171–180 of 180 posts
Earlier quoted context omitted.
ITs still a good result: you can sell the house and rent, or move to a place where house appreciation wasnt so pronounced. Real-estate does give leveraged wins.
Dumping all my wealth into one leveraged asset sounds scary as shit.
The Case-Shiller Index currently has home prices rising at 2-3x inflation: https://www.housingwire.com/articles/46307-case-shiller-home... That would certainly seem to be unsustainable.
I've never understood how stock market returns can exceed inflation in the long run either...it seems inescapable logically that if you can come up with an asset with a guaranteed return, people will flock to it until the real return equals approximately zero.
Earlier quoted context omitted.
I've never understood how stock market returns can exceed inflation in the long run either...it seems inescapable logically that if you can come up with an asset with a guaranteed return, people will flock to it until the real return equals approximately zero.
Time (aka risk) matters. The fact that certain assets only have a "guaranteed" return over periods of 30 years or longer significantly limits the kind of people that are willing to flock to them.
Like a corporation that sells annuities? It seems like a minor detail of financial engineering, just like figuring out how to profit from a perpetual motion machine.
It still seems obvious to me that any asset with perpetual outperformance must revert to the mean before or after it eats the world and people just have gotten very accustomed to denying this fact because the boom in the US stock market has outlived any human who doubted it.
Look at Moore's law - it became an article of faith, but things that can't go on forever the same way don't.
Earlier quoted context omitted.
Meh... even in super hot markets like Vancouver, foreign purchases were 10% of transactions. And a lot of it was in the very expensive houses. It’s locals who are driving most of the price appreciations (and flippers).
10% of the expensive houses sitting unoccupied also drives up prices. People are flipping moderately-priced houses because they have a chance of becoming the new expensive ones. There aren't two different housing markets.
They get their mail delivered there while renting it out to help bolster their residency claims.
So they are getting a nice tax shelter while pricing legit home buyers out of the market.
Nobody wants to actually do anything about it, so we pass laws that are easy to work around. Like a foreign buyers tax that is easily circumvented by using a shell corporation.
Earlier quoted context omitted.
Time (aka risk) matters. The fact that certain assets only have a "guaranteed" return over periods of 30 years or longer significantly limits the kind of people that are willing to flock to them.
If that was the case, then couldn't someone simply establish a perpetual entity to invest and sell their average returns to people with shorter time horizons? Like a corporation that sells annuities? It seems like a minor detail of financial engineering, just like figuring out how to profit from a perpetual motion machine. It still seems obvious to me that any asset with perpetual outperformance must revert to the me…
> Like a corporation that sells annuities?
They exist, of course, but I think you'll find "simply" doesn't begin to describe how this works in reality, especially with the confounding factor of that corporation adding another layer of risk/opacity.
> any asset with perpetual outperformance
That's different from your initial premise, which was returns exceeding inflation. Outperformance is a different concept, which is about being better than the mean, but the "stock market" (at least in the US) is often considered that mean.
To consider inflation (i.e. zero, in real terms) to be the mean suggests zero economic growth and/or wealth creation and/or zero-sum activity, and I think it's safe to say it's obvious that's not what's happening.
It may certainly be that the stock market outperforms overall economic growth, but that premium can easily be explained by risk, so long as it's not huge. If S&P500 real returns are 6%, there's not much room for a huge premium to begin with, and I'd be surprised if it's as wide as a full percentage point.
Earlier quoted context omitted.
If that was the case, then couldn't someone simply establish a perpetual entity to invest and sell their average returns to people with shorter time horizons? Like a corporation that sells annuities? It seems like a minor detail of financial engineering, just like figuring out how to profit from a perpetual motion machine. It still seems obvious to me that any asset with perpetual outperformance must revert to the me…
> If that was the case, then couldn't someone simply establish a perpetual entity to invest and sell their average returns to people with shorter time horizons? > Like a corporation that sells annuities? They exist, of course, but I think you'll find "simply" doesn't begin to describe how this works in reality, especially with the confounding factor of that corporation adding another layer of risk/opacity. > any asse…
>> If that was the case, then couldn't someone simply
>>establish a perpetual entity to invest and sell their
>>average returns to people with shorter time horizons?
>> Like a corporation that sells annuities?
>
>They exist, of course, but I think you'll find "simply"
>doesn't begin to describe how this works in reality,
>especially with the confounding factor of that
>corporation adding another layer of risk/opacity.
>> any asset with perpetual outperformance
>
>That's different from your initial premise, which was
>returns exceeding inflation. Outperformance is a
>different concept, which is about being better than the
>mean, but the "stock market" (at least in the US) is
>often considered that mean.
