I know I shouldn't hope for a crash, but after putting out multiple offers over the last two years and being outbid by cash offers 100k over asking price multiple times, something needs to give.
Somebody told me that the institutions like black rock and others buying up everything and that’s houses and commercial buildings are so high, more people are going to be renting then ever before
This commercial debt and asset selling thing happened in my country around 2018 and we still haven’t recovered. It was bad and got worse during the pandemic and banks lost a ton of money and one even went bankrupt
Hey, Andrei! Wanted to give you my thanks for giving a shout out to SuperStonk! I am one of its original members when it had only 1,000 members. This is the second time you have mentioned us, and it brings me great joy to know you visit us! Thank you for your analysis on the post, and would love to hear your opinion on many more trending posts or DD's from our library. Love your content!
Since there is a whole library of DD on Superstonk to all kinds of topics you probably need to spend some time reading that stuff as an outsider to get a better view of the "full picture". The DD he discussed makes some assumptions, but these assumptions are then backed up by other stuff in other DDs that is not part of that DD. Much like you do not understand Math by taking a single math lesson to a special subject you do not understand the general picture by just reading single DDs.
if you lived through 2008 ..then you know it absolutely does matter...and a house is also your biggest expense..and without a job... it becomes tough to pay for.
As someone who works in the mortgage industry, I can tell you we are lowering our requirements for people to get a mortgage. While it may be great for responsible home buyers. It could lead to irresponsible or unprepared people defaulting.
Insightful Video. I was really hopeful of my investments this year, but all my plans has been disoriented, I've been studying the market crashes and I realized some investors made millions from the recent 2008 recession and I was wondering if such success rate could be achieved in this present market.
If you haven’t already you should watch the movie The Big Short. It’s one of my favorite movies and it’s all about the people that shorted the housing market. It also shows a bit of the corruption that took place in our system during the crash. Great movie.
Too many people doing this causes bear market runs and in the modern day of tech and Gov support we shall see how things turn out. Too many people get under and we get a squeeze lol good lick out there
To a smaller extent, most of the content said about housing crash, can apply to crypto crash. It's all leverage, and will continue to be so until one day people treat it like a currency and not SUPERSTONKS.
In TX they keep building apartments which baffles me because there is so much bare land. They have paper thin walls and are extremely small but cost the mortgage of a 4 bedroom house if not more
Hi Andrei, in several of your recent videos you mentioned that you were not feeling well/under the weather, etc. Maybe you should get your immunity (gut microbiome) checked out, look into your diet (nutritionist) and exercise, stress levels and hours of sleep. We appreciate you and your videos and wish to have you at peak performance. Find wellness soon and thanks for all you do!
TL;DR - Every time the Fed has raised interest rates since at least the year 2000 we've crashed because of people/companies being overleveraged from easy debt and can't afford to pay it back. I don't see time being any different. The problem is that with inflation being high right now, the Fed won't be able to cut rates low enough to get rates back to make the debt game continue again.
Mikey is right, also if they have to foreclose after a crash they won’t be in a position to get financing from a bank after because they are to much of a risk and even more probably won’t have a 30-40% down payment to get that loan in such risky times
I remember a couple months back Meet Kevin had made a video about the derivatives crash 💥 as well. It’s a possibility but we have to wait and see what will happen with these mbs.
I like what you said at the end that "a house will always be a house." That's definitely how I feel about my home. Yes, it would be unfortunate if the value goes down but nothing beats not having to constantly worry about where I live. Great video once again, Andrei!
