OT - Financial mess 101 ($700 billion bailout)

dougb · Post by **dougb** » Tue Oct 07, 2008 7:37 pm

Best wishes,

Doug

XXXIV · Post by **XXXIV** » Tue Oct 07, 2008 7:43 pm

dougb wrote:

Best wishes,

Doug

...If only it were that simple.

FatPitcher · Post by **FatPitcher** » Tue Oct 07, 2008 7:46 pm

dougb wrote:

Best wishes,

Doug

Hmm...does that carry any 9/11 connotations? Or am I the only one who thought of people jumping out of the WTC when I saw this?

XXXIV · Post by **XXXIV** » Tue Oct 07, 2008 8:00 pm

FatPitcher wrote:
Hmm...does that carry any 9/11 connotations? Or am I the only one who thought of people jumping out of the WTC when I saw this?

Never crossed my mind...I just thought NYSE.

dougb · Post by **dougb** » Tue Oct 07, 2008 9:15 pm

FatPitcher wrote:
dougb wrote:

Best wishes,

Doug
Hmm...does that carry any 9/11 connotations? Or am I the only one who thought of people jumping out of the WTC when I saw this?

Pretty sure the connotation was this:

http://mutualfunds.about.com/cs/history ... ursday.htm

FatPitcher · Post by **FatPitcher** » Tue Oct 07, 2008 9:48 pm

dougb wrote:
Pretty sure the connotation was this:

http://mutualfunds.about.com/cs/history ... ursday.htm

Yeah, you're right.

F308GTB · Post by **F308GTB** » Tue Oct 07, 2008 9:49 pm

Might be a good time to go to one of the most expensive countries to visit - Iceland. The economic mess is hitting them hard.

http://news.yahoo.com/s/ap/20081008/ap_ ... d_meltdown

F308GTB · Post by **F308GTB** » Thu Oct 09, 2008 6:50 am

1 in 6 homes now "underwater" (i.e., owners are upside down on the value of the property versus what is owed).

http://www.msnbc.msn.com/id/27089919/

Whoop-de-freaking-doo. I just wish we'd get over this mentality that a primary residence is an "investment". Since when is paying 6-8% interest a year, taxes, insurance, and upkeep on something that appreciates a few percent a year (except for the moronic overvaluing of some real estate sectors in the last few years) considered an investment?

Owning a house isn't an investment. It's rent stabilization!!!

Boo-hoo about owing more than the house is worth.

Boo-hoo

davet010 · Post by **davet010** » Thu Oct 09, 2008 8:12 am

F308GTB wrote:1 in 6 homes now "underwater" (i.e., owners are upside down on the value of the property versus what is owed).

http://www.msnbc.msn.com/id/27089919/

Whoop-de-freaking-doo. I just wish we'd get over this mentality that a primary residence is an "investment". Since when is paying 6-8% interest a year, taxes, insurance, and upkeep on something that appreciates a few percent a year (except for the moronic overvaluing of some real estate sectors in the last few years) considered an investment?

Owning a house isn't an investment. It's rent stabilization!!!

Boo-hoo about owing more than the house is worth.

Boo-hoo

I don't know how fast all of the US property market went up, but over here it has been ridiculous over the last 10 years or so. In the UK, almost all areas apart from the inner cities saw a doubling or even tripling in price (I almost used the term 'value') of homes...I know mine did, although it was irrelevant, as I knew that any tripling would be more than swallowed up of the tripling in cost of wherever I was wanting to move to.

The whole idea and structure of 'home ownership' as the ultimate aspiration also seems quite unique to Anglo-US culture in its current form. My cousin's wife is from Germany. and she was staggered by him pointing out that their mortgage was only 25 years, whereas in Germany 80-100 years is quite common. Equally, friends who live in France, Spain and Italy tell me that their local friends still rent in their 30s and 40s, and have never really aspired to that model of 'I'm 50 and completely own this house'.

The growth of more aggressive mortgage offers in the UK was partly fuelled by the price rise as well. When I bought my place in '98, the best you could get was a 25yr mortgage for a max of salary x3, with at least a 10% deposit. By last year, even in Manchester as a new graduate you'd have got nothing bigger than a flat in the inner city for that, so lenders started going either to x5 mortgages, or ones where they would include the full salary of partner/wife/husband etc. These are the sort of people who are really going to struggle in the near future.

