No one can see the future!!!

The fundamental difference in the USA from other countries is our Constitution. Our government can’t just do anything it wants unlike say the Philippines.

Bentleys on the other hand are a sure fire way to get rich. Do you know even a single poor person that owns one? I’m surprised more financial counselors don’t see the connection. And the best thing about it is it’s not just an investment, you can use it for transportation as well.

You can also live in a car (and you can’t drive a house). So a Bentley will make you rich, provide you with transportation, and if you park it down by the river, provide you with a waterfront home. If you want to add a bathroom – trailer hitch + porta potty – cheap, and easy.

Buy one now before you’re priced out forever!

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Y sm t thnk t’s nly bt rltrs mkng mny….

nd t NY PNT n tm y knw hw mch y rsk y cn hndl – nythng ls s prtndng nt t knw. nd w sw th rslt f tht prtns, bvsly, vr th lst yr nd hlf r s.< hrf="#" clss="rplyt" nclck="rplyt('45557','∓#91;trll∓#93;',''); rtrn fls;">Rply – < hrf="#" clss="qt" nclck="qt('45557','∓#91;trll∓#93;','wrckngbll - \'v bn syng by n fr vr 6 mnths nw. Prcs hv bn flt, t bst, dclnd 5-15% t wrst, dpndng n whch r.\r\n\r\nS my c ll lng ws t wn hm nyhw. Flppng s ptnl (f y cn stmch t), nd nvr dsmssd t. dn\'t knw wht y\'v bn rdng - bt nvt ppl t ply th hm wnrshp gm nt bcs t sts m ln, bt bcs t sts thm vn mr.\r\n\r\nY sm t thnk t\'s nly bt rltrs mkng mny.... \r\n\r\nnd t NY PNT n tm y knw hw mch y rsk y cn hndl - nythng ls s prtndng nt t knw. nd w sw th rslt f tht prtns, bvsly, vr th lst yr nd hlf r s.',''); rtrn fls;">Qt

However, I think your 0 down statement is even less authentic. You may have put zero down, but you have costs to retain the investment (mortgage payments, taxes, repairs).

Rent it out, have the carrying costs paid by the renters then it’s still authentically zero down.

And given Japan’s culture of saving I don’t they they have many negative net worth estates.

I’ve read that that’s a big part of the problem in Japan’s real estate market: mortgage debt liability survives the borrowers death and falls to the borrower’s family members (Fortune Favors the Bold by Lester Thurow).

Fine. I’ll concede you can get undefined rates of return from options, but I still maintain that the rate of return from options does not exceed that of 0 down house flipping because their rates are both undefined.

Both examples have taken turns for the ridiculous. Alan took perhaps the greatest highly publicized crash in the last 5 years as his basis for returns, when in fact you will not do that well on any other 4 day period.

However, I think your 0 down statement is even less authentic. You may have put zero down, but you have costs to retain the investment (mortgage payments, taxes, repairs). You can only call it a $0 investment if carrying costs are equal to the costs of not carrying. E.g. the first home you buy replaces rent, so if all carrying costs are equal to your rent then it can truly be considered a $0 down investment. If carrying costs exceed that, you no longer have infinite leverage, and if carrying costs are lower than rent would be (negative equity ARM potentially) you can claim an even better gain.

However, you are only likely to see such good gains on 1 house. Other houses you buy will have extra carrying cost, since they do not replace your rent.

One argument for housing being a good ‘predict the future play’ is that you don’t need to know much information for it to pay off. If someone told you in 2001 that prices in every major coastal city (and Las Vegas and Phoenix) would rise by at least 70% in the next 6 years you could make a profit. Meanwhile to win huge at options you would need to have quite a bit more information.

I can see the promo: “You are already leaving your children a HUGE national debt; why not a suicidal mortgage? Act now before you are priced out!!!”

http://www.usatoday.com/money/perfi/housing/2006-05-09-long-mortgage-usat_x.htm

The answer is easy – when the yield (net rental income) exceeds financing costs.

It’s all about the price.

But where were all these thoughtful MSM reporters last year?

So your initial $5 investment becomes $2000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 after one year.

Bah! Good luck doing that past a couple hundred thousand dollars. I can’t imagine an order for 500 thousand front month way way way out of the money puts getting filled. Even if it did good luck with the sell order, or the buy order if you exercise them instead (what would happen to the stock price if there was a buy order for 50 million shares of stock?) .

How would you be doing on those real estate investments?

I already said that with any kind of money options would be better so I’d be just as rich as you in our dream world. In fact I would have whatever you had plus one.

Let’s make that more clear…

20000000000000000000000000000
00000000000000000000000000000
00000000000000000000000000000
00000000000000000000000000000
00000000000000000000000000000
00000000000000000000000000000
00000000000000000000000000000
00000000000000000000000000000
000000000000000

You know how one million is equal to one thousand thousands?

That number above is roughly 20 trillion trillions.

So your initial $5 investment becomes $2000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 after one year.

Did I mention I would be uber-rich?

How would you be doing on those real estate investments?

