31 ms·

Sympathy or not, I don't think the problem was evil investors. Imagine you're retired, or close to retired, and you've got your various nest eggs of money that

by xscott 3y ago

Sympathy or not, I don't think the problem was evil investors. Imagine you're retired, or close to retired, and you've got your various nest eggs of money that you need to live off for the rest of your life. Keeping it in cash means losing to inflation. However, the Fed had interest rates so low that buying safe investments like CDs or Bonds also meant losing money to inflation. So you can pick a very volatile stock market, or buy / finance real estate. What option would you pick? And the interest rates for mortgages are strongly (although indirectly) coupled to those Fed rates. So low Fed rates means practically free cash to drive housing prices up. You're looking one layer deep and saying, "See! Those people bought all the houses!". I think the Government/Fed are the next layer of the problem. Maybe looking two layers deeper, we could see why these policies happened... I honestly hope the housing market crashes back to sane prices, but I'm not unsympathetic to the home owners or investors who will get screwed when that happens.

ido 3y ago
It's easy to have sympathy for the otherwise destitute grandma who has a little apartment she rents out and lives off of that rent. But as a society we'd be better off if the default for investment was to find a relatively low-risk, dividend-focused index-fund/ETF. The financialization of housing is a bad idea for the same reason we don't want healthcare and education to be mainly/exclusively for-profit (because housing, education and healthcare all benefit society when they are plentiful and affordable) - or for the same reason: basic infrastructure, the fire department or the police.
- xscott 3y ago
  > It's easy to have sympathy for the otherwise destitute grandma who has a little apartment she rents out and lives off of that rent. I'm not talking about sob story grandmas. I'm talking about people in the tech industry who got educated, saved their money, and want to retire. If that's not you now, it could be you in a few years. It made a LOT of sense for them to buy expensive houses, and maybe to rent them out. > as a society we'd be better off if the default for investment was to find a relatively low-risk, dividen-focused index-fund/ETF. When Fed rates were at/near zero, which ETF was giving dividends above inflation? [!] Even now with Fed rates at 5% (and CD's returning similar), Vanguard's Dividend Appreciation fund (VIG) only gives 2%, and there's plenty of volatility/risk there. I don't have the historical record for VIG's dividend rate, but it wasn't must better, and I don't think you'll find any (relatively safe!) ETFs now with dividends above 3% So while I can agree that would be a better society, it's not the one we live in. Who should we blame? Investors? Politicians? Voters? I suspect you're going to say "Capitalism", and I'll bow out of that conversation [!] I'm sure you can find several one-off stocks that have/had high dividends, but that's not something most people would feel safe putting their entire retirement in.
  - ido 3y ago
    I'm not blaming individual actors acting on incentives, yes the problem is systematic not you personally buying an apartment and renting it out (just like climate change is not your fault personally if you drive an SUV). A decade+ of near 0% interest rates had some negative effects on society, one of them is incentivizing actions that made housing increasingly unaffordable.

by xscott 3y ago

ido 3y ago

It's easy to have sympathy for the otherwise destitute grandma who has a little apartment she rents out and lives off of that rent. But as a society we'd be better off if the default for investment was to find a relatively low-risk, dividend-focused index-fund/ETF. The financialization of housing is a bad idea for the same reason we don't want healthcare and education to be mainly/exclusively for-profit (because housing, education and healthcare all benefit society when they are plentiful and affordable) - or for the same reason: basic infrastructure, the fire department or the police.

xscott 3y ago
> It's easy to have sympathy for the otherwise destitute grandma who has a little apartment she rents out and lives off of that rent. I'm not talking about sob story grandmas. I'm talking about people in the tech industry who got educated, saved their money, and want to retire. If that's not you now, it could be you in a few years. It made a LOT of sense for them to buy expensive houses, and maybe to rent them out. > as a society we'd be better off if the default for investment was to find a relatively low-risk, dividen-focused index-fund/ETF. When Fed rates were at/near zero, which ETF was giving dividends above inflation? [!] Even now with Fed rates at 5% (and CD's returning similar), Vanguard's Dividend Appreciation fund (VIG) only gives 2%, and there's plenty of volatility/risk there. I don't have the historical record for VIG's dividend rate, but it wasn't must better, and I don't think you'll find any (relatively safe!) ETFs now with dividends above 3% So while I can agree that would be a better society, it's not the one we live in. Who should we blame? Investors? Politicians? Voters? I suspect you're going to say "Capitalism", and I'll bow out of that conversation [!] I'm sure you can find several one-off stocks that have/had high dividends, but that's not something most people would feel safe putting their entire retirement in.
- ido 3y ago
  I'm not blaming individual actors acting on incentives, yes the problem is systematic not you personally buying an apartment and renting it out (just like climate change is not your fault personally if you drive an SUV). A decade+ of near 0% interest rates had some negative effects on society, one of them is incentivizing actions that made housing increasingly unaffordable.