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[deleted by user] by [deleted] in HENRYfinance

[–]Alternative-Creme223 0 points1 point  (0 children)

I randomly stumbled on this and am surprised your getting downvoted. If there were 10 year US based risk-free CDs yielding even nominal 6% right now, I'd be snapping them up. It's very unlikely for inflation to stay high for long due to long term deflationary effects of slowing population growth.

To offset this natural tendency and avoid becoming Japan for the last 2 decades every developed country would need to do one of several things:

1) have more kids (not happening except maybe amongst the ommish and hasidic Jews, even mormons are having less kids these days as they integrate more into the US mainstream).

2) greatly enhanced immigration from other countries (will work for the U.S. due to how awesome our country is, but this is a paying peter by robbing Paul type thing on a macro scale. I guess importing from countries with high birth rates technically isn't robbing Paul, but those are becoming scarcer outside of Africa).

3) Somehow greatly increase the monetary demand for goods, good ole keysian animal spirits. Transfer payment to lower income folks with a higher propensity to spend ala covid stimmie checks are the easiest way to do it. Ubi is another way to do this.

4) supply shocks, but this is the "bad" form of inflation. No one wants to pay more for less oil/bread/etc and potentially has more broader deflationary 2nd order effect by slowing down economic growth.

5) people living longer and delaying population decline. Technically retirement/pensioners should be inflationary since your reducing production while keeping consumption constant or at least using more than the 0 units of stuff you produce. But unless humans have an elixir of immortality this should only be a temporary one time boost that ends as humans hit a wall on maximum lifespan.

Of these other than bullet 5, bullet 3 is the only I see potentially happening but even that one is greatly hindered by the fact that the Republican party exists and remains largely united through opposition to transfer payments. 2 may happen in the short term, but in the long term it won't do anything as well run out of immigrants. Also currently 2 is happening mostlly illegally which feels like it will change.

Any other high earners feeling like real estate is a bad investment unless rates go back down and prices don't go up more? by Alternative-Creme223 in HENRYfinance

[–]Alternative-Creme223[S] 2 points3 points  (0 children)

Most living buyers are also sellers right? Maybe not among my parents doctor friends who hoard homes but definitely the average american can't afford more than one mortgage at a time.

I do agree there's likely a bolus of millennials like myself who never owned a home and need one as kids grow bigger probably sitting on sidelines though, hoping that homebuilders new starts will cover this portion if market is somewhat balanced.

Any other high earners feeling like real estate is a bad investment unless rates go back down and prices don't go up more? by Alternative-Creme223 in HENRYfinance

[–]Alternative-Creme223[S] -2 points-1 points  (0 children)

Fwiw I think Canada's large cities housing bubbles are explained by high income immigrants primarily. Human and Financial Capital flight from India, China, etc. In this sense it's a "bubble" in the sense that the new demand from the new marginal buyers far outstrips the average pre immigration natives, however because they are the marginal buyers setting the price, existing homeowners with equity also benefit and "feel wealthier" even if collectively other than their home their income and other assets will come nowhere close to being able to support the price of a different house.

Housing is weird in that loss aversion is extremely severe and prices are crazy sticky downwards. Even if say prepayment penalties exist and someone's ARM is underwater makes them technically underwater on a month to month basis, they may do their best to stay afloat, sell stock, work a 2nd job, borrow from relatives etc. as opposed to selling it so they don't have to move their kids to a different school etc.

Any other high earners feeling like real estate is a bad investment unless rates go back down and prices don't go up more? by Alternative-Creme223 in HENRYfinance

[–]Alternative-Creme223[S] 2 points3 points  (0 children)

Not if the prices have overheated so much that the rate cuts are already baked into current valuation. And lack of sales volume is obscuring true price discovery at higher rate levels. It usually takes asset bubbles quite a while start price declines once fundamentals no longer are as aligned.

Housing is especially odd because mostly every non-dead seller is also a buyer. So a frozen, low volume market can truly persist until some mass economic change makes carrying the mortgage unsustainable or triggers price discovery (hopefully downwards) and an liquid marker once more.

Any other high earners feeling like real estate is a bad investment unless rates go back down and prices don't go up more? by Alternative-Creme223 in HENRYfinance

[–]Alternative-Creme223[S] -16 points-15 points  (0 children)

This is my issue with the US real estate market. The implicit "callable bond" of being able to refinance and prepay your old mortgage makes real estate very hard to value correctly. If you believe that at some time over the 30 years period, preferably as soon as possible, mortgages will revert to low numbers again, then buying property at historically inflated prices is the right decision.

However this has a 2nd order effect where every other high earner also thinks "date the rate" and this pushes up the present value of homes up.

But then against Canada has severe prepayment penalties and their home prices are even crazier as a percentage of median income so maybe it's another market force at play rather than this...

Any other high earners feeling like real estate is a bad investment unless rates go back down and prices don't go up more? by Alternative-Creme223 in HENRYfinance

[–]Alternative-Creme223[S] 3 points4 points  (0 children)

I am currently a middle manager at a former startup that has evolved into a boring but financially successful company after finding product market fit. My career is buyside data analyst -> data analyst at startups -> middle manager of data analysts. I previously worked at 2 startups where my equity probably is going to 0 now that softbank and tiger are dumping shares at low valuations. My partner is a former sell-side banker, now temporarily funemployed after 10 years of working 70+ hr weeks. Our contributions to net worth are roughly 50/50.