Just Curious

[LegalEagle 22]

and who should be given credit/blame for it.

Personally, my investments have been hit pretty hard.

[otterinbham 0]

So have mine. However, I feel pretty good about bailing out of bank stocks back in June.

Not to be cavalier about things, but we've gone almost seven years without an economic downtown, and a mild one at that. Actually, we haven't seen a severe economic crunch since 1980.

I think, unless there's a catastrophic banking meltdown, we'll probably be back on the upswing in mid 2008. The housing market will take a while to absorb the excess inventory that it produced in the halcyon days of 2005 and 2006, when the housing market reached speculative levels approaching that of the Dutch Tulip Bulb Craze.

Banks, meanwhile, have pretty much taken their writeoffs on the bad paper they've written over the past 2-3 years. They'll be smarting for a few months, and it serves them right. If stupid little me could look at ARMs and Interest Only loans back in 2005 and see it as a really myopic strategy, why couldn't the banks? At the same time, the current foreclosure problems seem to be largely confined to the West Coast, South Florida, the Northeast and the Rust Belt.

For example, one house in about 2000 faces foreclosure in Alabama, while in Florida, it's one house in 40. All because these halfwits bought houses that were far too expensive for them, and were abetted by the mortgage companies shoving deals across the table that made absolutely no sense. Think about the last time you applied for a mortgage. Chances are, the mortgage officer told you that you could actually qualify for a loan that was two to three times more than what you were borrowing. But you were too smart to take the bait.

So, I think we'll have some turbulence for the first 4-6 months of the year, followed by a good back half of the year. And while a recession is possible, even likely, I don't think it will be severe.

[Auburn85 432]

hopefully, not to veer away from the topic at hand, but have people's definition of a recession changed over the last 10-20 years?

Say unemployment is 6-7% and gas is $3.50-$4 a gallon as a national average, is this going to be considered a recession and doom and gloom?

"For example, one house in about 2000 faces foreclosure in Alabama, while in Florida, it's one house in 40. All because these halfwits bought houses that were far too expensive for them, and were abetted by the mortgage companies shoving deals across the table that made absolutely no sense. Think about the last time you applied for a mortgage. Chances are, the mortgage officer told you that you could actually qualify for a loan that was two to three times more than what you were borrowing. But you were too smart to take the bait. "

so the reason this happened wasn't because the economy was bad, but as a result of all of these foreclosures mortgage problems, and ignorance, it has caused the economy problems? i'm not trying to blanket this as the lone problem. obviously, every great economy slows down as some point.

i think for gas to be as high as it has been the last couple of years, it shows how hard it is to bring the economy to a hault. yet, at the same time, we have allowed ourselves to be vulnerable.

and otter, do you think that the increase in b-ham's sales tax will hurt the economy alot or little?

[otterinbham 0]

hopefully, not to veer away from the topic at hand, but have people's definition of a recession changed over the last 10-20 years?

Say unemployment is 6-7% and gas is $3.50-$4 a gallon as a national average, is this going to be considered a recession and doom and gloom?

"For example, one house in about 2000 faces foreclosure in Alabama, while in Florida, it's one house in 40. All because these halfwits bought houses that were far too expensive for them, and were abetted by the mortgage companies shoving deals across the table that made absolutely no sense. Think about the last time you applied for a mortgage. Chances are, the mortgage officer told you that you could actually qualify for a loan that was two to three times more than what you were borrowing. But you were too smart to take the bait. "

so the reason this happened wasn't because the economy was bad, but as a result of all of these foreclosures mortgage problems, and ignorance, it has caused the economy problems? i'm not trying to blanket this as the lone problem. obviously, every great economy slows down as some point.

i think for gas to be as high as it has been the last couple of years, it shows how hard it is to bring the economy to a hault. yet, at the same time, we have allowed ourselves to be vulnerable.

and otter, do you think that the increase in b-ham's sales tax will hurt the economy alot or little?

The sales tax increase will hurt the economy a little, not a lot. Right now, the B'ham economy is way too strong to be derailed. The nation's fastest growing personal income and lowest unemployment rate makes it a hard economy to really hurt at this point.

Given that, up until the mid-90s, a 6% unemployment rate was considered unattainable, I hardly consider that to be a sign of a terrible economy. I think there will be a slump, but unless something unforseeable happens such as war in the Middle East or the nuking of New York, it will be mild for an economic downturn.

