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bearishgurl.
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January 21, 2013 at 6:30 PM #758188January 21, 2013 at 6:31 PM #758191
flyer
Participant[quote=earlyretirement][quote=CA renter]
What ER said is true about the yo-yo types who make incredible amounts of money on a lucky streak, but then double down and lose everything (and then some). Sometimes, they actually manage to come back again, but they usually crash again, too. Some might view this is “successful” because when these people are at the top, they can really fly high, but they can crash just as dramatically; and seeing this — more often than not — is what makes me want to do the exact opposite of what these people do, and what they invariably do is use leverage…lots of it (and get into really convoluted deals that don’t make any sense).[/quote]
Exactly. I’ve seen a lot of these types over the years. My feeling is this… it’s really difficult to really ‘know’ someone’s TRUE net worth. Many times it’s all smoke and mirrors and leverage and credit card debt fueling their lifestyle.
In other countries where I’ve lived it’s easier to ascertain one’s true net worth. Because no one is buying an expensive sports car unless they bought it outright. Or for the most part if someone “own’s” an expensive pad it means they bought it. If they take fancy trips around the world it’s because they have the cash for it.
The USA can be a land of smoke and mirrors where you THINK someone has a high net worth but it’s all a facade. They can live in a really amazing house in the best neighborhood, their kids can go to private schools, they take fancy trips and drive luxury cars…. but you know what? They could not only have NO net worth but worse they have NEGATIVE net worth.
I’ve met people over the years that kept trying to tell me that it doesn’t make sense to own outright and they could do better things with their money or earn more, etc. But the rub is that the vast majority of humans always over estimate their investment abilities. They think they can do better than anyone else. They think they are smarter than most people.
For those of you who haven’t watched “Queen of Versailles” – http://iurl.no/v1C Watch it! It’s amazing to see a guy building a $100 million dollar house yet not have any college savings set aside for his 8 (EIGHT) kids. All kinds of sharks like this out there.
Heck, I’m as guilty of this as anyone else and will be the first to admit it. Even people that are somewhat “conservative” in nature will make stupid investments that they didn’t think were stupid at the time.
So the trick is that those that say they will take $X money they have in the bank during the hard times to really have the money in the bank because in my experience there is always some “great investment” or “can’t lose investment” or “once in a lifetime investment property” etc. where you can take the funds you have and lose it.
Very, very, very few people have the discipline to hold large sums of money and ride out extremely difficult periods of time. I’m sure you will hear everyone and their brother tell you how much bloody money they’ve made in the last few years in the run off in the stock market.
But what most people don’t tell you is how scared they were at the peak of the crises when their 401k’s were getting decimated. And anyone that tells you they knew things would rebound so quickly is probably lying.
Like I said….most people think they are better investors then they actually are. I’ve met VERY few people that are truly gifted and make insane returns year after year after decade after decade. One is Warren Buffet and another is Steven Cohen. Although it looks like now there is a reason guys like Cohen could justify making 30% annual returns for decades.
People will go on and on telling you about their best and greatest returns on investment. While I’ve made some GREAT investments I try not to think about those. What I try to always remember is my WORSE investments.
An example of one of my worst investments. I was short selling stocks like Bank of America (BAC) for 2 years along with many of the financial companies back at the peak. I saw the crash coming and knew they were going to get killed so I started short selling them and made lots of money doing that.
Well, once banks started folding or getting sold and bailed out, I thought I was smarter than everyone else. I told myself, “you can’t lose!”. Long story short….I ended up investing in Washington Mutual (WAMU) 2 days before it went under.
I told myself that there was no way the government would let them fail. I saw other banks like Wachovia being bailed out and quickly sold so I figured that the same would happen to WAMU. I’m not sure if there are any WAMU investors on the board but if so you know how things turned out.
The FDIC handed over WAMU to Chase and the investors lost out. It was the quickest $250,000 I ever lost (literally in a few days).
So again, I saw think about your worst investments rather than your best investments. I’m as guilty as anyone else as making stupid investments or trying to “catch a falling knife”.
