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What’s the Best Way to Become Wealthy Today? Buy Real Estate OR Rent and Invest In Gold?

Home ownership is regarded as some sort of Holy Grail of financial planning… based upon the conventional belief that owning real estate is the #1 path…

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This article was originally published by Munknee

Home ownership is regarded as some sort of Holy Grail of financial planning… based upon the conventional belief that owning real estate is the #1 path to (at least) financial security – if not affluence – but is there really substance to this belief? This article says, “No, not today” and explains why.

Residential real estate in Manhattan is arguably among the most coveted real estate in the world. It is a small island, in the commercial heart of one of the world’s largest, most affluent, and most powerful cities so, obviously,

investing in Manhattan real estate is a great investment, right? If someone bought some residential real estate in Manhattan 100 years ago, they would have made a fortune on it by today, right? Wrong!


…In other words, net of taxes, the Manhattan real estate-holder would be significantly worse off financially than the gold-holder, and that is a best-case scenario: buying the most-coveted real estate on the planet and paying cash for it.

The vast majority of real estate that is being bought today (at record prices) is not coveted nearly as much as Manhattan real estate and the vast majority of home-buyers can’t pay cash for their properties. They take out large mortgages so, by the time the average purchaser is finished paying off their mortgage, they will have spent anywhere from two to four times the original purchase price – when interest and other charges are included. If buying the best real estate on Earth for cash (the original purchase price) is not a great investment, then what kind of investment are you getting paying two to four times the purchase price – for less valuable land? Not a very good one.

The obvious rebuttal from a homebuyer looking to live in the real estate unit that they purchase is that real estate is a great investment because they can deduct what they would have otherwise been forced to spend on rent from the cost of their home (including interest), but does it hold water? Well, at one time, when real estate prices were rational/reasonable and the supply of real estate was finite, disciplined homeowners could make home-buying a successful financial strategy but those days are long gone. Today, prices are not merely at all-time highs, they are at absurd, bubble extremes…

In this market, first-time buyers are forced to take on huge mortgages…[and, as a result,] any investment return in such a real estate purchase is eaten up long before 30 years (or even 20 years) of mortgage interest is added to the (record) purchase price of the house – along with the property taxes and upkeep that are required during the term of the mortgage – and that is if, somehow, the largest/most-unstable real estate bubble in history doesn’t collapse.

Conclusion

Real estate makes little sense (and cents) as an investment even for homebuyers planning on living on/in their real estate…Today, real estate, even in a prime market, is not a good investment. It is a wealth-trap, pure and simple. Grossly excessive prices combined with grossly excessive supply is a recipe for investment disaster and this bubble has been pumped up to insane extremes by the longest stretch of record-low interest rates in history.

What about the future?

Well, prices cannot possibly be sustained this high over the longer term and interest rates cannot possibly be sustained this low…[so,] when these market turn and interest rates start to normalize [we can expect to have a] crash unlike anything seen in the history of real estate markets, and, for people who don’t want to gamble their financial future in the real estate casino, they have an obvious choice: gold.

Bottom Line

What is the best way to become wealthy today? Buy real estate and hope that (somehow) the bubble doesn’t burst? No. Rent and invest in gold. As 100 years of history clearly shows, real estate is not “as good as gold”.

Editor’s Note:  The original post by Jeff Nielson has been edited ([ ]) and abridged (…) above for the sake of clarity and brevity to ensure a fast and easy read.  The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.  Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

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Economics

5 Canadian metal stocks to buy

Highlights Over 43 per cent of the global mining firms are listed on the Toronto Stock Exchange and Toronto Stock Venture Exchange A stock mentioned…

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Highlights

  • Over 43 per cent of the global mining firms are listed on the Toronto Stock Exchange and Toronto Stock Venture Exchange.
  • A stock mentioned here surged by 104.8 per cent in the past year.
  • One of the companies listed earned a gross profit of US$380.2 million in Q2 2021, an increase of US$238.1 million year-over-year.

The Canadian headline index surged by 201 points or 0.97 per cent before closing at C$ 20,819. 94 on Thursday, October 14. Base metals, information technology, and the industrials sectors traded in the green.

Over 43 per cent of the global mining firms are listed on the Toronto Stock Exchange and Toronto Stock Venture Exchange. Here’s a compilation of five TSX-listed metal stocks to consider.

Also read: Top 5 TSX value stocks to buy

  1. Teck Resources Ltd (TSX: TECK)

Teck Resources is engaged in the development and mining of mineral properties. Its business units are focused on zinc, copper, coal, and energy.

Its gross profit increased to C$ 233 million in Q2 from the steelmaking coal business segment.

The company posted an adjusted EBITDA of C$989 million in the second quarter of fiscal 2021, up by 104 per cent year-over-year. Its liquidity as of July 26, 2021, stands at C$6.1 billion.

The stock trading C$ 39.10 apiece holds a P/E ratio of 106.10 as of October 15. The stock’s one-year growth stands at 104.8 per cent and nearly 56.3 per cent YTD.

