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HLS
ParticipantRUST,,
I did have a couple call me recently and tell me that they were planning on a “divorce” because only the husband was on their current loan, which was going in to foreclosure.I told her to consult an attorney, but I didn’t think that was necessary.
ParticipantI think that the rates are low and the “protection” is a joke. It’s based on WHOSE inflation numbers ??
What do they pay today ??The official inflation numbers don’t include the most important major expenses. The below article from a year ago explains it well.
http://www.mises.org/story/2302
It depends on how much money you are trying to hedge.
We live, work, spend and breathe US DOLLARS.For most people, earning a few more dollars will allow them to maintain their lifestyle. Not everything goes up.
Getting over 5% on FDIC insured cash and having some liquidity today is what people should be doing, and living beneath their means instead of above their means.
We aren’t talking about 3rd world hyper inflation, where prices are increasing daily. US govt will print/create do whatever they have to to keep that from happening.
ParticipantFLU,
I could discuss this with you for a long time.
(My opinions are not necessarily those of anyone else)The mentality of “the market” continues to amaze me.
It’s not a STOCK MARKET, it’s a market of stocks.Who cares what the DOW is doing, unless that is all you are invested in. It’s a basket of 30 stocks. THIRTY.
I see comments that refer to “THE MARKET” as nothing more than ignorant or foolish, possibly both.Unless you daytrade, who cares about daily moves.
The larger and well known a company is, the more potential there is for manipulation and worrying about short squeezes etc.One of the greatest stock market investors is BUFFET.
He recognizes VALUE and businesses that he understands.
He didn’t lose any fortune in the dot com boom, cuz he never bought into the myth, that many “average Joes/Janes” bought into and lost their azz.There are trillions of dollars “invested” by people that know less about stocks than they do about their mortgage. It’s what they believe is the right thing to do, based on popularity and salespeople.
Everybody CAN’T make money in any market forever. The greater fool theory can only go on so long before it busts.
It’s a legalized pyramid scheme that many people profit from, but it’s not security in my opinion any more than the equity in a house.Most people may have heard of P/E but cannot explain it. They don’t know what market cap, P/S ratio, enterprise value, PEG ratio, ROE or many other stats that are available FREE.
The fact is that average people that truly know very little CAN make vast amounts of money. It’s called LUCK.
People who bought houses in San Diego before 2003 got lucky. They didn’t KNOW they would double.Many people gladly sold into that bubble, with huge gains and little remorse. There always has to be a seller for someone else to buy anything.
Happens in stocks, it happens in houses. It’s different when you can explain WHY you are invested or why you are not.
Most people are invested for the long run. You hear all the time that it’s not timing, it’s time in the market. BLAH BLAH BLAH, selling you on what the average returns have been over the past 75 years. BLAH blah BLAH.
Following the herd will reward you when times are good and punish you when times are bad.
Nobody is right 100% of the time. Figure out what works for you.
Quick examples today:
GTF is up 122% RTWI is up 47%
HAR is down 19% TMTA is down 15%If you own any of the above 4 stocks, do you care what
“the market” is doing today ?The headlines are beyond idiotic. REAL money is made buying when things are out of favor, at or near bottoms, and selling at a profit. You can make 100%-500% when patient.
Most people jump on a moving train right before it stops moving, chasing gains and performance, hoping for a 10% or 20% gain. Buying yesterdays news about the last quarter that ended several months ago, is simply not logical, but that’s how it works.
When you understand that it’s idiotic, but that’s how it is, you can possibly profit from it.
Lots more can be said….
ParticipantJWM,
I’ve been on the same page as you. You’ve been saying MACRO since I’ve been on this board.I don’t want to think of it as “tin foil” but I agree that something IS up.
I don’t remember if you posted on this thread:http://piggington.com/what_should_we_do_to_protect_ourselves
Finger pointing is all over the place. There are millions of people who are blindly/mindlessly contributing to retirement accounts, flooding Wall Street with cash, under the guise of “security for their future”
Most people have no clue what they are doing JUST LIKE the ones who bought houses with no clue to real value.
The big boys are scared and don’t know what to do.
Mao’s Little Red Book didn’t address this situation.They NEED to protect the system, and perpetuate the myth.
What they said wasn’t an industry & Wall Street bailout is EXACTLY a bailout.The FF rate cut was good for less than 24 hours. I’m guessing if there had not been a cut, DOW would have been down 600-700 points. (That down day is still coming)
A 25 point cut with a statement to monitor would have been fine. A 50 point cut confirms that they are so scared and aren’t sure what to do. Let the dollar fall, forget about inflation for now.
Don’t forget, they ALWAYS say “We are doing everything that we can” I just LOVE that line !!!
You know this stuff better than anybody.
ParticipantHundreds of properties have hundreds of different landlords.
There are going to plenty of people who have paid all their other bills except the mortgage, who have solid jobs and documented income.