Imagine if the clever owners of real estate decided to retrofit their suddenly unused and empty office complexes for residential living and took the pressure off housing demand. Then nobody would have to go broke
Lots of info here but unfortunately all over the place and conflating different types of real estate risks (residential vs commercial.) Just to touch on your main point about leverage. Residential home buyers rarely use securities backed loans to finance homes. Securities backed loans are the risky stuff, as you mentioned, security values drop, there’s margin calls, rates go up and their variable rates increase, etc etc. Most buyers however were using 30 or 15 year fixed rate mortgages for the last few years, as their rates were in the high to low 2s. These are fixed rate loans, unaffected by changing rates. Another type of loan, used a bit more often than securities backed lines of credit, are “asset dissipation” loans. Where the bank assumes a stream of income from securities and uses that as the borrowers income to qualify for the loan. Typically only done for high net worth individuals buying homes in the jumbo loan category. Risky, if values goes down, their income clearly would drop, and that could affect affordability. DTI ratios for these types of loans are in the 40% range, and usually the assets used in the calculation are IRAs (no leverage), so we’d have to see even more market downturn before the income gets stressed in many of those loans. So In short, lots of scary talk, nice video editing and cinematography, but the financial data was a hodgepodge of scary what-if’s pulled from online sources without clear correlation or confident assessment of what’s to come. In my view, leverage isn’t as big of an issue as it was in ‘08, and we will see a pullback in home values from a drop in demand (interest rates going up) and a reduction of inflation (cost to build home goes down, prices follow), but it won’t be as severe as ‘08 because we still have a major home supply issue. - Finance professional.
To add to this, when you take out a Commercial Loan for a property, the owner has to sign a "Personal Guarantee" -- in case you default on paying for the commercial property the bank can come after your assets -- ie, your house. It's like getting margin called
I'd like houses to be back to normal prices at least. And I like the buying opportunities of a stock and crypto market crash. For the usually invetable rally. However yes crashes randomly occur and bears can be right two of every twelve years but regardless yeah. Lol. Someday could be a final bad crash however of course too but that'll prolly be politically caused. Thanks.
Great content per usual! Really appreciate all the research you do! I hope I'll be able to buy a house in the next couple of years and not get screwed over
Bought a house in 2018, now I’m selling and walking with $50k which I’m using as a down payment on a duplex. The rent should just about cover my mortgage and hopefully in the future I can leverage this new property to buy more multi-family homes
Over the last five years, the market generated an average return above 19%. Even with 15% inflation, you come out with a 4% growth in real returns. On top of that, if you own properties, inflation pumps up your property value a lot which can make borrowing a lot.
Ya inflation benefits those that can borrow large amounts of money, but then it bends over and screws everyone else. God forbid we ever have a semi equitable free market with sound money
Ella Inflation can hurt retirees way more. Think about it. If you own bonds or annuities you’re screwed. It’s why pensions had to go way out on the risk curve just to get a return. Sure some old rich people with assets do well, but don’t forget the FED bent over social security and has screwed em for two decades with low interest rates on debt. Social security can only buy government debt. So by 2034 they’ll only pay 76 cents on the dollar. When they print the money to bail em out Since the fed screwed em they’ll print the money, cause inflation and then have to inflation adjust each year. It’s not good. It’s bad for old people.
Which market? The housing market hasn't averaged 19% annual returns over the past five years. And sustained 15% inflation? Never gonna happen. And what do you mean "can make borrowing a lot"? Can take out loans based on home's increased equity?
While I understand the differences between the 2008 housing crash and todays issues, I’d be interested to see the chart you showed for current margin/real estate cost compared with a chart from 2008.
Honestly I'm never purchasing a home in the USA. I'll be renting for the upcoming years, and investing my money In fine art, and the S&P 500. My retirement plan is buying a big home in Mexico, and living with my wife once again in her home country. Good luck to everyone out there!
well said. I guess at the end of the day anything is possible and you just have to stay informed with what’s going on. expect the best and plan for the worst.
I think the reality of this is quite evident. Take a look at the capital structure Elon Musk proposed in his purchase of Twitter. A large portion of the equity in his leveraged buyout is financed by a margin loan against his Tesla shares. An already incredibly overvalued asset. To my knowledge, this is uncommon practice and has HUGE implications for Tesla shareholders. I was shocked when i heard about the cap structure of the buyout, and i think it provides us an indication of the possibility proposed in the video.
There are several underling reasons this theory won't blowup so fast. One is banks don't react that quickly to economic fluctuations, especially micro`s. Banks take the long view and act as a filter to smooth out many potential `rough spots` on the risk side of the equation. Take how banks handled two decades of near zero interest rates. They were hard pressed to make money in this environment, yet they adapted by lowering operating costs and other measures. Another consideration against this theory is the velocity of money in the US, specifically. It remains the highest of any nation. Lenders continue to lend and borrowers continue to borrow to propetuate the creation of business and long term value. Banks/lenders need this cycle to continue as it is the essence of their livelihood. Banks have and will continue to act as a sponge to ease short term economic disturbances. Requirements for higher cash reserves aids this capacity.
