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Sunday, May 08, 2011

Property investment & asset bubbles

We have all seen whats happened when hot money goes in search of the next big thing:

First there was the tech boom, this morphed into the property boom as the US fed forced down interest rates inorder to prevent an economic crash following the bubbles burst in 2000.  Now it's a gold and the commodity boom.

Looking at this gold price graph it has remarkable similarities to that showing house prices until the bubble burst in 2007.

Personally,  I rather be invested in bricks and mortar rather than holding a couple of blocks of shiny metal.  At least you get a nice rising rental income and people will always need a place to live.  When the gold bubble goes pop the lustre will very quickly disappear from this mineral and paradoxically the investment that was going to protect investors from capital loss with be the source of an almighty financial loss. 

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