As for negative equity....house prices have been falling here for about 9 months, so I guess that there are a fair few people in that position.

Feanor · Post by **Feanor** » Thu Oct 09, 2008 8:57 am

F308GTB wrote:1 in 6 homes now "underwater" (i.e., owners are upside down on the value of the property versus what is owed).

http://www.msnbc.msn.com/id/27089919/

Whoop-de-freaking-doo. I just wish we'd get over this mentality that a primary residence is an "investment". Since when is paying 6-8% interest a year, taxes, insurance, and upkeep on something that appreciates a few percent a year (except for the moronic overvaluing of some real estate sectors in the last few years) considered an investment?

The Mortgage Interest Tax Deduction has to be considered, though.

F308GTB · Post by **F308GTB** » Thu Oct 09, 2008 9:14 am

Feanor wrote:
F308GTB wrote:1 in 6 homes now "underwater" (i.e., owners are upside down on the value of the property versus what is owed).

http://www.msnbc.msn.com/id/27089919/

Whoop-de-freaking-doo. I just wish we'd get over this mentality that a primary residence is an "investment". Since when is paying 6-8% interest a year, taxes, insurance, and upkeep on something that appreciates a few percent a year (except for the moronic overvaluing of some real estate sectors in the last few years) considered an investment?
The Mortgage Interest Tax Deduction has to be considered, though.

Have you ever actually seen how little that tax deduction is? It's in your best interest to be in a situation where you don't have that deduction. For example, take a look at http://www.alllaw.com/articles/tax/article3.asp which is supposedly pushing the benefits of home ownership. In the first example, gee whiz "Bob" saves $3720 in federal taxes. He paid $32129 in federal taxes, $1200 in rent. 2nd case he buys instead of rents and has the same $1200/month mortgage, not including real estate taxes of $1500 (as far as I can tell that is in addition to the mortgage, not inclusive to it). So the real savings is down to $2220. Throw in insurance and upkeep and those savings go bye-bye. As a renter, the landlord maintains the structure/appliances.

Or take my first home. Bought for $65000 in 1994. Paid off in 10 years, and I probably spent ~$100k over 10 years for the principal and interest. Another $48k or so over those years in real estate taxes and insurance (it really sucked paying over $500/month for my house after I "owned" it outright). Say $10k over the 10 years for upkeep. $5000 over those 10 years in homeowners association dues.

In 2005 we sold the house. It went up a sizeable amount. We sold for $110k. Less realtor fees we net $103400. So I lost $59600 on the deal, or nearly $500/month over the time I was living there. I could have rented for around $700/month in the area, so my rent was lower. But from an investment perspective? I lost money. How is that an investment?

As Dave Ramsey says, if you want to invest in real estate, pay cash. Don't finance.

F308GTB · Post by **F308GTB** » Thu Oct 09, 2008 10:10 am

Feanor wrote:
F308GTB wrote:1 in 6 homes now "underwater" (i.e., owners are upside down on the value of the property versus what is owed).

http://www.msnbc.msn.com/id/27089919/

Whoop-de-freaking-doo. I just wish we'd get over this mentality that a primary residence is an "investment". Since when is paying 6-8% interest a year, taxes, insurance, and upkeep on something that appreciates a few percent a year (except for the moronic overvaluing of some real estate sectors in the last few years) considered an investment?
The Mortgage Interest Tax Deduction has to be considered, though.

And more food for thought...

http://finance.yahoo.com/real-estate/ar ... hink-it-is

http://www.smartmoney.com/smartmoney-ma ... investment

XXXIV · Post by **XXXIV** » Fri Oct 10, 2008 12:21 pm

dougb wrote:

Now would be good. Plus I cant think of a more patriotic act.

GTHobbes · Post by **GTHobbes** » Fri Oct 10, 2008 2:19 pm

XXXIV wrote:
dougb wrote:

Now would be good. Plus I cant think of a more patriotic act.

These sure are f***ed up times we're living in. At the rate things are going, I wonder if there will even be a stock market in a couple of weeks.