The cause of the economic problems has mainly to do with an overbuilt housing sector, and its effect on lending, along with the corollary effect on building materials and transportation. It could get serious, but I think the Fed is doing a pretty good job of managing the problem.

[Bottomfeeder 244]

So have mine. However, I feel pretty good about bailing out of bank stocks back in June.

Not to be cavalier about things, but we've gone almost seven years without an economic downtown, and a mild one at that. Actually, we haven't seen a severe economic crunch since 1980.

I think, unless there's a catastrophic banking meltdown, we'll probably be back on the upswing in mid 2008. The housing market will take a while to absorb the excess inventory that it produced in the halcyon days of 2005 and 2006, when the housing market reached speculative levels approaching that of the Dutch Tulip Bulb Craze.

Banks, meanwhile, have pretty much taken their writeoffs on the bad paper they've written over the past 2-3 years. They'll be smarting for a few months, and it serves them right. If stupid little me could look at ARMs and Interest Only loans back in 2005 and see it as a really myopic strategy, why couldn't the banks? At the same time, the current foreclosure problems seem to be largely confined to the West Coast, South Florida, the Northeast and the Rust Belt.

For example, one house in about 2000 faces foreclosure in Alabama, while in Florida, it's one house in 40. All because these halfwits bought houses that were far too expensive for them, and were abetted by the mortgage companies shoving deals across the table that made absolutely no sense. Think about the last time you applied for a mortgage. Chances are, the mortgage officer told you that you could actually qualify for a loan that was two to three times more than what you were borrowing. But you were too smart to take the bait.

So, I think we'll have some turbulence for the first 4-6 months of the year, followed by a good back half of the year. And while a recession is possible, even likely, I don't think it will be severe.

"On our list of New Year's resolutions, I would include not listening to pundits who claimed 1. that housing prices could not go down nationally, 2. that triple-A ratings meant no default risk and 3. that calculating fair market value was easy for mortgage products."

http://www.reuters.com/article/ousiv/idUSNYH00061920080108

I think the recession is going to be severe. So much so, that the homeless citizen problem will triple, if not more. Crime will escalate to unpresedented levels, and total chaos will erupt in major cities all across the nation causing the military to become involved. President Dunce will declare Marshal Law, and make himself "resident" forever. The Constitution will be scraped as our financial system collapses along with the US Dollar. I believe we must revisit the early 1930's to find a comparable time in history. Dubai is the new America.

New currency:

http://blip.tv/file/520347

[AURaptor 1,126]

BF, I'm so very glad I don't live in your world.

[LegalEagle 22]

Why no mention of the national debt?

Isn't it a problem? Doesn't it affect the worth of the dollar?

What about the psyche of the American public? Aren't they pessimistic? Won't they curtail spending?

I think I read this week that service jobs were more numerous than manufacturing jobs in the U. S. Isn't that a bad sign. Don't we need to be producing product rather than waiting on tables?

[otterinbham 0]

Why no mention of the national debt?

Isn't it a problem? Doesn't it affect the worth of the dollar?

What about the psyche of the American public? Aren't they pessimistic? Won't they curtail spending?

I think I read this week that service jobs were more numerous than manufacturing jobs in the U. S. Isn't that a bad sign. Don't we need to be producing product rather than waiting on tables?

Well, Bush isn't helping our cause. Neither is Congress. Both are, long-term, disastrous for this country. But the next several years is what we're discussing in this thread.

Long-term? Get your money overseas.

[otterinbham 0]

All this being said, here's a forward-looking statement by a member of the Federal Reserve Board:

Economy will recover without cuts, Plosser says

Philly Fed president worried about inflationary psychology taking hold

By Rex Nutting, MarketWatch

Last update: 8:42 a.m. EST Jan. 8, 2008

WASHINGTON (MarketWatch) - At least one member of the Federal Open Market Committee believes further cuts in interest rates probably won't be required to heal the economy.

In a speech in suburban Philadelphia on Tuesday, Philadelphia Fed President Charles Plosser said he believes the weak U.S. economy will "improve appreciably" by the second half of the year, before the effect of any additional rate cuts would be felt.

At the same time, Plosser said he saw "worrisome signs of underlying price pressures." He said "we should not rely on slow growth to reduce inflation." Read his full speech.

