It is a way to reduce costs in an atemporal way. You need to account for the facts that a) the money spent today is money that cannot generate revenue tomorrow and b) costs are only important in as far as they affect your revenue. If your revenue grows faster than your costs, you are “winning”, as our new beloved POTUS likes to say, no matter how high the costs are.
A home generates very little revenue in terms of reducing costs once you do own it, with the interest on the credit most people need to take only making the returns worth. There will be exceptions, but there are also exceptions in other markets, e.g. early buyers of AAPL, Bitcoin or someone who just happened to short mortgages during the Lehman Shocks. On the other hand, a purchase of equity through a highly diversified ETF not only has better yield, it actually allows you to withdraw a portion of that yield to pay off expenses. A home only removes one cost factor while creating others. In the end you end up with the savings you have by not paying rent vis-a-vis having to pay rent but receiving a steady passive income from equity and bonds. Case studies suggest that the latter is a more sound financial decision.
In terms of having a roof over your head, yes, I am certain that is a very reassuring feeling, but a roof is not the only thing you need. What matters is how much of your income after taxes you end up spending on food and the said roof. Neither of the two options will make you a balling billionaire, but not buying a home generally provides a higher standard of living.
This may seem a bit crass, but you have to consider that the Japanese are essentially socially obligated to attend funerals of the extended family they may not really care about much. When the current senior generation has half a dozen siblings this becomes a bit hard on the already very old living seniors. It’s not really the western get together and remember the joyful moments of the deceased’s life kind of event that you may think it is.
Look, you are very vehement about this as seen by the preponderance of your posts in this thread, but you are also wrong and don’t bring much to the table. I have provided you with both data and research on the matter, which you ignore in favor of ad how rationalizations or, worse, simply ignoring when you have been shown to be objectively wrong and continuing on with your uneducated conjectures. No offense, but you are wasting everyone’s time.
I think it’s the sunk cost fallacy rather than some lobby. For most people their home is the single biggest asset they own and a disproportionately large portion of their net worth. People get very territorial if you say that their camera brand is not as good as that other camera brand, even though they could easily buy both from a single salary. Now consider how much more reluctant you would be to accept that you’ve made a bad investment into something that essentially consumes your life’s earnings.
You can add me to that list of fools. I could not convince my own wife about this.
I think that is a problem quite a few people are facing. No matter how sound your decision is, if your wife is not willing to not own a home like her peers, you are just screwed. The dream of owning a home is way too ingrained into our culture.
It depends on a per person basis, but there is no one who benefits from owning something that is volatile, illiquid and has poor growth when the option to own something that is less volatile, highly liquid and has high growth is available. I can rent an apartment and have more money at my disposal, while sacrificing very little in return if anything at all. It is a zero sum game and by buying a home you are essentially subsiding someone else whom you could have rented it from for much much less.
It is only different in that it makes even less sense to invest into a home in the U.S. You are paying insane opportunity costs. This is very easy to illustrate:
If you had purchased a home and rented it out in 1970, forty years later in 2009 you would have had 3.6 times the initial value in returns. That is the increase in the value of the property, an absolutely laughable 1.2 times, plus the rent and minus the costs. By contrast, if you invested into something as boring as the S&P500 and called it a day, you would have made a whooping 9.6 times returns while having better liquidity and diversification.
What you seem to forget—and I don’t blame you, since 99% of the population is with you on this one—is that money today does not have the same worth as it does in the future. Your landlady is not a finance wizard either. In fact, I would wager that if you collected all landlords in your town, the vastest majority of them could not even do proper accounting, much less determine the future value of their asset.
If you run the numbers, you lose. It is as simple as that and does not change no matter how much exposure you have had to the sunk costs fallacy. For your own good, please educate yourself instead of making assumptions about something you are clearly a layman in.
My favorite topic that everyone always gets upset about. You don’t buy a house because it makes sense from the financial point of view; you buy it because it makes you feel good.
There is sufficient literature showing that the long-term inflation-adjusted returns—or savings—on homes have been lower than those of risk-free bonds, to say nothing of equity. Since the article asks about “readers around the world”, here is one such book in German. The author does a financial evaluation of home ownership over several decades in Germany and other developed countries. It makes no sense to buy a home outright and even less sense to buy it on credit as is typically the case.
An important factor in this discussion that is usually pulled out of the air by well-meaning but not financially savvy individuals is that homes are “safe investments”. They are not. By buying a home, you are putting a large portion of your net worth into a single asset type: homes in your area. Any decrease in housing prices or the quality of your area in general immediately results in a huge decrease of your net worth. If you have to sell your house for any of a myriad of reasons, you lose a lot of money. Furthermore, an uninsured home is a very risky asset, as it may just burn down one day, whereas an insured home further reduces the growth of its value due to the costs of insurance. Lastly, if you actually want to sell your home and you are lucky to get some kind of profit out of it, you are facing considerable transaction costs and much lower liquidity than you would be if you were trying to sell a market-listed instrument.