I keep hearing plenty of people talk about a crash happening but rarely mention how much they actually think the market will fall? Like is a 5% or 10% fall really a "crash"?
I said this months ago investors using cash isn't using cash they using margin to act as cash to buy houses and when stonks crash housing crash as margin leverage limit goes down.
The more you learn about how US economy works, the more you realize the average people pay for the rich people’s game. Unfortunately you lose if you don’t play the game. If you play the game, you will still likely lose but at least have a chance at winning.
Yeah! The more research you do about 2008 the madder ya get! They walked away rich after gambling their fortunes away and the taxpayer picked up the losses while they kept their riches! Then they pass tax laws to advantage the gamblers also. Been talking to nephew about investing for retirement and he’s bewildered coming to the realization that since the advent of the 401K, the gamblers have compelled the rest of us to have to fund their game. The little guy has no choice but to play if they ever want to hope to retire.
Hey keep trying my account is boosted on fools who think they are the lucky one. Casinos thrive on your thought process as well. Almost feels like an ad designed to intice gamblers
Good video. The crash comes because housing values are typically tied to income. Things have gotten detached in recent years and people have had extra money from government handouts and stock or crypto market appreciation. When people start losing jobs during a recession it will effect the repayment ability and then those houses will go to market which will increase supply on demand is falling and that’s why housing will crash
Housing values are tied to supply and demand.. people with income are buying multiple homes.. lowering the supply blocking out first time home buyers..
I’m not sure how any of this would greatly affect housing costs. Commercial property values and residential property values are not tightly correlated since they are not seen as substitutes. There is a growing presence of institutional cash buyers particularly in sunbelt cities but don’t expect these institutions to be selling off their investments in a rising rent environment. Perhaps a commercial real estate crash could reshape the housing market if all those building are repurposed into housing or left to create blight and rot in city centers but that’s a whole different theory.
There are a few things that don’t work out in the logic here. Fundamentally, when banks “lend” money, they look at NET assets (assets - liabilities), they deduct the margin ( on your brokerage account for example) when issuing new debt and assessing a corporation or individuals “risk”. Therefore there is no margin on margin situation here (that’s crypto). 2nd, CMBS’s also have a fixed interest rate feature (similar to fixed home mortgage). The real risk with CMBS is the ballon payment at the end of the fixed tenor.
the funny thing is back in 2008 all the Smart people, the rich, the connected all got out of the markets before the tank, and they are doing it again today!!!! "don't listen to what they say, watch what they do! Follow the money"
This video was so so excellent! When I saw the title I was so excited to watch! Thank you for doing so much research and putting as much into your videos as you do. This video was so informative and was absolutely amazing! I’m diving into my own research because of this video.
So much mumbo jumbo. Like any other market, it’s supply and demand driven. Want the housing market to cool off? We need demand to cool off first, or we need supply to go up. The latter is happening now. Records amount of new construction home contracts are in place. With so many new homes being constructed and with some more patience from buyers, sellers will have no choice but to start offering more competitive pricing as buyers now have more options to choose from.
As someone who is just now old enough and stable enough to look at owning a home, I certainly wouldn't mind seeing prices come back to reality because this current market is ridiculous and now rates are going up. Completely unattainable for a middle class worker. Especially single income like myself. If real estate investors ended up taking the majority of a hit from a housing crash, I say good. They're part of the reason regular people are priced out. Especially younger people who haven't had the opportunity to own real estate yet.
A self funded investor is not receiving Govt benefits, is making $10k a year on the house they own, is spending $10k a year to keep it maintained, and is supplying a roof over the head of a family that is in irregular employment and cannot afford the mortgage. Stamp duty alone is about $40k....and then your deposit is another $40k. Investors are providing a housing service the Govt won't supply, or fund, and are ineligible for Govt benefits.
Everyone seems to be talking about upcoming recession. Not sure if it's more attention grabbing or it's really true. Andrei presented interesting theory about the housing loans.
We just reported a negative quarter of GDP growth. If the next quarter reports the same, we’re officially in a recession. Recession is marked by two consecutive quarters of negative GDP.
