30 Reasons To Get Out Of Real Estate And Into REAL Assets

[stockholmer]

http://www.businessinsider.com/30-reasons-to-get-out-of-real-estate-and-into-real-assets-2011-7

We are in a major paradigm shift that like a tsunami starts slowly and ends with the landscape wiped clean.The paradigm shift is from paper assets to real tangible assets. This shift happens every generation or so,where one asset class dramatically outperforms the other. The 40′s and 50′s paper assets like stocks and bonds were the place to be. In the 60′s and 70′s real assets like oil,cattle and precious metals were the best performing assets. In the 80′s and 90′s paper assets once again reigned supreme. Since 2000 there has been a real rush from paper assets to real assets once again. This paradigm shift will be much more dramatic than anything we have seen in our life time. This asset shift is going to coincide with a major shifts in demographics,politics,and world power.

The collapse of paper assets will not only include stocks and bonds, it will be the collapse of the entire basis of our society, the dollar. The dollar is the nexus of all commerce and is our way of life. The almighty dollar has terminal cancer and it will not recover to live to see the next paradigm. This shift from paper assets and real assets is driven by money/debt creation. Since our dollar IS debt,it is necessary for more debt to be created every year in excess of the debt AND interest accrued the year before. The majority of this debt was created during boom times when no one feared debt. When the inevitable slow down came,the Elite created more money/debt to keep the system going. This new money/debt creation,relative to the amount of real goods and services in a slowing economy,produces more inflation which naturally boosts the value of real assets.

This cycle has been successfully managed by the Elite in the past with the creation of Bretton Woods, the closing of the gold window,the Petro Dollar, Paul Volker slaying the inflation dragon in the 80′s with 22% interest rates,the banker bailout and QE 1 and 2. This time around,there is no way out except for a default. How that default plays out is still up in the air. I believe that we will get another deflationary shock to scare Congress and us into more money creation and then it is off to the hyper inflationary printing presses. The ONLY way to protect yourself from this mathematically inevitable disaster is to sell all of your paper assets now and buy real tangible assets. (Please read the ground breaking the Silver Bullet and Silver Shield for a better understanding of this concept.)

One of the most common misconceptions of real tangible assets is the thought that Real Estate is a real tangible asset. After all, it is called REAL Estate. Real Estate is much more a paper asset than a real asset and it will suffer tremendously during this dollar collapse. The Real Estate question is the biggest question I get in my Strategy Sessions. Real Estate is such a huge and personal investment,so it is hard for people to think rationally and unemotionally about this. If you can not only grasp the idea,but have enough courage to follow through on your idea,this will prove to be one of your most important decision you will ever make.

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[MineralMan]

1. Actually, I believe I will hang onto my paid-for house.

It's paid for because I bought a tiny house in California in 1974. It was cheap enough that I could pay it off in less than 10 years. I put all sorts of work into it, and it sure needed it. Then, when it became necessary to move to Minnesota to care for my wife's dying father, we sold it and move here. We bought another house with the proceeds from the sale, with some money left over.

That tiny little house proved to be a pretty good investment. I can't imagine what I'd gain by selling the one I have now. Can someone explain how that could possibly benefit me in any way?

[SoCalDem]

2. Paid off homes are the biggest blessing going.

Housing is probably the biggest expense that most people have, and it's not hard to see how desperate it must be to be unemployed/retired and to have to plunk down 1/2 or more just to have a roof over your head.

Real estate GAMBLING is an issue though.. people buying houses with incomes that won't support the purchase is a recipe for disaster, because you have to depend on the (now vanished) plan that when you want to sell, you can, and for a lot more than you paid/borrowed against.

Too many people (especially young first timers) get too enthralled by the "house" and all its accoutrements, and fail to unload it when it becomes an albatross. They hand on desperately , in hopes that their job will suddenly become secure, or that their anticipated raises will pan out, and every month that goes by, they only dig that hole deeper.

[MineralMan]

3. So, a house CAN be an investment?

That's what I thought. We paid more for this Minnesota house than it is currently worth, due to the decline in the market. However, we'll be here for a long, long time, and that will probably turn around.

The article doesn't seem to mention the concept of actual ownership of one's own home. That's a pretty good investment, I think. Sure feels good to me, I know.

[SoCalDem]

4. We've lived in this house since 1982, and willl never move

truthfully, a lot of that decision stems from the fact that we have no energy or desire to pack up all our stuff:rofl:...but that said, we are just fixing it up and have convinced ourselves that we are here for the duration:)

Homes as a personal "investment" for the long-term future are here to stay, but the flipper-frenzy or job musical chairs stuff makes home ownership a real problem for a lot of younger people.

Also, realtors are very persuasive ( and desperate right now) people. They HAVE to "convince" people they can afford a house...and too often they find out too late that they cannot..

I am glad to see banks going back to the way they used to do things.. It makes it harder for some people to get into that first house, but when they do buy, they probably can afford it..

