terms. (U.S. stocks, by contrast, have been flat - albeit on a roller coaster - which is inherently unsettling.)

Accordingly, less appetite for NY real estate among the European wealthy. A net negative for Manhattan prices.

That said, I have been surprised at how "firm" Manhattan real estate prices have been so far this year. New developments, though, do seem to be dead in the water with very few transactions. I'm guessing that this reflects their very high prices per square foot relative to most of the re-sale properties that have been transacting at a brisk pace.

Is the question how correlated NYC real estate is to Europe's economy? What a question?
I'll leave it to the quants to see if the coefficient is the magical 0.6. Regardless, Ive often felt and have heard others express that NYC real estate is the money market of the world(a safe asset which won't go to zero). Those that have money are often inclined to invest in a NYC condo as a way to park money in a real asset that can generate some return; This money is not looking for the highest return.

The current European situation may have more of an impact on commercial real estate. Credit spreads have clearly risen. May limit recovery in commercial lending is my best guess.

Contagion. If it happens, NYC (along with the rest of economy) is screwed. Think Lehman times five...

Lets hope ECB nips this nightmare in the bud. Should be announcing vigorous steps to save Greece, EURO, and Europe this weekend.

Seems like everytime we bail out someone it just encourages the banks to continue to do stupid things and to make risky bets.

Probably the right thing to do...along with very strict requirements from the IMF and ECB...but the bankers are just not learning their lessons. And not clear that they will if they can always count on a bailout. Kind of a put.

ANYTHING that slows the flows of funds around the world (deal flow, investment, re-fi's, etc.) hurts NYC real-estate. No high commission deals and there are no high commissions, so less bonuses, less money for high-priced lawyers (and their high priced associates, and their high priced legal secretaries, etc.)

Financial uncertainty for now and in the future hurts long-term decisions like the purchase of real estate.

What's going on is that private debt is being converted to sovereign debt. They say Greek public debt is 115% of GDP.. Well ours is at 90%. The reserve currency of the world will be Gold. $1500-$2000 an ounce anyone?

Emerging market countries, including China, in particular, have virtually no gold in their FX reserves. Can't help but be intrigued by the case for gold - and gold stocks.

As regards our debt, that does not include the present value of our Medicare/Medicaid/Social Security obligations which are north of $40 trillion. The arithmetic just doesn't work.

The important thing is to be as close to the precious metal as possible. Gold and Warehouse receipts are best followed by Gold Stocks(not exploration companies). Where you do not want to be is in ETF's that have their exposure via derivatives which is just someone else's IOU..

Which ETFs have their exposure via derivatives, pls?

"Which ETFs have their exposure via derivatives, pls?"

I believe almost all of them do. And there is a volatility component and decay factor too. So just be careful when trading these bad boys

GLD is, of course, the big ETF at $46 billion.

From Bloomberg:

SPDR Gold Trust is an investment fund incorporated in the USA. The investment
objective of the Trust is for the Shares to reflect the performance of the price
of gold bullion, less the Trust's expenses. The Trust holds gold and is expected
from time to time to issue Baskets in exchange for deposits of gold and to
distribute gold in connection with redemptions of Baskets.

Doesn't sound like derivatives to me - but perhaps I'm wrong.

As regards "decay," I'm guessing you're referring to the expense ratio. It's 0.41%. I don't particularly like that but it is certainly not onerous either.

Am I missing something, guys?

Of course you can pull up the individual prospectus and latest quarterly filing. Most ETF'S have derivative exposure. And with GLD I suspect you cannot demand physical delivery. Found this article....

http://www.runtogold.com/2009/02/another-problem-with-the-gld-etf/

As regards its volatility, seems to me it's pretty much in line with that of the S&P 500. (That said, I'm not trading it either. It's somewhat of a strategic, longer term hedge for me. Just don't feel real comfortable with the longer term outlook as regards deficits and currency debasement.)

