Thornburg - a high quality mortgage company = goes from "hold" to "sell." (loans, business credit)

[70Ford]

Mortgage Fallout Spreads To Thornburg - Forbes.com

The downgrade surprised investors because Thornburg holds high quality mortgages. The company makes mortgages to relatively wealthy borrowers and has repeatedly stated that its defaults remain low.

[ViewFromThePeak]

Originally Posted by 70Ford

Mortgage Fallout Spreads To Thornburg - Forbes.com

The downgrade surprised investors because Thornburg holds high quality mortgages. The company makes mortgages to relatively wealthy borrowers and has repeatedly stated that its defaults remain low.

Mortgage securities are trash. If these folks were truly wealthy, the house would be bought in cash. Most of these folks are high-income spendaholics with jobs that are volatile in a bad economy.

Inflation is eating away at even upper-middle income and lower rung wealthy Americans who aren't sophisticated enough to get out of the dollar.

[Daddys///M3]

Originally Posted by ViewFromThePeak

Mortgage securities are trash. If these folks were truly wealthy, the house would be bought in cash. Most of these folks are high-income spendaholics with jobs that are volatile in a bad economy.

Inflation is eating away at even upper-middle income and lower rung wealthy Americans who aren't sophisticated enough to get out of the dollar.

Not necessarily true. Many wealthy people do not like to have their cash tied up in their property. Many prefer to stay leveraged and utilize the opportunity cost that a mortgage allows them to, even if they can afford to pay their homes off.

[cookiemonster12]

Originally Posted by Daddys///M3

Not necessarily true. Many wealthy people do not like to have their cash tied up in their property. Many prefer to stay leveraged and utilize the opportunity cost that a mortgage allows them to, even if they can afford to pay their homes off.

Totally agree......In the world of big bucks it is actually a NO-NO to own your house outright.

[FarNorthDallas]

I've worked at pricey country clubs and seen hundreds of member applications and credit reports from "rich people" and the truly wealthy ones absolutely pay cash for their houses - the primary home and the vacation homes. No mortgages.

[ViewFromThePeak]

Originally Posted by FarNorthDallas

I've worked at pricey country clubs and seen hundreds of member applications and credit reports from "rich people" and the truly wealthy ones absolutely pay cash for their houses - the primary home and the vacation homes. No mortgages.

Quite right.

People don't realize that while a mortgage is a tool of tax deduction, the truly rich have many more weapons in their arsenal to cut their tax base and a tiny mortgage interest deduction won't make a dent.

[Daddys///M3]

Originally Posted by ViewFromThePeak

Quite right.

People don't realize that while a mortgage is a tool of tax deduction, the truly rich have many more weapons in their arsenal to cut their tax base and a tiny mortgage interest deduction won't make a dent.

Although there are different schools of thought on this, I would like to point out that those that are wealthy that carry mortgages do not do so as a tax benefit, although it does help the net tangible benefit. The reason they do it is a little thing called opportunity cost. What is the point in paying for a home in cash when that money could be working for you, equity does not earn you any money. Compound interest and dividends do. Offset the interest of the mortgage you are paying, if your rate is 6% your net after tax write offs would be 4.5%. I personally could think of a few ways that my money could earn more than 4.5%. Now, maybe if I was worth billions then I might, but probably not.

[ViewFromThePeak]

Originally Posted by Daddys///M3

Although there are different schools of thought on this, I would like to point out that those that are wealthy that carry mortgages do not do so as a tax benefit, although it does help the net tangible benefit. The reason they do it is a little thing called opportunity cost. What is the point in paying for a home in cash when that money could be working for you, equity does not earn you any money. Compound interest and dividends do. Offset the interest of the mortgage you are paying, if your rate is 6% your net after tax write offs would be 4.5%. I personally could think of a few ways that my money could earn more than 4.5%. Now, maybe if I was worth billions then I might, but probably not.

Opportunity cost doesn't mean anything when you run a business. The wealthy I'm thinking about own investment property not on personal credit, but on business credit (LLCs). They run factories, employ people, and get business loans for capital formation. They would never put their own personal money on the line. The mansion, their primary residence and/or vacation home, they own is a result of their wealth they've accumulated through their business(es), not a vehicle for leveraging against "opportunity cost".

There's also the wealthy who drive beaters and grocery shop at Aldi. The "how do you think I got so rich?" crowd (if you remember the commercial)

[Daddys///M3]

Originally Posted by ViewFromThePeak

Opportunity cost doesn't mean anything when you run a business. The wealthy I'm thinking about own investment property not on personal credit, but on business credit (LLCs). They run factories, employ people, and get business loans for capital formation. They would never put their own personal money on the line. The mansion, their primary residence and/or vacation home, they own is a result of their wealth they've accumulated through their business(es), not a vehicle for leveraging against "opportunity cost".

There's also the wealthy who drive beaters and grocery shop at Aldi. The "how do you think I got so rich?" crowd (if you remember the commercial)

I would have to be extremely wealthy to tie my capital up like that. Perhaps those are the people that you are talking about. The kind of people with a net worth of tens of billions? Because even if I was worth $10mm, I would not buy my home with cash. I would mortgage it. I would leverage myself, spread the liquidity around and expand my portfolio so as to acquire more with less, and keep my money working for me while using the banks money to make money. But that's just me, and I'm sure that not everyone agrees with my line of thinking.

[70Ford]

Thornburg Mortgage (TMA) continued to plunge after the company revealed it can't cover current margin calls and that it will restate past earnings to account for a decline in the value of its mortgage securities held in a portfolio at the end of 2007.


Restating earnings.....oooh........

Now $1.35 ....from $25.93 in August.