4 ms·

10% equity in a house that is 200k, vs 10% equity in a house that is 500k. Which is bigger?

tempsy 4y ago
What does this have to do with being rewarded in the same way a corporation was being rewarded for irresponsible levels of spending and cash burn in low rate environments which is what you saw with Shop and others? Using cheap money to buy appreciating assets is a good use of debt. Using cheap money to spend extravagantly on headcount and perks is not.
- alldayeveryday 4y ago
  > Using cheap money to buy appreciating assets is a good use of debt. Yeah, right up until the point that those assets suddenly diminish in value. > Using cheap money to spend extravagantly on headcount and perks is not. The financial system seemed to disagree and rewarded the behavior, ala stock price increases for extended period of time, up until the point where it didn't. See the similarity now? You are merely saying that "good use" of debt is when you are winning in the game, and "bad use" is when you are losing. The financial system has for too long rewarded speculative gambling rather than value generation.
  - tempsy 4y ago
    you’re trying to frame taking out a standard mortgage on a house as irresponsible gambling so no don’t see how that’s similar to a corporation who burned billions using cheap money and ended up trashing their company
    - alldayeveryday 4y ago
      No, re-read my comments. I said taking a mortgage on a much larger home than you need, or taking out multiple mortgages, or doing debt arbitrage (all, risky moves). You threw in the word "standard" as a means to misrepresent my argument.
    - MisterMower 4y ago
      Many people are buying homes exclusively for the price appreciation. They are using leverage to turn a $50k down payment on a $400k house into a capital gain of $200k when the price of that house rises to $600k. In the process, no actual value has been created. But the gambler, er homeowner comes out way ahead. Someday interest rates will return to historical norms, and these folks will get crushed. They partied hard, and the hangover will be epic. Financial prudence, scorned for the past 20+ years, will be back in style again.
deleted 4y ago
[deleted]

What does this have to do with being rewarded in the same way a corporation was being rewarded for irresponsible levels of spending and cash burn in low rate environments which is what you saw with Shop and others? Using cheap money to buy appreciating assets is a good use of debt. Using cheap money to spend extravagantly on headcount and perks is not.

alldayeveryday 4y ago
> Using cheap money to buy appreciating assets is a good use of debt. Yeah, right up until the point that those assets suddenly diminish in value. > Using cheap money to spend extravagantly on headcount and perks is not. The financial system seemed to disagree and rewarded the behavior, ala stock price increases for extended period of time, up until the point where it didn't. See the similarity now? You are merely saying that "good use" of debt is when you are winning in the game, and "bad use" is when you are losing. The financial system has for too long rewarded speculative gambling rather than value generation.
- tempsy 4y ago
  you’re trying to frame taking out a standard mortgage on a house as irresponsible gambling so no don’t see how that’s similar to a corporation who burned billions using cheap money and ended up trashing their company
  - alldayeveryday 4y ago
    No, re-read my comments. I said taking a mortgage on a much larger home than you need, or taking out multiple mortgages, or doing debt arbitrage (all, risky moves). You threw in the word "standard" as a means to misrepresent my argument.
  - MisterMower 4y ago
    Many people are buying homes exclusively for the price appreciation. They are using leverage to turn a $50k down payment on a $400k house into a capital gain of $200k when the price of that house rises to $600k. In the process, no actual value has been created. But the gambler, er homeowner comes out way ahead. Someday interest rates will return to historical norms, and these folks will get crushed. They partied hard, and the hangover will be epic. Financial prudence, scorned for the past 20+ years, will be back in style again.

deleted 4y ago

[deleted]