Stock Market is the bottom in?

[Mortenson]

Haha. Lotta variables. I think the old thinking was a house would never lose ya money. 6500 seems fair enough to keep your asset maintained, unless it's 14k sq ft. Do you change out your caulk often? Most the guys on this thread know how to keep their homes an asset. In the real world, I'm not sure. All bets are off in the Great Reset that's beginning. Lotta financial geniuses going to be proven wrong.

 

[Telemark]

If a home/property is owned outright with no lien, would some still consider it a liability?

Of course. Unless you are renting out part of it, or plan to sell it. You have financial obligations on your house, like insurance and maintenance. If it's costing you money rather than earning you money, it goes in the liability column.

 

[Telemark]

Time will tell what happens with home interest deductions. It is a political decision and not predictable

It is a political decision, made by politicians, who are in bed with the banks.

 

[Telemark]

Commodity prices do not go up with inflation. Commodities are very cheap today, with the exception of those affected by stimulus

Commodity prices do go up with inflation. They are likely to increase with the decline in value of the USD.

Regardless, it's already happening. Just go and check corn and wheat prices.

 

[Telemark]

. I'd worry about rates that can't go down enough from here to bring forward the next greater fool (economic term, not an insult) to award you a gain at sale time.

I'm not intending to sell. In fact I'm looking to buy a lot more rental properties in about 10 years. I think prices will drop as baby boomers start to die off, and millenials will keep renting because they don't value home ownership. This should make real estate cheap and rents high, making it an even better investment.

And the government will never tell people they don't have to pay rent. More likely the government will pay people's rent, because that's what the government does. They already pay rent for a lot of people, and now they are cranking out stimulus dollars regardless of the future consequences, so that people can pay their rent.

 

[chummer]

At present time I have roughly 150k of equity in my house. In 15 years when tell this state the well is dry, no more from me, I will sell this house and put the proceeds in my account. At that point, if we have a country left, I will be way ahead on the house. I only got a C in accounting so if you are going to subtract the 25 years of crippling NY taxes from that number than I guess it could be a Liability. Rent or buy you are paying someone, I would rather get a big chunk back at the end

 

[SD51555]

Commodity prices do go up with inflation. They are likely to increase with the decline in value of the USD.

Regardless, it's already happening. Just go and check corn and wheat prices.

I did, and soybeans, metals, oil, gasoline, and natural gas. All of these commodities are trading a hair above their production costs, and you see that by the number of commodity producers that go under each year. Here are the 20 year charts in corn, beans, and wheat. Anyone can easily pull these at MacroTrends. Very good search function.

Wheat Prices - 40 Year Historical Chart

Interactive chart of historical daily wheat prices back to 1975. The price shown is in U.S. Dollars per bushel.

www.macrotrends.net

The costs to raise these crops hasn't been frozen since 2007.

 

[SD51555]

If a home/property is owned outright with no lien, would some still consider it a liability?

Absolutely. But, you've gotta separate the investment consideration from the "What do you want to live in?" consideration. I've always said, if you want to live in a house, buy a house. End of discussion. But as far as an investment goes, terrible. Even if it's well set up with maintenance free stuff, the opportunity cost of equity, insurance, and taxes tank it as an investment.

Hunting land (excluding you savvy farm rent/CRP gurus) is also terribly inefficient when it comes to ways to spend money to take a deer. But we do it because it's about more than just the most cost effective way to bag a buck, get some meat, or be left alone.

 

[bwoods11]

Absolutely. But, you've gotta separate the investment consideration from the "What do you want to live in?" consideration. I've always said, if you want to live in a house, buy a house. End of discussion. But as far as an investment goes, terrible. Even if it's well set up with maintenance free stuff, the opportunity cost of equity, insurance, and taxes tank it as an investment.

Hunting land (excluding you savvy farm rent/CRP gurus) is also terribly inefficient when it comes to ways to spend money to take a deer. But we do it because it's about more than just the most cost effective way to bag a buck, get some meat, or be left alone.

I would disagree with you...I would say that depends a lot on what type of property you have. We own a lake home and the equity has jumped significantly. I could sell it tomorrow for large increase. Why would that not be considered a good investment?