Plosser did hold out some chance that he could support further rate cuts if the economic outlook becomes "substantially weaker" than he now expects. His forecast is for the economy to be "quite weak" for another few months, with the unemployment rate rising "somewhat above 5%." He doesn't expect any "significant improvement" in the housing market until next year.

Plosser, who is one of 10 voting members of the FOMC this year, is known as one of the most hawkish members of the committee, meaning he focuses more on fighting inflation than on maintaining steady growth.

Plosser's comments don't necessarily mean he'd vote against a rate cut at the Jan. 29-30 meeting.

Analysts and markets expect at least a quarter-point cut in the federal funds target rate to 4%, and are increasingly projecting another aggressive half-point cut to 3.75%, based on a significant slowing in job growth and in the manufacturing sector.

The FOMC has already lowered its target rate by a full percentage point since September.

Over the weekend, Fed Vice Chairman Donald Kohn said unanimous votes in the FOMC don't necessarily reflect the diversity of views presented in the committee's closed-doors discussions. Some members go along with the majority view on the final vote, hoping that their collegial spirit will persuade members to their views next time, Kohn said.

Details

Plosser said he believed the economy would be "quite weak" in the fourth and first quarters, and then improve.

"Since monetary policy's effects on the economy occur with a lag, there is little monetary policy can do today to change economic activity in the first half of 2008," he said. "I am still optimistic that the economy will improve appreciably by the third and fourth quarters of 2008, and that is when any monetary policy action today will begin to have noticeable effects."

Plosser said the Fed's main task is to keep prices stable.

"Recent data suggest that inflation is becoming more broad-based," he said. "Recent increases do not appear to be solely related to the rise in energy prices. Consequently I see more worrisome signs of underlying price pressures."

He feared that a prolonged period of higher inflation could lead the public to expect higher inflation. "If inflation expectations continue to rise, it will be difficult and costly to the economy to deliver on our goal of price stability and puts at risk the Fed's credibility for maintaining low and stable inflation."

[otterinbham 0]

By the way, here are two stocks that bear close examination. I think both represent opportunity.

Citigroup. Yeah, it's taken a dive because of its exposure in the mortgage market. But nobody can tell me that this company is going away. It's off 50% since last June, and may go lower. But this company is very strong, has written off most of the losses it's taken, and should be coming back over the next two years. To me, it's a bargain at the moment and should be a good long-term investment.

http://www.marketwatch.com/tools/quotes/in...intflavor=basic

Countrywide. IF they don't file for Chapter 13, this will be a huge opportunity (I repeat, IF). Yes, they're pretty exposed right now in subprime lending and, no, their stock probably hasn't hit bottom. At the same time, if they weather the next few months, expect their stock price to climb. They have a formidable distribution channel in place, a nationwide brand, and lots of assets. Even so, their stock price is 9% of their high at midyear 2007. So if they survive until March, this could be the next HealthSouth. It may be a smart buy if you have nerve and a high tolerance for risk.

http://www.marketwatch.com/tools/quotes/in...eq=1&time=9

[LegalEagle 22]

By the way, here are two stocks that bear close examination. I think both represent opportunity.

Citigroup. Yeah, it's taken a dive because of its exposure in the mortgage market. But nobody can tell me that this company is going away. It's off 50% since last June, and may go lower. But this company is very strong, has written off most of the losses it's taken, and should be coming back over the next two years. To me, it's a bargain at the moment and should be a good long-term investment.

http://www.marketwatch.com/tools/quotes/in...intflavor=basic

Countrywide. IF they don't file for Chapter 13, this will be a huge opportunity (I repeat, IF). Yes, they're pretty exposed right now in subprime lending and, no, their stock probably hasn't hit bottom. At the same time, if they weather the next few months, expect their stock price to climb. They have a formidable distribution channel in place, a nationwide brand, and lots of assets. Even so, their stock price is 9% of their high at midyear 2007. So if they survive until March, this could be the next HealthSouth. It may be a smart buy if you have nerve and a high tolerance for risk.

http://www.marketwatch.com/tools/quotes/in...eq=1&time=9

I think you'll have at least 3 - 6 months to jump on Citigroup b/4 it takes off.

Countrywide is only for money you can stand to lose. Really speculative.

[otterinbham 0]

By the way, here are two stocks that bear close examination. I think both represent opportunity.

