All Forum Posts by: Andrzej Lipski

You don’t have to like it but the financial system runs off this model. No bank can handle whats going on. And thats my point either we completely change the banking model (not just regulation) but product changes, rate changes, everything which will depress trillions in wealth. Or we can’t let certain elements fail. As far as I’m concerned the big 4 essentially are consumer extensions of the Fed Reserve.

As to regulation. Of course it will stick. For awhile. Just like it did after 08 and then people will loosen the regulations up as it slows down growth. Pendulum always swings hard - in both directions.

Ok. I think that I've lost the context here. and there is a lot of misinterpretation or assumptions. The conversation is going nowhere.

I'm fine with housing crashing. I've been preparing for it since last year. It will remove the risker takers and inefficient players. Nothing impactful can really be done now that will stop or soften the collapse that is happening. There are still several more events that have yet to occur that will contribute to the collapse. Any attempts to flood the economy with cash to help the banks or save the market will spark inflation again and just kick the bust down the road and make it a bigger problem.

I'm not sure why you think I like or dislike the financial system. It is a system. It can be exploited as we can see based on the housing bubble that formed since 2011. And now it is being exploited to the down side. It can be changed to mitigate the collateral damage of crashes but that kind of change has to happen way before a bubble happens. So demanding change now it too little to late. Its like trying to reverse engine on a full speed super tanker a mile from shore. It you didn't start 5-10 miles earlier a crash is going to happen. The housing market is big. The economy is big. Like a supertanker. Trying to save it from a collapse now is too little too late.

The context is actually simple. We are talking about a recession. We are talking about 75% drops in housing. Mortgage product disappearing, credit disappearing. You are essentially talking about a total business meltdown.

So my question is why would you be ok with that? I’ve got no homes with less than 50% equity in them except one new one that is cash flowing massively. SO I’m technically fine but the reality is every single one of us would be hit if home prices drop 75%.

So no I’m rather confused. ON why you are ok breaking the system. It’s not a correction but a break. They are very different thigns.

Inflation hasn’t changed and won’t change. I’m not saying flood the economy with cash. I’m saying we don’t want it to stop flowing the way it is. Hold rates keep it high so there is low volume and much lower leverage being used. Which is whats happening.

Its simple the bigger the boom the bigger the fall. You have to break something to make it stronger. Do you think that I'm hoping the system won't recover? That is far from what I've been talking about. There have been massive economic collapses in the past that look like blips in the rear view mirror. The economy always come out stronger for it. It's not a wish of mine its just part of the business cycle. Its going to happen. Better to prepare. If you were around in 2008 you would have seen even healthy portfolios end up getting wiped out because they didn't take precautions.

Unfortunately leaving rates flat isn't going to change anything. Its only going to create a zombie economy that stalls out and doesn't grow. Trying to restart an economy that is stagnant takes much longer than breaking it. With breaking it you damage the inefficient participants and provide more stable and cash rich participants to buy these assets and business discount. This provide better footing for future growth.

Yep I bought in 08. Still deals to be had. 75% reductions, in home values, which I think is realistic if you break the banking system, not to mention all the systemic industries hit from tech to insurance to manufacturing.

08 wasn’t even that scary or bad. This would be. People need to look at how massive the big 4 are, compared to every other bank but also compared to the pain we saw with tiny collapses in 08. And I don’t mean just pure assets but % of assets compared to the whole system. If they were too big to fail in 08 - the too big to fail in 2023 has a whole other meaning.

Did you buy before 2008 and were you over leveraged? It wasn't bad for you but a lot of people lost fortunes and from that a whole group of people made them. If it wasn't for 2008 you may not be where you are.

Were you really aware of what was going on? I'm not sure if you remember but the banking system came to a grinding halt in 2008. You know a few banks imploded like about 500 of them to the tune of over 600 billion dollars? There were bank runs on BOA and Citi. Many corporations couldn't make payroll. And you are saying it wasn't that bad? Lol. I can see that things do not add up in this conversation. Thanks for the time. If you need to have the last word please go ahead and reply but I don't find and value in continuing.

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Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

Quote from @Michael Wooldridge:

So no I’m rather confused. ON why you are ok breaking the system. It’s not a correction but a break. They are very different thigns.

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Quote from @Michael Wooldridge:

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Quote from @Michael Wooldridge:

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Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

Quote from @Michael Wooldridge:

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I'm not thirsty for Thiel like Nathan is but it's a free market. If a corporation is fragile then shorting it or pulling money accelerates its collapse and speeds up the recovery. The whole point of a recession is to eliminate the inefficiencies in the system. Survivors create a floor for greater growth in the future.

if we continue to enable perpetual growth of inefficient systems then it means we build bigger houses of cards.