  1. First Quantum Minerals Ltd (TSX:FM)

The stock worth C$ 27.68 apiece grew by nearly 125 per cent in the past year and 21.13 per cent year-to-date. First Quantum Minerals produces gold, zinc, nickel, copper, and cobalt.

It has mining operations in Australia, Africa, and Latin America.

Also read: Top 3 Canadian smallcap stocks to buy this fall

Its cash flows from operating activities of US$679 million in Q2 2021 were US$524 million higher than Q2 2020.

First Quantum stocks hold a P/E ratio of 46.70, as per TMX data.

The mining firm had US$1.79 billion in net unrestricted cash and cash equivalents at the end of the quarter.

  1. Labrador Iron Ore Royalty Corporation (TSX:LIF)

In the second quarter of fiscal 2021, the investment company posted a royalty revenue of C$ 78.8 million, compared to C$ 46.2 million a year ago.

Its equity earnings from Iron Ore Company of Canada were C$66.2 million in Q2 2021, compared to C$28.7 million YoY.

The steel firm’s stocks surged by nearly 40 per cent in the past year, with a P/E ratio of 7.10.

The company pays a quarterly dividend of C$ 2.10 per stock, with a three-year dividend growth of 39.51.

Also read: This TSX oil & gas stock skyrocketed 285% in a year!

  1. Lundin Mining Corporation (TSX: LUN)

The mining firm’s stocks traded C$10.28 at close on October 14. The diversified base metals producer has operations in Chile, the US, Sweden, Portugal, and Brazil.

Lundin Mining’s gross profit for Q2 2021 was US$380.2 million, an increase of US$238.1 million year-over-year.

The Canadian mining leader had cash and a net cash balance of nearly US$250 million and US$ 190 million as of July 28, respectively. The firm has a return on equity (RoE) of 15.07 per cent and its current dividend yield of 3.5 per cent.

The stocks surged by over 34 per cent in the past year and over 12.8 per cent quarter-to-date.

  1. Turquoise Hill Resources Ltd (TSX:TRQ)

The firm through its principal asset, the Oyu Tolgoi copper-gold mine, is engaged in the exploration, development, and mining operations.

The international mining company posted US$ 317.8 million in revenue from the operating segment for the three months period ended June 30.  The stocks delivered an ROE of 4.63 per cent and a return on assets of 3.25 per cent on October 15.

The scrips have added nearly 80.37 per cent of growth in the past year. It closed at C$19.12 on October 14.

Also read: The Best Cryptocurrencies of 2021

Bottom line

With inflation looming, gold and base metals prices could hold steady or grow. However likely this is, it’s not a given.

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Articles

Stocks, Bonds, Crypto, & Copper Soar As Confidence Crashes Near Decade-Lows

Stocks, Bonds, Crypto, & Copper Soar As Confidence Crashes Near Decade-Lows

This week was a tale of two halves. Stonks chopped lower into…

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Stocks, Bonds, Crypto, & Copper Soar As Confidence Crashes Near Decade-Lows

This week was a tale of two halves. Stonks chopped lower into Wednesday morning, bounced off an opening dump then accelerated (despite The Fed Minutes signaled considerably more hawkish taper and rate-trajectory expectations). Nasdaq was the week's biggest gainer (thanks to Small Caps puke today) and The Dow underperformed but only modestly...

That was the S&P's best week since July.

Major reversal in Small Caps today however from the cash open, as the rest of the majors rallied divergently...

This week's panic-buying has reduced the drawdown from record highs (for the S&P) to just 1.5%...

Source: Bloomberg

After Monday's dump, every day this week has opened with a panicky short-squeeze to ignite momentum...

Source: Bloomberg

But as today's OpEx struck early, the short-squeezers ran out of ammo...

Source: Bloomberg

Both Defensives and Cyclicals were bid this week but the latter outperformed today to win the week...

Source: Bloomberg

Sectors were all higher on the week but Utes lagged and Materials led the gains. Financials were towards the lower end of the overall performance...

Source: Bloomberg

In bank-land, earnings have sparked a notable divergence with MS leading and JPM lagging (after a buying panic renewed in WFC today)...

Source: Bloomberg

VIX was clubbed like a baby seal this week, hitting a 15 handle briefly today...Tough to see much downside for vol from here (especially given the typical post-opex bounce)

Bonds were very mixed this week with the short-end dumped and long-end well bid (2Y +8bps, 30Y -12bps)...

Source: Bloomberg

2Y yields pushed up to their highest since March 2020 and 5Y at its highest since Feb 2020...

Source: Bloomberg

The yield curve flattened dramatically this week (the biggest curve flattening week since June) with the 5s30s spread at its lowest since May 2020 as traders signaled expectations for a Fed policy error...