Banks approving anyone was the problem in 2008. Over-leveraging will be the problem this time. Margins are super high right now due to euphoria in the markets.
The data that puts housing valuations @ current levels is based on speculation and assumptions, so is GDP. That is a weak counter argument. The basic premise of his thesis is that the mortgage industry is a gambling casino largely propped up by derivatives and other financial instruments that create debt - everyone knows that is true. Further housing prices decoupled from economic growth in the 80s when average real-wage incomes flatlined. In short, the housing market is toxically unstable, it’s global, and the liquidation process has started in China. Contagion is next. RE: In the long-run everything be fine is an irresponsible mantra that destroys generational wealth. Most people live paycheck to paycheck and cannot afford to wait it out.
housing prices are largely based on supply & demand which is very different then 2008. The sky in not falling. we more than recovered from 2008 along with every recession and depression. time in the market that is well diversified solves all problems. this too shall pass.
![[UNCUT] The Loyal Pin ปิ่นภักดิ์ EP.15 (2/4)](http://i.ytimg.com/vi/qbHbshrA1f0/mqdefault.jpg)
I know I shouldn't hope for a crash, but after putting out multiple offers over the last two years and being outbid by cash offers 100k over asking price multiple times, something needs to give.
Right
Somebody told me that the institutions like black rock and others buying up everything and that’s houses and commercial buildings are so high, more people are going to be renting then ever before
Same here bro
Are you concerned at all about loans becoming tougher / increased rates if it all crashes ?
Let it crash, people need to learn
This commercial debt and asset selling thing happened in my country around 2018 and we still haven’t recovered. It was bad and got worse during the pandemic and banks lost a ton of money and one even went bankrupt
Hey, Andrei! Wanted to give you my thanks for giving a shout out to SuperStonk! I am one of its original members when it had only 1,000 members. This is the second time you have mentioned us, and it brings me great joy to know you visit us! Thank you for your analysis on the post, and would love to hear your opinion on many more trending posts or DD's from our library. Love your content!
Hell yeah
Lol do u want an award for being an original member? Lmaoo
Andrei, do another video on Superstonk DD 🔥
Since there is a whole library of DD on Superstonk to all kinds of topics you probably need to spend some time reading that stuff as an outsider to get a better view of the "full picture". The DD he discussed makes some assumptions, but these assumptions are then backed up by other stuff in other DDs that is not part of that DD. Much like you do not understand Math by taking a single math lesson to a special subject you do not understand the general picture by just reading single DDs.
Moass ain’t happening
if you lived through 2008 ..then you know it absolutely does matter...and a house is also your biggest expense..and without a job... it becomes tough to pay for.
Plan to rent out spare rooms.
On top of all the other debt people take on when economy is booming
As someone who works in the mortgage industry, I can tell you we are lowering our requirements for people to get a mortgage. While it may be great for responsible home buyers. It could lead to irresponsible or unprepared people defaulting.
You did that before 2008. You aren't supposed to do that any more.
Thank you God!!
just like in 2008 with poorly structured loans? lol
Insightful Video. I was really hopeful of my investments this year, but all my plans has been disoriented, I've been studying the market crashes and I realized some investors made millions from the recent 2008 recession and I was wondering if such success rate could be achieved in this present market.
Yes, if you go short against the market you’d make such success.
First thing to do is follow up on market trends and choose the right assets
Easier said than done, but I already wrote this down and I'm willing to get started.
If you haven’t already you should watch the movie The Big Short. It’s one of my favorite movies and it’s all about the people that shorted the housing market. It also shows a bit of the corruption that took place in our system during the crash. Great movie.
Too many people doing this causes bear market runs and in the modern day of tech and Gov support we shall see how things turn out. Too many people get under and we get a squeeze lol good lick out there
Andrei should have 5x the subs he has. I really enjoyed his well researched and informative vids. You the best m8
ok
To a smaller extent, most of the content said about housing crash, can apply to crypto crash. It's all leverage, and will continue to be so until one day people treat it like a currency and not SUPERSTONKS.
I really appreciate how clearly you’re able to put me into the middle of this. Awesome job, thanks!
