All About Assets (One-Stop Shop Chat Thread)

[kyphysics]

This is a "super thread" designed to encourage chat on anything assets-related:

stocks
bonds
real estate
commodities
precious metals
fine art/collectibles (including, NFTs)
cryptocurrency & alternative assets...etc.

As someone who is years away from being able to own a home, I would love to learn everything I can on homebuying and real estate - from valuation to practical homeowning and buying/negotiation matters. While I own some stocks, I am probably still a novice and would love chat about market news, investment opportunities, fun trends (i.e., $GME), and the like. I do not own things like cryptocurrencies or art, but wouldn't mind learning or chatting about those things as well.

Probably the greatest value I could see in this thread would be to prevent someone like myself from making an easily identifiable catastrophic financial blunder. One fear I always have is what if I bought a home for hundreds of thousands of dollars that had major defects in it that cost up to 20..30% of the value to fix. That would be a nightmare. Or, what if I bought some investment (w/ significant portfolio weighting) that lost 90% or more of its value that did not easily recover? Financial literacy is part of the thread aim. Another is just the fun side of things with watching markets and manias/bubbles, etc. and seeking value ideas too. There are, of course, separate existing threads with discussions of these various topics, but I felt a kind of one-stop shop, super-thread aggregating all of these things could be nice for the forum (helping to reduce clutter and direct conversation into an easy to find thread/area).

Fun-Fact-Of-The-Day: According to Yale University's Robert Shiller (Nobel Laureate Economist), homes have been historically bad investments, as they do not even beat inflation over time. I was shocked by this statistic. Capital appreciation is much better in other asset classes, such as stocks. However, I wonder if this thinking is flawed, because of "neighborhood effects" and quality of life factors (schools, public amenities, social networks, etc.)? If I wanted to just save money on housing and put all my money in the stock market, then I could just live in the ghetto in a rodent and pest infested apartment with high crime, low public investment (maybe higher environmental pollution), and unstable social and economic conditions. And that has its own costs too.

 

[kyphysics]

To initiate discussion, here was an interesting Tweet on asset class performance over the past couple of years, along with M2 (money supply) data:


M2 up ~40% in past two years, while S&P 500 is up ~50%.

 

[kyphysics]

Fun News of the Day
Good for those who cashed out of crypto with a nice profit and home/down payment.

Will late buyers be so fortunate?

 

[scompi]

Will late buyers be so fortunate?

Given a long enough time frame, probably. Nobody who held bitcoin for 4+ years has lost money. They usually made a lot depending on the chosen time frame.

Well that's a condescending tweet. We don't know when "these people" bought crypto. We also don't know if they sold for a gain or a loss. We can't know a) how many will sell in Q1 for a loss to fund a down payment, and b) when they first bought, in which case they can still be selling for a gain. So this "crypto crash" may not even have an effect on the trend. These statistics are pointless.

 

[gmax137]

This is a "super thread" designed to encourage chat on anything assets-related:

stocks
bonds
real estate
commodities
precious metals
fine art/collectibles (including, NFTs)
cryptocurrency & alternative assets...etc.

Just my 2 cents, but I think "super threads" are a terrible idea. If they succeed and see a lot of posts, all that means is the interesting information gets harder to find. I'd much rather see individual threads on specific subjects.

Take a look at the Fukushima threads. "Part 1" has 14,000 posts. Good luck finding something you remember having seen in there.

micro-rant ends here

 

[kyphysics]

Just my 2 cents, but I think "super threads" are a terrible idea. If they succeed and see a lot of posts, all that means is the interesting information gets harder to find. I'd much rather see individual threads on specific subjects.

Take a look at the Fukushima threads. "Part 1" has 14,000 posts. Good luck finding something you remember having seen in there.

micro-rant ends here

Lots of truth there that I agree with.

