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If Everybody Else Decides That Houses Are A Great Investment, A Problem Can Easily Develop...

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"In the stock market — or the housing market, for that matter — people often struggle to think more than one or two steps ahead. That’s a big reason that bubbles can form. It was true that a lot of dot-com companies from the 1990s were on to something new and important, just as it was true that housing prices rarely fall. But if everybody else decides that dot-com stocks and houses are a great investment, a problem can easily develop. The prices of those assets can rise so high that they’re no longer a good value."

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I see this problem in so many conversations.

When someone says "you cannot go wrong with bricks and mortar" I shake my head. You clearly can, if you had bought in Tokyo in 1989 you would have gone very wrong with bricks and mortar. Anyone spending £830k on a 3 bed new build in Cambridge is going to lose out. People who spent £300k on off-plan flats in Bradford or £150k for Ski chalets in Bulgaria lost out.

It goes further though, the football club I support were planning to build a new stadium and the amount of times people said building it was a "no brainer" and "you can't go wrong, there are 10000 more seats" was unbelievable to me. Even the slightest bit of critical thinking involving the interest payments versus the additional potential income showed there was a paper thin potential upside given the most favourable circumstances. It was a huge financial risk and ultimately fell through as it couldn't be financed.

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Lets talk about some real best investments like:

Your health,

Your family and friends,

Your peace of mind,

Your business.

Your self generated, pro active, high value low cost education.

Expensive land and bricks are no good to anybody if in poor health, alone, fearful, not self educated and a slave to creditors......DYOR

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Lets talk about some real best investments like:

Your health,

Your family and friends,

Your peace of mind,

Your business.

Your self generated, pro active, high value low cost education.

Expensive land and bricks are no good to anybody if in poor health, alone, fearful, not self educated and a slave to creditors......DYOR

Excellent post +1

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Yup, I keep getting the old "you can't go wrong with property, there will always be a demand for houses...".

My response - "What will happen if, in 5 years time, you need to sell your house and that 'demand' can only get hold of 20% less money than today 'cos mortgage rates have ticked up and lending is more restricted?"

Them ".........ummm.......but.....but........*silence*.........." You can almost hear the cogs whirring away in their heads.

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To be fair if you get the timing right, houses are a great investment.

If you bought in Japan and sold before the crash, you'd have been laughing to the bank. As with all investments timing is everything and if everyone is heading to buy it's probably the time to get out before the inevitable crash.

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Lets talk about some real best investments like:

Your health,

Your family and friends,

Your peace of mind,

Your business.

Your self generated, pro active, high value low cost education.

Expensive land and bricks are no good to anybody if in poor health, alone, fearful, not self educated and a slave to creditors......DYOR

Very well put there is an old indian saying build your business then your house.

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People "win" at houses because the trends that form, move over a long time frame. It is easy to sell a stock or share by a click of a mouse button, not so easy with houses. Also the government doesn't like disorderly markets, especially ones that back the banking system.

They will try to step in when they can - see Northern Rock, LTCM, and this current Chinese stock market crash (so far 3 currency devaluations, and liquidity injections). Sometimes governments can fail to prop up the market, but it's hard to call as they have much more firepower than you or I could muster.

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the market will win in the end - just as it did with tuple bulbs, dot coms and just as it will with future bubbles

but the end can be a long time coming

especially if the government uses taxpayers' monies to prolong it

that long time could be longer than you are alive

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especially if the government uses taxpayers' monies to prolong it

Bit like railway mania. Takes two collapsed bubbles before it was all sorted properly.

Governments can hold off reality for a long time but reality always wins in the end.

Outside of London it looks like the second bubble is already bursting, some here have waited life-times some like myself have waited a few years.

It's been a horrible ride but so close to the finish line now.

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Bit like railway mania. Takes two collapsed bubbles before it was all sorted properly.

Governments can hold off reality for a long time but reality always wins in the end.

Outside of London it looks like the second bubble is already bursting, some here have waited life-times some like myself have waited a few years.

It's been a horrible ride but so close to the finish line now.

I do hope you are right. I haven't been as depressed about house prices as I am now for ten years. I am so fed up with the smugness of the VI and the escalating prices. The regions around London are now getting the real impact from the absurd prices in London itself; like a wave moving out from the evil city.

As if this wasn't bad enough the fall in fuel prices will help people to commute further. I keep hoping for a massive spike in oil prices or a sharp fall in the £, both of which would raise fuel prices which in turn would act as an additional damper on house prices. The reality at present is that oil prices are falling, the £ is high and property in the South East is ‘mental’.

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You buy a place for what it can do for you......not on how much it can make you.....why, you can buy a comfortable 3 bed freehold house in a peaceful, safe, and warm open place in Spain for less than £50k....fast broadband, good roads/infrastructure and cheap fares.....the cost of three years rent in some overpriced, over rated places.....just saying.....this is not investment advise. ;)

Edited by winkie

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Bitcoin's bubble, last year, in which it spiked to $1200 before dropping to $220, is an excellent case in point.

