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The problem with leveraged investments is that if it goes down you can get wiped out. If you have $100 and buy one share at $100, which goes to $50, then to $15

by ptero 4y ago

The problem with leveraged investments is that if it goes down you can get wiped out. If you have $100 and buy one share at $100, which goes to $50, then to $150 you end up with a $50 profit. Buy 2 shares at 2x leverage instead and you can, after a margin call, end up with $0. The house also brings in the need to pay taxes and do repairs. And if one is constrained financially they are tempted to defer necessary repairs or go the DIY path without the right skills, which is often disastrous.

renewiltord 4y ago
Right, but that's a problem for my BTC-USDT perpetuals. For housing, political force can be brought to bear. After all, you don't get margin called on a house. It's a non-recourse loan usually. So if you can't pay, you walk away and the bank forecloses. And usually, you can pay, it's just a question of it being worth it. And it's worth it because you can force politicians to make it worth it by taxing society to backstop your property value.
- ptero 4y ago
  Yes, but you can be stuck with the house for a very long time, all the while paying the taxes and repairs. And selling a house is a BIG hassle (plus a payment of 2-5% to the realtor). If you change your work (or your work changes you) and need to move, you may have to sell into a weak market and lose a lot of money. A good neighborhood can become bad, motown-style, etc. Foreclosings are a thing, especially in recessions. If you walk from a loan, you lose your principal (and get a lifestyle penalty: future loans, future jobs, etc.). This is not nearly in the same league as selling a stock you no longer like. > For housing, political force can be brought to bear. Sorry, by whom? By a large group, maybe; after a few years of lobbying. By a homeowner hit with an unlucky spell -- forget it.
  - renewiltord 4y ago
    Sure, if you rate flexibility highly, you don't want this financial instrument, but you are insulated from total society risk since you can ensure that you take money out of anyone's pocket to keep your housing instrument strong. It's probably the safest instrument one could use and definitely the safest instrument with leverage. But we don't have to discuss. We can each take our bets to the market and see what manifests best.
  - renewiltord 4y ago
    To be clear, I think your points on the lock-in are sound and the sales 'tax' effectively of a realtor etc.

by ptero 4y ago

renewiltord 4y ago

Right, but that's a problem for my BTC-USDT perpetuals. For housing, political force can be brought to bear. After all, you don't get margin called on a house. It's a non-recourse loan usually. So if you can't pay, you walk away and the bank forecloses. And usually, you can pay, it's just a question of it being worth it. And it's worth it because you can force politicians to make it worth it by taxing society to backstop your property value.

ptero 4y ago
Yes, but you can be stuck with the house for a very long time, all the while paying the taxes and repairs. And selling a house is a BIG hassle (plus a payment of 2-5% to the realtor). If you change your work (or your work changes you) and need to move, you may have to sell into a weak market and lose a lot of money. A good neighborhood can become bad, motown-style, etc. Foreclosings are a thing, especially in recessions. If you walk from a loan, you lose your principal (and get a lifestyle penalty: future loans, future jobs, etc.). This is not nearly in the same league as selling a stock you no longer like. > For housing, political force can be brought to bear. Sorry, by whom? By a large group, maybe; after a few years of lobbying. By a homeowner hit with an unlucky spell -- forget it.
- renewiltord 4y ago
  Sure, if you rate flexibility highly, you don't want this financial instrument, but you are insulated from total society risk since you can ensure that you take money out of anyone's pocket to keep your housing instrument strong. It's probably the safest instrument one could use and definitely the safest instrument with leverage. But we don't have to discuss. We can each take our bets to the market and see what manifests best.
- renewiltord 4y ago
  To be clear, I think your points on the lock-in are sound and the sales 'tax' effectively of a realtor etc.