3 ms·
Read the book The Great Crash of 1929, written in 1955. Our current market is similarly speculative as that one. If the federal reserve reacts by tightening
by silexia 5y ago
Read the book The Great Crash of 1929, written in 1955. Our current market is similarly speculative as that one. If the federal reserve reacts by tightening up monetary policy, a lot of existing assets can go to zero and you will still be holding that debt.
- bhelkey 5y agoBasically, you are saying: 100K house + 120K mortgage + 120K assets could become 100K house + 120K mortgage if the market you invest in craters? I get where you are coming from. I don't share your conclusions, but I understand the reasoning. You are looking at this though the lens of what is the most stable possible asset in case of a crash. I get investing in something physical that provides value to you. Thank you for the insight.
- saltcured 5y agoRight, the owned house is somewhere you can live even while the numbers on paper go haywire for a while. Related to this, the same market crashes that can dip the asset values and put someone underwater can also affect other income streams, making it difficult to continue to make payments. If people feel at risk in such circumstances, they might liquidate those other assets in an attempt to protect the house, and in the worst case still fail later and have to surrender the house too. The more rational behavior migth be to walk away from the house and possibly see the other assets recover, but that depends on being able to secure other living arrangements in a difficult time.