Thursday, October 15, 2009

The Bubble Bursts

Rav Shmuel Tefilinsky, zt”l, once told a story about a wealthy investor from outside of Israel. This man arrived in Israel with six thousand lirot with which to invest in real estate. Since the rents at that time were very high in Tel Aviv, this man decided that it would be worthwhile to borrow another six thousand and purchase a building for the astronomical price of twelve thousand lirot.
The man did so and for a time everything went well but not long after his big purchase there was a terrible depression and no one was able to pay the exorbitant rents they owed. Not surprisingly, real estate in general fell precipitously and the building which a short time before had been worth twelve thousand lirot was now only worth four thousand.
Of course, the bank did not really care about this wealthy man’s bad luck; they just wanted him to either make the payments on his loan or return the money that he had borrowed. They sold his building for four thousand and the miserable man was thrown in jail because he was unable to raise the remaining two thousand lirot that he owed.
Rav Tefilinsky commented, “If only this man had been happy to purchase a more modest building for six thousand, he would have had a building worth two thousand lirot during the hard times. And later, when real estate picked up again, its value would be restored to six thousand.
“This is a mussar haskel. Never borrow if one can avoid it!”

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