Now you can really gamble on house prices

There are many ways to gamble on your own house price.

For example, if you buy a house and plan to sell it within a short period of time, you are gambling on the price going up fairly rapidly.

The same thing is true if you borrow more than you can afford to pay on your mortgage. If the price of your house goes down enough, you could lose the house and still owe thousands of dollars to the mortgage holder.

Now Standard and Poor’s (S&P) is creating a way for you to gamble on house prices in general. It’s just like a casino.

S&P is creating 10 indexes of house prices in various regions of the United States, including Boston, NY, LA, Chicago, Denver, DC, San Diego and San Francisco.

Once these indexes are created you will be able to buy futures contracts or options (on the Chicago Mercantile Exchange). Without getting into detail on these various “derivates” we can say that using them is really pretty much the same as placing a bet. You bet that prices will go up or down in some specified period of time, and if you are right, you win. How much you win depends on how much they go up or down. If they go in the wrong direction, you lose. (And you could lose even more than you bet!)

I hate to see all these tools for gambling come into general play in the investment market. They call them “investments” but they are really no better than gambling.

A friend of mine used to say that the only difference between a bookie and a broker is that the bookie knows he is a crook.

Maybe he was right.

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