COVID and the housing market

[Lightcycle]

I think what we have here is geek speek, or an academic or industry definition, not an English language definition.

An investment is not limited to cash or financial instruments, it could be donkeys, time, political capital etc. The goal of investing is simply a meaningful return as defined by the investor. More cashflow, more donkeys, more votes, more time, faster lap time, etc are all reasonable investment goals.

Sometimes finance & economic geeks need their own definitions for scholarly papers and discussions - everyone else can use the English language definition.

That's not it at all. He made up his own definition to only include cashflow but to exclude appreciation, presumably to drive home his opinion about RE not being an investment. However almost every definition of investing includes both cashflow *AND* appreciation or profit

From Investopedia: Definition and Types of Investments

An investment is an asset or item acquired with the goal of generating income or appreciation. Appreciation refers to an increase in the value of an asset over time.

From InvestingAnswers.com: https://investinganswers.com/dictionary/i/investment

An investment is an asset that is intended to produce income or capital gains. Investing is the act of using currently-held money to buy assets in the hopes of appreciation.

From Merriam-Webster: Definition of INVEST

the outlay of money usually for income or profit

From Dictionary.com:

the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.

When you exclude appreciation or profit from the definition and only focus on cashflow, then all sorts of instruments that are traditionally considered investments fall out of scope. Even Canada Savings Bonds, one of the safest and least speculative investments, that only pay out their compounded interest at redemption, don't pass the "only cashflow" test.

But they certainly do *appreciate* though...

Just like real estate. And stocks that don't pay a dividend...

You know what does fit his definition:

An investment is a capital outlay to produce a cash-flow.

A trust fund.

Think about it: Capital outlay? Yes. Produces cash flow? Yes.

However it does slowly deplete itself over time...

Most would not consider a trust fund an investment.

 

[mimico_polak]

He also sounds fun at parties lol.

Sorry @DarR i couldn’t resist but your post screams of condescension.

Housing can 100% be an investment, even if ‘cash flow’ is your only requirement.

 

[nobbie48]

Like I previously wrote, the word investment or investor is now used so loosely that it has lost its meaning.
If a capital outlay does not produce a cash-flow, it not an investment. It's a speculation. It is what it is , like it or not.
BTW, a dividend is a return of profit to shareholders and thus constitutes an investment as it's a cash-flow.

The distinctions are very clear cut.
An investment is a capital outlay to produce a cash-flow.
A speculation is a capital outlay to produce a gain, based on recognizing geo/social-political anomalies.
Gambling is a capital outlay to also produces a gain, based on probabilities.

25 years on Bay street and past chair of the Toronto CFA derivatives committee. When I hear a realtor saying that a new bathroom is a good investment, I just feel like vomiting from the ignorance.

The new bathroom is a fantastic investment for the real estate agent. He / she invests a little bit of time convincing you to do it. You lay out $50K and get $20K back. RE gets extra commission on the $20K and the place sells faster with less effort. Win, win, win for them. Lose, lose for you.

 

[DarR]

So... stocks that don't pay a dividend are not an investment and stocks that pay a dividend are...?

Yikes. I don't think anything productive can come of this conversation, if we can't even agree on this fundamental point.



Double Yikes.

Soooo.... Berkshire Hathaway... no dividend. No cashflow. Not an investment:

Why Doesn’t Berkshire Hathaway Pay a Dividend?

Berkshire Hathaway is sitting on $144 billion, but CEO Warren Buffett believes there are better ways to use the spare cash than paying dividends.

www.investopedia.com

Oracle of Omaha... Not an investor.

Got it.

That is correct. If you're expecting a gain without cashflow then Berkshire is a speculation. You are speculating that the price will go up.
A far as Buffet goes, most of his capital outlays are investments but some are speculations also.

I'm not being condescending here.
Just because we parrot something that's false over and over, does not make it true.
The textbooks are full of inconsistencies, especially in finance and economics.

BTW, you have not answered my question.
What's your definition and distinctions between an Investment, Speculation and Gambling?

 

[nobbie48]

Is education an investment or speculation?

