Intrinsic Value Equilibrium

With economic indicators so depressed, inflation’s not yet quite so obvious. But that’s the beauty of fiscal and monetary manipulation and it’s statistical “analysis” by your government. They can calculate it any way that makes things “rosey” and they think people will believe.

So what’s the “real” value of property?  Certainly there are artificial factors that will inflate property values. Government fees, taxes and advertising will cause values to increase past historically intrinsic values. It’s to the government’s advantage to encourage this behavior. They receive more tax revenues and it’s a circular behavior. In fact, there’s no incentive to maintain some form of restraint.  More tax revenue justifies increased property values which justifies more tax increases, etc., etc. This, then, justifies more government spending.

Of course, this is no attempt to justify the exuberant and irrational behavior of J.Q Public. However, the vast majority of investing considers government rules and regulations. But then our government officials ARE smarter than everybody, which is why they “need” more control, right?

So let’s take your average Cape Coral lot which, in the late eighties (and for about the previous 25 years), was selling for around ten thousand dollars or over 30 ounces of gold @3oo dollars an ounce (or over 300 ounces prior to ’73).  In 2004 that lot was selling for about $80,000 or over 250 ounces of gold @3oo dollars an ounce. Remember, tax revenues substantially increased in the meantime, as did government spending.

Now comes foreclosure sales and Lee County tax sales where the property is turned over to new owners who have no memory and don’t have to pay the exorbitant taxes, it’s down to about twenty five thousand in value. However, gold is, today over $1200 an ounce or a value of 20 ounces of gold for the very same piece of property . . .at a lower value of  $25,000.  Notice that with all the property inflation and deflation, there is a natural economic tendency for intrinsic or long term historical value to maintain an equilibrium with gold values.

Now your local government is screaming for you to replace all the money (dollars) they wasted in times of plenty so that they can do it all over again.