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If. 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
by TomVDB 8y ago
If.
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.