Some counterpoints would be that:
a.) anything already discussed can be reposted (whether copying from past and pasting or just "reposted" in the sense of rewritten)
b.) it prevents like 10 different threads from clogging up the General Chat section
c.) a skilled thread manager(s)/curator(s) can "pin" or have a running master summary of super important points (so that they never get "lost" and also serve as a quick summary guide to major thread views)
d.) re: a.) I think old views often get updated or just recast in a new light, such that it is worth re-writing them every 6 months...1 year, etc. I've been in super long threads before (10K+ posts) on various forums and they can be great. If you have a bunch of regular devoted posters and good curation/management of the thread, it can work well. Old topics get brought up again and often revised/re-debated/updated etc. to the value of all readers/participants.

I'll try to see if I can think of more points later on...just a few off the top of my head.

 

[russ_watters]

Fun-Fact-Of-The-Day: According to Yale University's Robert Shiller (Nobel Laureate Economist), homes have been historically bad investments, as they do not even beat inflation over time.

I'd be curious to see the actual study and its logic. Real estate isn't necessarily like other investments. Your first property has a lot of associate costs besides the purchase of the property itself (taxes, maintenance), but also avoids costs like rent. Additional properties have the same costs but may or may not generate income from renting them out.

 

[kyphysics]

I'd be curious to see the actual study and its logic. Real estate isn't necessarily like other investments. Your first property has a lot of associate costs besides the purchase of the property itself (taxes, maintenance), but also avoids costs like rent. Additional properties have the same costs but may or may not generate income from renting them out.

I cannot find his actual academic printed work on this (if there is any), but constantly see quotes back to 2013-ish with him saying the same thing, such as this:
https://www.bloomberg.com/news/arti...thinks-owning-a-home-is-a-terrible-investment

Conventional wisdom says our own homes are a great place to invest money because the value of a house will inevitably appreciate. One of Shiller's most eye-popping findings actually says quite the opposite: Historically, between 1890 and 1990, the actual rate of return on owning a home has been virtually non-existent. We think housing is a great investment. Shiller says it's not

https://www.usatoday.com/story/mone...y-your-home-is-not-a-good-investment/8900911/

As my colleague David Hanson wrote last week, a recent Gallup poll shows that Americans now believe housing is the best long-term investment, beating out stocks, bonds, and gold.

They might be right, only because the average stock investor does so poorly that a home may indeed be their best investment. But housing has historically been a terrible bet for people who think it will return more than inflation. To show you what I mean, I have to tell you about my visit to Yale economist Robert Shiller's office a year ago.

Shiller -- who won the Nobel Prize last year -- is regarded as the world's foremost housing expert. He has married historical data with deep insight into human psychology to offer some of the best housing analysis anyone's ever produced. . .

"If you look at the history of the housing market, it hasn't been a good provider of capital gains. It is a provider of housing services," he explained.

By that, he means a home gives you a place to live, a place to sleep, a place to store your stuff.

My understanding is that Shiller is only looking at price appreciation of the asset. Again, in my original post, I questioned this logic. Think of neighborhood effects. If I wanted pure price appreciation, I could just live 10 to a 1 bedroom apartment in the ghetto, where there are underfunded schools, high crime, low social and cultural capital, higher levels of pollution, food desserts, lack of municipal amenities, etc. etc.

I'd also probably never find a spouse! Really, half - if not more - of the reason to live in a decent neighborhood/house is probably to keep a marriage happy! Who wants to live in a dump? So, yeah, whatever with Shiller's thesis. I'LL BE GLAD TO BUY A HOUSE IN A NICE NEIGHBORHOOD!

 

[kyphysics]

I could also save money by never showering, never shaving, buying all my clothes from thrift stores, never going to a nice restaurant, etc. ...but, again, I would never find a spouse!

 

[gmax137]

I think a given person's view on housing as an investment depends on their location. Someone who bought a small house in San Jose CA in 1970 (~$15,000) selling today (~$1,500,000) likely has a different view than someone in a tough rust belt market.

 

[kyphysics]

Question About IRAs (or any tax-deferred/protected account):

Does anyone take advantage of the no tax (at least, temporarily) attribute to "trade" in their IRA for short-term gains?