Citigroup. Yeah, it's taken a dive because of its exposure in the mortgage market. But nobody can tell me that this company is going away. It's off 50% since last June, and may go lower. But this company is very strong, has written off most of the losses it's taken, and should be coming back over the next two years. To me, it's a bargain at the moment and should be a good long-term investment.

http://www.marketwatch.com/tools/quotes/in...intflavor=basic

Countrywide. IF they don't file for Chapter 13, this will be a huge opportunity (I repeat, IF). Yes, they're pretty exposed right now in subprime lending and, no, their stock probably hasn't hit bottom. At the same time, if they weather the next few months, expect their stock price to climb. They have a formidable distribution channel in place, a nationwide brand, and lots of assets. Even so, their stock price is 9% of their high at midyear 2007. So if they survive until March, this could be the next HealthSouth. It may be a smart buy if you have nerve and a high tolerance for risk.

http://www.marketwatch.com/tools/quotes/in...eq=1&time=9

I think you'll have at least 3 - 6 months to jump on Citigroup b/4 it takes off.

Countrywide is only for money you can stand to lose. Really speculative.

No question, but you have to invest for the long-haul. Also, when it comes to Countrywide, it's nothing ventured nothing gained. I remember when HealthSouth hit 5 cents a share. I thought to myself, "Hmmm. The furniture and equipment is worth more than that." And I came THIS CLOSE to investing $2,500.

Now HealthSouth stock is at $19. A few months ago, it was at $27. So, even at $19 bucks a share, I would have cleared $947,500. If I had sold at $27, I would have cleared $1,347,500.

I still kick myself over that one.

[CCTAU 3,349]

Why bring up fuel prices? They are not truly part of the economy as we like to compute it. Sure they have an impact, but the prices are not due to jobs being lost or products not being produced. The fuel issues in this country are due to several factors that are not related to controlling the economy from a governmental perspective.

1. For too many years we have cowered in fear to the greenies. No new refineries means slower production of fuel. There is plenty of oil in the world. If we had not had an issue with refineries during Katrina, the price of oil and fuel wold have remained fairly low.

2. The oil and fuel companies in America are not owned by American companies any more. Therefore, when they saw an opportunity to gouge, they did. Along with oil prognosticators.

3. The economy is soaking up the fuel increases without buckling. Sure we have to watch our consumption a little closer, but it's not killing us.

I'm not saying I like it this way. I'm just saying that it's hard to lump fuel prices in as a true indicator of the economy doing well or not. I guess as to whether or not fuel prices stabilize in the future will determine if it truly integrates back into a true measure of the economy. But for now, I don't see it as a fair measure. I know there are arguments that it is. And I'm sure I'll here them.

[otterinbham 0]

Why bring up fuel prices? They are not truly part of the economy as we like to compute it. Sure they have an impact, but the prices are not due to jobs being lost or products not being produced. The fuel issues in this country are due to several factors that are not related to controlling the economy from a governmental perspective.

1. For too many years we have cowered in fear to the greenies. No new refineries means slower production of fuel. There is plenty of oil in the world. If we had not had an issue with refineries during Katrina, the price of oil and fuel wold have remained fairly low.

2. The oil and fuel companies in America are not owned by American companies any more. Therefore, when they saw an opportunity to gouge, they did. Along with oil prognosticators.

3. The economy is soaking up the fuel increases without buckling. Sure we have to watch our consumption a little closer, but it's not killing us.

I'm not saying I like it this way. I'm just saying that it's hard to lump fuel prices in as a true indicator of the economy doing well or not. I guess as to whether or not fuel prices stabilize in the future will determine if it truly integrates back into a true measure of the economy. But for now, I don't see it as a fair measure. I know there are arguments that it is. And I'm sure I'll here them.

To a point, yes. But when fuel prices increase the price of transportation, then all kinds of sectors suffer, from agribusiness to retailing to building materials, and so on. A jump in fuel prices means a jump in prices for everything else.

So if you want to stick it to the Arabs, Exxon, and everybody else, quit buying enormous cars.

[AUTiger1 0]

So have mine. However, I feel pretty good about bailing out of bank stocks back in June.

Not to be cavalier about things, but we've gone almost seven years without an economic downtown, and a mild one at that. Actually, we haven't seen a severe economic crunch since 1980.

