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if RE market craps out around the time the stock market craps out, its not much diversification in the face of downside risks…
by cinquemb 8y ago
if RE market craps out around the time the stock market craps out, its not much diversification in the face of downside risks…
- TomVDB 8y agoIf. You can’t protect yourself against a global calamity where everything suddenly correlates. But look at what happened during the crash of 2000 where stocks and housing market went opposite ways for a nice example to the contrary.
- cinquemb 8y agoAh yes, and then less than a decade later, if you were lucky enough to still be paying off your multi-decade mortgage, they went down together and those ill-liquid paper gains were wiped out and then some (along with people loosing "their" homes, or now paying a mortgage on house whose value had declined). With our global debt fueled recovery, if turns out be when. Being in cash, short the market, or UST's would have been better.
- TomVDB 8y agoNobody ever said that the RE and the stock market are always decorrelated. But it's undeniable that they sometimes are decorrelated. That makes the RE market a way to diversify your investments. Nothing more, nothing less. There's no silver bullet that will protect you under all circumstances. IOW: I have no idea what kind of point you're trying to make.
- cinquemb 8y agoMy point is that, sure, RE market is a way to diversify ones investments, but it is no longer a good way like everyone has blindly assumed it is because of the underlying conditions influencing risk assets in markets. If people think de-correlated upside, and correlated long tail downside is a suitable portfolio strategy, then I can't help but take the other-side of that trade… enjoy the slight premium while it lasts, because I'll take it back and then some when it blows up in your face.