Re:'The worst is yet to come' for the global economy, IMF warns
by imtringued on Wednesday October 12, 2022 @03:05AM
(#33173800)
>They disproportionately own the assets that are tanking in value
You don't seem to understand how this game is played. You keep 10% of your portfolio as liquid money or near liquid assets. This means a rise in asset values increases your dry powder. But since dry powder doesn't go down in value as fast as other assets, you get to buy all the distressed assets on during the fire sale. That is the essence of speculation.
If a 4% mortgage crashes housing prices, your money goes that much further, but you only benefit from the crash if you have enough money to buy the home outright. If you must borrow part of the money, then you must pay interest which means you aren't getting a discount on the house, you're paying the same monthly payment but some of it is going to the bank.
You don't seem to understand how this game is played. You keep 10% of your portfolio as liquid money or near liquid assets. This means a rise in asset values increases your dry powder. But since dry powder doesn't go down in value as fast as other assets, you get to buy all the distressed assets on during the fire sale. That is the essence of speculation.
If a 4% mortgage crashes housing prices, your money goes that much further, but you only benefit from the crash if you have enough money to buy the home outright. If you must borrow part of the money, then you must pay interest which means you aren't getting a discount on the house, you're paying the same monthly payment but some of it is going to the bank.