Source: Bloomberg

The very-short-end of the curve repriced dramatically this week - in a hawkish manner - with a full rate-hike now priced in for September 2022 (with expectations that The Fed's taper will start in Dec and end in July 2022)...

Source: Bloomberg

And on a side note, the 'kink' is back and building in the T-Bill curve as the odds of a clean debt-ceiling extension in December slide...

The dollar fell for the 3rd straight day today and suffered the broke a 5-week winning streak.  The dollar has traded in a tight range for the last 3 weeks though...

Source: Bloomberg

Crypto soared higher, rising for 3rd straight week, led by Bitcoin...

Source: Bloomberg

With Bitcoin back above $60k for the first time since April (and in fact reached almost $62k today)...

Source: Bloomberg

Commodities all made gains this week (CRB all comms hit an all-time record high) but copper was the dramatic outperformed while gold lagged...

Source: Bloomberg

WTI rallied for an 8th straight week, its longest winning streak since May 2015, topping $82 for the first time since Oct 2014...

Source: Bloomberg

Copper soared this week (its best week since Nov 2016 and 2nd best week since Oct 2011), back near the May highs, as global inventories plunge...

Source: Bloomberg

Gold tagged $1800 but was unable to hold it...

Finally, you have to laugh really that stocks are surging back towards record highs on a day when consumer sentiment printed at its 2nd lowest level in a decade...

Source: Bloomberg

"Probably nothing..."

 

Still this chart makes us wonder if a redux is in the cards?

Source: Bloomberg

Tyler Durden Fri, 10/15/2021 - 16:00

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Precious Metals

Bitcoin Nears $63k As Dorsey Signals Square Considering Mining System

Bitcoin Nears $63k As Dorsey Signals Square Considering Mining System

Update (1635ET): Square (and Twitter) CEO Jack Dorsey has been a long-time…

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Bitcoin Nears $63k As Dorsey Signals Square Considering Mining System

Update (1635ET): Square (and Twitter) CEO Jack Dorsey has been a long-time advocate for cryptocurrencies and this evening he tweeted about his latest plans to create a Bitcoin mining system:

As he detailed in a brief thread:

1/ Mining needs to be more distributed. The core job of a miner is to securely settle transactions without the need for trusted 3rd parties. This is critical well after the last bitcoin is mined. The more decentralized this is, the more resilient the Bitcoin network becomes. True? 

2/ Mining needs to be more efficient. Driving towards clean and efficient energy use is great for Bitcoin’s economics, impact, and scalability. Energy is a system-level problem that requires innovation in silicon, software, and integration. What are the largest opportunities here? 

3/ Silicon design is too concentrated into a few companies. This means supply is likely overly constrained. Silicon development is very expensive, requires long term investment, and is best coupled tightly with software and system design. Why aren’t more companies doing this work? 

4/ There isn’t enough focus on vertical integration. Considering hardware, software, productization, and distribution requires accountability for delivering to an end customer vs improving a single technology in the chain. Does seeing this as a single system improve accessibility? 

5/ Mining isn’t accessible to everyone. Bitcoin mining should be as easy as plugging a rig into a power source. There isn’t enough incentive today for individuals to overcome the complexity of running a miner for themselves. What are the biggest barriers for people running miners? 

Our team led by @JesseDorogusker will start the deep technical investigation required to take on this project. We’d love your thoughts, ideas, concerns, and collaboration. Should we do this? Why or why not? We’ll update this thread as we make our decisions. And now over to Jesse. 

That headline was enough to push Bitcoin even higher on the day, nearing $63k at its peak...

*  *  *

Cryptos are all rallying this morning but Bitcoin is making headlines as it broke back above the $60,000 level for the first since April...

Source: Bloomberg

This has extended a recent run from around $40,000 which has been driven by increasingly optimistic signs of a Bitcoin ETF being imminent...

Source: Bloomberg

This has pushed Bitcoin back up to be the world's 8th largest asset (just below that of Silver), and well above $1 trillion market cap...

Source

Citing “people familiar with the matter,” Bloomberg has reported that the United States Securities and Exchange Commission is poised to approve the first Bitcoin futures ETFs in the country.

The anonymous sources said:

“The regulator isn’t likely to block the products from starting to trade next week.”

Bloomberg's Eric Balchunas recently laid out his odds for which of the numerous ETF proposals will be accepted first...

And for those in the "digital gold" camp, this analog from the '70s is interesting. CoinTelegraph reports that Austrian investor and analyst Niko Jilch this week referenced famed investor Paul Tudor Jones while explaining the “excitement” over the Bitcoin ETF.

Tudor Jones had previously highlighted Bitcoin’s cycles being similar to gold in the 1970s — just when it had become a futures product itself and enjoyed a 10-year bull run followed by a 50% correction.

Gold’s 1970s rip, TechDev additionally noted, fits extremely neatly over Bitcoin’s performance since October 2020.

Finally, not to be forgotten, Ethereum is holding above $3800...

Tyler Durden Fri, 10/15/2021 - 16:42
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