The point of Gold is that it is VERY volatile, and that it is *NOT* correlated to equities.

topper - not all etfs have paper derivatives behind them..GLD actually owns physical bullion, but not sure if there are derivatives in addition to that in the etf...or if its only physical holdings of bullion which comes with maint and storage fees.

As for decay, no, Im refering to the natural decay factors that come with futures pricing and the leverage used in these etf funds - also, they perform better in times of higher volatility. Hard to explain, lots of math, but here is an explanation from Accrued Interest back in 2009. In short, its likely better over the long term to SHORT THE INVERSE etf than to go LONG THE ETF itself because of this natural decay fator with time:

http://accruedint.blogspot.com/2009/05/leveraged-etf-math-this-may-smell-bad.html

non levered etfs are less exposed to this decay factor but do have mgmt fees and expenses..outside of that, timing is everything!

http://www.runtogold.com/how-to-buy-gold-or-silver/

http://www.youtube.com/watch?v=VWcciJGHs9s&feature=player_embedded#!

another short way to describe it is the 20% up / 20% down cycle with time..play this out and you will notice a natural decay on both sides

Thanks.

Don't think the issues related to leveraged ETFs do apply to non-leveraged ones. But yes, there are the expenses.

As regards timing, for some investments I do time and others I have more of a strategic focus. I'm more strategic on gold. That said, it is interesting to look at sentiment indicators for gold and move somewhat in reverse. A very emotional investment for many.

Volcano's not done...big ash cloud now over the north Atlantic, 1,200 miles long.....

Europe's in big trouble, in many ways, as are we......

Good prospectus material.
1)Decay factor(i.e. expenses)
2)Limited legal protections and limited recourse
3)Risk of theft
4)Unsegregated assets
5)No inspection of assets or monitoring of sub custodians
..im sure there''s more (in the age of Goldman CDOs and Bernie Madoff no idea why people
buy this crap

