Wisdom is the outcome of seasoned reflections acquired through wide experience and extensive learning. Proverbs are distilled phrases intended to capture these subtle reflections. These immortal adages are not said in vain and one dismisses them at her own peril. Today, some modern investors are willing to negate a reality that has prevailed for eons. Arguably, the most successful investor of the last half a century has said a lot about gold, many of them intended to diminish its luster. ‘Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn’t produce anything’! Warren Buffet.
To some extent, we concur with the famous investor, but we also think there are technical issues that need to be looked at more thoroughly. To start with, gold is a rare metal, hence dear, not superficially dear, but naturally dear! Moreover, there are areas in the hi-tech industries (known & unknown) where gold remains critical. The current price of gold (in the world market) indicates a rising real demand, not only from mere investors, but also amongst the large majority of the nation states of the world system. Gold doesn’t produce anything, but so are many of the unicorn companies of late modernity. In this regard, the states are even worse when it comes to destroying capital. To be sure, the wealth that is touted to be made today are, by and large, ephemeral, as they are based on the flooding of economies/markets with phony money, obtained via debt, debt and debt! Globally, states, corporations/companies, household, etc. are all in debts up to their eyeballs, so to speak. Despite the continuous brainwashing of the global establishment, debts remain cumbersome obligations. Therefore debt is not wealth! Here is what the famous banker of the late 19th and early 20t had to say about real money/wealth. ‘Gold and silver are money everything else is credit.’ J. P. Morgan. This is the crux of the problem!
Without undue analysis about the merit and demerit of commodity backed currencies, one can at least accept the fact that when systems are confronting massive dislocations, people tend to trust these rare commodities or precious metals more than anything else, including their state’s currencies. Without a doubt, the modern world system is in the process of bifurcation, threatening to dismantle the prevailing global economic arrangement! It seems fear is what is fuelling the current price appreciation of gold and silver. That is why even seasoned investors like Buffett are having second thought about what he used to call the ‘old relic’. He is selling his interests in banks like Goldman Sachs and is buying companies that are digging gold. Obviously it is fear that is occupying his productive and investment oriented mind. On the other hand, speculators are being rewarded hand over fist, in the stock market, thanks to the generous printing of money. The collective parasites, i.e., the ruling elites and their moronic minions, are enjoying the existing phony money regime; but time is running out on them. Even if hyperinflation doesn’t rear its ugly head, hyper chaos emanating from the desperation of the sheeple might do the trick, so to speak. See the articles next column and on page 29.
What is the purpose of gold or silver or any other intrinsically value-laden stuff? In times of crisis, these rare commodities serve as stores of value. The current significant price increase of precious metals is mainly due to the depreciation of currencies, i.e., the increasing loss of purchasing power. Paper currencies cannot hold their values, as they are being printed non-stop. Ultimately, the value of paper money will return back to its intrinsic value, which is zero, to use Voltaire’s expression. For example, the value of the US dollar has gone down by over 90% since Dec 23, 1913, the year the FED was sneakily and formally established, just before Congress’ Christmas recess! At the end of the day, buying gold, in effect, guarantees that currency manipulation (by the power that be) cannot go on indefinitely. It is clear that the tendency of late modernity is to make life easy to the undeserving parasites at the top, while 80% of the global sheeple is forced to live in suspense. The job of the 20% of the sheeple employed by the elites is to make sure the 80% behave in accordance with the masters’ strategic objectives. To this end, the employment of ‘useful idiots’ to diligently avail bread and circus to the masses is paramount. After all, a sleeping sheeple is much preferred than the restless one! Here is an example of a palpable trepidation.
‘We are in a crisis, the worst crisis in my lifetime since the Second World War. I would describe it as a revolutionary moment when the range of possibilities is much greater than in normal times. What is inconceivable in normal times becomes not only possible but actually happens. People are disoriented and scared. They do things that are bad for them and for the world.’ George Soros. Georgy; take solace from the wisdom of the ancient elders: “Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants, but debt is the money of slaves.” Norm Franz. Good Day!
WHY GOLD?
COVID-19 crisis hasn’t lowered AA house prices – Yet
Investing in prime residential Real Estate has generally been a hot topic in Addis Ababa. After all, there are several people that have made a killing doing it. The turmoil surrounding the COVID-19 virus seems to have slowed down this momentum, buyers and sellers are currently assessing the consequences of this event. For now, the industry is facing an acute working capital crisis which is essential to restart the business and keep it moving. As for housing prices they have not dropped significantly in the way some may have expected; clearly the future of the market remains uncertain.
First, a look at how the Real Estate industry evolves…
The Real Estate cycles when left to work through the markets typically transition through the following supply and demand phases. In the expansion stage supply peaks and prices somewhat max out to then stabilize gradually; at this stage a transition takes place in the market where buyers chase premium properties and push price levels even higher. In the recession cycle, when typically there is income disruption, people can’t earn enough to provide for their families, and satisfy their debt obligations. This is the phase where the Real Estate cycle begins to contract.
An event like the COVID-19 crisis would dramatically reduce most home transactions; and although some prices have been lowered here and there, there is no dramatic move in prices. But what one can see, and what has not been seen before, is that this time sellers are more inclined to negotiate.