>To consider inflation (i.e. zero, in real terms) to be
>the mean suggests zero economic growth and/or wealth
>creation and/or zero-sum activity, and I think it's
>safe to say it's obvious that's not what's happening.
Essentially all my savings are in fact in the stock market. So I'm not promoting, say, gold, or bitcoin, or whatever alternative. I'm just nervous if I can't justify the direction of the herd in spite of the fact it would make me feel better if I was sure the market would keep going up.
Earlier quoted context omitted.
> If that was the case, then couldn't someone simply establish a perpetual entity to invest and sell their average returns to people with shorter time horizons? > Like a corporation that sells annuities? They exist, of course, but I think you'll find "simply" doesn't begin to describe how this works in reality, especially with the confounding factor of that corporation adding another layer of risk/opacity. > any asse…
>> If that was the case, then couldn't someone simply >>establish a perpetual entity to invest and sell their >>average returns to people with shorter time horizons? >> Like a corporation that sells annuities? > >They exist, of course, but I think you'll find "simply" >doesn't begin to describe how this works in reality, >especially with the confounding factor of that >corporation adding another layer of risk/opacity…
Even so, what you propose doesn't quite exist, and my point was that this is because it isn't simple, or, if you will, that your use of "simply" was dismissive of the Devil that's in the details.
Annuities and even perpetuities exist, but even characterizing them as an "everyday thing" is borderline misleading. An annuity is a common instrument for retirement. Otherwise, not so much.
For your proposed use-case of turning long-term returns into short-term ones, for any investor that comes asking, they don't exist at all, AFAIK.
> No, it's not meant to be different. "Outperformance" can mean performance relative to a given benchmark
Fair enough. I was going off the understanding that the benchmark had to, itself, perform, which inflation does not (unlike, e.g., the S&P500, which describes actual performing assets).
> Right now in the US, maybe it's not happening.
Since the context is long-term, "right now" would need to be at least the past 3 decades, so that's an extraordinary "maybe" requiring extraordinary evidence.
> But look at Japan and what's happened to investment returns and inflation in the last 30 years
Japan's overall economic situation appears to be reflected in the Nikkei 225 returns (losses), so consistent with my thesis there, too.
> I'm not promoting, say, gold, or bitcoin, or whatever alternative.
And that's the crux of the issue. None of those examples have much opportunity to produce anything or create additional wealth, whereas companies do. More common alternatives are bonds, which are either another form of capturing the output of companies (including non-publically-traded ones) or of taxes (which, arguably, captures labor output, to the extent that it's income/payroll tax). True alternatives would need to be assets that could do the same, such as land (agriculture, mining).
Earlier quoted context omitted.
What you say is true only if you never downsize and never leave a hot market. Realistically most people will book those profits when they no longer need to live next to a job center. When you don't need that downtown job anymore you can sell a million dollar house in a big city and buy a nicer house for half that elsewhere, pocketing the other half million as pure, tax-free profit.
"What you say is true only if you never downsize and never leave a hot market." What you say is true only if you know exactly when to downsize and leave a hot market. It can be the case that housing will always be more valuable in one place than another. But it can't be the case that the rate of increase will always be dramatically higher, because that will lead to a runaway differential. Therefore you have to expect…
Earlier quoted context omitted.
You're talking about unrealised profits. In order for the profits to be realised you need to sell the house. So what happens then? Either you keep the profits and are left without a house, or you buy another house and are left without a profit. Because, you see, it's not only your particular house that has appreciated, all houses have.
What you say is true only if you never downsize and never leave a hot market. Realistically most people will book those profits when they no longer need to live next to a job center. When you don't need that downtown job anymore you can sell a million dollar house in a big city and buy a nicer house for half that elsewhere, pocketing the other half million as pure, tax-free profit.
Just today (in Austin) I saw a banner by the road outside a bank offering "100% financing" for homebuyers. If banks breathlessly pitching to lend buyers the entirety of a home's price is not a sign of an overheated debt-led housing market, I don't know what is.
I was in a bank yesterday, and saw the same thing. They had a person from their mortgage department approaching customers and informing them that they had 0 down loans available. This I take to be a bad sign. We're in "this time it's different" territory.
Considering that home sales volume has dropped a lot as affordability has fallen (due to higher interest rates + higher prices), banks mortgage business is likely falling - not due to foreclosures but rather due to lower home sales volume. They may feel that, with lending standards now higher than 10 years ago, the risk of losing money in a potential foreclosure is now low enough that the risk is justified given the loss of business.