We’re back…… Using home equity as ATM’s!!!!

[earlyretirement]

[quote=flu]

Depends if he can beat the APR.

Funny you should mention this.

About a year ago I was chatting with my former coworker at a large stable company… We were talking about the financial mess people are in and somehow we talked about returns and open enrollment on ESPP (employee stock purchase plan). He mentioned that he wishes he could participate, and I asked him why he couldn’t.

He mentioned his spouse went back to school, he has a mortgage, a new kid, and if that it would be a very tight short term cash flow issue if he were to use is post-tax dollars and contribute to the ESPP plan deferral.

I jokingly said “dude, you’re way to financially prudish…Why don’t you adopt some of the more creative american financial ingenuity and get a balance transfer from a credit card you don’t use for 1%, and use that balance transfer for your day to day bill, and meanwhile withhold more of your paycheck toward your ESPP. You work at a stable company, for which your company stock is virtually dead as a doorknob in terms of volatility regardless of what the market is doing, and you get 20% off of the FMV of the stock between the 6 months offering period…And the time it takes for the shares to vest and when they end up in your account is at most a 2 day trading period, and the shares will be granted after any planned earnings announcrment….so it’s unlikely you’ll see a -20% within that 2 days…”
Dead silence… I thought I offended the guy by going too far, so I changed the subject and that was the end of it…So I thought.

6 months later, he calls me back up and says, “hey, I ended up getting my ESPP shares and just sold them for 20% minus costs…”

I was like, I thought you said you would have cashflow issues, and didn’t want to do it. What did you do, max out your CC?

He was like “No. Even better…I thought about what you said…So I went to schwab and took out a no cost Heloc @ 4%, and withdrew enough to cover my day to day bills while I contributed the maximum I could to my ESPP… 6months later, I sold the shares the day after I vested when the shares were deposited into my account for 20% on the spot gain, and immediately I paid off the small Heloc balance the next few days…And for this period I have some cash to cash flow until closer to the end of this period, and I’ll draw from my Heloc again for about 3 months and pay it back..Next year I won’t have to anymore…And you know what, I think I might even be able to report my interest charges on my Heloc as an investment interest expense…”

Lol….[/quote]

Flu,

I’m glad it worked out for your friend. But for every success story you hear about I think you’d probably admit there are hundreds of people where this sort of thing ends up bad. Right?

Of course the thing there is these people that leveraged and it didn’t turn out right for them will never brag about those scenarios. LOL.

[spdrun]

But still, if I was doing something stupid or ignorant, I’d sure appreciate someone pointing it out.

I’d rather keep it to myself unless the person was a close friend or family.. More failure for stupid people = more success for me. F’em.

[an]

ER, I don’t mean to say you always had the pot. I’m saying you have the pot now, so your thinking is definitely different than those who don’t and resort to these risky behavior to get rich. Do you think they’re any different than those who take their paycheck on pay day to the casino hoping to hit it rich? Sometimes, you have to take a step back and see that there are many different people with many different mindset. I won’t say one way is better than the other because I’m not smart enough to know that. I’ll just let the result speak for itself. Your way obviously worked for you. Congrats. But I don’t like to bastardize those who do things differently.

I know buying 1 year CD is different than buying stocks/forex/etc. But it’s still investment, isn’t? It’s just very safe investment vs more riskier investment. I did the risky stuff when I was 18 and starting out with $1-2k. It didn’t work out, I learned my lesson and move on. Some people need to learn it the hard way and some will never learn. But that’s their prerogative and I won’t say they’ve cross some magical limit.

[earlyretirement]

[quote=spdrun]

But still, if I was doing something stupid or ignorant, I’d sure appreciate someone pointing it out.

I’d rather keep it to myself unless the person was a close friend or family.. More failure for stupid people = more success for me. F’em.[/quote]

That’s my point and something else I mentioned in another thread. It’s human nature for people to brag or talk about all the great investments that turned out their way.

Funny, most of my friends and clients never mention their biggest mistakes or worst investments that didn’t end up well. Those somehow conveniently get left out of the conversation.

[Coronita]

[quote=earlyretirement]

[quote=flu]

Feel free to laugh until you make your first bad choice.[/quote]

Absolutely I think we all have made some mistakes and hiccups in life and investments. I’m not disputing that. Anyone that tries to deny they haven’t made any mistakes is absolutely lying. The key is to learn from those mistakes.

But still, if I was doing something stupid or ignorant, I’d sure appreciate someone pointing it out. Which is what I think I’m doing mentioning this whole credit cards in the stock/currency markets thingy.[/quote]

I think that’s where I disagree. Most people are myopic. very few people are open minded. All it takes is for one bad experience or hearsay and they’ve made up their mind.

Risk of losing money is part of the game. Yes, everyone tries to minimize loss, but it ‘s part of the game. Trying to “investment” in equity market is no different that trying to pick the winners losers in a small business or commodity or IOU papers or real estate. It depends on well in part of chance, meeting action.

But my point is there’s a huge difference between
(a) not understanding speculation X, and therefore not wanting to play
(b) not understanding speculation X, and concluding what you don’t understand is a automatically bad investment for everyone. Personal ignorance often masks itself in form of “bad idea”.

For instance, I personally wouldn’t invest in small business because I’m fairly unsophisticated in understanding how someone’s business runs, how they make money, etc. Likewise, I’m risk adverse to playing the commodities market, because I have no clue. Then again, that’s me…Do I think it’s bad idea to invest in any/all small business? Absolutely not, if one understands it. And likewise, people who know what they are doing in the commodities market I envy because I don’t get that either. Nor do I have the time/patience to try to figure it out. In general, if I don’t understand something, like how a business runs, or how the commodity works, if I were to put any money into something, I would consider that gambling. Even if I didn’t understand it and put money into it, I also would realize that a possible outcome is $0…That goes with everything. Except if you want to keep something in a CD under the FDIC limit(s). But then the returns suck.

