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Author Topic: Best investment you can make is debt.  (Read 2103 times)
steelhouse
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April 29, 2012, 01:03:16 AM
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Since 2000 the average national debt inflation has been 7.8%.  Since 1971, this number has been about 8%.  This number is the change in national debt year over year.  Now if you take out a loan for 3%, and put it in an asset that does not lose money, you are making a return on the poor sap and fool that keeps their money in U.S. fiat bank account.

Homes imho, are undervalued in the U.S.A. right now.  The cost of materials to make a house is greater than the cost of the house in many cases.  Thus, if you bought a home in say Las Vegas for $100,000 over 30 years, basically the savers of the world bought you a house.  You basically took their money out of their account with the blessing of congress and the president.  Not only that, it is tax deductible.  You default on your loan, you can get your credit back in 3 years and the morons treat you as a victim of banks.

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April 29, 2012, 06:01:47 AM
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Now if you take out a loan for 3%, and put it in an asset that does not lose money,
[...]
Thus, if you bought a home in say Las Vegas for $100,000 over 30 years,

well, that's a problem right there.  about the only city you could have picked with a worse history on house prices would be detroit.

the interest and inflation rates aren't the only factors though.  the price you paid for the house has a huge impact.  they are only now approaching "shiller slope":



http://www.calculatedriskblog.com/2012/04/upward-slope-of-real-house-prices.html

Homes imho, are undervalued in the U.S.A. right now.  The cost of materials to make a house is greater than the cost of the house in many cases.

the cost of materials to make a "jewel box" home (heated floors in bathrooms, granite in bedrooms, etc) for a 3,500 sq. foot home is greater than the market price it could be sold at, perhaps.  but builders are still today constructing relatively basic new homes and selling them so they must be able to sell the home for more than it cost to build.

whether or not they are "undervalued" is going to vary on individual situations, but overall the prices keep dropping  and each time a bottom gets called before a new lower level is reached.
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April 29, 2012, 07:16:52 AM
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Since 2000 the average national debt inflation has been 7.8%.  Since 1971, this number has been about 8%.  This number is the change in national debt year over year.  Now if you take out a loan for 3%, and put it in an asset that does not lose money, you are making a return on the poor sap and fool that keeps their money in U.S. fiat bank account.

Why are you using the national debt instead of CPI? Sure the CPI might be biased, but it can't be that biased otherwise people would stop buying treasuries, e.g. if the real inflation rate was 8%. They would be giving money to the government in the same way you suggest some poor sap with a fiat bank account would be doing for you.

steelhouse
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April 29, 2012, 08:30:59 AM
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Because cpi includes productivity, 1% population growth, use of the dollar overseas, and possibly the savings habits of the rich.

This exercise was to show that almost all government ideas to help people do the exact opposite they hurt the poor and working.  Allow business healthcare deduction, you increase the cost of health care.  You increase the student loan requirements and interest, you increase defaults and put more burden on the responsible, at the same time raising the cost of education.   You create government jobs, you make people work longer hours.  You give people time off from work, you force the honest workers to work longer hours.  Run massive deficits, you steal from grandmas savings account.  You tax the honest people, the dishonest people and government will grow stronger.   you give GM a tax break or loan, the other companies have to work longer hours for less pay.  You allow the post office to run in the red for so long, you increase the total cost of postage.  The government gets involved in jobs and job making, to allow the depression to lengthen.  You support unions, you deny the poor the right to work at good jobs.  You support solar credits, you support a carbon tax (which I do).

To prevent this all taxes other than defense and law should be voluntary.
Jeremy West spendbitcoins.com
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April 29, 2012, 10:46:37 AM
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To prevent this all taxes other than defense and law should be voluntary.

And why shouldn't taxes on defense and law be voluntary? I don't agree with 99.9% of what the so-called "defense" forces do. Why should I be forced to pay for that? And I also would like to be able to choose my own arbiters and disagree with the majority of law.

All human interaction should be voluntary.

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April 29, 2012, 10:38:23 PM
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Homes imho, are undervalued in the U.S.A. right now.

I don't think this is correct. I don't see what material or labor costs have to do with the supply and demand of houses. If there were too many houses built and not enough demand, even if material and labor costs are X you will still need to sell below X because of too much supply.