How do Ethiopian house buyers respond to an event like this? Would the market become risky for investors over the next two to three years?
The way investors and consumers engage in dealing with the COVID-19 crisis will determine how quickly the country will recover from the economic downturn to reach 2018-2019 levels very quickly. Anecdotal evidence suggests, high value house price levels remain high right now, while demand has already started to collapse. It would appear that home sellers are reluctant to decrease pricing as aggressively as potential buyers are exiting the market. Eventually, the lack of real demand will prompt price levels to contract to attract interested buyers. As we’ve seen in many places, when prices start to decline – a vicious cycle begins where potential buyers wait out the bottom offers because they know the dynamics of the markets have changed in their favor.
When large numbers of people or businesses suddenly lose their sources of income, this creates a significant disruption in the supply/demand side of the Real Estate market. How extensive is this disruption in AA? We don’t know. What we know, is it’s hard for prices to move when there aren’t as many housing transactions to make prices move in aggregate. It’s also hard for prices to move as long as there is no pressure on Real Estate firms from banks pulling out capital or asking repayment of loans. Real Estate companies will continue trying to seek peak price levels even when sales activity continues to decrease. How can that be??
Simple supply and demand theory suggests when prices are high and buyers begin to lose faith in future price increases – the cycle shifts from rising price levels to falling price levels as buyers begin to wait out the better deals and wait for the bottom in the markets to setup.
At this stage, given the virus crisis, the erratic nature of ethnic politics in Addis Ababa – in addition to a potentially explosive national election, plus the recent banking regulatory requirements and the reluctance of foreigners to move until there’s a vaccine – the housing market is on pause – buyers and sellers have left the market, transactions have dropped in response, and prices aren’t moving.
So what’s next?
From both theory and experience, we know that the more you let the market determine your price the better off the economy will be. But can the market fix the housing sector? Not really. At a minimum you need government to develop policies encouraging developers to build housing that the modern economy demands. The Government needs to avail land for developers to build affordable housing and vibrant neighborhoods. It also needs to provide subsidy and incentives for affordable housing. In short, free-market solutions although desirable must take into consideration the complex interrelationship of people’s culture, building costs, wages and the economy in general.
Finally, one sensible recommendation for those with money on hand waiting to capitalize for when house prices come down: Don’t despair there is a slight advantage in your favor! It could be twelve to eighteen months before you see the best opportunities.
NBE buys gold worth $72 mln in a month
Total export last year was only $197 mln
In the first month of this budget year 2020/21, Ethiopia secures over 72 million dollars from the export of gold, which is one third of the total earning the country secured in a full year in the last budget year.
In a press conference held on Tuesday August 18 Yinager Dessie, Governor of National Bank of Ethiopia (NBE), said that only in July, the first month of the 2020/21 budget year, the country secured USD 72 million from gold export.
He said that the government’s new approach is working to amass the gold from miners and control the illegal trade.
The amount secured in a single month is more than 36.5 percent of the total revenue secured in the full year of the last budget year.
In the 2019/20 budget year Ethiopia earned USD 197 million from gold export, which is 85 percent of the target. Moreover in the 2018/19 budget year only USD 27 million was earned from the precious metal export, which is the worst performance ever in the recent gold export history.
“We have undertaken massive study regarding the illegal trade on gold that led us to improve our price to buy the metal from miners mostly artisanal miners,” the Governor said.
“Due to policy change we managed to buy USD 60 million, USD 50 million and USD 72 million worth of gold in a single month in the past few months,” Yinager added.
In the past budget year the trend of the hard currency earnings from the precious metal returned back as one of the major hard currency sources for the country.
At the good time in 2011/12 budget year the country secured USD 420 million from gold export. Mostly the production of artisanal miners, who sold the metal to NBE that is responsible for export, is the major source for Ethiopian gold export.
Tigray, Benshangul Gumuz, Southern Nations, Nationalities and People’s Regional State and Oromia are the major areas for artisanal miners. Besides that new resource locations are found for the precious metal in the regions mentioned above and other regions like Afar.
Globally the price of gold has surged and surpasses USD 2,000 per ounce, which is unseen in the gold market history.
India has handed over a consignment of medical aid
India has handed over a consignment of medical aid consisting of 100,000 HCQ tablets and other essential drugs including life saving antibiotics on 21st August 2020. Dereje Duguma, State Minister of Health, while accepting the consignment, conveyed his gratitude and appreciation for this assistance. The handing over ceremony was held at the premises of the Embassy of India and was attended by officials of Ministry of Foreign Affairs, Ministry of Health and other dignitaries.
The donation of medicines was made in fulfillment of announcement made by the Prime Minister of India in April 2020 to combat COVID-19 pandemic to assist 25 African countries including Ethiopia.
India’s cooperation in the health sector with Ethiopia includes support for training and capacity building, supply of equipment and medicines, telemedicine facilities and continuing medical education for health care professionals as well as facilitation for treatment at tertiary care facilities in India. India has donated a 64-Slice CT Scan machine to Black Lion Hospital in Addis Ababa and provides fully-paid training opportunities to hundreds of Ethiopian doctors, paramedics and other health care professionals under the Indian Technical and Economic Cooperation programme as well as the India-Africa Forum Summit initiative.
