Market Talk – July 26, 2024
ASIA: The major Asian stock markets had a mixed day today: NIKKEI 225 decreased 202.10 points or -0.53% to 37,667.41 Shanghai increased 4.16 points or 0.14% to 2,890.90 Hang [...]
Real Estate – Leverage – Transition to the Reset
QUESTION: Hi Mr. Armstrong,
Thank you for the daily blogs on world events with an independent analysis that makes sense. I find them better than investment bank reports that just make up the pages.
Could you please elaborate on what happens to properties when the monetary reset comes? If people lose confidence in fiat money and hoard real assets, wouldn’t that be a positive thing for properties? Or only if they are bought out in full (i.e. no mortgage)?
Thank you.
Regards,
S
ANSWER: The problem with real estate is the LEVERAGE. The value of a house has been escalated due to the fact that in the USA you can borrow using 30 years of future income. The crisis that unfolds is the collapse in the mortgage market. Then we will see a deleveraging of real estate. However, that said, real estate makes the transition as a hedge during a reset. For example, during the German hyperinflation that led to a currency reset, that new currency that was issued was backed by real estate – not gold. Keep in mind that as the currency declines, then the repayment cost of a mortgage declines. One the one hand, mortgages will be unavailable but those who hold the mortgage lose the most. Therefore, you should be able to pay off your mortgage with cheap currency assuming you have hedged and make it through the transition.
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