When Did Everything Become An Investment?

3fngrs

Poster Extraordinaire
Joined
Oct 30, 2017
Posts
5,717
Location
Ohio
I believe you are not properly divested with those investments. Adding alcohol and women will make sure all your losses are not in one area.
Dammit! I quit drinking a year and a half ago and have been in a monogamous relationship with the same woman for the last five years. I can't even get dissipation right.
 

mr natural

Friend of Leo's
Joined
Jan 5, 2004
Posts
2,694
Age
55
Location
Atlanta, GA. Neither Albany nor Oak Park
I’m heavily into the barter system with friends on Facebook for a while now. Trading everything from guitars, clothing, regional food products, records, kitchen supplies, obsolete computer cables, whatever someone needs that you are not using. I am part of a growing network. The latest deal is trading a novelty Krishna lunchbox to an old Dead tour veteran who has become Hinduish. He was a master tie dye shirt maker who has started making shirts in the old school tour style again. I get shirts for me and Mrs. Natural. The barter system rules for use value. The only exchange value is shipping cost.
 

studio

Poster Extraordinaire
Joined
May 27, 2013
Posts
8,484
Location
California
I'm sticking with something more tangible, like a NFT.
NFT

New Foot Tag?
We're all gettin' one.

Toe-Tag-5-300x225-1-2.jpg
 

Chester P Squier

Friend of Leo's
Joined
Jan 16, 2021
Posts
2,500
Age
74
Location
Covington, LA
Because most people don't understand the difference between an investment and an expense, which may later have scrap value.
It's time for the TDPRI accountants to chime in and define "investment," as presented in a cash flow statement. There are investments and there are expenses. The difference is a dollar value. A Squier Affinity Strat would be an expense. A new Martin D-45 would be an investment, because it would be over a defined threshold.
 

Rustbucket

Poster Extraordinaire
Joined
Mar 28, 2016
Posts
6,427
Location
Arizona / Québec
Consumer debt, buying things people can’t afford, and prioritizing current wants over long term financial security are all much bigger problems than whether or not you can sell X for more than you paid for it.

I tend to think of investments more as things that generate income or long term compound growth. Buying something in hopes of selling it an appreciated value later can be an investment, but is more based in speculation IMO.
 

chris m.

Doctor of Teleocity
Joined
Mar 25, 2003
Posts
10,416
Location
Santa Barbara, California
I’m old-fashioned; I define “investment” as “purchasing something with the expectation that it will rise in value.” Buying your home could be considered an investment, since you have to pay for somewhere to live anyways, even though you’ll pay more in interest (if you borrow money) than the home will appreciate. Again, that’s because you have to stay somewhere, so it boils down to throwing money away on rent or buying a house. On the other hand, there’s folks who justify anything as an “investment”. Like my brother, he told me a few years back that they needed a new washer so they “invested“ in a $2000 Speed Queen or whatever it’s called. Huh? That washer isn’t going to make him any money, and it likely won’t last much longer than your basic $400 cheapo. They could’ve bought 5 basic washers for the cost of that one…(oh, it’s just him and his wife, no kids, and they’re in their 70’s. And broke.)
Homes are a special case, beyond the fact that we get to live in them. Here are some factors that play into it:

1) If we didn't buy, we'd have to rent. Rent money goes down the drain. The same money going into a home means you're building up equity. Downside is you also have to do maintenance and repair rather than just calling the landlord.

2) Most people buy homes with a mortgage, making it a highly leveraged investment. Let's say you need to put 20% down on a $400k house. That's $80k out of pocket...plus significant additional frictional costs including closing costs, taxes, insurance, etc. For simplicity let's call that $20k for an even $100k of your own money on the table. But lets say the home appreciates to $500k. You just doubled your original investment of $100k even though the home value only went up 25%. That's the power of leveraging. But that is also the danger of leverage. If the house were to go down in value by 25% such as in a market correction, you would have a 100% loss on your original investment.

But the reason home ownership has been such a big equity builder for most home-owners is because of that leveraging effect. You get to keep all of the appreciation on an asset that you didn't have to buy outright. The bank that gave you the loan doesn't get any of that appreciation-- they are just holding a contract that guarantees them a dollar-denominated cash flow every month for 30 years.

