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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: koan who wrote (78869)	5/7/2008 6:48:31 PM
From: Elroy Jetson	Respond to of 116555

Yes, of course I think a person's home or other real estate investment and oil reserves in the ground are analogous with regard to the present and future value of money. And so should you. The capital cost of oil reserves in the ground are far less costly than the price of oil - so you would be even less inclined to sell it today than you would real estate. In contrast, real estate always costs 100% of the price of real estate so the carrying costs on your vacant parcel of land are far higher. This is why A is far more likely than B: A.) a building is constructed on a real estate parcel that can be economically developed - you are creating rent income and keeping the asset. B.) an additional oil well is drilled into an economic oil reserve - you are selling the asset via an installment sale. If the oil supply of a particular oil reservoir were endless, the best solution would be to drill as many wells as possible to obtain an endless supply of oil as soon as possible. But an individual oil reservoir is finite just like selling a piece of real estate as opposed to renting it out. You can only sell it once. Should I sell my asset at today's price or at the better price ten years from now? The answer is rarely "sell it today" when prices are appreciating. .