etf

Moderator Emeritus
10+ Year Member
Apr 27, 2005
3,060
12
Status
i don't think the san francisco market will crash, simply because supply is limited. normally when land gets scarce, people tend to build up. but here, we don't build upwards because of the earthquake risk. so sfo real estate will always be at a premium.
 

Jocomama

Make 'em bleed!
10+ Year Member
May 7, 2006
292
1
Ann Arbor, MI and Chicago
Status
Attending Physician
Never head of illiquid
Yes - liquid, however stocks are liquid (period)

Cash, CD, stocks, funds are all liquid.
Retirement, notes, real estate, etc - are not considered liquid assets.

Never heard of highly, or less liquid - but then msheadoc and myself are from the banking industry - you know, formal, shirt and tie (business suit for her).
Anyway - renting is a great way to go, as long as you match the PITI (Mortgage[Principal+Interest], taxes and insurance/HOA/dues) or better

Also great write off as a resident because you can deduct against any capital gains when you are below the AMT (alternative minimum tax bracket); or even as attending - carry the loss forward.




etf said:
lol, yeah i know about the tulips, as well as the south sea bubble that took isaac newtons cash and prompted him to say "i can calculate the movement of the stars, but not the madness of men."

oh, and liquidity simply refers to how easy it is for something to be converted to cash. stocks (particularly those in the s&p 500) are considered highly liquid, since you can trade them pretty much instantaneously and get the money quick. houses on the other hand take time to sell, so it could be months before you see the proceeds of a home sale.
 
OP
E

etf

Moderator Emeritus
10+ Year Member
Apr 27, 2005
3,060
12
Status
Jocomama said:
Never head of illiquid
Yes - liquid, however stocks are liquid (period)

Cash, CD, stocks, funds are all liquid.
Retirement, notes, real estate, etc - are not considered liquid assets.

Never heard of highly, or less liquid - but then msheadoc and myself are from the banking industry - you know, formal, shirt and tie (business suit for her).
Anyway - renting is a great way to go, as long as you match the PITI (Mortgage[Principal+Interest], taxes and insurance/HOA/dues) or better

Also great write off as a resident because you can deduct against any capital gains when you are below the AMT (alternative minimum tax bracket); or even as attending - carry the loss forward.
hehe, in the world of stocks, liquidity can be high or low - for instance, shares of s&p 500 companies are highly liquid, in that there are millions of shares changing hands every session, so your market order will be executed usually within 5 seconds - and the bid/ask spread is narrow. orders for less liquid securities will take longer to fill, and there might be a high bid/ask spread - this is especially true with options - when there is a lot of open interest the contract is relatively liquid, whereas some contracts aren't.

a lot of bonds are illiquid, in that there isn't a large secondary market for them so you might not be able to sell them right away, unless you want to take a big hit. Personally, I consider retirement accounts liquid because you can "liquidate" them and have the money in cash within a matter of minutes, although you will probably take a tax hit.
 
About the Ads
OP
E

etf

Moderator Emeritus
10+ Year Member
Apr 27, 2005
3,060
12
Status
also, stocks of privately held corporations as well as limited partnerships are generally illiquid, in that there isn't a real secondary market for them, so if you wanted to sell shares of your business for example, it might take time to find a buyer and properly value those shares...
 

Jocomama

Make 'em bleed!
10+ Year Member
May 7, 2006
292
1
Ann Arbor, MI and Chicago
Status
Attending Physician
What you consider liquid vs non-liquid assets isn't what the banks consider them.
Plus remember, no matter how quick you close an option, stock, etc. there is still a 3 day period before you get the money (unless you are down in the S&P500 pit trading)

Not true about bonds. These are sold constantly. Mortgage Backed Securites (Fannie, Freddie, Ginnie) are sold in lots of 20+million from banks to other servicing holders (COuntrywide, Chase, etc) and the Jumbos are traded regularly after being bought by GE capital, CSFB, etc.
Munies are constantly trades, same as junk bonds.

By the book - retirement of anykind in this country is NOT a liquid asset.
Definitions:
Illiquid
"An asset or security that cannot be converted into cash very quickly (or near prevailing market prices)."

Liquid Definition: Liquidity refers to how quickly and cheaply an asset can be converted into cash. Money (in the form of cash) is the most liquid asset. Assets that generally can only be sold after a long exhaustive search for a buyer are known as illiquid.

Read
etf said:
hehe, in the world of stocks, liquidity can be high or low - for instance, shares of s&p 500 companies are highly liquid, in that there are millions of shares changing hands every session, so your market order will be executed usually within 5 seconds - and the bid/ask spread is narrow. orders for less liquid securities will take longer to fill, and there might be a high bid/ask spread - this is especially true with options - when there is a lot of open interest the contract is relatively liquid, whereas some contracts aren't.

a lot of bonds are illiquid, in that there isn't a large secondary market for them so you might not be able to sell them right away, unless you want to take a big hit. Personally, I consider retirement accounts liquid because you can "liquidate" them and have the money in cash within a matter of minutes, although you will probably take a tax hit.
 