All of these make personal housing bad investments. The only two good things that come out of such a purchase is that you have the freedom to restructure your house as much as you like and that you are effectively forced to save more by the virtue of the home financing company breathing down your back. Both come at a great cost.
I rent and I strongly encourage everyone to briefly study the available literature on the topic before coming to erroneous conclusions that you will be “saving on the rent” or “investing into something very safe”. On the bright side, these erroneous conclusions are the reason why those of us who did do due diligence get to rent so cheaply. Thanks homeowners.
P.S.: This does not transfer to commercial properties and REITS.
This is a bit of a non sequitur. Bitcoin is in the process of adoption and what you are saying that there will be a major correction at the end of that process. That is like saying that water is wet. Of course that will happen; the question is if you can make money on it before it happens. If you compare the market capital of Bitcoin with something like gold it is still puny, so it really isn’t as if we ran out of capital to speculate on it. At the current rate of growth, you can very quickly double your investment at which point you can cash out your original position in fiat and, regardless of what happens, leaving you with only opportunity cost to bear on the remaining half.
You should not treat it like any another high-risk position. Put somewhere between 1/10 and 1/20 of your net value into it and call it a day. Even if you lose everything, you will recover it in a year of average equity growth. Conversely, if you manage to cash out, you will probably cash out quite nicely.
Apple Watch is literally the only smart watch that can be somewhat acceptable to wear with a suit. It still looks somewhat goofy, although the stainless steel variant somewhat mitigate the issue. Being Apple brand makes it semi-ok for most semi-formal occasions. If you even remotely care about fashion or don’t want to look like a tech support guy, you probably shouldn’t be wearing something that looks like a diving watch to work.
In terms of fitness trackers, there’s Withings, which offer some watch-looking but very limited trackers. I don’t know if you would actually get any benefit out of one, but there’s that.
Lol, what? I mean, sure, you can wiggle around the definition of "pollution" until it fits your narrative, but China is producing almost twice the amount of CO2 that U.S. does. Regardless, both China and the U.S. produce CO2 making things that are actually useful as opposed to calculating nonsense for the sole sake of having a very secure and very slow ledger.
How are the two even remotely comparable? One is a tool to monitor and optimize the energy use in your house, the other a tool to monitor you and call the nation’s finest to toss you into a cell for what we as readers perceive to be unjust reasons.
I too have read 1984 as a fourteen-year-old and it was my favorite book for a long while, so much so that I wish people would stop referring to it for entirely inane reasons.
Like with all new technologies, there are bound to be issues with the implementation—especially in the early stages—but don’t dismiss it outright.
Are you sure it’s not the fact that a smart valve controlling how much hot water comes into your heating costs several hundred dollars whereas a non-smart one costs a bit more than a coffee?
Usually I am pretty nonchalant about politics, but as a German now living in Japan this really pissed the shit out of me back in the day on multiple levels and it still does now. Not only did we abandon a perfect good energy source by following what is now known as Merkel’s characteristic “we will make it!” approach without considering what the costs to our environment and our economy would be, we also turned a tragedy into a bloody farce. This was the worst disaster to hit Japan in decades with tens of thousand dead. This was worse than the 9/11 and worse than anything that has happened to us after the Allies accepted the surrender seventy years ago. Yet all our compassionate nitwits focused on was that a reactor got damaged and contaminated a surrounding area. Not only that, but they somehow decided that we should turn off our reactors despite being about as remote from both earthquakes and tsunamis as you can get, justifying it largely as being too expensive because they themselves could not work out a system where the tax payer would not subsidize the energy companies running the damn things.
The people I’ve spoken to about it then somehow believed that we will switch to renewable—which in themselves are not a bad concept but nowhere close to powering an industrial nation of this magnitude. So here we are now: Japan is happily using cheap nuclear power and my TEPCO electricity bill is a pleasure to look at; we are surrounded by nuclear plants in other countries; and we are burning coal with the only moderately feasible alternative being burning something else or buying electricity from France, which is again entirely nuclear. God, this naïveté will really screw us over at some point.
It is awesome. Japan has one of the lowest mortality rate in car accidents in the world despite nobody wearing seatbelts in the back. (May be somewhat related to the low speed limits though.)
Slashdot Mirror
The Fifth Fleet, silly.
Only in the same way doctors don’t produce anything of value.
Clearly lawyers should work for free.
I am 20% confident that it is in fact the Zerg.