But of course we don't gt bubbles in housing any more.

It's different this time.

And everybody knows they always rise.

And nobody was predicting that for bitcoin.

Were they?

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Thats the first I had heard about bitcoins fall.

An interesting thing about the media, when bitcoin was surging in late 2013 there were media stories every other day, but when an asset class starts falling be it bitcoin, gold or houses the media always go very quiet. I think there are two reasons for this:

1) the majority of news stories are all doom and gloom so to balance things out they throw in the odd finance thing to lighten the mood - "300 people killed in a train crash... but your shares have gone up by 2%" that idea doesnt work when the finance news is bad so the story just gets dropped.

2) They don't want to 'make things worse' by encouraging everyone to sell at once, (though it doesn't ever seem to worry them that stoking price rises could be equally bad)

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Amazon is a good example, with a recent(ish) price to earning ratio of 912 http://seekingalpha.com/article/2950286-munsters-revenge-amazon-forward-pe-is-now-912

This company hasn't made a profit in 20 years since it started and has dodgy accounting. It's ex wall street owner (Jeff Bezos) shares are predetermined to be sold in chunks at certain thresholds where the stock gains in value, this means that he never actually "decides to sells shares himself" which could affect investor confidence. His recent sale of $500 million worth of over inflated stock will be 500 times more money the company has ever, or will ever make. http://www.bloomberg.com/news/articles/2015-08-06/jeff-bezos-sells-more-than-500-million-in-amazon-shares

This was out recently: http://www.theverge.com/2015/8/15/9159309/you-probably-dont-want-to-work-for-amazonAs a stock ponzi scheme with no real profits so employees have to be squeezed.

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Lets talk about some real best investments like:

Your health,

Your family and friends,

Your peace of mind,

Your business.

Your self generated, pro active, high value low cost education.

Expensive land and bricks are no good to anybody if in poor health, alone, fearful, not self educated and a slave to creditors......DYOR

You are sounding wise again! Stop it. ^_^

People seem obsessed by "property investments", and believe me, I've seen people hand in the keys, and do a runner, or go bankrupt. It's not a sure bet, and it never was, and the constant counting people keeps people from doing more fun things. :wacko:

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Lets talk about some real best investments like:

Your health,

Your family and friends,

Your peace of mind,

Your business.

Your self generated, pro active, high value low cost education.

It is a great reminder. The above are things we have at least SOME control over.

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If Everybody Else Decides That Houses Are A Great Investment, A Problem Can Easily Develop...

Shouldn't this wisdom have been shouted out before the hyper-bubble? Not at the treble-peak of it.

'Forget fair non hyperbubble housing.. be grateful for the little things.'

Santa: The legacy of my creators is scattered throughout the galaxy. This planet was one of great importance. It is here that they've kept some of their most valued treasures.

Tucker: What kind of treasures we talking about? Like Indiana Jones Golden Island treasures? Or is it some stupid metaphorical stuff like (mocking exposition tone) "The real treasure was friendship the whole time".

-Red vs Blue

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Bitcoin's bubble, last year, in which it spiked to $1200 before dropping to $220, is an excellent case in point.

But of course we don't gt bubbles in housing any more.

It's different this time.

And everybody knows they always rise.

And nobody was predicting that for bitcoin.

Were they?

Bitcoins were today's tulip bulbs. :wacko:

Who would buy "Pokemon Cards" today? :blink:

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Bitcoin's bubble, last year, in which it spiked to $1200 before dropping to $220, is an excellent case in point.

But of course we don't gt bubbles in housing any more.

It's different this time.

And everybody knows they always rise.

And nobody was predicting that for bitcoin.

Were they?

Yeah of course!

http://www.cnbc.com/2013/11/12/peter-schiff-calls-bitcoin-bubble-tulip-mania-20.html

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the market will win in the end - just as it did with tuple bulbs, dot coms and just as it will with future bubbles

but the end can be a long time coming

especially if the government uses taxpayers' monies to prolong it

that long time could be longer than you are alive

hit the nail on the head - could be a long wait for reality to bite

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I will continue to focus on the gathering evidence for HPC coming in - rather than surrender to 'close the forum' '20 year+ waits' / 'might as well buy now' logic.

He stood on the gantry, hands in his ski anorak pockets, watching the skutters lasering their way through the Nova 5 hull. 'How long before we're in?' he asked Holly.

Two, maybe three days.

There was a noise: the sound of creaking metal buckling and ripping as the huge, arch-shaped door, which the laser torches were cutting into the craft's hide, slowly teetered forward and fell like a medieval drawbridge, crushing all eight skutters.

'Maybe even sooner,* added Holly unconvincingly.

-Red Dwarf

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