 

[danp]

Wait, it costs 50k to build a bathroom? I was planning on hiring someone to build me one in my basement (there's already a rough-in) and I thought it would be like 10k at most.

 

[DarR]

Is education an investment or speculation?

I have no clue how to define an education in that context.
It is a tool, a skill set, perhaps a commodity or an asset in one's self.

 

[Lightcycle]

That is correct. If you're expecting a gain without cashflow then Berkshire is a speculation. You are speculating that the price will go up.
A far as Buffet goes, most of his capital outlays are investments but some are speculations also.

What is the difference between a stock that pays a dividend and one that doesn't?

The stock market treats both the same. When a company pays a dividend, the market capitalization goes down by the exact cost of the payout.

Imagine two parallel universes, with an identical company in both universes.

In one universe, the company pays a dividend. In the other universe, that same company opts to keep that cash in the war chest instead of distributing it out to shareholders.

Universe 1: You have $100 worth of their stock. The company pays out $1 in dividend. The stock is re-priced by the market and the value of your holdings in that stock goes down to $99 and you have $1 in cash in your account.

Universe 2: You have $100 worth of non-dividend-paying stock. You choose to sell $1 of the holdings. You now have $99 worth of stock and $1 in cash in your account.

By your definition, Universe 1's stock is an investment, Universe 2's stock is not. This makes no sense. It's the exact same company which stock is subject to all the market fluctuations in both universes. Just that one breaks off a piece of its market cap on a fixed schedule to create cashflow, and the other you choose to do it manually to create your own cash-flow. The only difference is that the gain in both universes are taxed differently, one as dividend income, the other as capital gains.

Both are creating cashflow and the value of the holdings and payout can be duplicated in both universes. The stock price of both can go up or down depending on market conditions and the health of the company. Yet by your narrow definition, it's the company that has to initiate the payout for it to be considered an investment.

What if you choose to opt for a DRIP instead of a cash payout and receive stock instead of a cash disbursement. Investment?

What about Canada Savings Bonds? No payout till redemption. No cashflow. Investment?

BTW, you have not answered my question.
What's your definition and distinctions between an Investment, Speculation and Gambling?

I'll answer that question when you answer the one I asked you right from the outset:

Where do those definitions come from?

I have never heard of a definition of investment that only includes cash-flow and excludes appreciation or profit . Can you cite another source that backs up your opinion of this definition? In another message above, I cited 4 sources which included both. If everyone agrees on a definition, and you are the only one that holds to your own definition and you think everyone else is wrong then, as I've stated before, communication isn't possible because we're not even speaking the same language.

 

[shanekingsley]

Wait, it costs 50k to build a bathroom? I was planning on hiring someone to build me one in my basement (there's already a rough-in) and I thought it would be like 10k at most.

All depends on the size and details of the bathroom.

For 6 years I worked only for clients in Rosedale, Forest Hill, Bridlepath and the Beach. Had about 80 clients across those regions. I always made it point to take a massive dump in each house so I could see their bathrooms and it's much better than using Timmies. Some of these bathrooms were easy $100k.

We've redone all three of our bathrooms in the last 4 years and each one was under $10k. Ours are smaller, simple bathrooms with not a lot of fancy stuff - just using mid-grade products from Lowes and using a local guy who does good work. If I were to do it again, I would definitely put in heated floors.

 

[DarR]

What is the difference between a stock that pays a dividend and one that doesn't?


I'll answer that question when you answer the one I asked you right from the outset:

What is the difference between a stock that pays a dividend and one that doesn't?


What about Canada Savings Bonds? No payout till redemption. No cashflow. Investment?

I'll answer that question when you answer the one I asked you right from the outset:

A stock that pays out a dividend provides a CF yield.
An investment has a yield whereas a speculation has a capital gain.
A bond provides a promised yield through periodic coupon payments. A CSB also has a yield as it pays interest.

 

[mimico_polak]

Wait, it costs 50k to build a bathroom? I was planning on hiring someone to build me one in my basement (there's already a rough-in) and I thought it would be like 10k at most.

