You know, it's going to be sad to see stories of people who saved all their lives, moved up in the world, worked hard, did the right thing.
Then poof! One bad transaction - buying that $1.2 Million Toll Brothers McMansion 50 miles from the city center in say, Boston, and all that effort, all that hard work, washed away. And right before retirement - and don't get me started on that mess (pensions, social security, etc)
Here's Motley:
When prices shoot up, they can just as easily shoot down, especially if the upward buying pressure came from speculators or other short-term dwellers who may be forced, by their employment or by changing financial times, to seek a quick exit.
I continue to believe that things won't be simple. We're going to see some soft landings and some pretty harsh rides. No doubt, much of the ethereal "wealth" created by the American pastime of borrowin' 'n' swappin' will remain, at least for those who can afford to stay in their houses and ride out any big drops.
In the end, the only way for a smart Fool to play in this sandbox, whether buying a home or looking at stocks in the space, is to focus on the particulars of the situation at hand and figure out whether the math works. You can't predict the future, but you can make sure that if it goes ill for you, you won't be crushed by it.
December 17, 2005
Motley Fool: When prices shoot up, they can just as easily shoot down
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6 comments:
good luck out there. and have the courage to sign in and use a user name so we can track your silly comments
itbetterwork:
I would review your economic history. Germany's economic collapse, which was triggered by hyperinflation happened in the 1920s, not the 1930s. Hitler came to power in 1933. The depression that started in West in 1929 spread to Germany, thereby facilitating the doomsayers in the National Socialist movement.
And for the record, Germany in the 1920s is not comparable to the US today. Inflation monetizing debt? Really? What exact amount of inflation do you think we have? 100% 200%... just curious.
And if that is the case, in a high inflationary environment, it makes great sense to be in debt, because inflation diminishes the real value of your debt to virtually zero. Soooo, your hypothetical overstretched person would be making a smart investment decision. Being a renter, in that case would be stupid. Rents would shoot up because of inflationary pressures, the apartment owner in that case would make a killing as the real value of their debts would be eaten by inflation, as their nominal incomes were increasing under the same pressure. Case in point, apartments were considered a great inflationary hedge during the last period when the US had significantly high inflation, the 1970s.
"And for the record, Germany in the 1920s is not comparable to the US today":
Let's see..
1) nationalism run amock
2) a strongman leader who felt he was above the law
3) invasions of countries unprovoked
4) civil liberties eliminated in the "national interest"
5) an economy built on a house of cards
starting to feel a bit berlinesque I'd say
1930's Germany, perhaps. 1920's no, as it was still under the Weimar Republic. The Nazis didn't take power until the 1930's and it was only then that the economy recovered incidentally enough. The late 1920s and early 1930s were a bad time for Germany. Regardless of your political views, economically its a completely different situation.
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