3 ms·

> Their prices go up, if the real estate market goes down. Hopefully they provide more detail here. I'm old enough to remember 2008 and recall many financial

> Their prices go up, if the real estate market goes down. Hopefully they provide more detail here. I'm old enough to remember 2008 and recall many financial instruments with a traditionally inverse correlation to each other behaving unexpectedly. Similar unexpected behavior led to the LTCM crisis in 1998.

DoreenMichele 7y ago
My father -- born in 1922, grew up in The Great Depression -- always said "The best way to double your money is fold it in half and stick it in your pocket." There are no guarantees in life (except maybe death and taxes). They seem to be taking reasonable precautions. They don't deserve to be lambasted for being a bit green and failing to phrase their comment like smarmy con artists pretending there is zero risk -- just trust me (wide, toothy grin).
- loftyai 7y ago
  Thanks for the kind words Doreen, your father sounds like a wise man :) We have tried to engineer the agreement to the point where only during times of nuclear war or some crazy natural disaster, would we not be able to cover the losses. And per our contract, we are not liable for these act of god events. So, we recommend all of our customers to purchase insurance on property, especially if they live in risky areas related to weather phenomenons. Down the line, our priority is to incorporate climate modeling , so that we just no longer recommend properties prone to natural disaster damages.
loftyai 7y ago
You're correct in that many financial instruments with traditionally inverse correlation started moving differently. However, this is mainly from the natural correlation between two instruments that may develop over time. For example, assuming the cell phone market only had 2 players, apple and samsung. And let's assume investors think it's a winner takes all market. So, historically, if apple shares went up, it means investors think they will dominate, which means investors think samsung will lose. This may lead samsung stock to decline when apple stocks increase and vice-versa. Now imagine a recession. Investors don't care about that relationship anymore, because they just want to pull their money out of the market. Now everyone is dumping both apple and sumsung, so now, the correlation has changed. I assume this is what you are talking about for the instruments you were mentioning. But, we use options, which are artificially created, so when we buy put options, they will always be 100% inversely correlated to the underlying REIT/ETF. Therefore, if the REIT/ETF goes down during a recession, our options will increase in price. Hope this clarifies things!

DoreenMichele 7y ago

My father -- born in 1922, grew up in The Great Depression -- always said "The best way to double your money is fold it in half and stick it in your pocket." There are no guarantees in life (except maybe death and taxes). They seem to be taking reasonable precautions. They don't deserve to be lambasted for being a bit green and failing to phrase their comment like smarmy con artists pretending there is zero risk -- just trust me (wide, toothy grin).

loftyai 7y ago
Thanks for the kind words Doreen, your father sounds like a wise man :) We have tried to engineer the agreement to the point where only during times of nuclear war or some crazy natural disaster, would we not be able to cover the losses. And per our contract, we are not liable for these act of god events. So, we recommend all of our customers to purchase insurance on property, especially if they live in risky areas related to weather phenomenons. Down the line, our priority is to incorporate climate modeling , so that we just no longer recommend properties prone to natural disaster damages.

loftyai 7y ago

You're correct in that many financial instruments with traditionally inverse correlation started moving differently. However, this is mainly from the natural correlation between two instruments that may develop over time. For example, assuming the cell phone market only had 2 players, apple and samsung. And let's assume investors think it's a winner takes all market. So, historically, if apple shares went up, it means investors think they will dominate, which means investors think samsung will lose. This may lead samsung stock to decline when apple stocks increase and vice-versa. Now imagine a recession. Investors don't care about that relationship anymore, because they just want to pull their money out of the market. Now everyone is dumping both apple and sumsung, so now, the correlation has changed. I assume this is what you are talking about for the instruments you were mentioning. But, we use options, which are artificially created, so when we buy put options, they will always be 100% inversely correlated to the underlying REIT/ETF. Therefore, if the REIT/ETF goes down during a recession, our options will increase in price. Hope this clarifies things!