A "phony" low payment that appears to be less than rent, is the nasty lure that tricked too many younger people into houses that would later break their hearts:(

[MineralMan]

9. All very good points.

[stockholmer]

5. it is not talking about long-held, paid for real estate, it is about speculation and current buying

In order to break even on a 200,000 dollar house over 30 years, you need to have the price go up 2 and a half times (if the interest rate is 6%) to cover a 20,000 dollar down payment and 180,000 financed. The total cost of those payments will be around 490,000 dollars, thus the value of that house needs to go up 250% over the 30 years.

Now, if you bought that same house for 200,000 in 2006, and it is now worth 150,000 (in other words, a 25% drop - a VERY common rate of loss nationwide at present), you now need a 330% increase in value over a 25 year period just to break even. This is assuming that there is NO further drop in value (something I would say is highly unlikely, in fact I see another 25 to 35% nationwide drop in value over the next 3 to 5 years).

In other words, you are permanently under water. And this was based on a 25 percent loss of value, there are millions of homes who have lost 40, 50, 60 percent.

[REP]

8. 6% for 30 years? Do people really do that?

I just bought a house on a 15 year at well under 5% with more than a token down payment. Oh wait. I understand how money works.

[Samantha]

13. And actually you are correct

Civics 101 -- property equals security. Of course, ownership of property is assumed. If one owns his or her own property and can simply pay the real estate taxes, he or she will never be homeless. Having a home should be everyone's number one priority because food can be acquired from that home. One can hunt, fish, grow a garden, participate in a co-op, etc.



Sam

[saras]

6. "Real Estate" is a weasel term that confuses the issue from the start

There's a huge difference between owning a house to live in and owning a house to collect rent on. Often, if not usually, the pressures are opposed - your interest as a homeowner living in a house and your interest as an investor diverge widely.

[MadHound]

7. Arggh, another huckster trying to get people to buy gold and silver at the top of the bubble,

More stupidity from just another idiot.

Thanks, I think I'll hang onto my land. It provides me with shelter and food, and since I didn't buy it in a bubble economy, it isn't losing value. Even if it does lose value, it doesn't matter, because I'm spending the rest of my life here.

[DURHAM D]

10. +1

[stockholmer]

11. if you think gold and silver are at the top of a bubble, you truly lack macro-economic understanding

Your statement is just patently untrue. No one is telling people to sell BOUGHT AND PAID FOR houses that were purchased at good prices. THAT is a pure strawman argument. Give me a break. You are better than that.

That being said:

All global fiat currencies are being utterly debased and destroyed right before your eyes. Throughout history, every single fiat currency has collapsed in a violent plummet. Every one. This time will be no different.

Even If you were ONLY buying into the teeth of the manic parabolic gold bubble of January/February 1980, you would have been in the black since 2007, if you were buying in 1977, 1978, and the first half of 1979 you were ALWAYS in the black, and if buying in 1982 to 1985 (and almost all of the rest of the 1980's), you were in the black from 2005 onwards. If you had been buying from the end of 1997 up until 2005, you would have seen huge profits of over 300 to 600 percent already, just in gold. Silver is even more dramatic in its rate of return, even with the very recent pullback from $47/$49 an ounce to $35/$$37 an ounce.

Gold has increased by double digits as a percentage gained for the last 10 years in a row. Can you say the same of the NASDAQ? The Dow? The S&P? The US dollar? US Treasuries? The average US IRA? LOL! How about your paycheck? How about the value of the average American house? Not so funny, now, eh?


I have been long gold AND silver since 1998 and 1999 (in physically-held, allocated non-bank secure vault accounts), when the US trashed the Glass–Steagall Act and legalized derivatives under the Clinton/Rubin/Greenspan troika. I have an average gain of over well over 300%, whilst the Dow is utterly stagnant from the tech bubble crash of early 2000 till now. In fact, it is off greatly, due to inflation, and many were crushed in the stock crash of 2008-2009, and pulled out, locking in huge losses that they could have somewhat recovered in the QE 1 and QE 2 fueled bubble that is now unraveling. Check back with me in 3 or 4 years when those 300% figures are closing in on 1000% profits.

In 1970, the average US car cost $3900 and it took 114 ounces of gold to buy. In 2011, that same car is around $29,000 yet takes less than 19 ounces of gold to buy. Hello dollar debasement!

Plus, my friend, when the Fed fund rate peaked under Volcker in the middle of 1981 at 20%, the US national debt was only 1 trillion, today it is 14 times that (soon to 16 times that) , and even a move of the Fed's Fund Rate (it is now and has near zero% since the 2008 crisis) up to only 5% or 6% (hardly the 20%+ that the PIIGS are paying) would mean well over a trillion in debt service payments over just ONE year. If/when the funds rate does double digits, say hi to $1.5 to 2 trillion a YEAR in debt service payments alone.

If you are holding long term US treasuries, you will be the one gasping soon, unfortunately. Bill Gross of PIMCO (director of the biggest bond fund in the world) pulled completely out of ALL US debt over 3 months ago. I suggest you do the same.

[bvar22]

12. Our "Real Estate" is a "tangible asset".

It produces most of the food we eat,
and the spring water we drink.

It is Bubble Proof,
and property taxes here are a very low.

I can't think of a more valuable tangible asset.