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so You'll Thrive and Profit, In Spite of It... "

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The End Is Near, Part 4: Peak Trophy Asset Inflation

Stories about insane prices being paid for unique (and some not so unique) things are now a daily occurrence. A few examples:

Picasso’s Women of Algiers smashes auction record

(BBC) – Picasso’s Women of Algiers has become the most expensive painting to sell at auction, going for $160m (£102.6m) at Christie’s in New York. Eleven minutes of prolonged bidding from telephone buyers preceded the final sale – for much more than its pre-sale estimate of $140m.

The previous world record for a painting sold at auction was $142.4m, for British painter Francis Bacon’s Three Studies of Lucian Freud in 2013.

The sale also featured Alberto Giacometti’s life-size sculpture Pointing Man, which set its own record. It is now the most expensive sculpture sold at auction, after going for $141.3m (£90.6m). Both buyers chose to remain anonymous.

 

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Sales of $100 Million Homes Rise to Record Worldwide

(Bloomberg) – The ultra-luxury housing market is scaling new heights as a record number of properties around the world command prices topping $100 million.

Demand for mega-mansions and penthouses has accelerated as wealthy buyers seek havens for their cash and search for alternative investments such as art and collectible real estate, according to a report Thursday by Christie’s International Real Estate, owned by auction house Christie’s. Five homes sold for more than $100 million last year, with at least 20 more on the market with nine-figure asking prices, the brokerage said.

Just one home sale exceeded the $100 million mark in 2013, following four such transactions in 2012 and three in 2011, Christie’s reported.

Sales are likely to increase this year with more newly built properties and off-market homes trading for at least $100 million, Conn said. Demand is growing among affluent Americans and Europeans; billionaires from unstable economies, such as Russia and Middle Eastern countries; and buyers from mainland China, who were barred from investing overseas before 2012 and since have snapped up houses in cities including Hong Kong, Los Angeles, New York and London, he said.

Residences currently on the market with asking prices at that level include a $400 million Monaco penthouse, a $365 million London manor and a $195 million estate in Beverly Hills, California, according to Christie’s. France’s Cote d’Azur, a getaway for jet-setters, has homes with asking prices of $425 million and $215 million.

 

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The median cost of a house in San Jose is $900,000

(MarketWatch) – The median price for a previously owned single-family home in the San Jose, Calif., metropolitan area just hit a whopping $900,000, according report released Monday.

That first-quarter price was up 11.4% from a year earlier, and more than four times the U.S. median of $205,200, the National Association of Realtors reported. It’s important to note that these price figures are for the median, not the mean, meaning that there are as many homes that cost more as those that cost less than these levels, whereas a mean price could be skewed upward by a number of high-value transactions.

 

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The 16 Tech Startups that Joined the Unicorn Club in 2015

(CB Insights) – The worries about a bubble haven’t hurt private companies in their pursuit of getting a billion dollar valuation. In fact, through April 13, 2015, 14 new private companies raised financing at a billion dollar or greater valuation. To give you a sense for how crazy things are, our data set was pulled yesterday. Today, two more were added to the club. So now, we’re at 16 unicorns (Docker and Zomato were added today).

By the time you finish reading this research brief, 2-3 more will likely be added to the club. Yes – things are just that nuts.

Yep, things are indeed just that nuts. But they’re not surprising. When the world’s central banks create trillions of dollars of new currency every year and hand it to 1% of the population, of course the latter will start indulging their inner Marie Antoinettes.

It’s also not historically unusual. Trophy asset prices always soar at the peak of financial bubbles. In the late 1990s tech stocks were trading for 100 times sales. In the mid-2000s lots in California trailer parks were going for $1 million+. And in both cases penthouses and fine art set records. So in one sense this is familiar territory.

But in another sense it’s unique. Where previous bubbles were localized in one or two asset classes and the amount of irrational wealth thrown off was as a result comparatively modest, this bubble is global, with every major central bank flooding its economy with new currency. New billionaires are everywhere, and their search for trophy properties on which to spend their mountains of excess cash is getting desperate.

 

9 thoughts on "The End Is Near, Part 4: Peak Trophy Asset Inflation"

  1. I’ve been in numismatic coins for decades and made a good buck plus I enjoy the history lessons you ;learn. the ANA (numismatic association) is the oldest chartered organization in the US so it’s not a flash in the pan trend.

    1. Realistically? Numismatic value will not matter. Bullion melt value WILL, to a point… I am a BIG believer in PMs VS paper money, however… when it truly ends? Gold nor silver will not matter. You cannot eat it nor drink it? So it’s worthless if there’s no food or water, and those who also know will also decline gold for water.
      So bury your PMs NOW and invest in LEAD, LAND and ways to procure food and water. These are your essentials in the coming days.

  2. I’m interested as hell to see how all this plays out.

    The closest thing that I can relate to all this is learning about and deciding if I wanted to “invest” in numismatic coins. The crazy thing is that I was constantly bumping up against the idea that I personally thought those coins are crap. I couldn’t care less about them or their age or rarity or uniqueness, and yet I was told that there are “others” out there who do and will pay top dollar for them. It just seemed like another example of the “greater fool” plan of investing (a greater fool than you always exists to buy what you’re selling). I can’t help but think these billionaires are doing the same thing.

    THIS JUST IN: Most art sucks (and that includes the rare shit). Why any one thinks that some body else is going to pay even more than bubble prices for subjective material crap is beyond me. Ditto for fancy, maintance-intensive homes and companies that make stupid stuff for stupid people. (Actually, I do have one theory: That price inflation will be so bad that even bargain fire-sale prices post-bubble will exceed one’s nominal purchase price of said junk. But I digress….)

    The backlash to all of this is going to be oh-so sweet. Mark my words the “smart money” are going to get absolutely pancaked, and all of our monetary officials and politicians all over the world (remember, it’s global now) are going to wish it were the comparatively halcyon days of France 1789. There’s going to be hell to pay when the mentally Comprachicoed freaks of the world are unleashed.

  3. Let me be reincarnated as a Wall Street bank when I die one day. Lots of money, freedom to flout the laws of the land, and a perpetual ‘get out of jail free’ card!

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