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What many people use to do was to downsize. That is to extract their equity and then live comfortably somewhere else either as rental, with other family, etc. Of course, that is no longer possible for millions of seniors who are under water with their mortgage.
In order to be underwater you have to have negative equity. In order to have negative equity you need to have a mortgage. In order to be under water with a mortgage it needs to be a recent decision to fianance one in order to have negative equity. That means buying a house within recent years with little or nothing down. If you did that as a senior or near senior you didn't follow the advice that was available here there and everywhere. Well perhaps there is another possiblity they leveraged the equity in house and took out a large home equity loan which means they made money on the house that others who didn't leverage didn't. Perhaps they are the lucky ones because they have already made a tidy sum on their house.
In order to be underwater you have to have negative equity. In order to have negative equity you need to have a mortgage. In order to be under water with a mortgage it needs to be a recent decision to fianance one in order to have negative equity. That means buying a house within recent years with little or nothing down. If you did that as a senior or near senior you didn't follow the advice that was available here there and everywhere. Well perhaps there is another possiblity they leveraged the equity in house and took out a large home equity loan which means they made money on the house that others who didn't leverage didn't. Perhaps they are the lucky ones because they have already made a tidy sum on their house.
Yes, you need to have a mortgage in order to be underwater. But even seniors who fully paid off their homes, in nice regular style, lost an enormous amount of wealth due to overbuilding which cheapened the value of their homes. Overbuilding was not an accident. It was part of a very disastrous game for most of us and very profitable for a very small part of our society that was played out all over the world and is not happening in real time in Toronto. Watch and see how it plays out.
Everything else you talked about is about the speculation that was made possible by cheap money (courtesy of Greenspan and Bernanke) and speculative bank processes that made an enormous amount of money for a very few while everyone else lost money. It is all a game of Monopoly ... with cheating.
As an addendum, most seniors know that the real cost of living is far higher than what is officially reported. This magic is accomplished via a little scheme thought up by Greenspan and his friends (eg. Milton Friedman) who managed to change the method for calculating COL by introducing such interesting concepts such as "substitution" (think Pink Slime as a substitute for hamburger in the COL calculation and you get the idea). All of this was done with the concurrence of our representatives who are fully bought off by the banking community.
To understand all this is to understand how the middle class was robbed of 40% of their wealth. If you don't understand this, then those who do not understand history are bound to repeat it (at least once every 80 years).
Unfortunately that seems unlikely. Your posts don't seem to address the responses you get (#41 & #43 for starters), your posts are more like loosely or even unrelated talking points...but I wish you all the best.
The important point here is that we are all experiencing is a world-wide game of Monopoly (concentration of wealth) where a player is also a banker who is constantly replenishing his/her pocket with an unlimited supply of money. This would be cheating during the actual game of Monopoly but it is perfectly legal in the real world. Bankers make up the Federal Reserve and since the end of Glass-Stegall during the Nixon era, have been able to speculate in any manner they wish with our money. They can also print all the money they they want for themselves. The end result for every other player in the game is obvious for anyone who has ever played a game of Monopoly. The 40% decline in wealth could certainly get worse as it has in many nations in Europe. Just think Monopoly and it is easy to understand.
Oh well this is an exciting weekend about to happen. I got more defensive today and took some of the more beta funds down and the lower beta funds up. Nice reasonable run up for the year. Not as good as it was in April but still good and still a net growth for the year. Trying to keep moving forward is a challenge as many of you know but as long as it is forward as it is all is good. Beautiful weather at the beach this weekend and a lot of happy seniors. Not all happy but a lot of. Basket 3 got smaller and basket 2 bigger. If Monday is a good day Basket 3 will get even smaller until the mess in this country gets resolved hopefully in Novembee and by the end of the year. If we can get corporate profits solidly on the upswing and taxes kept low a lot of seniors can make money. It is important for seniors who don't need to spend every dollar they have to develop a plan on how they will put their excess money to work. Even if it is $50 a month it can still compound into good things for you.
