*THE HULL TRUTH is the world's largest FREE network for the discussion of Boating & Fishing. Whether you're researching a new boat, or are a seasoned Captain, you'll find The Hull Truth Boating & Fishing Message Forum contains a wealth of information from Boaters and Sportfishermen around the world.
Welcome to the updated THT!
If you are having trouble signing in, please email feedback@thehulltruth.com with your username and we will help you. We thank you for your patience as we help you access the new site!
Random Quote: Is a Donut Shop considered entrapment for Cops?
#4 All of those SOB's who made loans should be made to work out loan payments to the borrowers on their primary home. The speculators and investors will have to be reckoned with in a manageable accord. . - Capt. Winston
So simple to spout off when you aren't involved. Easy again to call all mortages sub prime, isn't it? Well, the young people that bought houses and now one spouse lost their job and they get screwed because a normal re-fi isn't available. Somehow our kids should have known this could happen?
People our age buying a beach condo anticipating retirement and buying it on an interest only ARM...and now having to re-finance it because neither their old home has sold and their income has dropped and their condo doesn't appraise for what they owe on it?
People using money from their 401K or IRA to buy investment property on a no-doc ARM because it was the smart thing to do...and now facing foreclosure because the same bank that lent $$ to them the first time won't re-up the loan despite a perfect payment record?
It's these kinds of situations that's causing the snowball effect with mortgages, it affects everybody that has a mortgage less than 8 years old except for the 30*year mortgages.
Well, the only one I would have partial sympathy for is #1 - but even they should have left sufficient cushion to get through a few years of tough times.
The common thread that runs across all three, as well as the vast majority that caused the structural problems by buying on speculation and without any means to pay it off, is that they assumed that the RE market would continue to go up close to double digits forever.
Assuming that the market will go up is part of the situation, but not all. Another assumption was that the mortgage credit market will always be available to finance or re-fi mortgage debt. This is where the catastrophy lies becauce the current crisis pulled the rug out from under anybody that needs to re-finance on par with what they had to start with.
That doesn't mean that everybody having financial crisis lives beyond their means; it means that the financial industry has changed the basic rules of mortgage borrowing. That results in people that bought homes/condos with ARMS can't re-finance with ARMS and in many cases their monthly mortgages double. What that's doing is driving the price of real estate down much more and driving normally prudent people to bankruptcy.
This crisis isn't about the SubPrime market as described (low income, bad credit, buying $300K homes on no down payment). The big impact is on the regular Americans that are driving this country.
__________________
Rick
VOR ocean race Hooter Scooter
28' Chaparral BR (SOLD)
42' Post SF (SOLD)
temporarily boatless...
That results in people that bought homes/condos with ARMS can't re-finance with ARMS and in many cases their monthly mortgages double. What that's doing is driving the price of real estate down much more and driving normally prudent people to bankruptcy.
Remember that.......... ARMS=Gambling. If they would have bought what they could afford with a FIXED product, most owners would be ok today.
* Side note: This is one of the better discussions on this subject that I've read in a while. No name-calling, half-way intelligent discussion (I say half-way b/c Tireless is involved- ), and perspectives from a wide range of age groups.
Thanks guys!!
BTW ~ I can read this and many other threads with little personal anxiety b/c I'm fortunate enough to have made financial decisions based on God's wisdom vs. man's knowledge.
I hope that everyone reading this thread will prevail and do the right thing - whatever that might be.
You are right - that was another bad assumption that that teaser rate of 2.5% would always be available, and if the banks had done proper credit screening, OR the borowers had any kind of understanding of family budgeting, they wouldn't have left themselves in a position where resetting left them imminently insolvent.
I believe that the HUD-1 statements do pay some lip service to interest rate sensitivities, but people just didn't care - it was a combination of ignorance, greed, and just plain trying to impress their friends or cash in on the flipping craze.
There is a fundamental question in here - does the government have any kind of obligation to protect people from themselves. Based on all of the other petty and trivial regulations that are out there, it seems like we are OK with that (seat belt laws, speed limits, environmental fanatacism, political correctness in speech, etc). As a finance professional, I know that a large percentage of people don't have a clue as to how to manage their budgets, and that's why the system became so fragile.
People our age buying a beach condo anticipating retirement and buying it on an interest only ARM...
People using money from their 401K or IRA to buy investment property on a no-doc ARM because it was the smart thing to do...
First, let me say I feel bad for anyone losing their home whether it's from ignorance, stupidity, greed, or good old fashioned misfortune.
These two scenarios you put up are, to me, gambling, plain and simple. Gambling that interest rates will stay the same or go lower, therefore allowing you to afford the adjusted payment or to refi when it's time to adjust. Gambling that RE values will continue to climb so that loan-to-value looks good and the bank will let you refi. Gambling that the RE market will remain strong and allow you to sell if needed.
Most of the people that didn't gamble will come out of this okay. Maybe skinned up a little, but okay. The gamblers, well, they may have a harder time of it. That's what happens when you gamble.