I think, unless there's a catastrophic banking meltdown, we'll probably be back on the upswing in mid 2008. The housing market will take a while to absorb the excess inventory that it produced in the halcyon days of 2005 and 2006, when the housing market reached speculative levels approaching that of the Dutch Tulip Bulb Craze.

Banks, meanwhile, have pretty much taken their writeoffs on the bad paper they've written over the past 2-3 years. They'll be smarting for a few months, and it serves them right. If stupid little me could look at ARMs and Interest Only loans back in 2005 and see it as a really myopic strategy, why couldn't the banks? At the same time, the current foreclosure problems seem to be largely confined to the West Coast, South Florida, the Northeast and the Rust Belt.

For example, one house in about 2000 faces foreclosure in Alabama, while in Florida, it's one house in 40. All because these halfwits bought houses that were far too expensive for them, and were abetted by the mortgage companies shoving deals across the table that made absolutely no sense. Think about the last time you applied for a mortgage. Chances are, the mortgage officer told you that you could actually qualify for a loan that was two to three times more than what you were borrowing. But you were too smart to take the bait.

So, I think we'll have some turbulence for the first 4-6 months of the year, followed by a good back half of the year. And while a recession is possible, even likely, I don't think it will be severe.

I have a question about the ARM's and Interest Only loans that you mentioned. Why do people go with those loans over a 15 or 30 yr with a fixed rate. I know that if you could buy a 250K house, that you can barely afford, with a low interest rate and then live in it for a year and try to sell it at a profit the ARM could work out in your benefit, IF the rate doesn't take a huge hike up. Then you are stuck with a house that you can't make the payments on and you have to foreclose. I have never figured why people fall for those. Give me a fixed rate loan anyday. Yeah I might have a higher rate and higher payment, but at least I want get stuck in a house that I can't afford. I have to agree with you though. I think that by late 08 we will be back on the upswing, and everything will start to work itself out.

[otterinbham 0]

So have mine. However, I feel pretty good about bailing out of bank stocks back in June.

Not to be cavalier about things, but we've gone almost seven years without an economic downtown, and a mild one at that. Actually, we haven't seen a severe economic crunch since 1980.

I think, unless there's a catastrophic banking meltdown, we'll probably be back on the upswing in mid 2008. The housing market will take a while to absorb the excess inventory that it produced in the halcyon days of 2005 and 2006, when the housing market reached speculative levels approaching that of the Dutch Tulip Bulb Craze.

Banks, meanwhile, have pretty much taken their writeoffs on the bad paper they've written over the past 2-3 years. They'll be smarting for a few months, and it serves them right. If stupid little me could look at ARMs and Interest Only loans back in 2005 and see it as a really myopic strategy, why couldn't the banks? At the same time, the current foreclosure problems seem to be largely confined to the West Coast, South Florida, the Northeast and the Rust Belt.

For example, one house in about 2000 faces foreclosure in Alabama, while in Florida, it's one house in 40. All because these halfwits bought houses that were far too expensive for them, and were abetted by the mortgage companies shoving deals across the table that made absolutely no sense. Think about the last time you applied for a mortgage. Chances are, the mortgage officer told you that you could actually qualify for a loan that was two to three times more than what you were borrowing. But you were too smart to take the bait.

So, I think we'll have some turbulence for the first 4-6 months of the year, followed by a good back half of the year. And while a recession is possible, even likely, I don't think it will be severe.

I have a question about the ARM's and Interest Only loans that you mentioned. Why do people go with those loans over a 15 or 30 yr with a fixed rate. I know that if you could buy a 250K house, that you can barely afford, with a low interest rate and then live in it for a year and try to sell it at a profit the ARM could work out in your benefit, IF the rate doesn't take a huge hike up. Then you are stuck with a house that you can't make the payments on and you have to foreclose. I have never figured why people fall for those. Give me a fixed rate loan anyday. Yeah I might have a higher rate and higher payment, but at least I want get stuck in a house that I can't afford. I have to agree with you though. I think that by late 08 we will be back on the upswing, and everything will start to work itself out.

Yeah, I mostly agree with you. However, I do have to feel for those people who are trapped in geographic markets where house prices have gone insane over the past 15-20 years.

Case in point? My brother bought a house in LA in 1994 for about 300K. Ten years later, he puts it on the market for 900K. However, he lucks out and gets five competitive bids, and they wind up putting the final sale price over the $1,000,000 mark. Now, mind you, this is a 2 bedroom, 1920s bungalow in Las Vieles. And these kind of insane prices were even worse in places such as San Francisco, New York, Boston, Miami, or Southwest.