In TX they keep building apartments which baffles me because there is so much bare land. They have paper thin walls and are extremely small but cost the mortgage of a 4 bedroom house if not more
Hi Andrei, in several of your recent videos you mentioned that you were not feeling well/under the weather, etc. Maybe you should get your immunity (gut microbiome) checked out, look into your diet (nutritionist) and exercise, stress levels and hours of sleep. We appreciate you and your videos and wish to have you at peak performance. Find wellness soon and thanks for all you do!
Omg I love LOVE that you continue to reference Yugioh in your content. Keep doing that haha, such a highlight of your videos for me.
Thank you for sharing Superstonk! Much appretiated.
Hope you bought some 😙
TL;DR - Every time the Fed has raised interest rates since at least the year 2000 we've crashed because of people/companies being overleveraged from easy debt and can't afford to pay it back. I don't see time being any different. The problem is that with inflation being high right now, the Fed won't be able to cut rates low enough to get rates back to make the debt game continue again.
Thanks for watching have something to share with you hit me up 👆👆✍️..
Welcome to R/Superstonk! Please do some more videos on DD/theories in the sub. Your input is appreciated and easy to digest
If people are lining up to buy overpriced houses now I can't imagine the rush to buy lower priced houses.
Unfortunately the ones selling will be at a loss because they bought so high and can't afford it.
Mikey is right, also if they have to foreclose after a crash they won’t be in a position to get financing from a bank after because they are to much of a risk and even more probably won’t have a 30-40% down payment to get that loan in such risky times
Who knows it might go higher and never drop down to the prices you expect. And missed your chance to buy a home altogether.
Will people have jobs? And the investors will just buy more houses.
That’s exactly the opposite of human psychology. People buy high and sell low.
I remember a couple months back Meet Kevin had made a video about the derivatives crash 💥 as well. It’s a possibility but we have to wait and see what will happen with these mbs.
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I like what you said at the end that "a house will always be a house." That's definitely how I feel about my home. Yes, it would be unfortunate if the value goes down but nothing beats not having to constantly worry about where I live.
Great video once again, Andrei!
Imagine if the clever owners of real estate decided to retrofit their suddenly unused and empty office complexes for residential living and took the pressure off housing demand. Then nobody would have to go broke
Sounds easy till realize that has to approved by the county. A buisness residence is taxed as so and swapping them is a hassle and a half.
Nice idea but essentially impossible due to loan agreements on the buildings and their construction, amongst other complications
Doubt it.
Not to mentioned the cost of retrofitting it into a residence
when labor and material costs are so inflated 🤡
Lots of info here but unfortunately all over the place and conflating different types of real estate risks (residential vs commercial.)
Just to touch on your main point about leverage. Residential home buyers rarely use securities backed loans to finance homes. Securities backed loans are the risky stuff, as you mentioned, security values drop, there’s margin calls, rates go up and their variable rates increase, etc etc.
Most buyers however were using 30 or 15 year fixed rate mortgages for the last few years, as their rates were in the high to low 2s. These are fixed rate loans, unaffected by changing rates.
Another type of loan, used a bit more often than securities backed lines of credit, are “asset dissipation” loans. Where the bank assumes a stream of income from securities and uses that as the borrowers income to qualify for the loan. Typically only done for high net worth individuals buying homes in the jumbo loan category. Risky, if values goes down, their income clearly would drop, and that could affect affordability. DTI ratios for these types of loans are in the 40% range, and usually the assets used in the calculation are IRAs (no leverage), so we’d have to see even more market downturn before the income gets stressed in many of those loans.
So In short, lots of scary talk, nice video editing and cinematography, but the financial data was a hodgepodge of scary what-if’s pulled from online sources without clear correlation or confident assessment of what’s to come.
In my view, leverage isn’t as big of an issue as it was in ‘08, and we will see a pullback in home values from a drop in demand (interest rates going up) and a reduction of inflation (cost to build home goes down, prices follow), but it won’t be as severe as ‘08 because we still have a major home supply issue.
- Finance professional.
Thanks for watching have something to share with you hit me up 👆👆✍️..
So how bad will I be screwed buying a house right now 😂
you have the BEST voice.. i could listen to you all day long... thanks for your content and effort ! Keep up the good work !
To add to this, when you take out a Commercial Loan for a property, the owner has to sign a "Personal Guarantee" -- in case you default on paying for the commercial property the bank can come after your assets -- ie, your house. It's like getting margin called
Message me here to explain better on how to make money easily online
Not all Commercial loans make you sign over personal assets. I've never had to.