Following right on the heels of the bursting tech bubble, I can't beleive so many people didn't see this coming. The market way overheated, values going thru the roof, the media cheerleaders. My house, according to the appraiser, doubled in value in two years. Come on, the writing was on the wall!
People our age buying a beach condo anticipating retirement and buying it on an interest only ARM...
People using money from their 401K or IRA to buy investment property on a no-doc ARM because it was the smart thing to do...
First, let me say I feel bad for anyone losing their home whether it's from ignorance, stupidity, greed, or good old fashioned misfortune.
These two scenarios you put up are, to me, gambling, plain and simple. Gambling that interest rates will stay the same or go lower, therefore allowing you to afford the adjusted payment or to refi when it's time to adjust. Gambling that RE values will continue to climb so that loan-to-value looks good and the bank will let you refi. Gambling that the RE market will remain strong and allow you to sell if needed.
Most of the people that didn't gamble will come out of this okay. Maybe skinned up a little, but okay. The gamblers, well, they may have a harder time of it. That's what happens when you gamble.
Following right on the heels of the bursting tech bubble, I can't beleive so many people didn't see this coming. The market way overheated, values going thru the roof, the media cheerleaders. My house, according to the appraiser, doubled in value in two years. Come on, the writing was on the wall!
I have to agree: someone gambled and lost in the scenarios mentioned. They were neither prudent nor conservative with their finances. I feel very sorry for their predicament BUT they were gambling unwisely. Common sence should have told them it was risky!
That said, I've been in cash in my after-tax and IRA stock accounts for many months now after losing a significant amount of money in the couple "sucker" rally's we had earlier in the year. I regret my losses but am not crying over "water over the dam". Actually I'm in very good shape waiting to put cash back to work.
Unfortunately, My 401-K is still invested thinking we were near a bottom (always the optimist) but new contributions are going into the money market fund. When new bull markets occur, the biggest gains are usually very early in a rebound. That's why I was reluctant to remove my 401-K funds out of the investments they were in. I was thinking this would end at any time with all the angst and negativity in the press. I hope you guys are right about being near the bottom but I think it could get a lot worse before it gets better
I'm predicting Dow 6000.... the pendulum had swung wayyyy to the right when it hit 14,000, based on pure B. S. now its time for the pendulum to go all the way to the left.. I see 6000 on the Dow. before it stabilizes around 7 or 8000. I also see crazy interest rates within a year or two.. worse then the early '80's. so for the short term AND long term CASH IS KING.
Art Hogan of Jeffries was on CNBC this a.m. before the market opened and he predicted that Friday would be the bottom, just touching 8,000.
So far he looks right.
If he invested and was correct, he will have some happy clients in the coming weeks.
If he was wrong, well hey, no guts no glory, out the window he goes.
A question...say you had 45 percent invested in a strategic stock fund in the 401k plan..and didn't touch it over the last year.....I am guessing its lost 20 or 30 percent of its value....but at the same time each paycheck its buying stocks at the "crashed rates of today...now say it starts going up over the next few months......
how long till a breakeven ..or go ahead cycle? (obviously I'n not a stockbroker).
A question...say you had 45 percent invested in a strategic stock fund in the 401k plan..and didn't touch it over the last year.....I am guessing its lost 20 or 30 percent of its value....but at the same time each paycheck its buying stocks at the "crashed rates of today...now say it starts going up over the next few months......
how long till a breakeven ..or go ahead cycle? (obviously I'n not a stockbroker).
Depends on the relative size of the money ALREADY in the 401K, versus the amount you are ADDING every month.
People who have a large investment will take a lot longer to recover than beginning investors.
But 45% in a strategic stock fund (if the rest is in bonds) isn't a very high stock allocation -- that's even low for some retired folks -- overall portfolio would have lost only about 12%...not a big hit. If one only had 45% in stock mutual funds and 55% in bonds, and had more than say, ten years, to retirement, now might be the time to begin cautiously BUYING stocks and change that percentage to more like 60% stocks and 40% bonds. (Note there are a lot of IFS in the above, because the question wasn't completely clear. ) My 2 cents worth.
If it bottoms as you say will it go up or skid for months or even years? At first I thought it would be tough for the markets to regain our trust but then reality set in and I reminded myself that people are pigs so if the markets start going up, showing a high rate of return people will jump back in faster than they pulled out.
I have AIG working on a "Big Al" credit default swap. Bring it homie.......I am all in.
Shall I bring the cigars?
Big Al
Would those be La Monica Cubana Charlemagnes? If so, bring them....I like a salty smoke. Let's party at KJS's fishing camp.
Actually I have turned the fishing camp into a crabbin camp, but you are still all invited to the party! I seem to have learned how to use the non existant bunker as crab bait to put in my crab pots to catch an abundance of crabs that I am told are not there! It is really miraculous.
Just leave them Monica cigars behind, cause he stuck them up her dookie hole.
