If we were to discount an investment, much like a US Treasury is sold at a discount to its face value, we would be accommodating the cost of our risks rather than discounting a good to meet our relative satisfaction. If we think about equilibrium and replace the idea of relative satisfaction with the value of risk, we can suppose that someone is willing to pay more for an investment with decreased risk, and less for an investment with increased risk.
If you were offered ‘$100 in the future’ or ‘$100 today’, you would prefer the money today. Why? Because at that specified moment in the future, the offer would be ‘$100’ or ‘$100 and all the money earned’ respectively. This assumes you were a reasonable person and invested the money to appreciate.
[video_lightbox_youtube video_id=Gm1wpNEA174 width=640 height=390 anchor=https://www.resheets.com/wp-content/uploads/2010/11/turkey3.bmp] Oreo Turkey Cookies (Explored), Photo Credit: Coopet Photography Thanksgiving is here, and if you’re planning on blaming tryptophan, the organic protein found in turkey, for your extreme Thanksgiving Day drowsiness, scientists would argue it’s all in your head! Tryptophan’s presence is far too small to have any real effect, and rather, sheer caloric intake, booze, …
The following set of pictures are breathtaking, weird, beautiful, or just plain interesting visual real estate productions. Because if you’d asked Louis the XIV, the Sun King, just what rent he might come to expect on the Palace of Versailles, that would be the end of your French vacation.
A widely traded stock, commodity, property, or good is priced based on its present-day prospects, near-future prospects, far-future prospects, past production, or any number of infinite indicators convincing experts of ‘value’. If gold was guaranteed to price at $3,000, it’s already there, it’s that simple. For every expert convinced that one particular indicator, say past performance, concludes a rise in gold’s price, you’ll find another expert convinced that an alternate indicator, say moving average, ensures a drop in price.
In investment, there is a holy grail, it’s the concept of arbitrage: taking advantage of a price difference between two or more markets. In Commercial Real Estate specifically, it’s the rate difference between borrowing and earning – the cost of money vs. the return on a property. Arbitrage in CRE is called Positive Leverage.