Characterizing this as being undervalued in my opinion is inaccurate. Houses aren't undervalued, I mean it's true that built houses are valued less than the costs to build them, but because of the supply of houses the current prices are actually still overvalued. Houses will be undervalued when they'll sell for so little that it'll cause a shortage.

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April 30, 2012, 02:51:41 AM
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Ohhhh, results oriented thinking, 2+2 forum must still be down... ZING.

Bitcoin wins in silly results games. 100%? phffft, 100x

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April 30, 2012, 08:55:13 AM
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This is history, you can not drive a car while looking at the back mirror

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April 30, 2012, 09:58:04 AM
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Homes imho, are undervalued in the U.S.A. right now.

Houses aren't undervalued, I mean it's true that built houses are valued less than the costs to build them, but because of the supply of houses the current prices are actually still overvalued. Houses will be undervalued when they'll sell for so little that it'll cause a shortage.

Let's not forget the cost of carry: property taxes, maintenance costs, renovations, insurance etc. During 30 years you easily pay a small fortune on the ownership of a home.
You are also taking long term risks: Detroit looked like such a promising place 30 years ago right? Or crime rates rocket and the once neat neighborhood becomes gang wars territory. Or a motorway gets built in your backyard. Or a disco. Your once scenic view becomes a mall parking lot for a mall. And suddenly your property is worth 50% less. 30 years is a real long time for these things to happen.

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hazek
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April 30, 2012, 10:36:38 AM
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Exactly.

My personality type: INTJ - please forgive my weaknesses (Not naturally in tune with others feelings; may be insensitive at times, tend to respond to conflict with logic and reason, tend to believe I'm always right)

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steelhouse
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April 30, 2012, 07:15:33 PM
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Homes imho, are undervalued in the U.S.A. right now.

Houses aren't undervalued, I mean it's true that built houses are valued less than the costs to build them, but because of the supply of houses the current prices are actually still overvalued. Houses will be undervalued when they'll sell for so little that it'll cause a shortage.

Let's not forget the cost of carry: property taxes, maintenance costs, renovations, insurance etc. During 30 years you easily pay a small fortune on the ownership of a home.
You are also taking long term risks: Detroit looked like such a promising place 30 years ago right? Or crime rates rocket and the once neat neighborhood becomes gang wars territory. Or a motorway gets built in your backyard. Or a disco. Your once scenic view becomes a mall parking lot for a mall. And suddenly your property is worth 50% less. 30 years is a real long time for these things to happen.

You pick a good area.  You can always walk out on your loan if the home is worth less.  You can even file bankruptcy and be back in a home after 3 years.  But, we are really talking about the loan.  A motorway or disco might make your home rise in price too.   The middle class of the 70s was made in many ways off the FHA loan scam.  They got the loan and the houses went up with inflation.  Leaving them rich at the expense of stock and cash holders.  

Some guy is building an exact replica of the titanic, the interesting part of the story imho is they are building it in China. Everyone is usa is screwed the kids want to be policeman, fireman, nurses, and teachers because that is where the money is. The reality is it is not their money, the poor sap at Walmart pays for those salaries.
hashman
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May 04, 2012, 09:39:34 AM
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Since 2000 the average national debt inflation has been 7.8%.  Since 1971, this number has been about 8%.  This number is the change in national debt year over year.  Now if you take out a loan for 3%, and put it in an asset that does not lose money, you are making a return on the poor sap and fool that keeps their money in U.S. fiat bank account.

Why are you using the national debt instead of CPI? Sure the CPI might be biased, but it can't be that biased otherwise people would stop buying treasuries, e.g. if the real inflation rate was 8%. They would be giving money to the government in the same way you suggest some poor sap with a fiat bank account would be doing for you.

Yes, historically we are in the 7+% range for the last 100 years.  Prices double every 10 years.

And yes, you are giving money to the government when you buy bonds at 3%.  However, you are giving them less than if you had just held the cash.

And yes again, taking out a loan is the only way (unless you are well connected) to get your hands on newly issued dollars.     
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May 04, 2012, 01:04:05 PM
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Oh, well if you say so it must be true.

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