[Coronita]

[quote=earlyretirement][quote=spdrun]

But still, if I was doing something stupid or ignorant, I’d sure appreciate someone pointing it out.

I’d rather keep it to myself unless the person was a close friend or family.. More failure for stupid people = more success for me. F’em.[/quote]

That’s my point and something else I mentioned in another thread. It’s human nature for people to brag or talk about all the great investments that turned out their way.

Funny, most of my friends and clients never mention their biggest mistakes or worst investments that didn’t end up well. Those somehow conveniently get left out of the conversation.[/quote]

My biggest mistake was leaving qualcomm in 1997 for a small scrappy startup in the bay area, that subsequently went public…..2 years after I left that startup…. There you have it.

Big mistake…. Huge…

[Coronita]

[quote=earlyretirement]

Flu,

I’m glad it worked out for your friend. But for every success story you hear about I think you’d probably admit there are hundreds of people where this sort of thing ends up bad. Right?

Of course the thing there is these people that leveraged and it didn’t turn out right for them will never brag about those scenarios. LOL.[/quote]

It’s part of the game…

Buying an asset, selling it higher…That’s all it is…Someone turns a buck by trying to buy something and tries to find someone else willing to pay more.

Kinda like a business. Build product that costs X, find someone that’s willing to pay X+Y for it…

This is all one big game… That’s all it is.

Someone wins. Someone loses…

[earlyretirement]

[quote=flu]
It’s part of the game…

Buying an asset, selling it higher…That’s all it is…Someone turns a buck by trying to buy something and tries to find someone else willing to pay more.

Kinda like a business. Build product that costs X, find someone that’s willing to pay X+Y for it…

This is all one big game… That’s all it is.

Someone wins. Someone loses…[/quote]

Sure. But I guess where I’m a bit confused is on any reasonable investment or finance blog or message board, if someone were to mention the stupidity of using credit cards to put in the stock/currency/commodities market, you’d get people agreeing and move on.

I guess this is why I’m spending more time on this board. LOL.

[Coronita]

[quote=earlyretirement][quote=flu]
It’s part of the game…

Buying an asset, selling it higher…That’s all it is…Someone turns a buck by trying to buy something and tries to find someone else willing to pay more.

Kinda like a business. Build product that costs X, find someone that’s willing to pay X+Y for it…

This is all one big game… That’s all it is.

Someone wins. Someone loses…[/quote]

Sure. But I guess where I’m a bit confused is on any reasonable investment or finance blog or message board, if someone were to mention the stupidity of using credit cards to put in the stock/currency/commodities market, you’d get people agreeing and move on.

I guess this is why I’m spending more time on this board. LOL.[/quote]

Lol. Is that what you’re talking about ?

I think you have agreement on the credit card usage in this example cited…But hey, maybe someone can do better than the 20%APR + the 3% return you would get in a normal investment these days…Ok maybe not most people…Maybe they think they do…

Well, what can you do when you have desperate people….

[spdrun]

20% APR what? I pay 10% on one card and they just offered me 0% cash (OK, with a 2% transaction fee) for 13 months.

[Coronita]

[quote=spdrun]20% APR what? I pay 10% on one card and they just offered me 0% cash (OK, with a 2% transaction fee) for 13 months.[/quote]

Read the fine print… Miss one payment and it will go to 19.99%. What? You think people that need to cash advance their credit car would have stellar credit?

[spdrun]

I’ve done it and set up autopay from an account with more than the “loan” balance to make sure that I wouldn’t miss a payment. Credit is useful, when you have money that you want to hold for some other purpose. (Say the $25k minimum in a pattern day trader account, plus ability to acquire properties for ca$h.)

[Coronita]

On second thoughts….Not that I would consider this personally…But I guess someone in serious financial doo-doo…

Hypothetical situation. Let’s say some person has no house to HELOC…. No chance of ownership…Let’s say the person has no savings, no IRA….And has a job that doesn’t really depend on having stellar credit.

But the person has 10 credit cards with $10000 credit line each.

Maybe works out for them is to cash out all credit cards on credit line, and put that money into the IRA….10 credit cards $3000 each say $30000 into an IRA, invested wisely…File BK.

Why? Because perhaps even after one files BK, retirement accounts are off limits.

Not that I personally would recommend this… But just saying….If someone is really desperate.

Chances are, they won’t even go to BK court, but will settle with the collector at much less than owed.

[earlyretirement]

[quote=spdrun]20% APR what? I pay 10% on one card and they just offered me 0% cash (OK, with a 2% transaction fee) for 13 months.[/quote]

Yeah, exactly. Back during the recession credit card companies stopped (or limited) these low or 0% balance transfer offers. But now they are starting to dole out the money again. Like you spdrun, I’m getting 0% transfer offers with a 3% transaction fee. Some of them are for 12 months but some from Citibank say it’s until the entire balance is paid off!

Granted my FICO is great and my credit limits are extremely high. But I still wouldn’t cash these in and stick it in the stock market. Although, if CD’s were paying 6% guaranteed that would be a different story I guess. 😉

If they are offering these kinds of things to spdrun and I, I imagine they are offering them to many people. What I think you will see with the real estate market going up in many areas with tight inventory, is people cashing these and using it in the real estate market, stock market (margin accounts) or other type of scenarios.

[spdrun]

I’ve got these offers since I got the card in 2009. Nothing new.

[Author]

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