Investing 102

[Vegas69]

The recent stats I’ve seen show Americans burying themselves in personal debt not dissimilar to 12 years ago. Student loans being the biggest difference. Kids have giant loan balances to enslave them for a loooooooong time. That’s exactly what all debt is, slavery. You are forced to work to pay it off. It reduces your options and flexibility.

The only debt that may not enslave you is investment debt. Real estate or business, but you can get caught with your pants around your ankles. It best be very optimistic calculated risk.

[GregWeld]

Ah yes Todd..... Student debt. In many cases it shows the same brilliant "investment" strategies as many of their other life choices. What do I mean?

Why would someone take out debt to the tune of $100,000 or $200,000 for a job that pays $35,000 a year. Can they not do basic math and realize the burden this is going to be? I don't care what the interest rate is...

[out2kayak]

Originally Posted by GregWeld

Ah yes Todd..... Student debt. In many cases it shows the same brilliant "investment" strategies as many of their other life choices. What do I mean?

Why would someone take out debt to the tune of $100,000 or $200,000 for a job that pays $35,000 a year. Can they not do basic math and realize the burden this is going to be? I don't care what the interest rate is...

I heard an interesting podcast on this. For your perusal:



Not that I agree with everything that he says, but it poses some interesting questions.

I think that government involvement in education is part of why costs for university have significantly escalated and why there are degree programs that are, from a society perspective, useless. These programs produce people with degrees that can only work at low wage / skills jobs.

[AU Doc]

Originally Posted by Vegas69

The recent stats I’ve seen show Americans burying themselves in personal debt not dissimilar to 12 years ago. Student loans being the biggest difference. Kids have giant loan balances to enslave them for a loooooooong time. That’s exactly what all debt is, slavery. You are forced to work to pay it off. It reduces your options and flexibility.

The only debt that may not enslave you is investment debt. Real estate or business, but you can get caught with your pants around your ankles. It best be very optimistic calculated risk.

Originally Posted by GregWeld

Ah yes Todd..... Student debt. In many cases it shows the same brilliant "investment" strategies as many of their other life choices. What do I mean?

Why would someone take out debt to the tune of $100,000 or $200,000 for a job that pays $35,000 a year. Can they not do basic math and realize the burden this is going to be? I don't care what the interest rate is...

That's a good point. The levels of student debt that kids are apparently leaving school with is one of those things that doesn't make sense on such a basic level that I have a hard time believing it's real. I've heard of Music or History majors leaving school with the same sort of debt that some MDs are leaving school with. One of those makes sense to some degree..... The other two not so much.

To be clear, I don't have a problem with studying Music, History, the arts, etc., but I think we are doing students a serious disservice by encouraging them pursue an academic path that will put them in debt for the majority of their adult lives. Further, many of those career paths are extremely difficult to find a job once they leave school.

Colleges pushing these sorts of academic paths reminds me a lot of predatory lending. "Sure, we'll loan you the money even though we know you'll never be able to make the payments." Sounds a lot like, "Sure, we'll prepare you for a career in a market that we know is saturated and never provide the income necessary to pay for that education."

[GregWeld]

So here's a good sign to watch for regarding "the future" and what happens with rising interest rates.....


Mortgage applications ----- DOWN 6.5%

Why? The reason given was "rising rates make homes less affordable". DOH!!

What happens if mortgage rates continue to rise and sales slow? You got it -- prices come down.... and??

You got it -- Builders start laying people off....

Let's hope the FED doesn't screw this up.

[Vegas69]

I'm definitely starting to see people priced out of the market here. Not severely, but for a majority of the last 7-8 years that didn't happen very often. I personally think the real estate market needs to become more neutral. This coming from a real estate agent. In nearly 18 years of wheeling and dealing in real estate, I've seen a neutral market for a very small sliver. I'm talking months as the transitions from buyer's to seller's to buyer's to seller's markets have been abrupt. I don't mind the idea of a listing sitting around for 30-90 days. I actually have a chance to sell it myself and convert some buyers into clients. I also don't have to juggle 10 offers on one listing. The amount of incoming agent calls can be pretty atrocious. It's also super competitive for our buyers. It's not uncommon for a buyer to lose out on a couple houses. I'll naturally carry more listing inventory in a neutral to buyer's market and I like that.

As with everything, you find the silver lining and make the best of the cards you're are dealt. There are always opportunities in every market if you don't put the blinders on. I just gave my real estate team a pep talk on this yesterday. ha

[WSSix]

I bought my house 3 days after it hit the market because it was what I wanted and I had to. The houses were moving very fast in this area. I'm in one of the very few areas that's still affordable for it's location.

I'm convinced the areas around Atlanta that I was looking are too hot to sustain. I got lucky I was able to get in where I am.

Housing prices and trends in general have me concerned on many levels. Maybe it's the area I'm near and travel through, but good houses going for 500k+ only to be torn down and replaced with mansions that are squeezed onto the lot is too common for me to thing it's "normal" or sustainable. There're no starter homes or middle class homes in many of these areas. It's mansions or low end. I fear we'll end up like San Fran and other areas where housing is stupid expensive. Sure, as a home owner, I may reap the benefits of this, but the larger implications have me concerned.

[GregWeld]

I love what Warren Buffett said on CNBC this morning about selling stocks when they're down....


"If you bought your house for $20,000 and someone came along and said, I'll buy your house for $15,000..... you wouldn't sell would you".

Implying that you know/think/historically your house value is going to go UP over time.....

He's talking about being an INVESTOR for long term and investing in the value of the underlying company -- versus investing in the PRICE of the stock. Think about that..... it's a typical great Buffett / Investing philosophy.