My Personal Credit Crisis

[Arraya]

Neurochemically speaking, optimism leads to increased frontal cortical activity which itself is a strong predictor of idea generation and overall liveliness of thought. Pessimism does the opposite.

Herd behavior is also a trait left over from out hunter/gatherer days. This is well know by the masters of finance, though they are not immune.

Rational thought was developed much later on down the evolutionary trail, thus not as dominate. Magical thinking still rules the species.

Bubble buyer behavior is a combination of the two evolutionary biases, usurping rational thought.

Humans also have a proclivity for trusting authority. I imagine this was developed by people who listened to their parents not to eat that berry or touch that snake had a better survival rate than those that did not.

The bubble was exacerbated by authority figures feeding the fire and amplified by the media.

People were just being typical humans. Trusting authorities and following the tribe.

[abell]

A few years back, some friends of mine were trying to convince my husband and I to buy a house (they had just bought, and now “own” two houses). We kept on using the online mortgage calculators and determined we could not buy a house that we would want to live in for an extended period of time. Then one day those friends were with my husband and I looking at real estate online. When my husband went to use the online mortgage calculator, one of our friends said “you are doing a thirty-year fixed? You’ll never be able to afford a home that way.” So I said “if we get a mortgage with an adjustable rate, what happens if the rate adjusts higher and we can’t afford it?” And she replied, “you just refinance your mortgage.” And I responded, “What happens if you can’t?” There was silence before she muttered “you’ll be able to.” I was surprised that my friend took on an ARM mortgage without even considering that things might change and make refinancing not an option. At that time, I thought she was not being realistic and probably in the minority. But now that I have followed the housing market for a while, it seems that attitude was pretty common.

[abell]

A few years back, some friends of mine were trying to convince my husband and I to buy a house (they had just bought, and now “own” two houses). We kept on using the online mortgage calculators and determined we could not buy a house that we would want to live in for an extended period of time. Then one day those friends were with my husband and I looking at real estate online. When my husband went to use the online mortgage calculator, one of our friends said “you are doing a thirty-year fixed? You’ll never be able to afford a home that way.” So I said “if we get a mortgage with an adjustable rate, what happens if the rate adjusts higher and we can’t afford it?” And she replied, “you just refinance your mortgage.” And I responded, “What happens if you can’t?” There was silence before she muttered “you’ll be able to.” I was surprised that my friend took on an ARM mortgage without even considering that things might change and make refinancing not an option. At that time, I thought she was not being realistic and probably in the minority. But now that I have followed the housing market for a while, it seems that attitude was pretty common.

[abell]

A few years back, some friends of mine were trying to convince my husband and I to buy a house (they had just bought, and now “own” two houses). We kept on using the online mortgage calculators and determined we could not buy a house that we would want to live in for an extended period of time. Then one day those friends were with my husband and I looking at real estate online. When my husband went to use the online mortgage calculator, one of our friends said “you are doing a thirty-year fixed? You’ll never be able to afford a home that way.” So I said “if we get a mortgage with an adjustable rate, what happens if the rate adjusts higher and we can’t afford it?” And she replied, “you just refinance your mortgage.” And I responded, “What happens if you can’t?” There was silence before she muttered “you’ll be able to.” I was surprised that my friend took on an ARM mortgage without even considering that things might change and make refinancing not an option. At that time, I thought she was not being realistic and probably in the minority. But now that I have followed the housing market for a while, it seems that attitude was pretty common.

[abell]

A few years back, some friends of mine were trying to convince my husband and I to buy a house (they had just bought, and now “own” two houses). We kept on using the online mortgage calculators and determined we could not buy a house that we would want to live in for an extended period of time. Then one day those friends were with my husband and I looking at real estate online. When my husband went to use the online mortgage calculator, one of our friends said “you are doing a thirty-year fixed? You’ll never be able to afford a home that way.” So I said “if we get a mortgage with an adjustable rate, what happens if the rate adjusts higher and we can’t afford it?” And she replied, “you just refinance your mortgage.” And I responded, “What happens if you can’t?” There was silence before she muttered “you’ll be able to.” I was surprised that my friend took on an ARM mortgage without even considering that things might change and make refinancing not an option. At that time, I thought she was not being realistic and probably in the minority. But now that I have followed the housing market for a while, it seems that attitude was pretty common.

