Profits from Market Crash 2017 - Look out carefully

I just came across this book, wondering whether I can buy and read it.

Interestingly, this was published in Sep 5, 2016, and Predicted Republican president.

LOL: This may be elt1 (Tony Pow) ???

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Thank you for posting that.

I have a question, perhaps especially for JIL, who understands these things best:

If I understand correctly, QE meant releasing money into our system by the government. Normally, that should mean inflation, right? Yet people (aka my husband) claim that inflation is not happening (more than normal) though because gas is cheap and food prices, as measured by some particular list of food including bread, haven’t gone up.

I think food prices have gone up, and that wheat prices can be controlled, and that gas is arbitrarily cheap because of foreign influences and therefore not a good indicator of inflation. Is it possible that housing prices are up because of inflation, not a bubble?

I do believe that in a market where there aren’t a lot of cash buyers, house prices are inversely related to the interest rate because people buy based on a fixed amount they can spend monthly, so some of the housing price is due to low interest rates.

Would love to hear people’s thoughts on this in general–please don’t just tell me that BA will go up, so buy. I want to understand if what is being seen across the US can be attributed to real inflation caused by QE rather than just a bubble.

That’s a physics question.

Inflation is directly proportional to the product of money supply x velocity of money.

While money supply has increased, velocity of money has not increased. That’s money is circulating very slowly around… turnover is low. Hence momentum, I mean inflation, remains low.

Banks are not lending much, corporate are hoarding their cash and corporate are not borrowing much. Is why velocity is low.

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Redfin data shows most purchases are with less than 20% down. So expect prices to be sensitive to mortgage rate.

Can you give me a link to that data?

Type in the city in the search box, scroll down to the end.

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Terri is absolutely right that monthly mortgage payment is the determinant of affordability. Majority of houses are purchased with mortgage, and the free and clear owned houses are not very relevant in market price finding.

However, using macro economics metrics as a major consideration in personal home purchase is misguided. First, no one understands macro economics accurately. If someone really accurately understand, he would be a billionaire and the purchase of a personal home would be like a purchase of new phone. no one would study economics before buying a phone, or even a home.

Education is good. But over education could be toxic. Your husband is not even an economist. Even though he might be exceptionally bright and thoughtful, I doubt he can figure out about the macro economy before your home purchase.

I spent a lot of time to do similar study and use it as a “rational” reason to avoid buying houses before 2007. Even though some of my points were proved correct, I think my personal finance would be much better if I acted dumb and listened to the realtors to “just buy, don’t over analyze”.

Starving child, if you give food, he/she won’t vomit ! QE printing had similar effect.

During 2007-9, Our economy went down 9 Trillion and government printed appx 4.5 Trillion. Most of the money went into recovery (still insufficient) and QE is mainly to stop foreclosures, mortgages are given mostly with 20% down payers until recently. Savings rate is increased and real estate is stabilized.

General Public/People’s income is not greatly improved. Job market recovering and not complete - Trump win shows !

In addition, worldwide recession (China+OPEC) results availability of goods + oil at a cheaper price that reduces inflation.

Hanera perfectly gave the details, economy is slowly recovering, not fast enough.

If you review year 1999-2000 and year 2006-7 FED rate hikes, they used to raise qtr point rates every meeting after meeting or alternate meetings. But now, they are almost considering one qtr per year. This is almost 12x slow speed.

November 17, 1998 ===> 4.75
June 30, 1999 ===> 5.00
August 24, 1999 ===> 5.25
November 16, 1999 ===> 5.50
February 2, 2000 ===> 5.75
March 21, 2000 ===> 6.00
May 16, 2000 ===> 6.50

June 30, 2004 ===> 1.25
August 10, 2004 ===> 1.50
September 21, 2004 ===> 1.75
November 10, 2004 ===> 2.00
December 14, 2004 ===> 2.25
February 2, 2005 ===> 2.50
March 22, 2005 ===> 2.75
May 3, 2005 ===> 3.00
June 30, 2005 ===> 3.25
August 9, 2005 ===> 3.50
September 20, 2005 ===> 3.75
November 1, 2005 ===> 4.00
December 13, 2005 ===> 4.25
January 31, 2006 ===> 4.50
March 28, 2006 ===> 4.75
May 10, 2006 ===> 5.00
June 29, 2006 ===> 5.25

Source: Fed Funds Target Rate History (Historical)

FED current lookout is just to manage the rate hike for healthy economy, but not to create another crash.

The welcome point is Trump’s reduction of corporate tax (and taxing overseas jobs/materials). This gives 20% cash flow to US companies. We need to see how future goes.

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I am a licensed Realtor. I am telling you now to just buy, don’t over analyze. :slight_smile:

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Well, I still analyze all the time, and I’m sure somtimes I still over analyze.