3) Interest rates vs. underlying inflation rate. Right now, if you're like me and have a fixed rate mortgage somewhere near 3%, then you're laughing all the way to the bank right now. With annual inflation rate around 8% that means the bank is seriously losing out. The amount I owe doesn't go up with inflation, but presuming my salary will include some pay raises that partially offset inflation, then it gets easier and easier in real terms to make that monthly mortgage payment.

If you have an variable rate mortgage tied to prevailing interest rates you are not laughing at all. At best you break even but probably come out behind because salary increases typically lag inflation for folks in career jobs.

4) "even though you’ll pay more in interest (if you borrow money) than the home will appreciate." That hasn't been the recent history at all. With historically low mortgage rates and ridiculous home price appreciation well above inflation, folks are definitely coming out ahead, even when they use a loan to buy their home. See leverage effect, above. They come out even more ahead if they are able to make a monthly payment above the minimum, thereby turning that 30 year loan into more like a 20 year loan. Although right now with current inflation rates it probably makes more sense to just make the minimum payment.

5) Upgrading appliances sometimes can affect final home sale price. Some buyers are swayed and impressed by flashy looking, up to date, fancier appliances like dishwashers, stoves, washer/dryer, refrigerator. So if someone were looking to sell their home there's a good chance they could at least recoup their outlays on fancy, new appliances, while getting to enjoy them for a few years before they sell. If all the appliances are functional but bare bones such as Kenmore's cheapest model, this can affect the perception of the house's quality even though a more sophisticated home buyer would be looking at the neighborhood and sale comps, as well as more significant structural things like roof condition, wiring, plumbing, foundation, termite damage, etc., rather than cosmetics. But you should never put lipstick on a pig. If it's an economy house in an economy neighborhood than fancy appliances are not going to affect the sale price. But I could easily see a $1M home going for $1.1M simply because it had the latest and greatest appliances. That's another $100k sale price for maybe $25k or $30k in appliance purchases.
 

421JAM

Tele-Afflicted
Joined
Dec 16, 2020
Posts
1,263
Age
50
Location
Atlanta, GA
“I’d love a screened porch, which in this part of the country I could use and enjoy every day almost year round. But when I sell I won’t get the money back that it cost to build it.”


I can’t stand this mindset. Expecting the enjoyment of their own life to be funded by others. That’s how children live. Grow up.
 

Greggorios

Poster Extraordinaire
Gold Supporter
Joined
Jun 18, 2016
Posts
6,290
Location
NY
“I’d love a screened porch, which in this part of the country I could use and enjoy every day almost year round. But when I sell I won’t get the money back that it cost to build it.”


I can’t stand this mindset. Expecting the enjoyment of their own life to be funded by others. That’s how children live. Grow up.
+1, When a neighbor was complaining that he might not be able to make much of a profit on selling his home and therefore real estate was a lousy investment my response was, "Which home?..this one that you and your family have been living in for the past 25 years?" As if there was no value to having had a roof over his head and a place to raise his family for over a quarter of a century.
 

Telekarster

Poster Extraordinaire
Gold Supporter
Joined
Aug 14, 2019
Posts
6,203
Location
Earth
I’m heavily into the barter system with friends on Facebook for a while now. Trading everything from guitars, clothing, regional food products, records, kitchen supplies, obsolete computer cables, whatever someone needs that you are not using. I am part of a growing network. The latest deal is trading a novelty Krishna lunchbox to an old Dead tour veteran who has become Hinduish. He was a master tie dye shirt maker who has started making shirts in the old school tour style again. I get shirts for me and Mrs. Natural. The barter system rules for use value. The only exchange value is shipping cost.

That is really cool man. I don't do FB or any other sort of social media other than here, otherwise I wouldn't mind checkin' out your network!
 

Timbresmith1

Friend of Leo's
Joined
Oct 1, 2010
Posts
3,432
Location
Central TX
Gradually over the last 30 years there is big pressure to monetize everything - to many greedy types - mixed in with people who want to cash in on everything - believe it or not Antiques Roadshow is an outcome of that thinking - eBay was too - where everything has a value. I dislike it - things were easier when people didn't price everything - even now you have people who think there guitars even though they are pieces of crap - are worth zillions because there old.
Yep. I have friends that have zero allegiance anything they own: “Everything has a price”.
Occasionally one will ask “What would you take for that?”.
The look on their face when I say “It’s not for sale” is pretty funny.
“But if you were gonna sell it…”
“I’m not selling it”
“But if you did…”
Ugh. It’s hard to put a price on friendship, but the value is dropping 😉
 

Blrfl

Tele-Afflicted
Joined
May 3, 2018
Posts
1,971
Location
Northern Virginia
It's time for the TDPRI accountants to chime in and define "investment," as presented in a cash flow statement.

