Inflation in wording

[NickZ24]

Values is being Wiped Out

Bloomberg said:

Lynn Nathe was growing tired of the meager gains from her family’s retirement account. In late 2021, she invested $200,000 with a company that was making 30% returns by buying the hottest ticket in global real estate: US apartments.
Now, she says, most of that money is gone.

https://archive.is/jlerY

What will those be called once they recover? Most speculative values are rarely wiped out, they are just worth less.
10 years ago it was no big deal when a stock lost 3%, now it has become dramatically inflated.

What do you make of that? Are you pulling money from a portfolio due to having been wiped out? Too much drama for a longer period of time makes people insensitive to real catastrophes.

[bitchstewie]

This just seems a very expensive lesson in not investing lots of your money in things you don't understand.

[NickZ24]

bhstewie said:

This just seems a very expensive lesson in not investing lots of your money in things you don't understand.

Absolutely and not taking out profits, 30% a year over 4 years they'd have 0 loss.

[leef44]

The article was an interesting read.

The investment relies on the following:

1) forever low interest rates (that 0-1% interest rates won't ever go up);
2) That collaterised loan obligations (CLOs) which replaced collaterised debt obligations (CDOs in the subprime mortgage era) would never collapse;
3) the China property model of taking money from current project to fund the next bigger project can continue indefinitely and that the rug won't ever be pulled from under you.

The model takes a property say $500,000. You invest $50,000 and they borrow $450,000 from the money markets which has first call on repayment. So effectively you have a 90% LTV property and the value MUST go up but if it goes down by 10% then your total equity is wiped out.

So yes the lady in question took all their retirement savings and read on social media that this was great, got FOMO so pull it all in one basket.

If there was ever a class in "how not to invest"...

[NickZ24]

interesting I find that in the earlier century you could break a leg and have a good time. Today the make a drama out of it and if there are not enough likes some even start crying.