Teal · Post by **Teal** » Fri Oct 10, 2008 2:27 pm

Well, the bad economy sure isn't hurting Obama-sheesh!
http://www.hollywoodreporter.com/hr/con ... c9d492a241

Post by **Jared** » Fri Oct 10, 2008 3:10 pm

Teal wrote:Well, the bad economy sure isn't hurting Obama-sheesh!
http://www.hollywoodreporter.com/hr/con ... c9d492a241

The politics thread is for politics. The financial mess thread is for the financial mess. Obama's ad buy basically has nothing to do with the financial mess. If this turns into the politics thread, I will lock this one as well, and keep them both locked longer.

Teal · Post by **Teal** » Fri Oct 10, 2008 3:37 pm

Jared wrote:
Teal wrote:Well, the bad economy sure isn't hurting Obama-sheesh!
http://www.hollywoodreporter.com/hr/con ... c9d492a241
The politics thread is for politics. The financial mess thread is for the financial mess. Obama's ad buy basically has nothing to do with the financial mess. If this turns into the politics thread, I will lock this one as well, and keep them both locked longer.

There is no politics thread, remember?

FatPitcher · Post by **FatPitcher** » Fri Oct 10, 2008 7:02 pm

GTHobbes wrote:
XXXIV wrote:
dougb wrote:

Now would be good. Plus I cant think of a more patriotic act.
These sure are f***ed up times we're living in. At the rate things are going, I wonder if there will even be a stock market in a couple of weeks.

The stock market is all about business confidence, and our elected and soon-to-be-elected leaders are doing very little to inspire confidence right now. Investors are teetering between "f***ed" and "mostly f***ed" for the upcoming 4 years.

Edit: Also, I can think of one more patriotic act: paying taxes!

dougb · Post by **dougb** » Fri Oct 10, 2008 7:22 pm

Well I'm not sure that anyone has all that many tools left to try and restore confidence. When banks don't trust other banks, I think we've passed well beyond the normal drop in market confidence that coincides with most of the moderately severe market drops. The scary thing is that the market appears to be less and less responsive (positively) as each intervention is announced.

My boss was talking today about how market drops were always followed by swings upward - which is true. But I think the market is just catching up to developments in the financial sector which have been underway for some time now.

Took a look at Nouriel Roubini's 12 steps to financial meltdown that was written in February 2008. Yikes! - we've been following that map down the toilet almost precisely and in fact have been doing so even faster than he predicted.

Best wishes,

Doug

greggsand · Post by **greggsand** » Fri Oct 10, 2008 7:22 pm

After 9-11, I waited a week or so, then bought some heavily deflated stocks. Some of which, eventually rose over 600% of what I paid (all of them have made money). I felt kinda 'good' investing in the market & actually made money at the same time.

I imagine next week could be a good one for bargain shoppers.

XXXIV · Post by **XXXIV** » Fri Oct 10, 2008 9:55 pm

FatPitcher wrote:
Edit: Also, I can think of one more patriotic act: paying taxes!

That was my point of reference.

FatPitcher · Post by **FatPitcher** » Fri Oct 10, 2008 10:13 pm

XXXIV wrote:
FatPitcher wrote:
Edit: Also, I can think of one more patriotic act: paying taxes!

That was my point of reference.

You're cleverer than you let on.

XXXIV · Post by **XXXIV** » Fri Oct 10, 2008 10:16 pm

FatPitcher wrote:
XXXIV wrote:
FatPitcher wrote:
Edit: Also, I can think of one more patriotic act: paying taxes!

That was my point of reference.
You're cleverer than you let on.

Thats what she said.

RobVarak · Post by **RobVarak** » Fri Oct 10, 2008 10:47 pm

XXXIV wrote:
FatPitcher wrote:
XXXIV wrote:
That was my point of reference.
You're cleverer than you let on.
Thats what she said.

It's not hard to seem clever after she's had 13 shots of uzo

wco81 · Post by **wco81** » Tue Nov 18, 2008 3:55 pm

Article by Michael Lewis, author of Moneyball and Liar's Poker, on Wall Street and subprime:

http://www.portfolio.com/news-markets/n ... reets-Boom

And short Eisman did—then he tried to get his mind around what he’d just done so he could do it better. He’d call over to a big firm and ask for a list of mortgage bonds from all over the country. The juiciest shorts—the bonds ultimately backed by the mortgages most likely to default—had several characteristics. They’d be in what Wall Street people were now calling the sand states: Arizona, California, Florida, Nevada. The loans would have been made by one of the more dubious mortgage lenders; Long Beach Financial, wholly owned by Washington Mutual, was a great example. Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking homeowners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.