So if you are a young family, and you want to live anywhere within an hour of the city and don't want to dodge bullets all the time, you have to pay through the nose. So you rationalize that you can start putting back money in order to start paying your ARM at a higher rate when it cycles over in three years, or that you will start seeing a bigger paycheck, etc. etc. And the mortgage loan officer is sitting there with his calculator, telling how much house you can afford. I do a lot of bank marketing, particularly mortgages, and I saw it all the time. People weren't buying a house based on the price, they were buying based on their monthly payment. So, sure, I understand the temptation.

Another way to look at it is that the market from 2002-2006 created lots of homebuyers who could never afford a home before. With interest rates dipping down to unreal lows and lending requirements unbelievably loose with 0% down payments and the like, lots of people bailed on their apartments to fulfill the dream of home ownership who couldn't ever afford it before, and ARMs were the way for them to do it. In fact, for a while, it was the case that owning a three bedroom home in Pelham and Hoover was actually cheaper than living in a two-bedroom apartment on Birmingham's southside. So I can't really blame people for taking their best shot at a piece of the American Dream. What's more, the large majority of people who bought homes using ARMs and Interest Only loans outside of the West Coast, the East Coast, and the Rust Belt, are making their payments with much lower delinquency levels than you hear about in the press. So, if they get through the next 3-4 years, families who were formerly stuck living in apartments will start developing equity, which is a nice side benefit to the bargain bin interest rates we saw just a few years ago.

What's more, a 30-year fixed rate mortgage is still available in the 5.5-5.75% range. That's pretty amazing.

All that being said, I've always stuck with the old fast and true rule that your mortgage/rent should be no more than 1/4th of your take home. Given that I work for myself, I like having some margin for error at the end of the month.

[AUTiger1 0]

Yeah, I mostly agree with you. However, I do have to feel for those people who are trapped in geographic markets where house prices have gone insane over the past 15-20 years.

Case in point? My brother bought a house in LA in 1994 for about 300K. Ten years later, he puts it on the market for 900K. However, he lucks out and gets five competitive bids, and they wind up putting the final sale price over the $1,000,000 mark. Now, mind you, this is a 2 bedroom, 1920s bungalow in Las Vieles. And these kind of insane prices were even worse in places such as San Francisco, New York, Boston, Miami, or Southwest.

So if you are a young family, and you want to live anywhere within an hour of the city and don't want to dodge bullets all the time, you have to pay through the nose. So you rationalize that you can start putting back money in order to start paying your ARM at a higher rate when it cycles over in three years, or that you will start seeing a bigger paycheck, etc. etc. And the mortgage loan officer is sitting there with his calculator, telling how much house you can afford. I do a lot of bank marketing, particularly mortgages, and I saw it all the time. People weren't buying a house based on the price, they were buying based on their monthly payment. So, sure, I understand the temptation.

Another way to look at it is that the market from 2002-2006 created lots of homebuyers who could never afford a home before. With interest rates dipping down to unreal lows and lending requirements unbelievably loose with 0% down payments and the like, lots of people bailed on their apartments to fulfill the dream of home ownership who couldn't ever afford it before, and ARMs were the way for them to do it. In fact, for a while, it was the case that owning a three bedroom home in Pelham and Hoover was actually cheaper than living in a two-bedroom apartment on Birmingham's southside. So I can't really blame people for taking their best shot at a piece of the American Dream. What's more, the large majority of people who bought homes using ARMs and Interest Only loans outside of the West Coast, the East Coast, and the Rust Belt, are making their payments with much lower delinquency levels than you hear about in the press. So, if they get through the next 3-4 years, families who were formerly stuck living in apartments will start developing equity, which is a nice side benefit to the bargain bin interest rates we saw just a few years ago.

What's more, a 30-year fixed rate mortgage is still available in the 5.5-5.75% range. That's pretty amazing.

All that being said, I've always stuck with the old fast and true rule that your mortgage/rent should be no more than 1/4th of your take home. Given that I work for myself, I like having some margin for error at the end of the month.

