On a recent NY trip my Uber ride into the city was shared with Lola, a visitor from Toronto. Our conversation began with why we were visiting the city and her interest in real estate, specifically Toronto where she was an investor in condos along with her brother. They owned multiple condos, all of which were financed with little or nothing down. This of course prompted several questions about prices, location and whether or not she was nearing a "flip" of her rented merchandise. At this point, 20-something Lola looked at me with disdain and the following response:
"Why would I flip the condos when my brother and I have made several million dollars each and lenders are lined up to lend us more money to but into a project next door? And the project next door will be incredible because my friend, Drake (rap "artist"), is going to get involved in marketing the project."
After listening to Lola I suggested she read a bit about the US housing bubble circa '05-'08 or take a shortcut and watch The Big Short. In fact, I emphasized that our firm was one of the most outspoken critics of the central banking inflated housing bubble while profiting from the inevitable demise. Continuing the conversation about leverage and how it seduces many on the way up while destroying many on the way down it was clear that Lola wasn't interested in my advice. It reminded me of my trip to southern California in '06, months before the crash in real estate unfolded.
~ Bill Laggner, Bearing Asset Management, May 20, 2017