 

[Telemark]

At present time I have roughly 150k of equity in my house. In 15 years when tell this state the well is dry, no more from me, I will sell this house and put the proceeds in my account. At that point, if we have a country left, I will be way ahead on the house. I only got a C in accounting so if you are going to subtract the 25 years of crippling NY taxes from that number than I guess it could be a Liability. Rent or buy you are paying someone, I would rather get a big chunk back at the end

Where will you live?

 

[Telemark]

I would disagree with you...I would say that depends a lot on what type of property you have. We own a lake home and the equity has jumped significantly. I could sell it tomorrow for large increase. Why would that not be considered a good investment?

Because you're not going to sell it tomorrow. And it has probably cost you a lot of money over the years.

 

[Tree Spud]

Absolutely. But, you've gotta separate the investment consideration from the "What do you want to live in?" consideration. I've always said, if you want to live in a house, buy a house. End of discussion. But as far as an investment goes, terrible. Even if it's well set up with maintenance free stuff, the opportunity cost of equity, insurance, and taxes tank it as an investment.

Hunting land (excluding you savvy farm rent/CRP gurus) is also terribly inefficient when it comes to ways to spend money to take a deer. But we do it because it's about more than just the most cost effective way to bag a buck, get some meat, or be left alone.

I disagree a bit. For many people, a house (with the exception of a 401K) is the best and probably only investment they will make. For the most part, it is the only thing they will allocate money towards that has a good probability of being worth more than when they bought it. For many, it will be the only asset of any real value they have near retirement.

Buying more house than you can afford, stripping all of the equity out of it, and having a 30 year mortgage is a bad approach.

Real estate can be a good part of your portfolio. All of our properties have at minimum doubled in value and several have quintupled. We had one that only saw about 20% appreciation.

When you consider buying real estate, try to save so you can put a 1/3 down, never buy more than you can finance with a 15 year mortgage. When you can put a lot down and have a great credit rating, that equals lower interest rate. And pay extra (as much as you can) on the principle every month to try and target paying off in 8-10 years.

The worst way you can spend money is buying vehicles (or any other purchases) and having to finance them. The average car loan length is 72 months right now. That is about as stupid as setting a pile of money on the ground and lighting it on fire. Save up for your vehicle purchase and pay cash.

For every $ you save from a finance payment, put it into your 401k.

If you can develop the discipline above to do this, you will build a good mindset for handling your money and other investments.

I am glad you clarified "hunting land". We all have to have a bit of an indulgence

 

[chummer]

Where will you live?

I am convincing both my kids to move south. First one to go gets me as a tag along. My plan is to keep my camp (tax are manageable), and have a small place somewhere warm to live 6 months and 1 day. Won’t need much, I amuse myself quite well.

 

[bwoods11]

Because you're not going to sell it tomorrow. And it has probably cost you a lot of money over the years.

You have to live somewhere, why not on the lake. Fun times, the equity has outpaced the interest, taxes and insurance. If I paid even half that much to rent a home, I'd be sick to my stomach. I would only being paying someone else's mortgage?

 

[S.T.Fanatic]

I would disagree with you...I would say that depends a lot on what type of property you have. We own a lake home and the equity has jumped significantly. I could sell it tomorrow for large increase. Why would that not be considered a good investment?

It would only be a good investment if it was a second home, the taxes are cheap, and you haven't owned it for that long.

 

[Bowsnbucks]

Have done well on Boeing, Disney, and Norwegian. Hell, I even bought Denny’s after seeing people sitting under a tarp outside a restaurant. I’m up 70% on that. You could have just about thrown darts and done well if you were buying this spring. The Denny’s episode made me realize how quickly people will flock right back to what they were doing when this is behind us. I tell my wife it was like everything in the store was 50% off or more. It was a great sale!


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I've said the same thing about the post-Covid boom. A lot of pent-up demand / market. Your Denny's comment rings true about people flocking back. Alcohol has done well during this pandemic. Lots of people buying stashes to drink at home while holed-up.

 

[Bowsnbucks]

it valuable is that others think it is .

Same with the stock market. It's ALL speculation. If some bit of news hits, any given stock - or the whole market - can tumble. Intrinsic value and market value are seldom the same. What's listed as $100 per share today can be at $10 tomorrow. Same buildings, same inventory, same prospects ............... different day.