I don't blame people for getting out of apartments and into homes. I hate to see people (we have friends that we have seen do this) jump into a crazy loan and go for a home based on the payments and not the price of the home. I call them house poor, b/c they have had to cut back on a lot of the little things to just make ends meet and it is sad. I don't blame you for leaving yourself some margin for error at the end of the month. Me and my wife bought our house about 3 years ago and the banks were telling us how much house we could afford (220 and up) and they were pushing different loans at us, trying to break them down for us. We simply said no thanks, that is too much money for us to spend on a house at this time, but we found one in a price range that we feel comfortable with, here is a down payment and we would like to have a 30 year fixed and we got it at 5 something%. I think that is the problem with a lot of people, they will buy anything no matter what the cost as long as they can finance it long enough to get the payments to where they can afford it. I know that at one time, one of the banks up here in NA, was offering a 72 month auto loan. I am sorry, but if you can't pay a new car off in 4 to 5 years then you need to ask yourself if you really need it or not. I have to admit, we have scrimped and saved, but we have been fortunate, the only debt we have is a mortgage and a couple of car payments and one of them is about to be over with. I do feel bad for the people that are stuck with more house than they can afford with the ARM's and Interest Only loans.

[otterinbham 0]

Well, if people would just be patient and not be unrealistic, it can pay off big time.

15 years ago, we bought a house on Southside. We rolled the dice on a neighborhood that we thought would turn around, and bought an historic house for $79,000. It was in great shape. All it needed was a nicer paint job, and some sweat to make the back yard look nice. Oh, and we took in the screened-in porch to create an office for me. The mortgage officer told us that we could live in a much nicer neighborhood and could borrow up to $300,000 to do it. We said, "No thanks."

Three years ago, we sold our original house for $270,000, took the equity and plowed into our present home. The mortgage people said we could get a loan over $800,000. Again, we didn't buy top of the market, but instead bought a house in Mountain Brook that needed TLC. My wife and I and two brothers in law finished out the basement in a weekend by dry walling, found some nice commercial-grade carpet at clearance, and started painting. Before it's all over with, we'll need to landscape the front yard, widen the driveway, finish out the Party Barn, and redo the kitchen. And the minute our youngest is clutching his diploma, the For Sale sign gets hammered out in the front yard.

So, just by buying low on undervalued properties and selling high in real estate and not overextending ourselves, we'll probably clear $600,000, even if the house only appreciates 6% a year (which is a conservative yearly average in Birmingham over the past twenty years). That in addition to our other investments in stock and commercial property. With luck, I can retire at 55.

However, if we had maxed out on our mortgage, we couldn't have done any other this. All our money would have been going to make mortgage payments.

[Auburn85 432]

the news media likes to lump the economy and gas prices together. and looking from some citizens view, it's a feeling more so than facts about the economy.

like why did gas get so high? because the economy is bad? no. gas is so high like some of the resons that's been stated such as no new refineries, more cars on the road than ever before.

plus, people using their money to buy cars, not only cars, but suvs. More gas being bought. Supply and demand. Then China and India's economies have grown.

yeah, the national debt is and will become a bigger problem if not dealt with sooner than later.

it still seems too that when some people hear that there is a deficit in the federal budget it's due to a lagging economy, when the main reason we have a deficit in the federal budget now is overspending.

we could easily have a surplus with the federal budget if it wasn't for lucritive spending while still spending at a higher rate than the clinton budgets.

[Bottomfeeder 244]

BF, I'm so very glad I don't live in your world.

LOL! It was meant as a joke.

[otterinbham 0]

the news media likes to lump the economy and gas prices together. and looking from some citizens view, it's a feeling more so than facts about the economy.

like why did gas get so high? because the economy is bad? no. gas is so high like some of the resons that's been stated such as no new refineries, more cars on the road than ever before.

plus, people using their money to buy cars, not only cars, but suvs. More gas being bought. Supply and demand. Then China and India's economies have grown.

yeah, the national debt is and will become a bigger problem if not dealt with sooner than later.

it still seems too that when some people hear that there is a deficit in the federal budget it's due to a lagging economy, when the main reason we have a deficit in the federal budget now is overspending.

we could easily have a surplus with the federal budget if it wasn't for lucritive spending while still spending at a higher rate than the clinton budgets.

We could easily had a surplus WITH TAX CUTS had Bush blown the dust off his Veto stamp and also not spent like a drunken sailor with his own massive new entitlement program.