A accountant's job is to keep track of where the incoming money came from and where the outgoing money went. They're pretty much in a just-the-facts business.

Anything you buy, whether it's a chair you expect to be worthless five years from now or something else that you think can be re-sold later for more later, is an outflow of cash, also known as an expense. Decisions about what to buy are made somewhere else, sometimes with input from the accountants (e.g., "do we have enough money for X?" and possibly "how much have we made on things we've bought and re-sold?").

It's time for the TDPRI accountants to chime in and define "investment," as presented in a cash flow statement. There are investments and there are expenses. The difference is a dollar value. A Squier Affinity Strat would be an expense. A new Martin D-45 would be an investment, because it would be over a defined threshold.

I couldn't disagree more with that. If I buy one share of Consolidated Widget at $1 and one share of Associated Veeblefetzer at $1,000 and the prices of both go up by $1, both are investments with positive returns. I'm $2 ahead of where I was.

Something you buy doesn't have to appreciate in value for it to be an investment.

Say you own no guitars and are offered a $500-a-night, ten-night stint at a venue so inhospitable that any guitar used there has to be chucked in the dumpster after five nights. There's a case to be made for buying a couple of $300 Affinities for that gig because you'll walk out of it at the end with $4,400 you didn't have before. By that point, the guitars are worthless, but they made you a handsome 733% return on the money you spent on them. (I'm hand-waving the value of your time and a few other things, but the point still stands.)

If your decision about buying the Affinities was based only on whether or not you'd be able to sell them for more than you paid, the clear answer would be that you shouldn't because they're an expense. With no guitars, you can't play the gig and lose out on the opportunity to make $4,400.

The moral here is that sometimes it's a vehicle for making money some other way and you have to look at multiple things together as a system rather than individual items.
 
Last edited:

drumtime

Tele-Afflicted
Joined
Mar 17, 2018
Posts
1,446
Age
71
Location
the mountains of Virginia
A accountant's job is to keep track of where the incoming money came from and where the outgoing money went. They're pretty much in a just-the-facts business.

Anything you buy, whether it's a chair you expect to be worthless five years from now or something else that you think can be re-sold later for more later, is an outflow of cash, also known as an expense. Decisions about what to buy are made somewhere else, sometimes with input from the accountants (e.g., "do we have enough money for X?" and possibly "how much have we made on things we've bought and re-sold?").



I couldn't disagree more with that. If I buy one share of Consolidated Widget at $1 and one share of Associated Veeblefetzer at $1,000 and the prices of both go up by $1, both are investments with positive returns. I'm $2 ahead of where I was.

Something you buy doesn't have to appreciate in value for it to be an investment.

Say you own no guitars and are offered a $500-a-night, ten-night stint at a venue so inhospitable that any guitar used there has to be chucked in the dumpster after five nights. There's a case to be made for buying a couple of $300 Affinities for that gig because you'll walk out of it at the end with $4,400 you didn't have before. By that point, the guitars are worthless, but they made you a handsome 733% return on the money you spent on them. (I'm hand-waving the value of your time and a few other things, but the point still stands.)

If your decision about buying the Affinities was based only on whether or not you'd be able to sell them for more than you paid, the clear answer would be that you shouldn't because they're an expense. With no guitars, you can't play the gig and lose out on the opportunity to make $4,400.

The moral here is that sometimes it's a vehicle for making money some other way and you have to look at multiple things together as a system rather than individual items.

Those quotes aren't from me?
 

421JAM

Tele-Afflicted
Joined
Dec 16, 2020
Posts
1,263
Age
50
Location
Atlanta, GA
+1, When a neighbor was complaining that he might not be able to make much of a profit on selling his home and therefore real estate was a lousy investment my response was, "Which home?..this one that you and your family have been living in for the past 25 years?" As if there was no value to having had a roof over his head and a place to raise his family for over a quarter of a century.

Right. Like it was a waste of money to buy that house.
 




Top