That's why I've followed Bogle, Buffet, et al for their low-cost, broad diversification strategy. Side bets on good dividend-payers.

Biggest miss all-time for me .......... Amazon when it first came out. Thought about that as a single-stock investment. Woulda, coulda, shoulda. Still in great shape though!! One of my best moves ...... investing with Mutual Shares fund years ago run first by Max Heine, then by his protege Michael Price. THAT MAN made money!!!!!! He specialized in distressed companies, distressed debt, mergers, LBO's, etc. He made the cover of - if I remember correctly - Fortune or Forbes magazine with the cover title of "The Scariest S.O.B. on Wall Street." Michael Price KICKED ASS !!!!!!!!!! One of my actively-managed hits.

 

[SD51555]

I would disagree with you...I would say that depends a lot on what type of property you have. We own a lake home and the equity has jumped significantly. I could sell it tomorrow for large increase. Why would that not be considered a good investment?

If the math pencils out, it may be a great move. For purposes of this, let's assume you don't use it or enjoy it and just focus on the numbers.

I benchmark off the stock market as an alternative or opportunity cost. If you take an 8% average stock market return, you'd have to have that property double in value every 7 years after you subtract your ownership costs (power, garbage, insurance, lawn, maintenance, property taxes) of roughly 2.5%/year (percentage of home value). Your real estate return would have to rise to 10.5%, or said another way, double in value every 6.8 years (72 / 10.5) to beat the stock market. It's also lower than that when you figure you gotta give the realtors their cut at the end as well. Let's call it 6.5 years. If it doubles every 6.5 years, it's been as good or better than an S&P 500 ETF.

If you bought a lake home in:

2007 for $300,000
2014 would be worth $600,000
2021 would be worth $1.2 million

If you were matching the stocks, that's about the appreciation you'd need to see. There's something to be said for diversity too. I'm not a fan of 100% stock either. **We won't go there though. The people ain't ready for that left pocket/pocket right pocket/cat throwing dice in an alley - stuff.

 

[Bowsnbucks]

Less likely to. Depends. How much does it cost to keep it from becoming a dump?

Not very much if you have construction skills !! I do. Mainly the cost of needed material. Asset / liability ............ terms applied by bean counters. Everyone needs a place to live - an asset in REAL terms. If you're lucky enough to buy / build when economics are good, and you can do much of the work yourself - it's an even bigger asset when it's time to sell - or pass to heirs. Mortgage interest deduction /savings applied to principal builds your equity faster. We also applied extra to the principal each month besides. Timely re-financing cut our interest rate too.

 

[yoderjac]

Same with the stock market. It's ALL speculation. If some bit of news hits, any given stock - or the whole market - can tumble. Intrinsic value and market value are seldom the same. What's listed as $100 per share today can be at $10 tomorrow. Same buildings, same inventory, same prospects ............... different day.

That's why I've followed Bogle, Buffet, et al for their low-cost, broad diversification strategy. Side bets on good dividend-payers.

Biggest miss all-time for me .......... Amazon when it first came out. Thought about that as a single-stock investment. Woulda, coulda, shoulda. Still in great shape though!! One of my best moves ...... investing with Mutual Shares fund years ago run first by Max Heine, then by his protege Michael Price. THAT MAN made money!!!!!! He specialized in distressed companies, distressed debt, mergers, LBO's, etc. He made the cover of - if I remember correctly - Fortune or Forbes magazine with the cover title of "The Scariest S.O.B. on Wall Street." Michael Price KICKED ASS !!!!!!!!!! One of my actively-managed hits.

You are right, there are no guarantees in any of it, but the broad market is more than speculation. It is always possible to have a historic event, Individual stocks and even sectors can be a gamble, and the broad market can be volatile. However, when you go back and look at the historical data, if your time horizon is long enough, the average returns are fairly predictable. Dollar cost averaging both going in and going out can reduce the risk of buying in all at once. I went back as far as I could with the historical data looking at annual total returns for the broad market. The dips almost never exceed 4 years, so if you can weather a 4 year dip by eating out of a cash bucket, historic returns are likely achievable.

I made some real blunders when I was young trying to "gamble" in the market with individual stocks.

Thanks,

Jack