There is a parallel between Warren Buffett's approach and how property investors win out. And that is the approach to tax. Capital gains tax is optional. If you dont sell you dont pay it. Buffett has said this is like getting an "interest free loan from the government". It is central to his approach, so its probably important.
If times get tough dont be shocked if the government considers taxing unrealised capital gains. It has been suggested by some economists.
But the dirty secret of shares and property is that there are next to no capital gains, outside of inflation. Much of capital gains are caused by inflation which is caused by currency debasement. The buy and hold approach to property has been a good defence against CGT and inflation. So when property does extra well people are front-running the Reserve Bank and debasing the currency by credit expansion. The dollar is a variable unit of measurement across time and space. The dollars being used to measure property are at the same time smaller than the ones in the rest of the economy. No wonder people are screaming about their rate bills going up. They are being cheated but they cant figure out how.
The whole question of valuation is bogus if you can not define what a dollar is. I dont know what a dollar is. Think of it, expert property valuers can not define their unit of measurement. We know what a kilogram of sausages is because we know what a kilogram is. The truth is the government doesnt want anybody to know what a dollar is.
Perhaps we should chart the gold/property ratio like this one for shares
http://home.houston.rr.com/intelligentbear/com-dow-au.htm
Now the RBA has a choice, give in to the property investors and let the dollar get smaller thereby supporting increased property values and sacrificing the careful savings of a lifetime for many retired people. Or let deflation bring property down with a thud. The governor of the RBA knows this and so does Greenspan (
http://www.gold-eagle.com/greenspan041998.html second last paragraph). He wants rates low to support non-property sectors of the economy but doesnt want people to borrow for property. The political reality is all attempts to avoid recession will be made so they will sacrifice the currency by keeping interest rates low and lower. As real interest rates (bond rate - inflation) approach zero gold will go up. The situation in the US is much worse than in Australia but we will follow them. After 11 rate cuts Greenspan and Bernake have recently said that they will print if it is required to avoid deflation and support asset prices.
That is why gold has been the strongest currency in the world lately. The Aussie dollar is going down relative to gold, the US$ is going down faster. Gold's rise over the last year has nothing to do with war however war may have something to with gold going up.
As for the share market, its better to say it sometimes appears to move from extreme to extreme rather than cycles. One common mistake I have made is "too earlyism". You get a good idea and jump in sometimes years before it works out. Jumping in before the market tells me its time to act. I believe the world financial situation is unstable and unpredictable because there is something wrong with the US economy and the US$. And if the US$ is the worlds reserve currency then anything can happen. This site has a good take on the situation
http://www.financialsense.com/series2/perspectives2.htm
Mr Turkey
) Australian shares were very volatile 