Except that we are reaching a point where individuals could in theory crash US system. And two part of thiel’s bets come down to the fed stepping in. Sorry but this is just something like SEC oversight to me - that is needed. Individuals with this power can’t be allowed to play with fire in our banking system. Some here seem to think we could survive a Wells or BOA crash but we can’t and the entire economy depends on the banking/credit market system.

I’m just a believer this shouldn’t be allowed because it’s unhealthy for the economy at a massive scale. And I’m specifically speaking to SVB not signature. Thiel rounded up a bunch of VC/PE and essentially did a hostile take over. Problem is folks could do stuff at the big banks like that and it has system risks to the country. And truthfully the globe as if we crash the world crashes

But individuals had this kind of power over 100 years ago. The early 1900s had a number of powerful people monopolize a commodity market or were in position to force a government hand.

If we want it to stop then you need to ask yourself why did the banking system put itself into a position where it could fail. If the financial markets have the ability to devastate like a nuclear meltdown then they should treat their instruments like they are radioactive. They should have more failsafe and contingencies. Until they learn to do that then they will continue to be susceptible to people like Thiel. Live and learn, bankrupt and reset.

Big difference is scale and importantly of liquidity. 100 years ago eh. Most of us would not own properties then. And I say that as a 1% even before my investment/re income. The world thrives off liquidity and credit in a way that 100 years ago never happened. And you know what happens now? We have home ownership and wealth because of it. We have 30 year products.

The scenario you are describing would devastate most of the folks on BiggerPockets. Even those that are approaching 20million in network and 1million in annual income post tax…

I will just say there is relative wealth as there is relative poverty. You may compare yourself as wealthy relative to others in modern society but other than a few outlier periods and regions the stratification of society has largely stayed the same through our history.

Also credit is older than you think, goes back at least 5000 years and used by all manner of people. We keep inventing new instruments and givong them fun names but their use is basically the same And we keep repeating the same cycles. Hopefully most people here aren't overleveraged and maintaining maybe 50 to 70% equity. Maybe they spent the last 2 years defensively investing. Who knows. I hope it doesn't become a repeat of 2000s or 1970s but so far it's happening. If it doesn't then we start heading down the road of hyperinflation.

Credit has been around but not like it has been since the post war era. Home ownership became a big thing - almost a national right. All of our values and benefits are derived from that.

And until modern history you are right - we had servs and we had the ruling class. Which sort of proves my point. What I’m saying is even as a 1% I wouldn’t have fit in the upper class. That’s more like the .2%.

Which brings me back around to my point that if we let this get to far out of control 99.95% here would be hurt.

You should read up on history it's not all feudal middle ages. Society has taken many forms that don't include 1 ruler and a bunch of serve.

As far as US home ownership yes the US incentivized ownership because they needed to expand because of the demand for resources and the need to displace what they saw as a threat on their wester borders. But homeownership isn't exclusive the the US its been there for centuries.

I'm not really sure what you think you mean about letting this get out of control. The Fed is doing just that. They put the brakes on heavy risk taking. They are keeping the bubble from getting bigger and causing an economy catastrophe. If a bunch of people took on too much risk then they need to start unwinding it.

It’s a word but a lot of versions of it match feudal or even the 1800’s with railroad barons etc… It’s all the same just a different word.

As to the out of hand. Simple you have to punish fools like Thiel or they will do it again. No pain and they will just do it. And if they do it to a meaningful bank? not just little SVB? That’s my concern.

I’ll make my money either way but returning to the land barrons, or railroad barons, or feudal times. Not a good thing in my book. Or good for the future of this country. Between Musk and his twitter bs and moves like this - I think we are overdue to slap down a few.

Then go for it. Use your money as a power for good and smack down those evil doers you feel are plaguing society. If you win you will be rich beyond belief. I wish you luck. For what ever his agenda is he is only riding the wave and capitalizing on it. The banks were going to systemically fail he's just taking a few down a little faster.

So SVB was a poory run bank that has assets to be positive in 9-12 months. Have you looked at how much cash on hand banks have? Any of them. Any single bank can fail with the right pressure. Furthermore it can become systemic because if a big one fails the all fail.

I’ll continue on my own path because we are talking SEC level oversight But I’m well aware of the risks these folks can have in the system. And this is NOT the same thing as shorting stock. Not by a long shot. A bank run can take down any bank - in a blink of an eye.