It is a way to reduce costs in an atemporal way. You need to account for the facts that a) the money spent today is money that cannot generate revenue tomorrow and b) costs are only important in as far as they affect your revenue. If your revenue grows faster than your costs, you are “winning”, as our new beloved POTUS likes to say, no matter how high the costs are.
A home generates very little revenue in terms of reducing costs once you do own it, with the interest on the credit most people need to take only making the returns worth. There will be exceptions, but there are also exceptions in other markets, e.g. early buyers of AAPL, Bitcoin or someone who just happened to short mortgages during the Lehman Shocks. On the other hand, a purchase of equity through a highly diversified ETF not only has better yield, it actually allows you to withdraw a portion of that yield to pay off expenses. A home only removes one cost factor while creating others. In the end you end up with the savings you have by not paying rent vis-a-vis having to pay rent but receiving a steady passive income from equity and bonds. Case studies suggest that the latter is a more sound financial decision.
In terms of having a roof over your head, yes, I am certain that is a very reassuring feeling, but a roof is not the only thing you need. What matters is how much of your income after taxes you end up spending on food and the said roof. Neither of the two options will make you a balling billionaire, but not buying a home generally provides a higher standard of living.
This may seem a bit crass, but you have to consider that the Japanese are essentially socially obligated to attend funerals of the extended family they may not really care about much. When the current senior generation has half a dozen siblings this becomes a bit hard on the already very old living seniors. It’s not really the western get together and remember the joyful moments of the deceased’s life kind of event that you may think it is.
I can only suggest that you read the opportunity costs article so you at least understand what we are talking about here. Clearly you do not.
Look, you are very vehement about this as seen by the preponderance of your posts in this thread, but you are also wrong and don’t bring much to the table. I have provided you with both data and research on the matter, which you ignore in favor of ad how rationalizations or, worse, simply ignoring when you have been shown to be objectively wrong and continuing on with your uneducated conjectures. No offense, but you are wasting everyone’s time.
I think it’s the sunk cost fallacy rather than some lobby. For most people their home is the single biggest asset they own and a disproportionately large portion of their net worth. People get very territorial if you say that their camera brand is not as good as that other camera brand, even though they could easily buy both from a single salary. Now consider how much more reluctant you would be to accept that you’ve made a bad investment into something that essentially consumes your life’s earnings.
I think that is a problem quite a few people are facing. No matter how sound your decision is, if your wife is not willing to not own a home like her peers, you are just screwed. The dream of owning a home is way too ingrained into our culture.
It depends on a per person basis, but there is no one who benefits from owning something that is volatile, illiquid and has poor growth when the option to own something that is less volatile, highly liquid and has high growth is available. I can rent an apartment and have more money at my disposal, while sacrificing very little in return if anything at all. It is a zero sum game and by buying a home you are essentially subsiding someone else whom you could have rented it from for much much less.
It is only different in that it makes even less sense to invest into a home in the U.S. You are paying insane opportunity costs. This is very easy to illustrate:
If you had purchased a home and rented it out in 1970, forty years later in 2009 you would have had 3.6 times the initial value in returns. That is the increase in the value of the property, an absolutely laughable 1.2 times, plus the rent and minus the costs. By contrast, if you invested into something as boring as the S&P500 and called it a day, you would have made a whooping 9.6 times returns while having better liquidity and diversification.
What you seem to forget—and I don’t blame you, since 99% of the population is with you on this one—is that money today does not have the same worth as it does in the future. Your landlady is not a finance wizard either. In fact, I would wager that if you collected all landlords in your town, the vastest majority of them could not even do proper accounting, much less determine the future value of their asset.
If you run the numbers, you lose. It is as simple as that and does not change no matter how much exposure you have had to the sunk costs fallacy. For your own good, please educate yourself instead of making assumptions about something you are clearly a layman in.
My favorite topic that everyone always gets upset about. You don’t buy a house because it makes sense from the financial point of view; you buy it because it makes you feel good.
There is sufficient literature showing that the long-term inflation-adjusted returns—or savings—on homes have been lower than those of risk-free bonds, to say nothing of equity. Since the article asks about “readers around the world”, here is one such book in German. The author does a financial evaluation of home ownership over several decades in Germany and other developed countries. It makes no sense to buy a home outright and even less sense to buy it on credit as is typically the case.
An important factor in this discussion that is usually pulled out of the air by well-meaning but not financially savvy individuals is that homes are “safe investments”. They are not. By buying a home, you are putting a large portion of your net worth into a single asset type: homes in your area. Any decrease in housing prices or the quality of your area in general immediately results in a huge decrease of your net worth. If you have to sell your house for any of a myriad of reasons, you lose a lot of money. Furthermore, an uninsured home is a very risky asset, as it may just burn down one day, whereas an insured home further reduces the growth of its value due to the costs of insurance. Lastly, if you actually want to sell your home and you are lucky to get some kind of profit out of it, you are facing considerable transaction costs and much lower liquidity than you would be if you were trying to sell a market-listed instrument.
