The Big Picture Is Revealing

[Bylo Selhi]

The Big Picture Is Revealing [Wall Street Journal, 19Jun05]

Most folks wouldn't dream of sinking half of their wealth into a single investment or borrowing money to buy stocks and bonds. Yet many already are. We all engage in 'mental accounting,' viewing our home, mortgage, mutual funds, stocks, bonds, bank accounts, auto loans and credit cards as totally separate from one another. But every so often, it's worth stepping back and looking at the big picture. If you do that, you will get a better handle on how much risk you are taking -- and you may discover simple ways to boost your overall investment return...

Many folks fret endlessly over a stock-market downturn. Yet, if you add up your assets, you will likely find that you are far more vulnerable to a real-estate crash. Indeed, if you are in your 20s or 30s and you have just bought your first house, your home might account for 80% or 90% of your assets.

[beaverlodge]

It may be underway. Let us hope that it will be what is popularly called a soft landing. Then we can consolidate and move on.

At this point I see no changes in the economy that would support any downturn. We have historically low interest rates and an economy that is essentially positive. Unemployment is not high. And workers have more confidence in their jobs than they had in the past.

The one negative may well be CONFIDENCE - THE LACK OF IT, and this could have a compounding effect on home and real estate prices. It it catches one there will be many more sellers, fewer buyers and reduced prices.

It may be underway. Just wondering.

[Feeonly.ca]

[url=http://www.marketwatch.com/news/print_story.asp?print=1&guid={96AA9068-43FC-4FEC-BE52-7011528EA798}&siteid=google]The "BIG" picture is not so great[/url]

[active]

consider a very conservative strategy.

Feeonly: And this would be?

[Feeonly.ca]

And this would be?

That would depend of course on the specific circumstances of you and your family.

[active]

I was actually looking for a general comment.

IF this big crash is really coming, than I would certainly do not want to hold bonds.

Feeonly: watch channel 12 at 5. I think the Ian Thow story is hitting the fan today.

[Feeonly.ca]

Since I have no way of knowing what's round the corner a balanced and diversified portfolio is my preferred mode of travel at all times. Slow and steady as she goes.

Speading gossip is a nasty pastime.

[active]

Speading gossip is a nasty pastime.

I agree.

Defrauding people is even nastier.

And getting people warned so that they do not lose their savings is actually an honourable thing.

It was not on tonight but it will be any day now. And it will get national attention. And it will be a sad day for Victoria.

[like_to_retire]

IF this big crash is really coming, than I would certainly do not want to hold bonds.

Why not? Guaranteed face value returned at maturity and a known yield. Laddering allows the latests rates to be picked up at regular intervals.

ltr

[active]

So the question is IF there would be such a total crash, how different asset classes likely would react.


Such a situation would take a significant time to recover and one would need to create a new basis for the economy to develop from.

If you need to eliminate a portion of the debt you will need to eliminate a similar portion of bonds, be it for nations or corporations. If companies go into default and creditor protection the bondholders will be wiped out. Time is not on your side.

If you hold shares you will likely see a huge decline and no dividends for a lengthy time, but if you keep holding them you would make some recovery at the end, that is if the subject company is one of the survivors.

If you hold real estate, than, after whatever reform would take place, the real estate is still there. Again after a maybe lengthy time it will recover in value.

This is pretty much what happened in Germany after WWII.

[dakota]

Indeed, if you are in your 20s or 30s and you have just bought your first house, your home might account for 80% or 90% of your assets.

You need a place to live regardless of the value.

[Brix]

You need a place to live regardless of the value.

Even renters live indoors. The options of buying or renting are always available to be evaluated.

[dakota]

The options of buying or renting are always available to be evaluated.

Reading another chatboard this morning, they were discussing selling their home in Vancouver which had doubled in value in the last four yrs. and renting until the prices drop off. According to them the rent hasn't escalated anywhere near what the prices of homes have as there is lots of available rental housing.

I do not believe this is the case in On. as the rents appear to have pretty much kept pace with the increase in house prices, in which case I would rather pay a mortgage than rent.

[beaverlodge]

There are more places for rent in Toronto than has been the case for many many years.

In some cases freebies are being thrown in the attract renters.

Those who rented before are now buying. Somewhere.

Everybody want to be a homeowner.