Many landlords don’t even run credit scores, just credit history and eviction/judgments. Some don’t even do that. (!!) First, last, and it’s yours :-0
If a mortgage payment was twice what the rent was, and people have stable jobs, I would gladly rent to them with a decent DTI. Not a big risk, they gotta live somehwere, and I know they won’t be looking to buy anytime soon!
A family who comes to me and explains that they came to their senses and it isn’t worth owning at $5000 a month when they were upside down over $100K and can rent at $2500 or less is a champ in my book.
Now, if they don’t have 1st and last after 6 months of not paying a mortgage, I would show them the door.I think that many landlords will come to that conclusion, some later rather than sooner.
I don’t think that it will put pressure on rental prices. The house that they vacate may become a rental at some point, and there are always people leaving the area that are just fed up with what is going on.
ParticipantYo Temec…
Last cruise I was on had about 4,000 with passengers & crew. Anybody wanting off that ship better get in line early!ParticipantFearful…
the inventory isn’t going to vanish. 1,000 foreclosed homes will seek a level until they are bought.
The lender’s do not want the inventory sitting vacant, nor boarded up creating blight.
The also generally don’t speculate on if/when the market will recover so they aren’t going to wait.Since it’s going to be different this time (!!)
Perhaps REO’s will become landlords and start renting thousands of properties out. It’s always easier to sell to an investor when you have a tenant.Either buyer A who was foreclosed on will buy Buyer B’s foreclosed house through creative financing, or the foreclosed party will look to rent somewhere.
Assuming that 1000 people want to stay in the area, they will be playing musical houses, and end up 1000 different addresses. Many times only one spouse was on a loan and the other can still qualify. They can buy a similar house and owe 30%-40% less and with more manageable payments.There will be cases where a house from a private party will be competitive with an apartment. They will be desperate.
Unless they start burning houses down to create a shortage, there is plenty of inventory. Many People STILL cannot buy until it becomes affordable. Somebody will figure out the rental angle, so it will create some cashflow.
I think that the majority of houisng related job losses have already happened. Many real estate agents and mortgage people are commission only, with other incomes while theyt are ‘waiting” or they have already left.
4plex,, there used to be an index of number of U-Hauls headed into town and outta town. I thought that was the 4 to 1 you were referring to. I haven’t heard the financial angle, thx.
Participant4plex.. Is there a site that actually posts “U-Haul ratios” ?
There are some other parts of the country that I’d like to see the ratio for. TIAParticipantBRS, we definitely DO NOT disagree.
I don’t think that I am going to state anything that I don’t think you already know.I don’t know what a “ton” of cash is, He said “a bunch of dollars” and that means different things to different people.
I know people that have had excellent success with property managers, and do little other than deposit checks and read their reports on multi units. I realize that it’s not for everybody. It’s only on paper, but their net worth is great based on returns on their original investment.
Had they paid cash for their house, they would only own ONE property free and clear.I’ll be the first to point out that leverage can make you rich when you are right BUT it will multiply your losses when you are wrong.
Most wealthy people got there by gains in real estate. Either land or buildings. Leverage is the key.
A 10% gain in real estate can be equal to a 50% gain in stocks.I think having a PILE of cash today is very conservative, but to each his own, Some people are totally risk averse, and there is nothing wrong with that.
Many people are getting less than 4%, and THAT to me IS silly when you can get around 5.5% FDIC insured.I personally wouldn’t have any money in the stock market that I couldn’t afford to lose 100%, I think that the stock market has more yahoos involved that don’t know what they are doing than the housing market did. They aren’t financing 100% in stocks, but they also think that the “market” only goes up. I wouldn’t WANT to lose 100%, but many people are counting on the stock market for their retirement gravy train. Shades of 1929 all over again.
Some day reality may kick in to the stock market just like it has with housing, except that while housing is regional,
a downturn in stocks will affect every single square inch of this country and beyond our borders, just like the mortgage mess has. Maybe it won’t happen.Money CAN be made in stocks, but I pity the people that get left holding the bag. Just two short years ago nobody thought that housing bubble would pop, and many people still don’t accept it today.
I also consider metals or commodities risky. One of these days those guys on late night TV that scream about gold being $1000 might be right, but how much will a gallon of gas or milk be ??
Fortunes will be made, and you can make money from panics and manias when you time it right. Many people just don’t understand cycles.
ParticipantBRS,
Why would you want to pay all cash for a home in an area that wasn’t inflated ?
Leverage & OPM is still the way to go.With a fixed rate mortgage, you end up paying back in cheaper dollars, and if you invest well, you come out way ahead of the game, esp after an inflationary period.
There are areas that are totally immune to the bubble, and even if they decline a bit, I’m willing to bet that they recover and rise faster than our local market.
Having rentals that pencil out in bubble immune areas offer great leverage and depreciation at a much better return than CA. There are tenants almost everywhere.
