@tubbyguts - I think this is a better analogy ..........
Let's pretend tubby bought a house in the US a few years ago for $1 million. He paid $200k out of his savings and took out a loan of $800k to cover the rest. In line with normal practice in the US, the terms of the loan state that he could hand the keys to the bank and walk away at any time, without the debt following him.
Recently, tubby had the house valued, and it turns out it's only worth about $500k in the current market. This is terrible, as he still owes $750k on the loan, and he knows he's going to have spend even more money on renovations over the coming years. Plus, he really needs every spare cent he can get his hands on right now, as he recently decided to buy himself a business.
Tubby decides to cut his losses and give the house to the bank for nothing.
I'm sure we can all understand why tubby would make such a decision. But what's the house worth now? Zero? Or somewhere in the region of $500k?
MSB Price at posting:
$1.14 Sentiment: None Disclosure: Not Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)