bostonbubble.com

[balor123]

They can also become turkeys for other reasons as there are plenty of uninsured events. Many natural disasters aren't covered for example and other similar events like terrorism. Cities can change zoning laws or go bankrupt (like buying a condo with an insolvent condo association), sexual predator could move in next door, city could discover that property was divided incorrectly (in theory title insurance covers but what if that company goes out of business or the court just gets it wrong?). The secretary of my group's house was hit by a car once. What if the driver ran away or just didn't have insurance and was just broke? GenXer is right - we can't afford to place all of our eggs in one basket and it's a shame that the government REQUIRES us to leverage so high (by letting us) just to protect the wealth of existing homeowners. Some debt is necessary but I think it should be more like margin: 2x max. That way you're providing enough credit to lube the housing market machine but not providing so much that it feeds on it.

[GenXer]

balor123: Do you think there will be a demand for financial planning analysis for real estate investors (i.e. 100+ million of them)? Or do you think we can make more money selling fake get rich quick in real estate schemes?

[balor123]

People only pay for products that produce answers they like and they like the ones produced by get rich quick schemes more than the ones produced by financial planning more. We'd make the most money if we performed financial planning analysis that resulted in a get rich quick scheme answer.

Maybe we should rate real estate investments to let people know which ones will make insane amounts of money. The best will be rated AAA and the worst FJQK and whatever in between doesn't matter because: (a) everything will be AAA and (b) no one will understand anything besides AAA anyway. To make our business model scale better, we'll reduce the resolution of our ratings to bundles of houses. Wait, I think someone tried this already.

If we wanted to make a better product that doesn't sell, then we'd start a Moody's competitor that gives real ratings. We'd like have Congress on our backs if anyone started using it, though, because we'd hamper their efforts to find a bigger sucker for the investments we'd fairly label as crap, which would likely include many muni bonds and even treasuries.

[GenXer]

Well, in the future, the only thing people will have left are 401k plans. I say, good luck to them. How many fresh grads have any clue as to what to do? By the time they get a clue, it would be several recessions/stock crashes later, and they will be pushing 40 with a puny savings rate. Pensions are gone, and the time of easy credit is gone too. Investment properties are being foreclosed by the millions. It will be interesting what new fad comes out of this recession. One thing is always going to be the same though - stocks and real estate will always attract suckers for turkeys.