What you have to do if you did not move your 401k out of stocks is keep buying every month right on thru this mess. If you are over 60 then your kinda screwed if the market does not come back. Hang in there.
People who have a large investment will take a lot longer to recover than beginning investors.
But 45% in a strategic stock fund (if the rest is in bonds) isn't a very high stock allocation -- that's even low for some retired folks -- overall portfolio would have lost only about 12%...not a big hit. If one only had 45% in stock mutual funds and 55% in bonds, and had more than say, ten years, to retirement, now might be the time to begin cautiously BUYING stocks and change that percentage to more like 60% stocks and 40% bonds. (Note there are a lot of IFS in the above, because the question wasn't completely clear. ) My 2 cents worth.
I wish I had the credential to back up the fact I think the statement here is gold. 2 cents? I'd consider that the valuation of your opinion in the current environment. Scoop this up now folks, when the pendulum swings we won't be able to afford gg's opinion.
Are you a 'pro' gg? I'm a heavy investor but merely an armchair broker. I did the E*Trade thing for a while, but could never better a top tier investment dept. with true fidiciary responsibility with regard to 'returns'. I have NO ear to the rail, they do, 24/7. Their 'fees' are not that self indulgent in the grand scheme (% of portfolio). It got to the point, I just kept thinking of the old adage " An attorney who represents himself in court, has a fool for a client."
It begs the question, toward "Faith" in a market with regard to the current volitility; What's up? Are there that many "on-line" players at the helm who are screwing with the mechanics with pure emotion'? Where is the response to the 'sound advice' you are offering here? I don't see it. The market doesn't scare me, the average Joe with his finger on the left click does.
Free (or as free as they can be) markets operate on the following basis:
1% Fundamentals (meaning true supply & demand and all that goes with it; actual economic mechanisms and all of their dynamics)
99% Confidence
Do not confuse confidence with trust; and most certainly do not confuse either of those with reality. The only reality that exists in the markets is whatever is believed by enough people who are buying and selling, at that moment in time. When there is a reasonable mix of realities, then the fundamentals rule, by and large. When that mix begins to gravitate more toward a singular reality, then the fundamentals lose grip. Get enough buyers and sellers on the same train and it will flatten the fundamentals, until such time as there is some sort of reversion to the balanced mix of realities.
For example - hurricanes and irate Nigerians with automatic weapons have been around for a long time, yet it has only been relatively recently that they have conspired to gain a momentum effect on the price of oil. Why is that? Reality, as held by enough people (speculators, mostly, with tacit acknowledgement of acceptance from producers) who are exchanging enough of the instruments (money, notes, contracts, etc.). Do they truly effect, in terms of economic engine fundamentals, the price of oil? Yes, but not truly at an impact reflctive of a 20 dollar a barrel jump in price. Having said that, the jump is "true", becuase the reality is strong. It is not founded in truth, but there is ultimate confidence in it, therefore it will prevail on the market.
The DNA of the market is awesomely complex. What it produces is equally simple. The gap between the two can be summed up in one word: Timing. It makes all of the difference.
Big Al
__________________
"I hate Illinois Nazi's" - Joliet Jake Blues
I have AIG working on a "Big Al" credit default swap. Bring it homie.......I am all in.
Shall I bring the cigars?
Big Al
Would those be La Monica Cubana Charlemagnes? If so, bring them....I like a salty smoke. Let's party at KJS's fishing camp.
Actually I have turned the fishing camp into a crabbin camp, but you are still all invited to the party! I seem to have learned how to use the non existant bunker as crab bait to put in my crab pots to catch an abundance of crabs that I am told are not there! It is really miraculous.
Just leave them Monica cigars behind, cause he stuck them up her dookie hole.
Damn nice haul KJS. I haven't seen a crab pot that full in three years in SAV. Roger that on leaving "behind" the Monica cigars, I didn't know how BJ trimmed the tips....apparently he used her turd cutter.
I think you need to distinguish between an acute, but hopefully short term banking problem and a longer term recession issue. I would not be surprised to see things drop another 10%-15% in the current lending environment, but get it all back and more in a day or two (or maybe even an hour or two!) once that problem is solved. Look at the TED spread as a leading indicator that that problem is finally being addressed.
What that tells me is that Friday was not a bottom, but just short covering in front of a weekend where a lot could happen but so far nothing has.
Once we get that pop, the real problems kick in. We will have much weaker employment, lower corporate profits, negative GDP growth and a host of problems to contend with for at least the next year, probably the next two years. We could easily see the S&P jump back over 1,000, but then stagnate in the 650-850 range most of the next few years.
Short answer- sell on the bounce if you are still in the market, because happy days are not here again. And by all means make sure your accounts are all under the FDIC insurance level.
Where I do see value right now is in bond funds, especially closed end funds selling at 30% discounts to current NAV. I would be curious if anyone else see things that way.
Re: I'm Calling The Bottom
), and perspectives from a wide range of age groups.
