> You don't build wealth by saving. You do it by investing using leverage.
For some reason, this sounds like "you don't build wealth by saving. You do it by lottery and scratchcards!"
For some reason, this sounds like "you don't build wealth by saving. You do it by lottery and scratchcards!"
These are not alike in any way.
No doubt someone will say "you don't have to buy", but then you have to rent. Forever. Because they keep bailing out housing.
Trump and his administration could have really done something awesome. He essentially got given the golden ticket for presidents: create a legacy. T. Roosevelt had parka, FDR had the new deal. Eisenhower built highways (which he copied from Hitler’s autobahn). JFK said we would put a man on the moon (and ultimately did).
Trump could have said hey, let’s build high speed rail across our country! Let’s reinforce our highways. Let’s dump a bunch of money into building new schools or paying teachers more. When the virus is gone the economy will be humming! The markets would have soared. The U.S. would have had something qualitative to show for the $2T line of debt we just took out on ourselves.
(1) https://www.cheatsheet.com/uncategorized/history-and-warren-...
Yes, his point that cash loses its value over time is true. No, he didn't get to where he is just by holding cash. Yes, your situation and mine are vastly different from Buffett's.
But it just shows that things aren't as simple as "cash=bad".
Trump has a pandemic. Ultimately, you can't really go out and build a high speed railway during a pandemic, when you want to enforce social distancing and isolations (construction is the opposite to social distancing). And the US is so big that high speed rail would still be an awful way to go cross-country (it's only really effective within states), perhaps effective for transporting goods but a guess on the data suggests this isn't economic. Dumping money into schools won't fix education, either.
Trump could've perhaps weaponised coronavirus better, but not by through of these ways. That said, he has chartered a course for the most 'socialist' action in recent American history, though: free money. I'd like to see if and how this impacts the future, perhaps it may affect the timeline of implementing a UBI.
Depending on what you mean by "fix". If colleges payed Silicon Valley salaries, I think the quality of College Education would soar.
unfamiliarity with the term "leverage", probably
Do you have suggestions for these?
Let's say the futures price is higher than the spot price and there is 3 months left until maturity. You sell the same (USD equivalent) amount in the future (expensive) and buy in the spot (cheap). You just made a profit and no matter where the price goes - you're hedged. The only thing is that you're stuck with 2 positions now. Just wait 3 months until maturity and the futures and spot price will converge to the same price. Now buy in the futures and sell in the spot and you've done it!
Of course, while being pretty much risk free the upside is also limited to how much (percentually) the future is above/below the spot.
Buy a house and some stocks in growth sectors.
Futures are how you multiply your money with relatively low risk. Stocks are how you get 5% returns amortized YOY if you're lucky
I don't need to be a finance expert to know when somebody sells a snake oil - things that sound too good to be true most often are.
As for me, I like to hedge out the market and sector movements by being long/short (adjusted for beta) within a given sector. I only make money if my long outperforms my short. Trump tweets and other companies' earnings in the sector do not affect my P/L.
This is a problem. The "risk free returns" are state enabled rentier schemes. They are not only "risk free", they are also "effort free".
If someone is taking a free ride they are a rentier.
If you have a lot of these people, overall living standards tank.
If it becomes the only paradigm that people can imagine making a difference, you are on the road to total collapse.
Leverage is the easiest way to make a larger percentage on your money, as long as it's used prudently.
Borrowing money to buy real estate and then collect income is a very common way to leverage your money. Over time that builds real wealth. My friend has bought 5 properties and is renting them all out. When he retires, the properties will have been paid for, and the rental money will act like his pension until he dies.
This only "builds real wealth" for one person. For the larger system consisting of all 6 people, it's a net loss (the interest payments are still leaving, upwards). We've built a financial system where it is in everybody's self interest to make everybody else worse off.
The positive sum progress from the economy was enough to outrun this setup when there was abundant energy and foreign countries to colonize, hence the focus on "growth". But that era is over, and we're now stuck with a black hole of debt that still needs to be serviced...
However, I'm able to rent and live in a much nicer area than where I could afford to buy.
This is the same in the US, FWIW. Most landlords aren't going to care what you do, as long as you don't damage common areas and return it in mint conditoin.
The justifications/case for home ownership can often be over-hyped. Everything works out well in a rising market. When shit hits the fan, sure my landlord can raise my rent, but I can move to another city for a better job with a very minimal hit. The stock market has created higher long term gains than the real estate market and is a hell of a lot more liquid.
The fact that people say your house is an "asset" is abuse of the definition and IMHO drives people to buy more house than they need. Sure it's an asset, but you also live there. Your liquidity is greatly reduced and your options become very limited.
Rental properties are another story. If you know what you're doing and can afford it, then I don't see issues with using that as an investing strategy. Just maybe don't buy all of them in the same city, or the same type of property. Just like with stocks and side hustles, diversification is important.
I can paint the walls, put up pictures (Berlin has better rules than UK/Australia). Not that I do when I can.
I've only been evicted a couple of times, and even then I wanted to move anyway so it was convenient. It's usually me/us moving on and the landlord annoyed that they have to find a new tenant.
And don't forget the wonderful bonus of anything that goes wrong being someone else's problem. Roof leaking? Phone the landlord. Rising damp? Phone the landlord. Mold problems? Neighbours building a new fence? Frost damage to the pathway? Pipes frozen? Window cracked? All not my problem.
Societal wealth is built by one person building a lot of wealth based on others paying him, and just replicating that millions of times over the population.
No, leaving out the critical piece does not represent my claim. Rather you're just shoehorning into the traditional narrative that each person trying to build the most individual wealth inductively extrapolates to society as a whole becoming richer.
The critical part of my claim is:
> For the larger system consisting of all 6 people, it's a net loss
Not merely a loss for 5 and a gain for 1, but a net loss for all 6 parties summed together. Draw a boundary around them and analyze cross-boundary flow. The interest payments flow away, meaning the group is worse off even though the landlord individually benefits.
Our economy is based around debt rather than positive wealth. For someone to have financial wealth, others must be in debt. The shining ideal where everybody is financially independent is impossible under the current system. And the more the financial bubble grows in relation to actual physical wealth, the truer this becomes.
Leverage works both ways, it will amplify both gains and losses.