Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Impossible. You cannot simultaneously have net portfolio value (equity) and total invested assets (debt + equity) constant, if leverage is being varied. Which is being fixed, total assets or equity?
1. No leverage. $500,000 house paid in cash. Equity = $500,000
$500,000-$400,000= $100,000 equity PLUS $400,000 cash = $500,000.
Total assets are the SAME.
Equity is not an asset. The house is an asset. In the first case you have $500k in assets and $0 debt, for a net value of $500k. In the second case you have $900k in assets and $400k in debt. The net value is the same, but the assets are not.
Equity is not an asset. The house is an asset. In the first case you have $500k in assets and $0 debt, for a net value of $500k. In the second case you have $900k in assets and $400k in debt. The net value is the same, but the assets are not.
Equity is not an asset? So by your definition leverage does NOT magnify my losses! That was my claim.
Waitaminnit waitaminnit. $100,000 equity IS an asset. $400,000 cash is an asset! A $500,000 paid off house is an asset. What happened to the whole assets-liabilities thing?
If equity is an asset, then the mortgage is not a liability. Assets - Liabilities should equal the house minus the mortgage, not the equity minus the mortgage. The latter would double-subtract the value of all debt secured by the house.
In your example, the house is an asset, and the cash is an asset, total $900k. The $400k mortgage is a liability. Thus assets minus liabilities is $500k, the correct value.
Who's the idiot? Someone who doesn't understand that ID stands for Identification? Oh wait! You were INSULTING me. I get it.
I also predict that this post will one day not be visible since it will be an "orphan." Do I need to explain that to you? No problem if you need that.
Why do I need to supply you with calculations? There is a perfectly good calculation above that you seemed to have missed that mathjak posted. How many do you need?
Who's the idiot? Someone who doesn't understand that math behaves the same on either side of the number zero. Leverage amplifies both losses and gains. ....
2 times -2 equals -4 and 2 times 2 equals +4.
( I put a '+' sign there since I know your math skills are a little sketchy ... )
Who's the idiot? Someone who doesn't understand that math behaves the same on either side of the number zero. Leverage amplifies both losses and gains. ....
That would be the person that can't support their statement but continues to blindly repeat it. That would be you, MJ and Ncole1.
If equity is an asset, then the mortgage is not a liability. Assets - Liabilities should equal the house minus the mortgage, not the equity minus the mortgage. The latter would double-subtract the value of all debt secured by the house.
In your example, the house is an asset, and the cash is an asset, total $900k. The $400k mortgage is a liability. Thus assets minus liabilities is $500k, the correct value.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