Investors should be aware that the gradual decline in the amount of gold represented by the Shares will occur
regardless of whether the trading price of the Shares rises or falls in response to changes in the price of gold.
The estimated ordinary operating expenses of the Trust, which accrue daily, are described in the Trust’s Annual
Report on Form 10-K, incorporated herein by reference.
-----------------------------------------------------------------
The Trust is not registered as an investment company under the Investment Company Act of 1940 and is not
required to register under such act. Consequently, Shareholders do not have the regulatory protections
provided to investors in investment companies. The Trust will not hold or trade in commodity futures
contracts regulated by the CEA, as administered by the Commodity Futures Trading Commission, or CFTC.
Furthermore, the Trust is not a commodity pool for purposes of the CEA, and none of the Sponsor, the Trustee
or the Marketing Agent is subject to regulation by the CFTC as a commodity pool operator or a commodity
trading advisor in connection with the Shares. Consequently, Shareholders do not have the regulatory
protections provided to investors in CEA-regulated instruments or commodity pools.
-----------------------------------------------------------------------------------
There is a risk that some or all of the Trust’s gold bars stored on behalf of the Trust could be lost, damaged or
stolen. Access to the Trust’s gold bars could also be restricted by natural events (such as an earthquake) or
human actions (such as a terrorist attack). Any of these events may adversely affect the operations of the Trust
and, consequently, an investment in the Shares.
----------------------------------------------------
Shareholders’ recourse against the Trust, the Trustee and the Sponsor, under New York law, the Custodian,
under English law, and any subcustodians under the law governing their custody operations is limited. The
Trust does not insure its gold. The Custodian maintains insurance with regard to its business on such terms
and conditions as it considers appropriate. The Trust is not a beneficiary of any such insurance and does not
have the ability to dictate the existence, nature or amount of coverage. Therefore, the Custodian may not
maintain adequate insurance or any insurance with respect to the gold held by the Custodian on behalf of the
Trust. In addition, the Custodian and the Trustee do not require any direct or indirect subcustodians to be
insured or bonded with respect to their custodial activities or in respect of the gold held by them on behalf of
the Trust. Consequently, a loss may be suffered with respect to the Trust’s gold which is not covered by
insurance and for which no person is liable in damages.
---------------------------------------------------------
Gold which is part of a deposit for a purchase order or part of a redemption distribution will be held for a
time in the Trust Unallocated Account and, previously or subsequently in, the Authorized Participant
Unallocated Account of the purchasing or redeeming Authorized Participant. During those times, the Trust and
the Authorized Participant, as the case may be, will have no proprietary rights to any specific bars of gold held
by the Custodian and will each be an unsecured creditor of the Custodian with respect to the amount of gold
held in such unallocated accounts. In addition, if the Custodian fails to allocate the Trust’s gold in a timely
manner, in the proper amounts or otherwise in accordance with the terms of the Unallocated Bullion Account
Agreement, or if a subcustodian fails to so segregate gold held by it on behalf of the Trust, unallocated gold
will not be segregated from the Custodian’s assets, and the Trust will be an unsecured creditor of the
Custodian with respect to the amount so held in the event of the insolvency of the Custodian. In the event the
Custodian becomes insolvent, the Custodian’s assets might not be adequate to satisfy a claim by the Trust or
the Authorized Participant for the amount of gold held in their respective unallocated gold accounts.
In the case of the insolvency of the Custodian, a liquidator may seek to freeze access to the gold held in all of
the accounts held by the Custodian, including the Trust Allocated Account. Although the Trust would be able
to claim ownership of properly allocated gold, the Trust could incur expenses in connection with asserting
such claims, and the assertion of such a claim by the liquidator could delay creations and redemptions of
Baskets.
----------------------------------------
The
Trustee does not undertake to monitor the performance of any subcustodian. Furthermore, the Trustee may
have no right to visit the premises of any subcustodian for the purposes of examining the Trust’s gold bars or
any records maintained by the subcustodian, and no subcustodian will be obligated to cooperate in any review
the Trustee may wish to conduct of the facilities, procedures, records or creditworthiness of such subcustodian.
See the section of the Trust’s Annual Report on Form 10-K, incorporated herein by reference captioned
“Custody of the Trust’s Gold” for more information about subcustodians that may hold the Trust’s gold bars

RE lags the market so I would assume that if the Euro continues its slide it will definitely affect RE prices. It certainly doesn't happen overnight. Their reduced buying power will show over the next year. Good times.

You pay a little for the convenience of ETFs. Rather than worrying about the .40%~ management fee and slippage from rollovers, with the volatility in precious metals, I'd rather focus on the big picture of where spot prices go rather than spend time buying futures and rolling over ontracts myself.

If you believe in a doomsday scenario though, buying physical bullion is not enough - gov't may confiscate them in times of national crisis like they did gold in 1933. In that case, better to open up a swiss bank account and lock up your gold in a safe there.

Andy why is that better than opening an account with Lind Waldock and taking taking possession with a warehouse receipt with a reputable warehouse. At least you have legal protections and you know there is basic accounting with regards to the segregation of your assets.

Keep in mind, freewilly, that you are required to report the fact that you do have a foreign bank account.

This isn't about tax evasion..

Not arguing against the physical route and the reasoning behind it. Personally I'm just lazy and go for speed and convenience and like to see "GLD" and "SLV" on the same account flashing on my screen real time and agonize over a play on the spread.

One argument for a non-physical product would be the tax advantages. Not the GLD, but the PHYS. Gold bullion is considered a collectible with capital gains taxed at 28%. PHYS is taxed 15%. But that opens up a whole other can of worms...

Why is it a surprise that ETFs don't equal physical delivery? Mutual funds that are non exchange traded you can't get physical delivery of the assets. Mutual funds have been around a long time.

"gov't may confiscate them in times of national crisis like they did gold in 1933"

and I guess government might reinstate slavery like it accepted since our country's founding. Right?