Discussion about this post

User's avatar
SimonM's avatar

Re: 33/ (Don't by a house)

(Since I can't comment on the author's blog, I'm commenting here)

1/

> "Stocks tend to strongly outperform real estate as an asset class – 10% over the 20th century for stocks, vs barely beating inflation for real estate."

[citation needed] (The Rate of Return on Everything)[https://conference.nber.org/confer/2017/SI2017/EFGs17/Jorda_Knoll_Kuvshinov_Schularick_Taylor.pdf] has (globally) real return on equities ~7.1% and housing ~7.7% so housing *out performed* over a very long time horizon. In the UK (where I believe the author is from) the relationship is less good (~7.5% equities vs ~5.6% housing) but even so, we're still talking about assets with very similar return profiles. Risk adjusted, housing massively outperforms across all countries.

2/

> In contrast, if the value of my stocks doubles, then I can actually spend the money on things that make my life better, such as nicer rental properties, child care, etc

This whole paragraph seems to miss the point about housing costs. If you buy a house, you have roughly speaking covered the shelter short you are born with. If you own stocks and rent, you are exposing yourself to some large basis risk between shelter and equity returns. Maybe this is a good bet, but it's not an obvious one to me

3/

> However, I have no reason to sell my stocks just because I want to move house.

Based on the authors own logic, you have no reason to sell your house just because you want to move house. You can rent out your house and rent your new house.

4/

> Secondly, the downside of leverage is that it leaves you massively screwed if your house falls in value.

One of the biggest advantages of mortgages (vs other kinds of leverage) is they are not margined. If the value of your house falls you *aren't* massively screwed. Yes, you might end up in negative equity, but as long as you continue to be able to afford your mortgage payments, no-one is forcing you to sell it

Expand full comment
Matthew Ritter's avatar

Just searched for “boiling point“ on Netflix, without success. Maybe not available in the US?

I can only assume it is a docudrama about the time that https://nitter.net/qualythe tried to go undercover as a line cook, in Las Vegas, in a heat wave.

Expand full comment
6 more comments...

No posts