"What assets are debt sensitive?" Houses are the most prominent example, but "publicly traded equities" are another really important one for many people who follow me, since they directly impact your comp package and/or your company's valuation.
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As I get older, I feel like at most points in my life I have underappreciated how large the impact of prevailing interest rates were on things which I cared about and probably underinvested brain cycles in understanding the same. Perhaps that is a life lesson for some people.
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What are your thoughts on Japanese housing prices considering the also ridiculously low interest rates there?
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Japan's arguable teetering on the edge of a long term recession and population decline, both of which will put downwards pressure on housing values.
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if you think it went up in the US, you haven't seen Europe, Germany, especially Munich. Quite bubbly levels: Summary: https://www.ubs.com/global/en/wealth-management/chief-investment-office/life-goals/real-estate/2019/global-real-estate-bubble-index-2019.html … Full report: https://www.ubs.com/global/en/wealth-management/chief-investment-office/life-goals/real-estate/2019/global-real-estate-bubble-index-2019/_jcr_content/mainpar/toplevelgrid_427310700/col2/actionbutton.1738287576.file/bGluay9wYXRoPS9jb250ZW50L2RhbS9hc3NldHMvd20vZ2xvYmFsL2Npby9kb2MvZ2xvYmFsLXJlYWwtZXN0YXRlLWJ1YmJsZS1pbmRleC0yMDE5LWdsb2JhbC5wZGY=/global-real-estate-bubble-index-2019-global.pdf …pic.twitter.com/vWHIh1FhyY
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Interest rates are down globally as well
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Interest rate suppression causes illusions and RE is one of the most visible manifestations. Cap rates are low because cash flow isnt going up to compensate for the 10 years of very low rates that flatter RE prices
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I've often wondered about this. Does this mean the relative cost of debt-sensitive assets like houses is always sort of the same? e.g. if rates were higher they'd be cheaper so that people could get mortgages, and vice versa.
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In theory the monthly cost of carrying the mortgage (both interest and principal) should remain about the same percentage of income, but that's been rising in the US given stagnant incomes.
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Would that make years with low interest rates « bad time » to buy since there is no chance to renegotiate lower interest on a high price property in the future ?
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I too like this concept. However its hard for me to understand the risk in this scenario: why wouldninterest rates go up? Typically because of inflation. So you might square out.
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