I have been thinking if I would be much more successful if I receive a few years less of education. I would be better off if I listened to the first realtor I met and just blindly bought a house. I always thought my realtors are dumb or thinking only of their commission when they push to just buy and stop asking too many questions.

Many people bought houses by being dumb and by being willingly manipulated by the sales person. They have inaccurate understanding of the market, they have totally wrong understanding of the economy. But they all get the appreciation, except liers who have no money to pay mortgages.

Is it generally true that it is harder to persuade highly educated people to buy their first home?

Less education = more housing appreciation?

Not just for real estate, even for stock investment, the lesser intelligent beats the highly intelligent. Intelligent folks tend to over analyze, over confident and trap by analysis paralysis. There is a running joke that a chimpanzee can select stocks better than a doctor. Isaac Newton lost his noble prize money speculating in stocks.

Is better to be a gullible fool than a smart ass.

Almost all of us are like this. This is what we say learning by experience ! I met my first realtor in 1999. At that time, the home price was almost half of what I purchased in 2004/5.

Less education is not good.

It is better to continue analyze, but do not leave a deal when you are sure.

Nowadays, by seeing the home, I just get the details in my mind, not even going through calculations. Whatever I see in the internet as deal, it becomes a Redfin HOT home soon. You will be like that over a period of time.

In fact, I want to get such a knowledge in stock market, get to know the deal when it happens. This is the key, you understand faster and better, for success in any field.

Stock is a different beast, too many clever crooks waiting to steal your money.

Housing maket is easier. It’s mostly mom and pop, regular folks, “poorly educated” folks. It’s better to be in the same market as these people instead of crooks.

Terri, you want to know if it is a good idea to purchase a home now based upon the expectation that home prices will continue to rise. There are opposing opinions and people have acted upon them accordingly. It’s not so cut and dry, but if you look at every single transaction there is a buyer and a seller.

IMO, buy a place if it makes sense for you. The biggest benefit of ownership is a sense of control. You can control your living environment and your costs. No one here can convince you to buy if you don’t want to, and no one here can accurately predict what happens next.

Here’s my anecdotal take. The market was very calculated over the last quarter or two. The market was pickier about which properties sold quickly and at what price. There was a divergence in the lot values versus outdated home pricing. When it was hot, lot value was very close to the price of a home you could move into. Some investors were willing to take losses and smaller gains to get out now. With that said, the markets I’m interested in have cleared most of the picked over inventory versus being pulled for re-listing next year. It feels like I missed a purchasing opportunity.

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ww13, Three Kudos to you. Owning a primary home helps in the long run and helps us defeating inflation (at minimum).

Other than some short-term corrections, buying housing has been the way to go since 1973 when Freddie/Fannie started directly buying mortgages from banks. Housing has been on a run ever since.

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Buying a primary home is the best investment you can make, it’s true for most people.

Most wealthy people I know made money from real eastate. The richest people are usually successful entrepreneurs, really rare. Second richest is the early employees at top companies, very rare. Third is people with multiple properties, quite a few. Fourth is long time homeowners. majority of Silicon Valley. Fifth is high income professionals who save money, majority of new people. Worst is stock traders, extremely rare.

Housing is definitely slowing down. Appreciation will be slow, some shallow decline is also possible. But I would buy a primary home when the right home comes along. Over the long term, you’ll get appreciation. With paper money printed at no cost, it’s hard to believe housing price can decrease over the long term. The question is how much it’ll appreciate in 20 years, not if.

If there is any nationwide housing price decline, we’ll get massive stimulus and the price will backup. It was shown in front of our eyes in 2008-2016.

American people and its government will not allow housing price to go down for too long. It’s a political issue, not just an economic issue.

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Traders are normally stand to loose in the long run, but investors are not. Like we say hold real estate forever, there are people who buy stocks and hold for long. I have seen at least three people here, holding growth/dividend stocks for many years. Their net worth is growing faster than RE. Simple holding of SPY for many years takes anyone at 7% YOY level.

The only difference is real estate is leveraged while stocks are not leveraged normally !

Buying a home is 4 times better than buy SPY. Home appreciation plus equivalent rent will match SPY total return. With a leverage of 5, you get 500% of what you can expect from SPY.

Buying aapl and holding for 20 years might be better. But out of so many stocks, no guarantee you will buy aapl, and no guarantee you’ll only buy apple.

For each person who bought aapl 20 years ago with an initial investment comparable to a down payment, there are 10000 people who bought a home with 20% down or less.

Even if you are lucky and smart enough to buy a stock with 100 times return, you may still buy with a small capital, not using the down payment.

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Only indication we have is that REITs are going down and down for the last six months from Aug 1, 2016 onwards.