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"houses and cars are assets"

Technically. What matters is that the house you live in and the car you drive are not investments. Choosing expensive ones is a bad decision if you want to accumulate wealth.

At best it's an opportunity cost - you are tying up money which could become an investment. Practically it's much worse - a car is practically guaranteed to lose most its value within a few years. A house might gain value but if you want to actually realize the gains you are left without a place to live, so these gains are imaginary money.

> the house you live in and the car you drive are not investments

The house? Probably not an investment. The land underneath it? That's a very different story.

It can kinda-sorta become an investment but only if you are prepared to move somewhere cheaper to retire.

You can also downsize and stay in the same area. Not uncommon for empty nesters.

You can certainly do very well speculating on real estate, but in most places and most of the time you are better off investing in the stock market.

If I am correct, in the national accounts, the house households live in is considered an investment.

A Classic 911 is an investment and houses don't automatically lose money like cash does.

Houses and cars are assets, but the larger the house the larger the non value generating expenditures such as taxes and maintenance too.

Cars are also assets that do not appreciate as a general rule.

Cars are depreciating assets.

right, but they are assets nonetheless, which is why police repossess them for asset forfeitures, and some cars even gain value by becoming collectible

Sure, but I think the point here is that given the option to maximize investment in a depreciating asset (buy fancy car) or minimize that investment (buy an inexpensive car) and invest the difference elsewhere, it's better to do the latter.

> some cars even gain value by becoming collectible

I've run some figures. Almost none pay back their storage, maintenance, and tax costs, let alone the opportunity cost of tying up the money.

I remember on an episode of "Antiques Roadshow" where some guy had a couple Leica's his father bought in the 1960s. They were mint, with all manuals, receipts, etc. The amount they were worth was pretty large, and the guy was ecstatic that he'd hit the jackpot.

The trouble was, if his father had put the same money into the S&P500, a completely boring investment, it'd be worth more today than those cameras.

Not sure if mint means the cameras were never used or just well maintained?

But if the father was able to take a lifetime of great photos in addition to the cameras increasing in value - I think I go with the camera 100/100 times.

I agree that if he used the cameras a lot, they were worth the money. The same for any other collectible.

But as monetary investments, they're terrible.

personally I do not count my primary residence or my daily truck assets even though they’re paid off.

the reason being if I lose them I can’t maintain my current quality of life. so the rising valuation of housing is a net negative, just more tax revenue for the state, doesn’t do me any favor

A new car loses a significant amount of value as soon as you drive it off the lot. If you finance it or lease it, then you don't even own the asset.

This isn't really true anymore. I just sold a 2 year old car with 25k miles on it for just 10% less than I originally paid. Prior to that I sold a 1 year old car with 18k miles on it for 1% less than I paid. You can also lease new cars for a very low fixed rate which includes all maintenance, insurance, etc. There is a value in having a safe, new, reliable car.

The last time I looked at used vehicle prices, they didn't seem like great deals. Also, I think with modern cars, the reality is that you can get the latest and greatest and, after 10+ years, they're still pretty darned reliable. The trick, especially in snow country, is to get rid of them before rust-related issues, among other things, become a problem. I have a 10 year old vehicle and will probably think about replacing over the next few years.

Things also seem to have slowed down for year to year changes. My 2016 VW GTI is literally the same as the 2021 that is still being sold, for example. A lot of models seem maxed out feature wise. I think we might be at peak car lol

I don't know, we've been buying my wife the same make and model for some time. The latest upgrade can talk to my phone, is more powerful and about 25% more efficient. The increased efficiency alone will save us 50% of the capital cost over the period we own it.

I expect its replacement will be either a PHEV or full EV, a huge change.

The chip shortage has put a dent in new car supply, driving prices up and having ripple effects on the used car market. It's an unusual time and shouldn't be thought of as the new normal.

Anecdotally my used car gained 25% in value over the last six months. But if I sold it and still want something to drive, I'm on the hook to buy a replacement that is also priced higher than normal.

Used cars are in high demand now because of covid-related shortages.

Do you have any resources or particular qualms with Thomas Stanley's research techniques? To me, it seemed like he was drawing conclusions based on data. Interested in why you think it was "crud masquerading as science".

>houses and cars are assets.

I would guess that the majority of people do not own their house outright. Just because you have a mortgage on a one million dollar house, doesn't mean you have one million dollars worth of wealth in your house.

Your mortgage is itself an asset. It’s one of the best hedges against inflation - as long as you don’t fall into the refi trap.

Only if the interest rate is fixed, right? Is it common for mortgage interest rates in the USA to be fixed at a set percentage for the life of the loan?

Yes it is.

And this is one of the relatively few situations that work out in favor of the consumer. With most mortgages, you can refinance to a lower interest rate--perhaps with some associated costs--if rates go down. But if rates go up, you're locked in with a fixed rate mortgage.

It literally isn't. It's a liability. Debt being reduced by inflation doesn't change that fact.

You are of course not wholly wrong. However, people paying on the latter half of a 30 year mortgage are almost certainly paying much less for housing than they would be paying to lease, due to inflation. And of course these payments are increasingly equity-weighted.

Just because a mortgage is a liability doesn't mean it's a bad financial decision to incur a mortgage to own a house, agreed.

I think it’s going to be futile to argue with you (partially because you’re correct in the technical sense) but I’ll give it one shot.

Imagine you have 20 million. Should you buy a million dollar house outright, or get a mortgage? Look at the prime rate today and compare it with expected market returns over the life of a mortgage.

This is without even considering the ground reality of renting a place (which is the common alternative), where rents are liable to rise perpetually, and without considering a plethora of other factors which contribute to calling a mortgage an asset.

Of course, if you can get by without needing to pay for shelter at all, you should do that.

I totally agree. I'm making the narrow point that a mortgage is a debt, and classified as a liability. A house is an asset. The benefit of purchasing real estate with leverage vs cash doesn't change how they sit on a balance sheet.

Personally I argue to everyone they should put down as little as possible for the reasons you're stating.

A better way to describe that is that buying a house with a mortgage is a leveraged investment.

The mortgage is the opposite of an asset.

It seems like you’re in a black and white world. Look up what asset means - it’s more than just antonym to liability.

The whole point of accounting is to force black and white distinctions, especially in ambiguous situations. But in fact there is no ambiguity about this. Owing someone money doesn't earn you money. Owning an asset that you may have acquired with a loan is what earns you money.

What is "the refi trap"?

Some people keep refinancing, taking out more money and accruing more debt. They do this every few years, never paying off their loan.

Yes this is one of the main points of the book. What people think is wealth is usually just a lot of debt. Wealthy people use debt to make money. Poor people use debt to buy things, to paraphrase another article that was on HN a few weeks ago.

Car is definitely not an asset. I will consider it as a liability. Price of car drop as soon as it is out of dealership.

That’s the definition of a deprecating asset. The loan you took out to buy the car is the liability.

And milky ways are assets too (inventory I suppose). Doesn't mean you won't go broke putting all your money into milky ways.

Only if you own them, right? Otherwise they are just debt you owe a bank.