Cash on hand means nothing when you measure it against their liabilities. It's like taking out a DSCR loan. Say your DSCR is 1.5 or 2.0. You are golden. Nothing could hurt you. Unless you have a tenant strike and they all stop paying. Now you have a problem and you might be on the verge of losing the property even with the cash you had on hand for capital expenses especially if you are in an landlord unfriendly market.

You pretty much made my point. Any single bank can fail and their strategy over the last decade was to over leverage themselves. The industry lobbyist to loosen Dodd-Frank. Now they have to pay the piper. The more people this hurts in the economy the more likely new tighter regulations will stick.

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Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

if we continue to enable perpetual growth of inefficient systems then it means we build bigger houses of cards.

But individuals had this kind of power over 100 years ago. The early 1900s had a number of powerful people monopolize a commodity market or were in position to force a government hand.

The scenario you are describing would devastate most of the folks on BiggerPockets. Even those that are approaching 20million in network and 1million in annual income post tax…

Credit has been around but not like it has been since the post war era. Home ownership became a big thing - almost a national right. All of our values and benefits are derived from that.

Which brings me back around to my point that if we let this get to far out of control 99.95% here would be hurt.

It’s a word but a lot of versions of it match feudal or even the 1800’s with railroad barons etc… It’s all the same just a different word.

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Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

if we continue to enable perpetual growth of inefficient systems then it means we build bigger houses of cards.

But individuals had this kind of power over 100 years ago. The early 1900s had a number of powerful people monopolize a commodity market or were in position to force a government hand.

The scenario you are describing would devastate most of the folks on BiggerPockets. Even those that are approaching 20million in network and 1million in annual income post tax…

Credit has been around but not like it has been since the post war era. Home ownership became a big thing - almost a national right. All of our values and benefits are derived from that.

Which brings me back around to my point that if we let this get to far out of control 99.95% here would be hurt.

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Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

if we continue to enable perpetual growth of inefficient systems then it means we build bigger houses of cards.

But individuals had this kind of power over 100 years ago. The early 1900s had a number of powerful people monopolize a commodity market or were in position to force a government hand.

The scenario you are describing would devastate most of the folks on BiggerPockets. Even those that are approaching 20million in network and 1million in annual income post tax…

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Quote from @Bernard Joseph S.:

Quote from @Andrzej Lipski:

Quote from @Jay Hinrichs:

think about this.

when rates were super slow how much over bidding was going on 50k 100k 200k over ask or market value all to capture that 3% rate.

now you can buy down a 15 year and get about 4 to 4.2 but pay way less.. why wait.

That kind of behavior was when rates were on the way down after the recovery from the 2008 crisis.

During the crisis few people could actually capitalize on the buying opportunities because lenders were not lending, home owners were foreclosed on, portfolios were collapsing like houses of cards. Most money was frozen in assets because they were upside down. Only those who has cash on hand were able to deploy it.

Incorrect. He’s talking the past couple years when rates hit the 3s. Over bidding everywhere to lock in. We all lived it, wild times.

Go check history. Mortgage rates were trending down for a few decades already. As rates go down asset value go up because it takes less money to gain more leverage. So more buyer demand and hence increased over bidding. Same thing happened around 2005 to 2008. Its happening again but yhus time we're going to opposite direction. Rates are going up significantly

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Seattle, Washington

Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

if we continue to enable perpetual growth of inefficient systems then it means we build bigger houses of cards.

But individuals had this kind of power over 100 years ago. The early 1900s had a number of powerful people monopolize a commodity market or were in position to force a government hand.

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if we continue to enable perpetual growth of inefficient systems then it means we build bigger houses of cards.

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All Forum Posts by: Andrzej Lipski

Andrzej Lipski has started 3 posts and replied 50 times.

Post: Silicon Valley Bank - Biggest Bank Failure Since Global Financial Crisis

Post: Silicon Valley Bank - Biggest Bank Failure Since Global Financial Crisis

Post: Silicon Valley Bank - Biggest Bank Failure Since Global Financial Crisis

Post: Silicon Valley Bank - Biggest Bank Failure Since Global Financial Crisis

Post: Silicon Valley Bank - Biggest Bank Failure Since Global Financial Crisis

Post: Silicon Valley Bank - Biggest Bank Failure Since Global Financial Crisis

Post: Silicon Valley Bank - Biggest Bank Failure Since Global Financial Crisis

Post: Anyone else waiting to buy once things settle?

Post: Silicon Valley Bank - Biggest Bank Failure Since Global Financial Crisis

Post: Silicon Valley Bank - Biggest Bank Failure Since Global Financial Crisis