Quote:
Originally Posted by Schneed10
The folks you speak of, the ones who got crunched by the economic meltdown, were largely the ones who speculated on the real estate market. Perhaps they were flipping houses, or buying places to rent them out, etc.
They made a couple big mistakes which, when combined, I would classify as stupid:
- They assumed real estate prices would continue to go up, even though they had already gone up way more than historical norms.
- They went into huge amounts of debt to finance it, leaving themselves on the hook for large sums of money in the event real estate prices actually came down.
You don't bet a lot to win a little. These people were taking out $400K loans on these houses and trying to sell them for an $80K profit. If you can't assess the risk inherent in that, you're a moron.
Others got hammered by economic events beyond their control. I feel sorry for those folks, but not the morons I mentioned above.
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First off, I think you're talking about individual investors in the real estate market. Sure, some of them took a serious beating, but countless others have inventory that they are holding onto & waiting for the market to appreciate it, i.e. good long-term investing. The people you speak of are part of the financial crisis, but the biigger problem were mortgage backed securities on wall st.
Your example of risk assessment is pretty much calling thousands of successful developers & real estate investors a "moron." (btw, $80K profit is really good for a $400,000 investment, that's 20%)
Capitalism requires risks. If no one took the risks you speak of, there wouldn't be much entrepreunership in the US, and in turn we'd have a lot fewer goods & services.