[abell]

A few years back, some friends of mine were trying to convince my husband and I to buy a house (they had just bought, and now “own” two houses). We kept on using the online mortgage calculators and determined we could not buy a house that we would want to live in for an extended period of time. Then one day those friends were with my husband and I looking at real estate online. When my husband went to use the online mortgage calculator, one of our friends said “you are doing a thirty-year fixed? You’ll never be able to afford a home that way.” So I said “if we get a mortgage with an adjustable rate, what happens if the rate adjusts higher and we can’t afford it?” And she replied, “you just refinance your mortgage.” And I responded, “What happens if you can’t?” There was silence before she muttered “you’ll be able to.” I was surprised that my friend took on an ARM mortgage without even considering that things might change and make refinancing not an option. At that time, I thought she was not being realistic and probably in the minority. But now that I have followed the housing market for a while, it seems that attitude was pretty common.

[davelj]

Ah… and more interesting details emerge about the wife of this man and his Personal Credit Crisis. He managed to omit his wife’s TWO previous bankruptcies…

http://meganmcardle.theatlantic.com/archives/2009/05/the_road_to_bankruptcy.php

Interesting stuff.

[davelj]

Ah… and more interesting details emerge about the wife of this man and his Personal Credit Crisis. He managed to omit his wife’s TWO previous bankruptcies…

http://meganmcardle.theatlantic.com/archives/2009/05/the_road_to_bankruptcy.php

Interesting stuff.

[davelj]

Ah… and more interesting details emerge about the wife of this man and his Personal Credit Crisis. He managed to omit his wife’s TWO previous bankruptcies…

http://meganmcardle.theatlantic.com/archives/2009/05/the_road_to_bankruptcy.php

Interesting stuff.

[davelj]

Ah… and more interesting details emerge about the wife of this man and his Personal Credit Crisis. He managed to omit his wife’s TWO previous bankruptcies…

http://meganmcardle.theatlantic.com/archives/2009/05/the_road_to_bankruptcy.php

Interesting stuff.

[davelj]

Ah… and more interesting details emerge about the wife of this man and his Personal Credit Crisis. He managed to omit his wife’s TWO previous bankruptcies…

http://meganmcardle.theatlantic.com/archives/2009/05/the_road_to_bankruptcy.php

Interesting stuff.

[davelj]

[quote=scaredycat]real innovators aren’t usually going for a buck; they’re following their wacky ideas and dreams. [/quote]

Think about that for a second. Think about most of the great innovations of the last several hundred years. Why did they happen? Because someone wanted to make a buck. A few perhaps didn’t – I’m thinking of some medical breakthroughs and others, where “larger” humanitarian issues were the driver. But, for the most part – if you really think about it – innovation comes precisely because someone wanted to put a little change in their pocket. If you were to put all of the patent applications currently on file with the US Patent Office into one of two categories, “Wacky idea and dream” or “I want to market this thing to make money,” I can almost guarantee that 90%+ fall into the latter category.

[davelj]

[quote=scaredycat]real innovators aren’t usually going for a buck; they’re following their wacky ideas and dreams. [/quote]

Think about that for a second. Think about most of the great innovations of the last several hundred years. Why did they happen? Because someone wanted to make a buck. A few perhaps didn’t – I’m thinking of some medical breakthroughs and others, where “larger” humanitarian issues were the driver. But, for the most part – if you really think about it – innovation comes precisely because someone wanted to put a little change in their pocket. If you were to put all of the patent applications currently on file with the US Patent Office into one of two categories, “Wacky idea and dream” or “I want to market this thing to make money,” I can almost guarantee that 90%+ fall into the latter category.

[davelj]

[quote=scaredycat]real innovators aren’t usually going for a buck; they’re following their wacky ideas and dreams. [/quote]

Think about that for a second. Think about most of the great innovations of the last several hundred years. Why did they happen? Because someone wanted to make a buck. A few perhaps didn’t – I’m thinking of some medical breakthroughs and others, where “larger” humanitarian issues were the driver. But, for the most part – if you really think about it – innovation comes precisely because someone wanted to put a little change in their pocket. If you were to put all of the patent applications currently on file with the US Patent Office into one of two categories, “Wacky idea and dream” or “I want to market this thing to make money,” I can almost guarantee that 90%+ fall into the latter category.

[davelj]

[quote=scaredycat]real innovators aren’t usually going for a buck; they’re following their wacky ideas and dreams. [/quote]

Think about that for a second. Think about most of the great innovations of the last several hundred years. Why did they happen? Because someone wanted to make a buck. A few perhaps didn’t – I’m thinking of some medical breakthroughs and others, where “larger” humanitarian issues were the driver. But, for the most part – if you really think about it – innovation comes precisely because someone wanted to put a little change in their pocket. If you were to put all of the patent applications currently on file with the US Patent Office into one of two categories, “Wacky idea and dream” or “I want to market this thing to make money,” I can almost guarantee that 90%+ fall into the latter category.

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