[LegalEagle 22]

More and more are predicting, recession, depression or stagflation. Unless there's some change, aren't rough economic times ahead?

[otterinbham 0]

More and more are predicting, recession, depression or stagflation. Unless there's some change, aren't rough economic times ahead?

Hell, I don't know. I'm no economic guru. I just have to deal with it everyday in discussions with bankers and politicians. My guess is that, if the dollar remains reasonably depressed, it could be an overall good thing for the domestic economy. The export market has already picked up and foreign investment dollars are pouring in.

Actually, I do agree with Peggy Noonan when she contends that we have hard history coming. I'm not apocalyptic in my outlook or anything, but we as a country really need to come to grips with the limits of power. Here in my estimation are things we should consider. Take them with a grain of salt, considering that I have moved steadily into the libertarian camp over the past several years. Dealing with Republicans and Democrats alike has taught me through bitter experience that almost all of them are noxious gasbags, and very, very few of them really give a rip about the future of the country, and if you believe more than 20% of what they are telling you, Bush, Clinton, Nancy Pelosi, Neil Boortz, The editorial staff of the New York Times, then you are a sheep.

So, here's what I think.

1) Our military commitments needs to be drastically curtailed. What has happened is that we have a huge web of bases around the world, some of whom have long ago lost their strategic importance but remain staffed out of sheer momentum. Do we really need bases in Germany or Kosovo? With far more people and almost infinitely more wealth and technical ability than its northern neighbor, can South Korea quickly develop the ability to defend itself against North Korea? This scrutiny needs to be applied to our longstanding military commitments around the globe, only keeping bases and troops in place where it's apparent that our vital interests are truly being threatened.

2) Realize that government is the very least efficient engine of change there is. Want to do something about the lack of health care? Or education? Or the inner city? The last thing you want to do is hand off responsibility to the Federal government, for von Hayek's Law of Unintended Consequences almost always comes into play. After all, political considerations become the most important consideration of all when it comes to allotting funds and determining priorities. Milton Friedman once estimated that Medicare and Medicaid has more than doubled the cost of healthcare in this country.

I would agree with that assessment, given how I have witnessed personally how government intervention in healthcare continues to destroy efficiency. Want to build a competitive hospital in an area? Be prepared to wind your way through years of state approval. Want to install a new MRI in your hospital? Be prepared to fight for it in front of the state hospital board. Oh, and be sure to hire dozens of staff members who do nothing all day but file paperwork with the government. The entire history of business over the past 30 years has been about the destruction and recreation of traditional distribution channels. In every other industry, technology and revised management theory have driven down costs relative to people's personal income. Heck, one German economist estimates that Wal Mart alone has kept inflation in check by a factor of 2-3% every year. Yet, in medicine, costs continue to spiral upwards despite heavier and heavier government oversight. Why because lack of competitive factors and the government's support of convoluted business practices keep rewarding existing players who have no interest in staunching the money flow.

3) You are responsible for yourself. This is a corollary to #2. Remember in 1995, when welfare reform was being debated? The New York Times contended that millions of people would be thrown out on the streets with the government safety net. Guess what? Nothing happened. In fact, employment levels increased.

Social Security, for example, will become a huge issue in the next five years as the Baby Boomers suck more and more money out of the GDP. As a result, the next battle will be between people who are collecting Social Security and those who know they are not going to realize any income. I'm personally don't plan on it. Why do you think my wife and I save, scrimp, and invest like crazy? We don't own a lake house, we don't take 3 vacations a year, and we're not sending my kids to private college (Unless there's a serious scholarship attached), chiefly due to the fact that we haven't taken our retirement for granted.

Unfortunately, for many in the bunch, they'll interpret "You are responsible for yourself" to mean "I'm not responsible for anybody but myself." Some seem to view poverty as a sign of a character flaw, while others believe that a government program absolves them of personal responsibility. Instead, I think what has to happen is that a wholesale change needs to take place in our personal lives where we make ourselves responsible for the welfare of others in our personal lives.

[otterinbham 0]

Case in point on an earlier post of mine. Bank Of America is flirting with Countrywide for acquisition. Stock price has jumped up by 51.4% in one day.

[LegalEagle 22]

Case in point on an earlier post of mine. Bank Of America is flirting with Countrywide for acquisition. Stock price has jumped up by 51.4% in one day.

They are doing it. Did you buy as you recommended?