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> From a finance perspective there's no difference between a house and a share in a corporation. They're both productive assets that provide returns. In the cas

by PEJOE 6y ago

> From a finance perspective there's no difference between a house and a share in a corporation. They're both productive assets that provide returns. In the case of a house, it provides shelter as a service, which can either be consumed by the owner (by living it it), or by selling it (renting it out). The only difference is that with a house, the relation to you is more direct, as opposed to a tiny fraction of a multinational entity. From a finance perspective, theres no difference between food and a share in a corporation. They're both productive assets that provide returns. In the case of food, it provides sustenance as a service, which can either be consumed by the owner (by eating it), or by selling it (on the side of the road, or in a restaurant.) The only difference is that with food, the relation to you is more direct, as opposed to a tiny fraction of a multinational entity, and it depreciates much faster. /s/ when you have a hammer, everything is a nail. When you see the world through finance, everything is a series of cashflows. The ability of a worldview to be applied to many things does not mean it is applied well to those things. The primary purpose of a house is to, well, house people. Shelter is a necessity. People who are most vulnerable to inflation are the poor, who mostly rent, and thus pay current market prices. They also pay the most for healthcare on a per care instance basis, and often pay for college with expensive debt (5%) if they go to college. If CPI, etc, are not measuring these price changes, perhaps we should use another measure that does.

gruez 6y ago
>From a finance perspective, theres no difference between food and a share in a corporation Clearly not. After you eat a bread, it's gone. After you live in a house it's still there. A better analogy would be something like a farm, which continuously provides sustenance as a service. >The primary purpose of a house is to, well, house people. Shelter is a necessity. People who are most vulnerable to inflation are the poor, who mostly rent, and thus pay current market prices. They also pay the most for healthcare on a per care instance basis, and often pay for college with expensive debt (5%) if they go to college. Should farm (or food producing corporation shares) prices be factored into the CPI as well? Like housing, food is also a necessity, and buying a farm would ensure you're protected against inflation in food. Also, your point about buying housing as some sort of protection against inflation doesn't tell the whole story. Yes, it's a hedge against future rent increases, but here's no free lunch because the inflation is already priced into the price of the house. If rents are expected to 10x in the next 10 years, you can be sure that housing prices will grow accordingly. That's why price-to-rent ratios are insane in coastal cities.
- PEJOE 6y ago
  > Clearly not. After you eat a bread, it's gone. After you live in a house it's still there. After you live in a house a long time it falls apart. Capital Expenditure restores the asset to its previous value. Bread just depreciates faster. but can still be traded, bought and sold. In Japan houses are often only ever used by one family, and the house is destroyed when the land is sold. I am taking your insistence on a cash flow perspective to its logical extreme to show that it is not always applicable. Corn is an asset when it is bought and sold. It is food when it is consumed. > Should farm (or food producing corporation shares) prices be factored into the CPI as well? I clearly say at the end that if CPI is not measuring these price increases we should use a different measure. I'm not sure you understand what's going on in this conversation, but food is in the CPI. > Also, your point about buying housing as some sort of protection against inflation doesn't tell the whole story. Where on earth do I say this? I say that poor people are exposed to inflation the most, especially increases in housing prices. We should have measure for what working Americans are exposed to, and do not.
  - gruez 6y ago
    >After you live in a house a long time it falls apart. Capital Expenditure restores the asset to its previous value. Bread just depreciates faster. but can still be traded, bought and sold. In Japan houses are often only ever used by one family, and the house is destroyed when the land is sold. I am taking your insistence on a cash flow perspective to its logical extreme to show that it is not always applicable. 1. the part of a house that's getting expensive isn't the house itself, it's the land. the multi-million dollar homes in san francisco would only be worth a few hundred thousand tops if they were moved to rural idaho. 2. corporations fall part too. more specifically, their physical assets (eg. machines in factories) fall apart. In both cases they're kept up by routine maintenance. The only difference is that in a corporation the maintenance is paid from revenue before profits/dividends are paid out, whereas in a house the maintenance is paid out of pocket by the owner. 3. it's not a question of deprecation. after you eat a piece of bread it's gone. that's not due to depreciation, it's due to you consuming it. >I clearly say at the end that if CPI is not measuring these price increases we should use a different measure. I'm not sure you understand what's going on in this conversation, but food is in the CPI. That's my original point. Rent (and imputed rent) is directly measured in the CPI, so there's no need to measure home prices.

by PEJOE 6y ago

gruez 6y ago

>From a finance perspective, theres no difference between food and a share in a corporation Clearly not. After you eat a bread, it's gone. After you live in a house it's still there. A better analogy would be something like a farm, which continuously provides sustenance as a service. >The primary purpose of a house is to, well, house people. Shelter is a necessity. People who are most vulnerable to inflation are the poor, who mostly rent, and thus pay current market prices. They also pay the most for healthcare on a per care instance basis, and often pay for college with expensive debt (5%) if they go to college. Should farm (or food producing corporation shares) prices be factored into the CPI as well? Like housing, food is also a necessity, and buying a farm would ensure you're protected against inflation in food. Also, your point about buying housing as some sort of protection against inflation doesn't tell the whole story. Yes, it's a hedge against future rent increases, but here's no free lunch because the inflation is already priced into the price of the house. If rents are expected to 10x in the next 10 years, you can be sure that housing prices will grow accordingly. That's why price-to-rent ratios are insane in coastal cities.

PEJOE 6y ago
> Clearly not. After you eat a bread, it's gone. After you live in a house it's still there. After you live in a house a long time it falls apart. Capital Expenditure restores the asset to its previous value. Bread just depreciates faster. but can still be traded, bought and sold. In Japan houses are often only ever used by one family, and the house is destroyed when the land is sold. I am taking your insistence on a cash flow perspective to its logical extreme to show that it is not always applicable. Corn is an asset when it is bought and sold. It is food when it is consumed. > Should farm (or food producing corporation shares) prices be factored into the CPI as well? I clearly say at the end that if CPI is not measuring these price increases we should use a different measure. I'm not sure you understand what's going on in this conversation, but food is in the CPI. > Also, your point about buying housing as some sort of protection against inflation doesn't tell the whole story. Where on earth do I say this? I say that poor people are exposed to inflation the most, especially increases in housing prices. We should have measure for what working Americans are exposed to, and do not.
- gruez 6y ago
  >After you live in a house a long time it falls apart. Capital Expenditure restores the asset to its previous value. Bread just depreciates faster. but can still be traded, bought and sold. In Japan houses are often only ever used by one family, and the house is destroyed when the land is sold. I am taking your insistence on a cash flow perspective to its logical extreme to show that it is not always applicable. 1. the part of a house that's getting expensive isn't the house itself, it's the land. the multi-million dollar homes in san francisco would only be worth a few hundred thousand tops if they were moved to rural idaho. 2. corporations fall part too. more specifically, their physical assets (eg. machines in factories) fall apart. In both cases they're kept up by routine maintenance. The only difference is that in a corporation the maintenance is paid from revenue before profits/dividends are paid out, whereas in a house the maintenance is paid out of pocket by the owner. 3. it's not a question of deprecation. after you eat a piece of bread it's gone. that's not due to depreciation, it's due to you consuming it. >I clearly say at the end that if CPI is not measuring these price increases we should use a different measure. I'm not sure you understand what's going on in this conversation, but food is in the CPI. That's my original point. Rent (and imputed rent) is directly measured in the CPI, so there's no need to measure home prices.