Housing Bubble Collapse

On the heels of a major sell-off in commodities producers and explorers, we are beginning to hear that the housing bubble in Canada has begun to collapse. There are fewer housing starts and lower prices.

A notable feature of the housing bubble in Canada was the concommittant commodities and banking stock boom speculation, which most people expected to continue indefinitely. So as Canadians enjoyed taking out equity in their homes and perhaps trading up in the process, you also have much more shrewd retail investment in commodities related companies. (and probably the banks.)

With the burst of the liquidity bubble in mining stocks such as Teck or McEwen mining, you have an abundantly clear repetition of one bubble after another over the years. With this rout will also come a continued adjustment in the gold stocks.

James West has a comment on futures in Gold, which is probably true in some ways. I would venture to say that for the first time in history, you don't have a fixed gold price and that it will eventually represent its true value in the monetary space, probably for the first time in history.

Secondly, I would also say that it is just the gold price rising, after all, and does not require the complete and utter collapse of the system. Let's get rid of that nonsense once and for all.

For instance, the Copper options chain looks almost exactly like that of gold, with the exception that there is no contango in Copper, while Gold has maintained its contango, even with the brutal sell-off today.

So it turns out that I'm wrong, that we did see gold prices dip below $1600/oz. U.S. in our lifetimes, just a couple of days after I said that we would not see it again. Perhaps I was way too hasty.

Copper Options Chain

http://quotes.ino.com/options/?s=NYMEX_HG.M12.E

http://finance.yahoo.com/q/fc?s=HGM12.CMX

Gold Options Chain

http://quotes.ino.com/options/?s=NYMEX_GC.M12.E

http://finance.yahoo.com/q/fc?s=GCM12.CMX

-F6