I could get $5 begging at the traffic light.

The reason they can’t regulate ARMs in any reasonable way is because that would kill the entire housing market. If a home owner makes a stupid investment your only hope is to find somone willing to make a worse decision to bail them out. If we legislate stupidity out of the mortgage mess then we really don’t have a housing market. We are now in a death cycle of toxic stupidity and any attempt to regulate this stupidity will force our society to pay for it in ways that no one wants to imagine.

A person can get into options nearly for free, assuming the play far enough outside the money, and in a short enough time frame. Let’s look at Google for an example. To buy an option that closes in 22 days and is near the money, you’ll pay around $18-$23 a contract. You must buy at least 100 contracts at a time, so it’ll cost you $1800-$2300. That’s not such a massive price to get in (not that Google is the way to go, but it’s a name everyone knows).

But let’s say you don’t have a couple thousand. You can instead use your uncanny ability to always predict the future, and make up for it. If you knew GOOG would lose $100 in value during last February (which I believe happened), you could buy a put at $100 below current price. Today, such a put sells for $0.90, and since you have to buy 100 you would be in $90 (plus $10 to make the trade and $10 to sell). Surely you can scrape together $110!?!

But let’s play devils advocate and assume you don’t even have $100. First, you can always drum it up. Just get a credit card, and you can get a cash advance for that amount. Or go get a pay day loan. Regardless, if you can’t find $100, you can’t buy a house anyways. Even with 0% down it costs some money to get into a new house (moving, painting, driving around to look at homes!).

And because of the magic of cumulative returns, you might make 300% on options every month or every week. So Alan is correct that it’s a better investment if you can predict the future than housing…even from 2000-2006.

Right on cue. Now that the unwinding is happening, here comes the forgot the money, it’s always been about personal enjoyment argument.

Rates of return are higher.

If you have any kind of money options are clearly better, but if you literally have zero money, you could’ve made hundreds of thousands in the housing market which you can’t do with options. Your rate of return if you start out with zero and make any money is effectively ERROR: DIVIDE BY ZERO. Which is infinitely more than you could get with options.

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Heck, I’d even go as far as to say options on margin are the way to go.

Without homeownership so fundamentally tied to the American Dream(TM), I do not think you would have seen so many people rushing to buy now to avoid being priced out forever, the bubble would have never really taken off. Like most bubble-sitters, more first time buyers, etc, would have looked at prices rationally and decided it was not worth it. Instead you had emotional purchasing which was ego driven and not rational in the slightest. This type of purchasing is not limited to homes, but most things also are not priced as many multiples of your yearly income either.

Exactly, Ubersalad, for an example, look at the Beanie Baby craze several years ago where there was a small bubble in the collector’s prices of those. That only affected a small percentage of the population because most people were rational enough to look at stuffed animals and realize they weren’t worth hundreds of dollars no matter how “collectible” someone thinks they are. Sure there were some “get-rich-quick” morons sucked into sinking their money into overpriced beanie babies, but most people had the emotional distance not to fall for it. That’s not so much the case with real estate, where being a “landowner” has a long history of instilling societal prestige to the individual.

Walking Away From A Get-Rich-Quick Thing

Seattle PI, Heraldnet, Bellingham Herald, Kitsap Sun and others were quoted yesterday on Ben Jones HBB.

Real economic growth is created by value-added production. You cannot create real economic growth by trading pieces of paper. We have to relearn that lesson over and over again. We can’t live off imported goods and export nothing. That’s like living off I.O.U.s.

Bob Lutz – General Motors Vice Chairman

Hell, just a few weeks ago Bear Stearns dropped from $60 to $2 over the course of a few days. You probably could have gotten 100000% (1000x) return in a few days just on that deal.

And then a few days later it went from $2 to $11. There is another 5x return over a few days.

Multiply opportunities like that over the course of a few years and you are talking serious returns.

If you are a real medium, then real estate is for chumps.

Who would say no? If all of us here can go back to 2002-2003 knowing what the future holds, all of us would be buying and unloading by 2006.

Otherwise, families, neighborhoods, communities and society and the economy as a whole will suffer enormous long-term damage if another casualty of the housing-finance crisis is the belief that homeownership matters. To lose that would be the equivalent of correcting an ill-advised paint job by bulldozing the structure.

I think this is precisely where we are headed. We won’t have hit bottom until there is an outright revulsion of home ownership. We will have hit bottom when accepted wisdom holds that “only fools buy homes”. Society has built up the myth of home-ownership into something far grander than it really is, and we are just beginning the correction of this misconception (i.e. that home ownership is a “good” thing).

Without homeownership so fundamentally tied to the American Dream(TM), I do not think you would have seen so many people rushing to buy now to avoid being priced out forever, the bubble would have never really taken off. Like most bubble-sitters, more first time buyers, etc, would have looked at prices rationally and decided it was not worth it. Instead you had emotional purchasing which was ego driven and not rational in the slightest. This type of purchasing is not limited to homes, but most things also are not priced as many multiples of your yearly income either.