If it pencils out now, any appreciation should just be a bonus.Kewp, not sure what your debt % rates are, but there are huge amounts of money available via balance transfer offers that extend interest at 4% or 5% for a few years, leving the cash available at your disposal.
I don’t think there is anything wrong with MANAGEABLE debt.
Save the cash as a cushion and make the monthly payments, esp when you can earn more on the cash than the debt is costing you.You are pretty conservative, but I don’t think you will be having any financial difficulties any time soon! Good for you.
ParticipantSeattle,,
I’d be real curious to know, on a deep down level, what these folks are thinking (In general)Do they feel
1) A victim of the system, and it’s not their fault
2)They knew what they were getting into and maybe couldn’t afford it
3) They had really no idea what they were geeting into and what the risks were
4) They figured that prices would just go up forever
5)That the govt should bail them out
OR ????Are you local,,, SD ??
ParticipantWe will only know in hindsight what the correct hedge was to protect “buying power” against inflation.
There are many collectibles that hold up quite well, but you need to know what you are doing. (Coins, stamps,antiques,etc)For most people just having CASH in the bank would be security, which many people haven’t got.
I wouldn’t worry about gambling on what MIGHT outpace inflation.Just having some dollars to take a hit would be a step up for many.
The best advice is to live below your means and prepare for the worst earthquake/hurricane/storm/tsunami that you could ever imagine, and hope that it only rains. (A 99c umbrella can protect you from that)
I posted the below on another thread:
As I advise my closest friends, at this time, I tell them to get cash in the bank that is FDIC insured to weather whatever storm might be brewing. As much as possible. When you have liquid cash available you can withstand financial curveballs that get thrown at you.
I know people with 2 years (or more) of liquid living expenses in cash, and they still have income streams today.
They have a ton of equity and dont care if home prices go up or down, they aren’t moving away (yet)I think that people who cannot get into a similar situation are just living beyond their means, and will be “a slave to the man” most of their lives. Living paycheck to paycheck and planning for “retirement” doesn’t work for everyone.
Most people never know the joy of financial freedom, some learn it too late in life. If the storm doesn’t come, you still have YOUR money in the bank, plus some interest.
Better to be prepared than be caught off guard.
Having toys, possessions, stocks, cars, equity etc. won’t pay the bills, allow you to buy food, travel, or enjoy life until it’s turned in to CASH.
Do you know what I think the governments biggest fear is ?
I’d say it’s that people stop spending money. Lowering interest rates sole purpose is to get people to spend money TO STIMULATE THE ECONOMY… Does it really “keep people in jobs” ??If the govt REALLY wanted to be helpful,
They would let the housing market collapse without intervention. we need an economic cleansing and entire generation or two to understand pain & reality. Reward the people who didn’t buy because they knew they couldn’t afford to.
They would encourage saving by raising interest rates so there was an incentive to save, not spend.
Let people save most of their income and tax them when they spend money on CRAP.
They would rewire the social INsecurity system that is broke like many pensions funds.Approximately 4% of San Diego homes are on the market today and are virtually unsalable at what people “think” their homes are worth. The other 96% are fooled about their “equity”. Imagine if 10% of homeowners want to cash out at the same time, it impossible as there are nowhere near enough buyers UNLESS the prices are in line with affordability and/or it is attractive to an EDUCATED investor so that they get a return commensurate with their risk.
So as long as there are people afraid of missing out and willing to pay more than someone else, there is a market.
At an auction an unlimited number of people can watch while 2 (two) bidders push a price to the moon.
Does it REALLY eastablish a value that the rest of the world has to agree with ?The stock market is a legalized pyramid scheme. On a micro scale, you would be thrown in jail for “trading stocks”.
On a macro scale, “everyone’s doing it”The stock market defies logic. Bad news can make stocks rise, good news can make them fall. It’s all about “Wall Street expectations” Can they beat the street.
That being said, people can definitely make money from the market, EXACTLY like in houses, but not everybody can make money all the time.
No tree grows to the sky. There is a forest fire once in awhile and ALL trees burn down.
It’s a game. Not everybody wins. People end up broke for one reason or another, or in a state of health that money cannot fix.
Play the game if you wish, but if you don’t define your own rules, you are just in with the sheep, following the herd, soaking in the propaganda.AS A DISCLAIMER, If you got this far, I’m not sure that I believe all of the above, but I enjoyed writing it.
Just think about what COULD happen, and be prepared.
I welcome any rebuttals 😉ParticipantBetter coming from you about this mortgage “trauma”
than a doctor telling them that they only have a few months to live.Gotta keep it in perspective.
I’m in the mortgage biz, but wasn’t involved in retail origination at the time of the craziness.
I deal with these people almost daily now, but not with other addiction issues (that I know of!)Most people have no clue of the future consequences. They are simply afraid of the unknown.
ParticipantThursday update
10 YR is up 15 bps right now. FIFTEEN.30 YR mortgage rates are now the same or higher than before the “miracle cure~kool-aid” FF cut TWO days ago.
Didn’t take long.
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