4 ms·

Investment properties are like stocks, except that retail investors are much more likely to be leveraged and much less likely to be diversified. It sucks to lo

Investment properties are like stocks, except that retail investors are much more likely to be leveraged and much less likely to be diversified. It sucks to lose your savings but this is just how the free market is. If you dump your life savings into a penny stock, you might get screwed over there too. That's the free market, if you don't like it then invest in bonds or atleast diversify. I suspect in some number of months, stock values are going to begin taking real hits, and when that happens I suspect we will start seeing the lost-my-retirement-to-SPXL sob stories

Ididntdothis 6y ago
“It sucks to lose your savings but this is just how the free market is“ There is no free market. It gets constantly manipulated to the benefit of favored groups. 2008 made this very blatant and we see the same thing now again. And the little guy is certainly not part of the favored groups.
- helen___keller 6y ago
  Well, that's true. Maybe I should have said, "that's just how the free* market is" If you're a retail investor, nobody's coming to bail you out. Diversify or face the consequences of your leveraged risk assets collapsing.
compiler-guy 6y ago
In normal times I would agree with you, but these aren't normal times. The government has said that many of your tenants can't work right now, and that you can't replace them with people who can. All of this is painful, but reasonable under the circumstances we find ourselves in. But "free market!" isn't what has messed up their plans. Surprise, almost completely unpredictable government regulation has messed it up.
- helen___keller 6y ago
  Sure but do we say the same for people who own airline stock, who own energy sector stock, etc? Either the government bails out the entire investor class, literally anybody who faced capital losses or loss of dividends in 2020, or we accept that risk assets are risk assets because a black swan can annihilate them, and we let them be annihilated.
  - compiler-guy 6y ago
    That is very much a false dichotomy. And we did give relief to many small businesses. In fact, I'm even not making an argument that we should bail them out. But I am making the argument that "free market: you lose" isn't really the situation we find ourselves in.
    - helen___keller 6y ago
      If you aren't arguing that government should bail out real estate investors who find their investments struggling, I'm not sure what exactly you are arguing for. "Free market: you lose" is quite literally what's happening. Absent further action by government, there are a lot of investors who are going to lose their shirt. Free market is defined as business in the absence of government intervention, hence my attribution. Would you prefer "risky assets in a black swan event: you lose"?
      - compiler-guy 6y ago
        I'm arguing that we aren't in a free market. The government has stepped in in a very unpredictable way and changed your contracts out from under you. That isn't "free market: you lose". That's the only claim. And yes, "risky assets in a black swan event: you lose" is a much better claim.
tenpies 6y ago
> Investment properties are like stocks, except that retail investors are much more likely to be leveraged and much less likely to be diversified. If by retail investor you mean the person holding stocks, I disagree. Most countries allow comically high levels of leverage when it comes to real estate. 5X is normal, 20X is not rare, and even infinity (e.g. no money down) was possible. On top of that I can use a mortgaged property as collateral for another mortgage to another property. It's leverage backed by leverage in the most hazardous way possible. Compared to other markets, the average real estate "investor" is so leveraged it would make even the most degenerate of WallStreetBets poster blush.
- helen___keller 6y ago
  Yes that's what I meant. Retail investors meaning individuals who decide to invest in real estate

Ididntdothis 6y ago

“It sucks to lose your savings but this is just how the free market is“ There is no free market. It gets constantly manipulated to the benefit of favored groups. 2008 made this very blatant and we see the same thing now again. And the little guy is certainly not part of the favored groups.

helen___keller 6y ago
Well, that's true. Maybe I should have said, "that's just how the free* market is" If you're a retail investor, nobody's coming to bail you out. Diversify or face the consequences of your leveraged risk assets collapsing.

compiler-guy 6y ago

In normal times I would agree with you, but these aren't normal times. The government has said that many of your tenants can't work right now, and that you can't replace them with people who can. All of this is painful, but reasonable under the circumstances we find ourselves in. But "free market!" isn't what has messed up their plans. Surprise, almost completely unpredictable government regulation has messed it up.

helen___keller 6y ago
Sure but do we say the same for people who own airline stock, who own energy sector stock, etc? Either the government bails out the entire investor class, literally anybody who faced capital losses or loss of dividends in 2020, or we accept that risk assets are risk assets because a black swan can annihilate them, and we let them be annihilated.
- compiler-guy 6y ago
  That is very much a false dichotomy. And we did give relief to many small businesses. In fact, I'm even not making an argument that we should bail them out. But I am making the argument that "free market: you lose" isn't really the situation we find ourselves in.
  - helen___keller 6y ago
    If you aren't arguing that government should bail out real estate investors who find their investments struggling, I'm not sure what exactly you are arguing for. "Free market: you lose" is quite literally what's happening. Absent further action by government, there are a lot of investors who are going to lose their shirt. Free market is defined as business in the absence of government intervention, hence my attribution. Would you prefer "risky assets in a black swan event: you lose"?
    - compiler-guy 6y ago
      I'm arguing that we aren't in a free market. The government has stepped in in a very unpredictable way and changed your contracts out from under you. That isn't "free market: you lose". That's the only claim. And yes, "risky assets in a black swan event: you lose" is a much better claim.

tenpies 6y ago

> Investment properties are like stocks, except that retail investors are much more likely to be leveraged and much less likely to be diversified. If by retail investor you mean the person holding stocks, I disagree. Most countries allow comically high levels of leverage when it comes to real estate. 5X is normal, 20X is not rare, and even infinity (e.g. no money down) was possible. On top of that I can use a mortgaged property as collateral for another mortgage to another property. It's leverage backed by leverage in the most hazardous way possible. Compared to other markets, the average real estate "investor" is so leveraged it would make even the most degenerate of WallStreetBets poster blush.

helen___keller 6y ago
Yes that's what I meant. Retail investors meaning individuals who decide to invest in real estate