My dad and I just quoted a reno of a bathroom for 15k and we believe that’s on the cheap end.

My cousin is putting in a bathroom in his basement right now and he’s around the 40k mark or so (includes upgraded drywall, electrical, and plumbing).

 

[Lightcycle]

A stock that pays out a dividend provides a CF yield.
An investment has a yield whereas a speculation has a capital gain.
A bond provides a promised yield through periodic coupon payments. A CSB also has a yield as it pays interest.

CF yield is set by the company through adjusting the dividend payout. You can duplicate the exact same yield by liquidating a portion of your holdings. The value of the resulting holdings and cash payout is exactly the same in both instances. You've effectively turned a non-dividend-paying stock into a dividend-paying stock.

Because they are exactly the same.

I feel like there's a lot that went unaddressed from my post. So I'm guessing the conversation is over.

 

[DarR]

@Lightcycle
You know, for thousands of years the world was flat because that was the consensus opinion.
Then some dared to state the world was round. Many were executed for heresy as it did not fit the self-serving narrative of the times.
Yes, you can synthetically turn a non-dividend-paying stock into a dividend-paying stock but this requires a deemed disposition.
In other words, you have to sell which is not the same as a cash-flow.
You can also synthetically recreate a stock with a combination of a long call option, a short put option and using the cash left over in a low risk bond. But it's not the same thing over the long run.
In the end, people will believe what they want to believe.

I have answered your question as best I could.
You have yet to tell me how you define an Investment from a Speculation and Gambling?

 

[nobbie48]

All depends on the size and details of the bathroom.

For 6 years I worked only for clients in Rosedale, Forest Hill, Bridlepath and the Beach. Had about 80 clients across those regions. I always made it point to take a massive dump in each house so I could see their bathrooms and it's much better than using Timmies. Some of these bathrooms were easy $100k.

We've redone all three of our bathrooms in the last 4 years and each one was under $10k. Ours are smaller, simple bathrooms with not a lot of fancy stuff - just using mid-grade products from Lowes and using a local guy who does good work. If I were to do it again, I would definitely put in heated floors.

I got involved in the failure of a heated floor in a high end reno. It was pointed out that the tiles were butterfly matched onyx, break one and replace four. The pedestal sink was $13K without the taps. And that wasn't wallpaper. They applied the silk to the walls and they guy flew over from Japan to paint it.

 

[nobbie48]

I have no clue how to define an education in that context.
It is a tool, a skill set, perhaps a commodity or an asset in one's self.

Everyone has their own definition of investment. Buying a beer for a loser isn't a good one. Buying the boss one could pay off.

We are talking financial investments. Moral and humanitarian ones will be different.

 

[nobbie48]

My dad and I just quoted a reno of a bathroom for 15k and we believe that’s on the cheap end.

My cousin is putting in a bathroom in his basement right now and he’s around the 40k mark or so (includes upgraded drywall, electrical, and plumbing).

My rule of thumb was a bathroom reno was the price of a small car and a kitchen a large car. The price for fit and finish determined whether it was a econo box or luxury car.

 

[mimico_polak]

My rule of thumb was a bathroom reno was the price of a small car and a kitchen a large car. The price for fit and finish determined whether it was a econo box or luxury car.

The client thought it would be 5k…with material and labour for a full overhaul.

 

[AllistonGT]

Did this winter of 2020. 100% of the work done myself. It’s a Reno so demolition was extensive. Moved a wall to gain 18”. My cost was about $20000. Vanity was no cost to me. The tub was about $4000 alone.
This would have to be a least $50000 to hire out. Probably more

Sent from my iPhone using Tapatalk

 

[mimico_polak]

@Allistonfjr my cousin is thinking of doing something like that…but he thinks it would fit in a 92” x 79” space…

 

[AllistonGT]

@Allistonfjr my cousin is thinking of doing something like that…but he thinks it would fit in a 92” x 79” space…

Ours is 108" X 132". I think it would be tight in a 79" X 92"space. Perhaps with a smaller vanity and shower. Our shower is 48' X 48" which is as small as I'd go without a shower door. No shower curb is worth the extra work and cost.