I typically buy and hold in my non-IRA account, in order to avoid short-term capital gains. But with tax-protected accounts, you don't have this issue. Do people trade more actively in them?

 

[kyphysics]

BTW, I believe that paying off your credit card every month fully does not help your "credit score" as much as letting a small/medium balance build up over a couple months and then paying it off and doing that again [reference needed]. It kind of makes sense, but I never researched it much.

This is a good debate question.

The FIRST thing my banker told me when getting a credit card at Wells Fargo was that it'd help me build my credit score in this way. . .But, I've read headlines saying it's a myth. Never looked into much either.

Imported this discussion from another thread, b/c it's more relevant here.

Anyone care to discuss/debate the merits of this common bit of financial advice? Is it a good idea to hold a balance on your credit card and pay it off later to build your credit score?

 

[collinsmark]

Imported this discussion from another thread, b/c it's more relevant here.

Anyone care to discuss/debate the merits of this common bit of financial advice? Is it a good idea to hold a balance on your credit card and pay it off later to build your credit score?

Using a credit card (sparingly), and then paying off the entire balance every month might be a fine way to build your credit score. Although the detailed credit score algorithms are proprietary, so I can't say this with 100% confidence. But my advice is do not leave any balance on your card at the end of the month. I'm very nearly certain that paying off the full balance of your credit card every month will in no way hurt your credit score -- rather it will probably help it.

The important bit is to not buy anything on your credit card that you won't be able to pay off completely at the end of the month. That's where a lot of people get into trouble.

Edit: In other words, to the best of my knowledge, credit scores (made by the three credit bureaus) do no reward people who carry debt. Rather they reward the consistent and reliable paying off of debt, preferably fully.

 

[Office_Shredder]

The various free credit score programs often tell you why your credit score changed each month. I've never been told it's gone up because I carry debt, but it has gone up because I use *less* of my available credit.

 

[jtbell]

I think a given person's view on housing as an investment depends on their location. Someone who bought a small house in San Jose CA in 1970 (~$15,000) selling today (~$1,500,000) likely has a different view than someone in a tough rust belt market.

My wife and I bought our house 34 years ago, in a small small-college town in the South. We paid $70k for it, although the previous owner probably probably could have gotten $80k if she had used an agent instead of the neighborhood "grapevine". (One of her neighbors was a colleague at the college where we taught.) Or maybe not. We had to do some work on it before moving in: upgrade the electrical system to bring it up to code, and add central air conditioning to replace the old window units.

The CPI-U is now about 2.5x what it was back then, so those figures correspond to about $175K to $200K in today's dollars. Zilllow just now shows the estimated value as $188K. And we've put money into the place over the years: replaced the carport and added a storage shed behind it, added a new deck, replaced the roof a couple of times, renovated some rooms (not visible from the outside, i.e. to Zillow).

Around here, "making money in real estate" means rental properties. I don't know what kind of return landlords get here, because I've never been interested in having a second job.

 

[russ_watters]

Imported this discussion from another thread, b/c it's more relevant here.

Anyone care to discuss/debate the merits of this common bit of financial advice? Is it a good idea to hold a balance on your credit card and pay it off later to build your credit score?

It's a myth:
https://www.nerdwallet.com/article/finance/credit-score-does-carrying-a-balance-help

 

[kyphysics]

What are some "must read" beginner books on the following?

--real estate
--investing
--personal finances

Looking for a general audience book(s) (nothing too technical - one that a layman could read through w/o constantly having to stop and look stuff up) on these topics. Thanks!

 

[kyphysics]

Random Question of the Day:

So, I know if you sell a stock (with gain) after a year from buying it, you pay long-term capital gains taxes.

If you stock that same stock (w/ gain) before a year has passed, then you pay short-term capital gains that are higher than LTCG.

What happens if you sell a stock at a loss before a year is up? Is there any penalty, b/c a year hasn't gone by or is it that taking a loss means you can sell it any time you want?

 

[russ_watters]

https://www.investopedia.com/terms/...t=Key Takeaways,price received for selling it.