I mention this story because I say again that most people simply don’t have the discipline to hold cash during great investment opportunities. Things in principle sound great but it’s another thing in real life.
Of course I’m not saying there aren’t any totally disciplined people out there that can do it when they say they would rather not pay off their primary house and leverage it and they can always make guaranteed money. In reality, we all have hiccups.
I consider myself a VERY disciplined investor and I’d like to think I’ve made some very wise investments. But my point in my diatribe above is to point out that we ALL make horrible investments or decisions to use our money. Whether it’s that can’t lose investment, that great rental/investment property or making a loan to a dead beat family member.[/quote]
All so true ER! CA has become the land of “smoke and mirrors,” and I’m saying that as a native.
That wasn’t really the case when my wife and I grew up here in LJ, but as it’s become more expensive, and competitive, and people have become more and more desperate to “keep up appearances,” it has devolved into that.
What’s sad is that many people will spend everything they make during their best earning years just to exist here, then be left high and dry later in life, when they need financial security. Not a good plan.
People are always astounded when I bring up the topic of “net worth,” it’s like an elephant entered the room.
January 21, 2013 at 6:57 PM #758193earlyretirement
Participant[quote=flyer]
All so true ER! CA has become the land of “smoke and mirrors,” and I’m saying that as a native.
That wasn’t really the case when my wife and I grew up here in LJ, but as it’s become more expensive, and competitive, and people have become more and more desperate to “keep up appearances,” it has devolved into that.
What’s sad is that many people will spend everything they make during their best earning years just to exist here, then be left high and dry later in life, when they need financial security. Not a good plan.
People are always astounded when I bring up the topic of “net worth,” it’s like an elephant entered the room.[/quote]
Absolutely true flyer. I’ve seen quite a bit of that in Southern California. San Diego seems to be much more laid back vs. other places like Orange County.
So true about people spending everything just to “exist” here. I’ve seen quite a bit of that as well. They talk about the great weather, the beautiful scenery, the wonderful beaches but they don’t really talk about their relatively low paying jobs with the sunshine tax and their relatively high rental/mortgage payments and high taxes.
I always wondered about how things will end for some. And funny about you mentioning the topic of net worth. I just finished reading, “The Number” by Lee Eisenberg. It was a great and interesting read. (They have it at the San Diego County Library so you don’t even need to pay to read it).
We can all agree to disagree on the smarts of paying off one’s mortgage early. However, I will say that those of you that have done it know how wonderful of a feeling and accomplishment it is. Once you live a totally debt free life including your primary mortgage or even investment property mortgages…. you’ll never again want to get into debt. (Or at least most of the people I know that are in that position tell me they agree with that sensation).
Also, I’ll mention that it’s funny how you get penalized on your FICO if you have no debt. Ironic that if you pay off your house after many years your FICO goes down. Or if you pay cash for your cars your FICO will go down if it’s been many years with no car payment.
My FICO has been over 800 for most of my adult life. I had mortgages before (over 7 years ago), I had car payments before (many years ago). I had LOTS of student loans previously (long since paid off). But after many years they drop off and your FICO score actually goes down if you have no debt. I always thought that was ironic. Oh well… Only in America!
January 21, 2013 at 7:31 PM #758194
CoronitaParticipant“convoluted” deals is relative…
If things are simple, everyone would be doing it, and then with near perfect information, no one would have an advantage and therefore rewards wouldn’t be there.
Sometimes “difficulty” is the perfect barrier to entry for just about everyone else which means a greater opportunity for someone who takes the time to understand to take advantage of the opportunity. The key is understanding and objectively deciding if the risk/reward is there and at your tolerance level and/or the purpose. There is a place for using different financial instruments, otherwise they wouldn’t exist. Stock options are a good example. Put options are a good “insurance” policy if you work at a company that gives you stock options that are in-the-money but haven’t fully vested..You would “insure” your unvested in-the-money company given stock options with low cost slightly out of money put options that costs you very little. That way if your company stock tanks, you capture your gain from the put options as your company’s stock tanks.
