Saturday, September 22, 2012

Why Buy Real Estate?


Inflation maybe? Check out this gold chart;

Daily
click to enlarge

Gold is a often viewed as the ultimate inflation hedge. It certainly is very sensitive, and possibly its price is
the earliest indicator of future inflation expectations. 
The breakout above the downward sloping trendline was back tested successfully and followed by a powerful thrust up.
Note the RSI index at the top of the chart and the MACD index at the bottom are indicating an overbought condition shorter term.  
This longer term chart puts it all in context; 

Weekly
click to enlarge
Note that neither the RSI or MACD are overbought.
The weekly chart illustrates a  breakout above a longer term downward sloping trendline.
The choppy sideways consolidation lasted roughly one year. It is quite likely that the upmove following that consolidation will last as long or longer (See the preceding patterns of consolidation and upward break outs).

Hello inflation.

Some of the great things about real estate as an inflation hedge ; 
its actual utility as shelter, 
it can generate income, 
the US gov. PAYS you to invest in it, 
leverage is super cheap, 
there are no margin calls, 
and if the system fails you possess it (ask the folks caught in MF Global's failure about that).
Finally it is the most undervalued asset class out there.





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