Do Low Interest Rates Ensure High Asset Prices?

The assets are generating this.

And so this is our yield.

Interest is nothing but rent.

In a world without leverage so if I didn't have all this

So this is just another visual representation that

So its assets.

That assets, A for assets, is equal to

That's its asset it has.

Because in the last video I talked a little bit about return on asset, where we just took the operating profit, and we divide that by the assets.

A 6 yield is guaranteed on the investment.

So cash could be an asset.

So this is the operating profit. This is the money that just comes out of the asset itself.

Malibu Equity and Investments.

And so we took this number as the numerator and we divided by the number of assets.

liabilities plus equity is equal to assets.

And then the equity is, essentially we would look at this formula.

I still have no liabilities

And they say, you know what?

I don't want to draw this box.

And rich, eh?

I'll do that in yellow.

Well, that means the ratio of the assets to the equity is 2 1.

liabilities.

So I'm going to give you a little equation, actually, just to take a little bit of a tangent.

He is a man of considerable means.

It should start to make a little bit of intuitive sense

Malibu Equity and Investments. Roger Van Zant.

And so you can see very simply that assets I'll write this down, you're getting a little bit of a introduction to accounting right here but assets are going to always be equal to liabilities plus equity.

let me give you that piece of terminology, it just means net asset value.

We could do a series of videos on that.

Obviously , a machine you can't do all of those things to it, but you can at least touch it and possibly smell and taste it.

liabilities plus equity.

So I have 100 plus 300 plus 250 so it's 100.

And this goes back to the very first video we saw.

So they really had, let's see, they had an 80,000 loan, a 250,000 asset, so they really had 250,000 minus 80,000, that's 170,000.

My liabilities would be 145,000.

And then the very first definition I gave you was operating profit over assets.

The business will yields a fair return on the investment.

And what I wrote here is, it has 4 billion of liabilities.

Benefits of course should exceed the costs.

He is a man of wealth.

He's a wealthy man.

Or across the street from each other.

So the total assets were 5 billion in assets.