Hot answers tagged

107

If you're moving up in house in the same area, it's better to wait until the alleged bubble bursts, since bubbles affect higher-prices homes more than lower-priced homes. You could also sell now and rent until the market bottoms out. There is no shame in renting, especially if you don't plan to stay in the house for more than a few years. If you're ...


29

If you sell and buy around the same time, the market situation (hot, cold, before, after, or no crash) is of little relevance - it just affects the size of the numbers on both contracts, and about the same, so it's mostly a wash. If you want to take advantage of your prediction, you have to split the selling and the buying in time - several months at least -...


22

Tricky choice, but there's a couple of things to consider. You said you plan on upgrading to a more expensive house, so you might save more on the new house post-bubble than you'd lose on your current house. Suppose you want to move from a $1M house to a $1.5M house - you'll need $0.5M. The bubble bursts, and housing prices fall 20% across the board. Now you ...


12

What about that graph today is different from that graph would have been 6 months ago? People 6 months ago bought thinking it would still go up, and it has. That's why people are buying today. That's what you asked. They may be right, they may be wrong, but that's why they are buying. Further, they may be buying because they have few other options. If ...


11

I deny your assertion that that market is overbought, and have a graph to lend credence to my assertion.


7

If you think you can actually pull this off, the best move is to detect bubble, sell, rent, wait for crash, buy. But you probably can't. Let's put it this way. I detected the 2008 bubble in 2004. For this scheme to work you would have to have been able to say beforehand when the bubble would burst and sell close to the burst. My detection in 2004 was too ...


7

What's the alternative? Bonds? Interest rates are at historic lows in most developed areas. Commodities? Energy prices are relatively low and have enormous volatility (remember the oil spike a few weeks ago after the US-Iraq dust-up? That's gone now). Mattresses? You actually lose value due to inflation. I don't know that people are saying that "it's a good ...


6

1: Don't time the market As the saying goes "time in the market beats timing the market". If you have money to invest, investing the money will yield better results than not investing the money. Unless you know a crash is coming (in which case why would you tell us instead of making your billions) you should be investing. 2: Why would you conclude ...


4

Is there any reason to think that such crash would make the companies contained in the index go bankrupt? Not by itself. A company doesn't care about the price of their own stock unless they're buying or selling it. If the company has enough money in their balance sheet they're not affected by their stock price. If not, wouldn't the index eventually ...


4

When over the long term housing costs in a area rise faster than wages rise, the demographic of who lives in the area changes. The size and income parameters change. A region that was full of young singles is now populated with couples with adult children, that means that the businesses and amenities have to change. At a national level it isn't sustainable ...


3

Prices are not the only issue. After a bubble bursts, it can be very difficult to sell at any realistic price, and so you can be stuck where you are while watching lots of affordable properties that you would like to buy come and go on the market. But also remember that bubbles can only be detected in retrospect. Asset price rises that seem irrational are ...


3

One way or another, you are going to experience the difficulty of the market. When a market is up, there are usually more buyers than sellers. That's what's driving the price up. This shows in how quickly a fairly priced property will sell. As a seller, this is fun. You often get the price you ask for, sometimes even more, and you sell quickly. But if you ...


3

I'm no financial expert, but one other thing I'd think deserves a bit of consideration is which end of the process that will be tough. When the market is high, you'd expect ease at selling and challenge at buying. When the market is low, you'd expect ease at buying, but challenge at selling. So the period in the bubble would seem more rough if you need to ...


2

A long term investor should avoid irrational securities such as Bitcoin and its related stocks other than possibly a small amount of lottery ticket gambling money that you are willing to lose on a long shot horse. Volatility is not your friend. A short term investor or trader looks for the trend and tries to catch some of the ride while practicing ...


2

In a strictly mathematical sense, no. Or rather, it depends what 'long run' means. Say today the home average is $200K, and payment is $900/mo. The $900 today happens to be about 20% of the median US monthly income (which is approximately $54,000/yr). Housing rises 4%/yr, income 3%/yr. In 100 years (long enough?) the house costs $10M but incomes are 'only'...


2

How would one hedge against a bond bubble bursting? or bearish sentiment in the bond market You can short bonds in the bond market. You can short bond etfs in the stock market. You can short bond futures. You can buy short-bond etfs in the stock market. You can buy double and triple leveraged short-bond etfs in the stock markets. You can buy put ...


2

Easy. Stocks are expensive. So are you going to invest to bonds? Bonds are expensive too. The interest rates of bonds are near to zero in Eurozone and low in US too. If stocks normally offer 3% real growth + 2% inflation = 5% nominal growth and 4% dividend, i.e. 9% total return, and now the dividend yield has fallen to 2%, the total return in current ...


2

Price discovery is enough number of traders who study fundamentals and influence the price. Index funds and large diversified funds work on pre defined algorithms... There is some decision making in large diversified funds, but as fund manager can't monitor every share, in reality only small percentage of shares are actively managed by the fund manager... ...


2

In part it's the bandwagon effect. People tend to do things, whether it's investing in apparently overpriced stocks or buying Beanie Babies* in hopes of selling them at a profit, not because they have rationally analyzed the risks & rewards, but because lots of other people are doing it. So we hear lots of news (and proclamations from certain ...


2

For most people, most of the time, the issue is qualifying for the mortgage, not the price differential between the old house and the new house. The problems is that periods when prices go down are often times when interest rates go up, like now. It tends to be a wash, since you wind up with the same monthly payment. You have a particular situation which ...


1

I'm going to limit the answer to Mutual Funds, since ETF shares are not bought from the fund but are exchanged between investors, so the money going to the fund itself follows a different mechanism (a single "authorized participant" handles the inflows to the ETF). In other words, when you buy an ETF, you're likely buying it from someone else, not ...


1

Your final point is the most important factor in this discussion, and one that is often overlooked. Changes in prices, and hence price discovery, are driven by trades, not by volume of ownership. Obviously, someone who's merely owned shares in a company for the last decade (without buying or selling more) has not participated in setting the price of the ...


1

Every now and then, you'll see a news article declare that some index or exchange has reached a new record high. It would be easy to say: "Well, clearly, that means it's a bad time to buy into the market." Except there's one problem with that thinking: over the long term, pretty much every major market grows without bound. That means that said markets ...


1

An investor, who is interested in the stock market indexes but thinks that they are too high, could take inverse positions. However, the long-term stock-market trend is upward so an inverse position would be an attempt to catch a short-term trend. Or the investor could take long positions in the indexes and write covered-calls on the indexes. But note that ...


1

Do some research on the previous bubbles and see which areas recovered faster Some of the things that prevent a market from dropping too much is the school district. More recently is the walkability and general feel of the neighborhood. As the population gets older, more people want to downsize, and if your current home is in a desirable area for folks ...


1

The trick is start renting before the bubble bursts, then move into a house afterwards. Both of my parents did that and it worked out quite well for them!


1

You haven't even mentioned whether you own property or not. If you don't own property now then you don't have to do anything. If you think there is going to be a property bubble and it will soon burst just get your finances in order and be prepared to buy if it does burst (that is if you are interested in buying property). If you do own property now, you ...


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