All of these make personal housing bad investments. The only two good things that come out of such a purchase is that you have the freedom to restructure your house as much as you like and that you are effectively forced to save more by the virtue of the home financing company breathing down your back. Both come at a great cost.
I rent and I strongly encourage everyone to briefly study the available literature on the topic before coming to erroneous conclusions that you will be “saving on the rent” or “investing into something very safe”. On the bright side, these erroneous conclusions are the reason why those of us who did do due diligence get to rent so cheaply. Thanks homeowners.
P.S.: This does not transfer to commercial properties and REITS.
The spotlight sun theory, my brother.
on things that have probably never occurred.
This is a bit of a non sequitur. Bitcoin is in the process of adoption and what you are saying that there will be a major correction at the end of that process. That is like saying that water is wet. Of course that will happen; the question is if you can make money on it before it happens. If you compare the market capital of Bitcoin with something like gold it is still puny, so it really isn’t as if we ran out of capital to speculate on it. At the current rate of growth, you can very quickly double your investment at which point you can cash out your original position in fiat and, regardless of what happens, leaving you with only opportunity cost to bear on the remaining half.
You should not treat it like any another high-risk position. Put somewhere between 1/10 and 1/20 of your net value into it and call it a day. Even if you lose everything, you will recover it in a year of average equity growth. Conversely, if you manage to cash out, you will probably cash out quite nicely.
Apple Watch is literally the only smart watch that can be somewhat acceptable to wear with a suit. It still looks somewhat goofy, although the stainless steel variant somewhat mitigate the issue. Being Apple brand makes it semi-ok for most semi-formal occasions. If you even remotely care about fashion or don’t want to look like a tech support guy, you probably shouldn’t be wearing something that looks like a diving watch to work.
In terms of fitness trackers, there’s Withings, which offer some watch-looking but very limited trackers. I don’t know if you would actually get any benefit out of one, but there’s that.
You could short all major cryptos for ages now.
Lol, what? I mean, sure, you can wiggle around the definition of "pollution" until it fits your narrative, but China is producing almost twice the amount of CO2 that U.S. does. Regardless, both China and the U.S. produce CO2 making things that are actually useful as opposed to calculating nonsense for the sole sake of having a very secure and very slow ledger.
How are the two even remotely comparable? One is a tool to monitor and optimize the energy use in your house, the other a tool to monitor you and call the nation’s finest to toss you into a cell for what we as readers perceive to be unjust reasons.
I too have read 1984 as a fourteen-year-old and it was my favorite book for a long while, so much so that I wish people would stop referring to it for entirely inane reasons.
Like with all new technologies, there are bound to be issues with the implementation—especially in the early stages—but don’t dismiss it outright.
Are you sure it’s not the fact that a smart valve controlling how much hot water comes into your heating costs several hundred dollars whereas a non-smart one costs a bit more than a coffee?
Usually I am pretty nonchalant about politics, but as a German now living in Japan this really pissed the shit out of me back in the day on multiple levels and it still does now. Not only did we abandon a perfect good energy source by following what is now known as Merkel’s characteristic “we will make it!” approach without considering what the costs to our environment and our economy would be, we also turned a tragedy into a bloody farce. This was the worst disaster to hit Japan in decades with tens of thousand dead. This was worse than the 9/11 and worse than anything that has happened to us after the Allies accepted the surrender seventy years ago. Yet all our compassionate nitwits focused on was that a reactor got damaged and contaminated a surrounding area. Not only that, but they somehow decided that we should turn off our reactors despite being about as remote from both earthquakes and tsunamis as you can get, justifying it largely as being too expensive because they themselves could not work out a system where the tax payer would not subsidize the energy companies running the damn things.
The people I’ve spoken to about it then somehow believed that we will switch to renewable—which in themselves are not a bad concept but nowhere close to powering an industrial nation of this magnitude. So here we are now: Japan is happily using cheap nuclear power and my TEPCO electricity bill is a pleasure to look at; we are surrounded by nuclear plants in other countries; and we are burning coal with the only moderately feasible alternative being burning something else or buying electricity from France, which is again entirely nuclear. God, this naïveté will really screw us over at some point.
The iPad Pro.
It is awesome. Japan has one of the lowest mortality rate in car accidents in the world despite nobody wearing seatbelts in the back. (May be somewhat related to the low speed limits though.)
>Japanese smoke everywhere. This was not a problem for me, a smoker.
No, they do not. The locals are more private about smoking here than most people are about going to the toilet. What are you talking about?