If the company stock holds it’s current price or goes higher, your purchased put option expires useless but your company issued options are worth something meaningful. Having the patience and time to understand complex things is a good thing. I can think of many people that lost their company benefit because they didn’t bother to understand hedging strategies when they worked at volatile companies, because frankly “it was too difficult to understand”…You just have more tools that you know are available, more so than people that don’t bother to take the time/patience/etc to understand.Part of the reason why I think a lot of americans are in the big financial messes they are in is because they don’t bother to take the time to understand what they are signing up to. Either the shutoff completely trying to understand and “use the the force” or they listen to someone else says and trust what they say..And then when the crap hits the fan, they blame everyone else. Case in point… Look at all the alt-a, stated income loans…Sure blame it on the banks. But really, did any of these people bother to try to understand anything or did they kinda just pleaded ignorance and now pushed the responsibility to someone else?
I don’t know… But the mentality of what some called “learned helplessness” that is prevalent is really astonishing to me. Learned helplessness eventually leads to “getting screwed” and if that wasn’t bad enough, inevitably leads to “blame someone else for it”…at least that’s what’s been happening.
January 21, 2013 at 7:41 PM #758195CoronitaParticipanttaxes are another example. The more convoluted one’s taxes are the greater the opportunity there is to reduce one taxes…
[quote]
Making your fortune is one thing, hanging onto it throughout your lifetime is another. I’ve seen people make and lose fortunes all my life. Our goal has always been to preserve ours for the long-haul.
[/quote]Today’s version would read:
Making your fortune is one thing, hanging onto it through your lifetime and avoid getting taxed to death is another.January 21, 2013 at 11:53 PM #758206an
ParticipantI think you guys/gals are convoluting two different points. One is creating wealth and the other is keeping wealth. Those are two different things. Leverage is good at helping you make more in a shorter period of time, but it won’t help you in keeping it if you’re spending more than you make. So, description of superficiality of Californian have nothing to do with creating wealth (leverage) but more to do with the ability to keep wealth (save what you’ve made). With regards to Yo-yo, I don’t know all the details but I’m sure different people yo-yo for different reason. Just because they yo-yo doesn’t mean they don’t know how to save. What if they’re just not always lucky and that’s the main cause of the yo-yo. I’m not going to sit here and judge them.
My main beef is CAR’s blanket statement that successful people tend to avoid debt at all cost while unsuccessful people don’t avoid debt. I can probably name at least 10 if not 100+ successful people who didn’t avoid debt at all cost for every one person you can name that is unsuccessful by avoiding debt at all cost. Also, for every one person you can name who yo-yo because of debt, I can probably name 100+ unsuccessful people who avoided debt (renters) who also live pay check to pay check.
I hate blanket statements. They’re always wrong, because there’s no way you can split the entire human race into two clean categories.
January 22, 2013 at 4:18 AM #758207ParticipantYou’re right, AN, everyone reaches their financial goals in different ways, at different times. As long as each of us reach our own particular financial goals in life, that’s all that really matters. (speaking purely from a monetary perspective)
My concern, and, I think, perhaps the concern of some others who have posted in this thread, is that the stats reveal only 5% of the population is financially solvent–based upon net worth–which is the generally accepted barometer for financial “success.”
As ER alluded, you don’t really know if people are financially successful until you know their net worth–minus smoke and mirrors.
As flu always says, don’t worry about it, take care of your own, which I know all of us here plan to do, but it still makes you wonder what the ramifications of the ever-declining financial solvency in 95% of the US population will create in our society going forward.
January 22, 2013 at 7:11 AM #758209CoronitaParticipant[quote=flyer]You’re right, AN, everyone reaches their financial goals in different ways, at different times. As long as each of us reach our own particular financial goals in life, that’s all that really matters. (speaking purely from a monetary perspective)
My concern, and, I think, perhaps the concern of some others who have posted in this thread, is that the stats reveal only 5% of the population is financially solvent–based upon net worth–which is the generally accepted barometer for financial “success.”
As ER alluded, you don’t really know if people are financially successful until you know their net worth–minus smoke and mirrors.