I'd like houses to be back to normal prices at least. And I like the buying opportunities of a stock and crypto market crash. For the usually invetable rally. However yes crashes randomly occur and bears can be right two of every twelve years but regardless yeah. Lol. Someday could be a final bad crash however of course too but that'll prolly be politically caused. Thanks.
The Pokémon, Yu-Gi-Oh, etc references take these videos to the next level 😆
Your mom is funny! Happy Mother’s Day! You raised a great kid who is helping a lot of people.
Great content per usual! Really appreciate all the research you do! I hope I'll be able to buy a house in the next couple of years and not get screwed over
The economy shrank and the money supply grew exponentially doesn't take a genius to know what's going to happen next
👆Hey mate
Thanks for watching have something to share with you hit me up 👆👆.✍️
Well put.
That gold to copper line had me rolling 😂😂😂😂😂
Gotta love the casino analogy from the big short
I never tire of your humor and content, few can pull it off. You do it well. :)
Had someone explain this exact situation to me over a year ago and this is the first time I've seen it mentioned since. Definitely intentional
WATCH THE BIG SHORT!
Wish I had you as a teacher at school! You can explain so easy to understand. Appreciate your work
👆Hey mate..
Thanks for watching have something to share with you hit me up 👆👆✍️.
Thanks, now my brain is a "little bit more wrinklier"!
Thanks for giving visibility to our beloved superstonk Andrei! Remember to buy hold and drs your GME shares
much respect. out there on the grind. hope you're feeling better
👆Hey mate
Thanks for watching have something to share with you hit me up 👆👆✍️...
I am here to admire the wall color behind you
Bought a house in 2018, now I’m selling and walking with $50k which I’m using as a down payment on a duplex. The rent should just about cover my mortgage and hopefully in the future I can leverage this new property to buy more multi-family homes
Over the last five years, the market generated an average return above 19%. Even with 15% inflation, you come out with a 4% growth in real returns. On top of that, if you own properties, inflation pumps up your property value a lot which can make borrowing a lot.
Depending on where you're invested, all of that has already been given back, and then some
Ya inflation benefits those that can borrow large amounts of money, but then it bends over and screws everyone else. God forbid we ever have a semi equitable free market with sound money
Ella
Inflation can hurt retirees way more. Think about it. If you own bonds or annuities you’re screwed. It’s why pensions had to go way out on the risk curve just to get a return. Sure some old rich people with assets do well, but don’t forget the FED bent over social security and has screwed em for two decades with low interest rates on debt. Social security can only buy government debt. So by 2034 they’ll only pay 76 cents on the dollar. When they print the money to bail em out Since the fed screwed em they’ll print the money, cause inflation and then have to inflation adjust each year. It’s not good. It’s bad for old people.
Which market? The housing market hasn't averaged 19% annual returns over the past five years. And sustained 15% inflation? Never gonna happen. And what do you mean "can make borrowing a lot"? Can take out loans based on home's increased equity?
Huge (barely early) congrats on 2M man
Checkout Louis Rossman's rant about rent prices and empty buildings in NYC.
As someone who’s looking to be a first time home owner soon (to live in), I hear “hopeful” every time you say “bad” lol
Nice to hear you talking about some commercial banking terminology!
R/Superstonk represent! To the moon baby
While I understand the differences between the 2008 housing crash and todays issues, I’d be interested to see the chart you showed for current margin/real estate cost compared with a chart from 2008.
Amazing explanation…need to watch again, but I did learn a lot!
This is such a stressful topic and yet he has this smooth deep voice that makes me calm.
👆Hey mate
Thanks for watching have something to share with you hit me up 👆👆✍️..
Congrats on 2m subs!
Honestly I'm never purchasing a home in the USA. I'll be renting for the upcoming years, and investing my money In fine art, and the S&P 500. My retirement plan is buying a big home in Mexico, and living with my wife once again in her home country. Good luck to everyone out there!
Good plan.
Nothing wrong with this plan! Personal finance is personal.
no more unsponsored Andrei! but the content still good
well said. I guess at the end of the day anything is possible and you just have to stay informed with what’s going on. expect the best and plan for the worst.