OP
E

etf

Moderator Emeritus
10+ Year Member
Apr 27, 2005
3,060
12
Status
Jocomama said:
What you consider liquid vs non-liquid assets isn't what the banks consider them.
Plus remember, no matter how quick you close an option, stock, etc. there is still a 3 day period before you get the money (unless you are down in the S&P500 pit trading)
um, options and treasuries settle the next day (not t+3 like stocks). also, if you have a margin account, money from the sale of stock is usually available that same day - i've withdrawn money the day of a sale, and wasn't even charged margin interest.

Jocomama said:
Not true about bonds. These are sold constantly. Mortgage Backed Securites (Fannie, Freddie, Ginnie) are sold in lots of 20+million from banks to other servicing holders (COuntrywide, Chase, etc) and the Jumbos are traded regularly after being bought by GE capital, CSFB, etc.
Munies are constantly trades, same as junk bonds.
i've also found that this is not true from experience - while things like treasuries and agencies are highly liquid, there are many bonds, particularly "junk bonds" that have a slow (and sometimes non-existant) secondary market. in fact, fidelity tells you this fact on the trading screen when you try and purchase a fixed income security that is not considered "investment grade."

Jocomama said:
By the book - retirement of anykind in this country is NOT a liquid asset.
Definitions:
Illiquid
"An asset or security that cannot be converted into cash very quickly (or near prevailing market prices)."

Liquid Definition: Liquidity refers to how quickly and cheaply an asset can be converted into cash. Money (in the form of cash) is the most liquid asset. Assets that generally can only be sold after a long exhaustive search for a buyer are known as illiquid.
i still don't see why "retirement" money is not considered liquid - for example, i have some money sitting in a money market account in my roth ira; money that i contributed (not earnings). i could withdraw this money tomorrow without incurring any taxes or penalties. i don't see how this doesn't fit the standard of "liquidity."

lol, and by your books definition, houses are "illiquid" since they generally involve a long exhaustive search for a buyer :laugh:
 
OP
E

etf

Moderator Emeritus
10+ Year Member
Apr 27, 2005
3,060
12
Status
wait, it says that i started this seperate thread about "liquidity" - that's weird, cause i don't remember doing that...
 

Shredder

User
10+ Year Member
5+ Year Member
Dec 14, 2004
3,907
4
Status
Medical Student
etf said:
i don't think the san francisco market will crash, simply because supply is limited. normally when land gets scarce, people tend to build up. but here, we don't build upwards because of the earthquake risk. so sfo real estate will always be at a premium.
Any analogs to Tokyo though? I feel like posting in this forum since I just discovered it
 
OP
E

etf

Moderator Emeritus
10+ Year Member
Apr 27, 2005
3,060
12
Status
sure, why not? they have earthquakes in japan, plus it's an island to boot.
 

Shredder

User
10+ Year Member
5+ Year Member
Dec 14, 2004
3,907
4
Status
Medical Student
Right, but wasn't there a big bubble and crash there? Dunno, I'm interested in Jap things
 

Jocomama

Make 'em bleed!
10+ Year Member
May 7, 2006
292
1
Ann Arbor, MI and Chicago
Status
Attending Physician
I didn't make up the banking and investment definitions.

Unfortunately not for us Dr types to debate - it is what it is.

There are some junks that may take more time to sell.
Margin accounts are not the norm and by definition usually takes 3 days to post clearance from your broker.

There are always exceptions to the rules. However, next time you go to a bank and provide your asset sheet for a loan, your retirement account will be in the heading below liquid assets, under retirement.

I didn't make the rules, nor the forms.
Nuf said, Doctor.

etf said:
um, options and treasuries settle the next day (not t+3 like stocks). also, if you have a margin account, money from the sale of stock is usually available that same day - i've withdrawn money the day of a sale, and wasn't even charged margin interest.



i've also found that this is not true from experience - while things like treasuries and agencies are highly liquid, there are many bonds, particularly "junk bonds" that have a slow (and sometimes non-existant) secondary market. in fact, fidelity tells you this fact on the trading screen when you try and purchase a fixed income security that is not considered "investment grade."



i still don't see why "retirement" money is not considered liquid - for example, i have some money sitting in a money market account in my roth ira; money that i contributed (not earnings). i could withdraw this money tomorrow without incurring any taxes or penalties. i don't see how this doesn't fit the standard of "liquidity."

lol, and by your books definition, houses are "illiquid" since they generally involve a long exhaustive search for a buyer :laugh:
 
About the Ads