As flu always says, don’t worry about it, take care of your own, which I know all of us here plan to do, but it still makes you wonder what the ramifications of the ever-declining financial solvency in 95% of the US population will create in our society going forward.[/quote]
Well, part of this is think is the prevailing attitude of learned helplessness.
Don’t do that, because it’s too risky. Don’t do that, because it’s going to be outsourced. Don’t do that, because Banks/Wall Street is bad… Don’t be doctor or lawyer because it costs too much. Don’t start your own business because it’s too risky and most likely will fail… Don’t invest, don’t take risk, don’t play stocks. Don’t be landlord…..
….But, maintain your qualify of life that you should have in America…because that’s your right and you deserve it, and we don’t want you to feel bad …
Is there any surprise why we see so much failure why people take the easy way out on credit? Hell, people automatically failed because they didn’t bother to start. Learned helplessness.
Hell, we start seeing kids get feel-good trophies for just trying these days, even if (sorry to say) they suck……”Winning isn’t everything, it’s how you play the game…” True. Winning isn’t everything… Sometimes it’s the only thing.
Unless one’s got some serious physical, health, mental issue(s), one’s got very little excuse in my book.So sick of this victim mentality herd sometimes…
January 22, 2013 at 7:31 AM #758213scaredyclassic
Participant[quote=flu][quote=flyer]You’re right, AN, everyone reaches their financial goals in different ways, at different times. As long as each of us reach our own particular financial goals in life, that’s all that really matters. (speaking purely from a monetary perspective)
My concern, and, I think, perhaps the concern of some others who have posted in this thread, is that the stats reveal only 5% of the population is financially solvent–based upon net worth–which is the generally accepted barometer for financial “success.”
As ER alluded, you don’t really know if people are financially successful until you know their net worth–minus smoke and mirrors.
As flu always says, don’t worry about it, take care of your own, which I know all of us here plan to do, but it still makes you wonder what the ramifications of the ever-declining financial solvency in 95% of the US population will create in our society going forward.[/quote]
Well, part of this is think is the prevailing attitude of learned helplessness.
Don’t do that, because it’s too risky. Don’t do that, because it’s going to be outsourced. Don’t do that, because Banks/Wall Street is bad… Don’t be doctor or lawyer because it costs too much. Don’t start your own business because it’s too risky and most likely will fail… Don’t invest, don’t take risk, don’t play stocks. Don’t be landlord…..
….But, maintain your qualify of life that you should have in America…because that’s your right and you deserve it, and we don’t want you to feel bad …
Is there any surprise why we see so much failure why people take the easy way out on credit? Hell, people automatically failed because they didn’t bother to start. Learned helplessness.
Hell, we start seeing kids get feel-good trophies for just trying these days, even if (sorry to say) they suck……”Winning isn’t everything, it’s how you play the game…” True. Winning isn’t everything… Sometimes it’s the only thing.
Unless one’s got some serious physical, health, mental issue(s), one’s got very little excuse in my book.So sick of this victim mentality herd sometimes…[/quote]
Sometimes winning is the only thing…
exhibit A…Lance.
January 22, 2013 at 7:32 AM #758214Participantit is extremely risky for anyone who is not 100% committed to do anything.
January 22, 2013 at 7:33 AM #758215Participantit is difficult to say that lance was even “cheating” in the sense that it was pervasive in the culture for all athletes to do the same thing.
IN normal society, winners will play by the prevailing customs, not the letter of the law…
January 22, 2013 at 7:37 AM #758216ParticipantI’m starting to sympathize with Lance more and more. Look, the guy won. he worked his tail off. He put together an amazing team. Sure he took performance enhancing drugs, but everyone did. he could not compete withoutt hem. Then, basically, people threatened to expose him and bring him down. Essentially that’s blackmail. Small little pathetic people who were afraid of success and greatness. So he did what he had to do.
no excuses!
January 22, 2013 at 9:15 AM #758220UCGal
Participant[quote=flu]
Well, part of this is think is the prevailing attitude of learned helplessness.Don’t do that, because it’s too risky. Don’t do that, because it’s going to be outsourced. Don’t do that, because Banks/Wall Street is bad… Don’t be doctor or lawyer because it costs too much. Don’t start your own business because it’s too risky and most likely will fail… Don’t invest, don’t take risk, don’t play stocks. Don’t be landlord…..