Andrei Jikh you got mad Charisma and the information you share is extremally valuable and for that I thank you!!!
this would be incredibly bullish for crypto. Trust-less financing will be the future
Andrei always has amazing videos. I watch Graham Stephen too but I feel like he just talks a lot without saying much
I think the reality of this is quite evident. Take a look at the capital structure Elon Musk proposed in his purchase of Twitter. A large portion of the equity in his leveraged buyout is financed by a margin loan against his Tesla shares. An already incredibly overvalued asset. To my knowledge, this is uncommon practice and has HUGE implications for Tesla shareholders. I was shocked when i heard about the cap structure of the buyout, and i think it provides us an indication of the possibility proposed in the video.
I would agree with you but we would need to fix one word: overvalued. LOL
Amazing teacher. New subbie.
You should do your whole video in "big head mode" sometime. That never gets old! Cracks me up everytime!
Shizzo, made me understand what this all means. Great video.
r/Superstonk is an amazing subreddit i’m glad you’re shining light to it
It's going to hurt this time around for many. If you are not sitting on cash the big question how long will it take to recover those losses.
Dre , thank you
Love the Gotenks reference
Want to see 2 M as soon as possible . Thank you bro 😎
There are several underling reasons this theory won't blowup so fast. One is banks don't react that quickly to economic fluctuations, especially micro`s. Banks take the long view and act as a filter to smooth out many potential `rough spots` on the risk side of the equation. Take how banks handled two decades of near zero interest rates. They were hard pressed to make money in this environment, yet they adapted by lowering operating costs and other measures. Another consideration against this theory is the velocity of money in the US, specifically. It remains the highest of any nation. Lenders continue to lend and borrowers continue to borrow to propetuate the creation of business and long term value. Banks/lenders need this cycle to continue as it is the essence of their livelihood. Banks have and will continue to act as a sponge to ease short term economic disturbances. Requirements for higher cash reserves aids this capacity.
But don't forget the govt is literally hurling cash into the gaps, so you are looking at inflation. And interest rate rises to contain it.
I keep hearing plenty of people talk about a crash happening but rarely mention how much they actually think the market will fall? Like is a 5% or 10% fall really a "crash"?
Yes the big one is coming
Thanks for watching
Hit me up there ☝️☝️
There are profitable nods and patterns I’d love to show you...
Interesting thx for a great video!
I usually understand about only 10% of Andrei's videos but I still watch them anyway. That 10% is very valuable imo :) thanks Andrei!
Keep an open mind and never stop learning!
great video as always, but you need a new makeup artist 😂
2M subs. Congrats!
Jaja I did read that article before you posting. Glad that you put it out there.
Interesting perspective- love the videos when you go into these theories in detail Andrei- learning a lot cheers 🤞🏽
Andrei u kill it every time.
Liked immediately after gotenks reference
I said this months ago investors using cash isn't using cash they using margin to act as cash to buy houses and when stonks crash housing crash as margin leverage limit goes down.
$QNT is the key
Excellent video
The more you learn about how US economy works, the more you realize the average people pay for the rich people’s game. Unfortunately you lose if you don’t play the game. If you play the game, you will still likely lose but at least have a chance at winning.
Squid Game with a little less death (just a tad).
Sure beats North Korea and West Taiwan, doesn't it?
Yeah! The more research you do about 2008 the madder ya get! They walked away rich after gambling their fortunes away and the taxpayer picked up the losses while they kept their riches! Then they pass tax laws to advantage the gamblers also. Been talking to nephew about investing for retirement and he’s bewildered coming to the realization that since the advent of the 401K, the gamblers have compelled the rest of us to have to fund their game. The little guy has no choice but to play if they ever want to hope to retire.
And then you become a “rich people” ? What about the rich people that lose?
Hey keep trying my account is boosted on fools who think they are the lucky one. Casinos thrive on your thought process as well. Almost feels like an ad designed to intice gamblers
thank you not being alarmist
I hope massive companies that buy houses suffer the most.
They been talking about a commercial crash for years, and I see it with all these empty store fronts and work from home
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Good video. The crash comes because housing values are typically tied to income. Things have gotten detached in recent years and people have had extra money from government handouts and stock or crypto market appreciation. When people start losing jobs during a recession it will effect the repayment ability and then those houses will go to market which will increase supply on demand is falling and that’s why housing will crash
Housing values are tied to supply and demand.. people with income are buying multiple homes.. lowering the supply blocking out first time home buyers..
Exactly.
So basically CDOs but with commercial real estate?
It’s about time Andre …all this mess this week and you finally came thru lol
When he said CDs , I was like: Heeey I understand what that is
I’m not sure how any of this would greatly affect housing costs. Commercial property values and residential property values are not tightly correlated since they are not seen as substitutes. There is a growing presence of institutional cash buyers particularly in sunbelt cities but don’t expect these institutions to be selling off their investments in a rising rent environment. Perhaps a commercial real estate crash could reshape the housing market if all those building are repurposed into housing or left to create blight and rot in city centers but that’s a whole different theory.
There are a few things that don’t work out in the logic here. Fundamentally, when banks “lend” money, they look at NET assets (assets - liabilities), they deduct the margin ( on your brokerage account for example) when issuing new debt and assessing a corporation or individuals “risk”. Therefore there is no margin on margin situation here (that’s crypto). 2nd, CMBS’s also have a fixed interest rate feature (similar to fixed home mortgage). The real risk with CMBS is the ballon payment at the end of the fixed tenor.
I love the Spacestation Gaming shirt!
👆Hey mate.
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the funny thing is back in 2008 all the Smart people, the rich, the connected all got out of the markets before the tank, and they are doing it again today!!!! "don't listen to what they say, watch what they do! Follow the money"
Great video Andrei. Thank you.
I hope so. I'm ready to clean up
This video was so so excellent! When I saw the title I was so excited to watch! Thank you for doing so much research and putting as much into your videos as you do. This video was so informative and was absolutely amazing! I’m diving into my own research because of this video.
Love the spacestation t-shirt. Gotta represent
So much mumbo jumbo. Like any other market, it’s supply and demand driven. Want the housing market to cool off? We need demand to cool off first, or we need supply to go up. The latter is happening now. Records amount of new construction home contracts are in place. With so many new homes being constructed and with some more patience from buyers, sellers will have no choice but to start offering more competitive pricing as buyers now have more options to choose from.
As someone who is just now old enough and stable enough to look at owning a home, I certainly wouldn't mind seeing prices come back to reality because this current market is ridiculous and now rates are going up. Completely unattainable for a middle class worker. Especially single income like myself. If real estate investors ended up taking the majority of a hit from a housing crash, I say good. They're part of the reason regular people are priced out. Especially younger people who haven't had the opportunity to own real estate yet.
I’m in the same situation
Sorry to say but this is reality now..
A self funded investor is not receiving Govt benefits, is making $10k a year on the house they own, is spending $10k a year to keep it maintained, and is supplying a roof over the head of a family that is in irregular employment and cannot afford the mortgage. Stamp duty alone is about $40k....and then your deposit is another $40k.
Investors are providing a housing service the Govt won't supply, or fund, and are ineligible for Govt benefits.
Everyone seems to be talking about upcoming recession. Not sure if it's more attention grabbing or it's really true. Andrei presented interesting theory about the housing loans.
We just reported a negative quarter of GDP growth. If the next quarter reports the same, we’re officially in a recession. Recession is marked by two consecutive quarters of negative GDP.
Banks approving anyone was the problem in 2008. Over-leveraging will be the problem this time. Margins are super high right now due to euphoria in the markets.
Last recession was tough. The next 2-3 years will probably be worse.
Thanks Andrei.
The data that puts housing valuations @ current levels is based on speculation and assumptions, so is GDP. That is a weak counter argument.
The basic premise of his thesis is that the mortgage industry is a gambling casino largely propped up by derivatives and other financial instruments that create debt - everyone knows that is true. Further housing prices decoupled from economic growth in the 80s when average real-wage incomes flatlined.
In short, the housing market is toxically unstable, it’s global, and the liquidation process has started in China. Contagion is next.
RE: In the long-run everything be fine is an irresponsible mantra that destroys generational wealth. Most people live paycheck to paycheck and cannot afford to wait it out.
housing prices are largely based on supply & demand which is very different then 2008. The sky in not falling. we more than recovered from 2008 along with every recession and depression. time in the market that is well diversified solves all problems. this too shall pass.