….But, maintain your qualify of life that you should have in America…because that’s your right and you deserve it, and we don’t want you to feel bad …
Is there any surprise why we see so much failure why people take the easy way out on credit? Hell, people automatically failed because they didn’t bother to start. Learned helplessness.
Hell, we start seeing kids get feel-good trophies for just trying these days, even if (sorry to say) they suck……”Winning isn’t everything, it’s how you play the game…” True. Winning isn’t everything… Sometimes it’s the only thing.
Unless one’s got some serious physical, health, mental issue(s), one’s got very little excuse in my book.So sick of this victim mentality herd sometimes…[/quote]
You know it’s interesting. I wonder if there’s a correlation between the helicopter parents who insist that little Johnny and Suzie be rewarded for effort, not result, who are the same parents who are all about appearances and achieve the facade of wealth through leverage.I’m just thinking of some of the parents at my kids previous school. And some of the parents I see at sports activities.
People who operate with a sense of entitlement – buying things they can’t afford, etc… might be training their kids to be entitled… entitled to trophies, entitled to grades… no work required… It is a value they’re passing on, generationally.
January 22, 2013 at 9:49 AM #758222Participantflyer, I’m also aware of the stats about 5% of the population who are financially solvent. I’m also aware of the average boomer’s nest egg being <$100k (excluding their home). But like flu have said and you mentioned, I don't give a flying rats a$$ that most people can't save. I'm saving and I'm looking out for my own. Growing up in SoCal, I've seen many smoke and mirrors and I'm not impressed by those. But, whatever floats their boat. I'm not here to judge them. I'm concentrating on my own situation and make sure I'll be financially independent by the age I want to be (50-55). I've ran many many scenario and there's no way I can get their without leverage. At the end of the day, it's all about net cash flow and risk appetite. Leverage is just one of the many tools one can use and are often used by many. I don't see how ER can condemn debt and stating people who yo-yo by using debt. While, he himself, took major risk and cash out his 401k to start his business. I too have seen people did exactly what he did, but wasn't as lucky and their business crash and burn. So, just because you pay things for cash doesn't mean the risk is any different. Sometimes, it's even greater, because you have nothing left to try again. flu, I completely agree with you about the prevailing attitude of learned helplessness and sense of entitlement. Those attitude exist through out the entire income spectrum, so, I wouldn't demonize one group vs the other. It's just the way most American feel. I feel that way when I see the press publicizing Cory Booker's point about living on $4.32/person/day. This is the budget for supposedly the poor. I've seen poor people who have gotten by with much less and still have healthy 3 meals a day. My family on average live on less than $4.32/person/day. I don't feel entitled to my money and that I have to work hard to keep it and take appropriate risk to grow it. Who here can say they've served a meal for 15 people with $15-20? This mean will trump anything you can find at a restaurant as well. We just did it a few weeks back. My wife made Pho from scratch. We fed 15 people for <$20. The Pho taste better than anything you can find at a restaurant, because we don't use MSG and we take proper time to stew the bones. Pho is not the only kind of food you can eat that cost $1/person. There are many Asian meals that will cost you about that much. Maybe Asians have experienced long bought of poverty, so our food take full advantage of what's available and be able to feed people for much less and still be very tasty. These food have been evolved and passed down for many generations.
January 22, 2013 at 10:33 AM #758226carlsbadworker
Participant[quote=AN]flyer, I’m also aware of the stats about 5% of the population who are financially solvent.[/quote]
I don’t believe only 5% are financially solvent. I think I am not in top 5% in terms of net worth, but I am financially solvent.
One in Four Households Have No Net Worth.
http://economyincrisis.org/content/one-four-households-have-no-net-worth
http://epi.3cdn.net/2a7ccb3e9e618f0bbc_3nm6idnax.pdfAbout one in five U.S. households owe more on credit cards, medical bills, student loans and other debts that aren’t backed by collateral — so not including car loans — than they have in savings, checking accounts and other liquid assets.
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