Yes, you need to have a mortgage in order to be underwater. But even seniors who fully paid off their homes, in nice regular style, lost an enormous amount of wealth due to overbuilding which cheapened the value of their homes. Overbuilding was not an accident. It was part of a very disastrous game for most of us and very profitable for a very small part of our society that was played out all over the world and is not happening in real time in Toronto. Watch and see how it plays out.
Everything else you talked about is about the speculation that was made possible by cheap money (courtesy of Greenspan and Bernanke) and speculative bank processes that made an enormous amount of money for a very few while everyone else lost money. It is all a game of Monopoly ... with cheating.
As an addendum, most seniors know that the real cost of living is far higher than what is officially reported. This magic is accomplished via a little scheme thought up by Greenspan and his friends (eg. Milton Friedman) who managed to change the method for calculating COL by introducing such interesting concepts such as "substitution" (think Pink Slime as a substitute for hamburger in the COL calculation and you get the idea). All of this was done with the concurrence of our representatives who are fully bought off by the banking community.
To understand all this is to understand how the middle class was robbed of 40% of their wealth. If you don't understand this, then those who do not understand history are bound to repeat it (at least once every 80 years).
You never had the equity in your house and could only ever approximate what it was worth based on someone elses sale. Doesn't mean anyone would give you that for your house or that there was someone actually willing to pay it until they do. If you counted on it that was a decision that was questionable at best. If you want the value of something you own on the day you have it appraised sell that day as tomorrow it may be different. Just like Gold at $1,900 an ounce. Just you paid that much for it last year doesn't mean anyone will today and they won't. Maybe next week but that isn't the valuation today. We both knew that what we had in our accounts in April was only worth that if we cashed in and if we didn't we knew another day it would be different up or down. Home equity is a lousy wealth place holder if it can take 6 months or more to liquidate. Ummmm yeah folks holding equities didn't get hit as bad if for no other reason than the ability to liquidate in a timely manner. One of the reasons African Americans got hit harder than Whites by the down turn was more of our wealth was in real estate and not other forms of equity. It was very difficult trying to get folks to look at equities instead of a more expensive house and I am not sure to this date if the lesson is learned. I wish the President would do more educating for people instead of being a social fairness cheerleader. it isn't helping anyone as we try to move forward and help all to build wealth. Hey the White House would do well to get MathJak and Robyn at the table and to talk to them about their ideas. I for as long as I can remember have read Money and other magazines. I always loved the section on real people and how and what they were doing. It was inspirational and seeing folks in situations comparable to mine who were comfortably doing well in retirement was a motivation and a road map. While MathJak was not a model for me (different situation) he was featured in there and I am sure was inspirational to many. It is better to learn how to do something moving forward than to look backward and complain. Lots of millionaires were made during the great depression and those are lessons to be learned. People need uplifting cheerleaders and not voices to echo their dispair about being screwed.
How could the middle class have been robbed by the banks because their housing value crashed. If I lend you 300K to buy a house and now it is only worth 180K am I not the one who got robbed by you? I am the one out of the money right now. If you walk away I am the one stuck. Isn't the issue that a lot of home buyers have robbed the bank of the money they lent them in good faith and these borrowers have now walked away leaving the bank and their shareholders to hold the key to a property worth far less than what these scoundrels were lent? We need to be outraged and demand as shareholders that the banks be more selective who they lend to and do a better job protecting the value of our shares. Just look at BOA and how those investments have taken a hit from deadbeat borrowers. Now they want to complain that they lost wealth they never had and the banks lost money they did have. Are these dead beats complaining about the fact that they are underwater on the new cars they purchased?
Some people get what I am saying and others .... will not. Just remember, the rich are getting richer (the only ones who are getting richer) and everyone else is getting poorer. The question everyone should ask is ... how come? Are they smarter or are they cheating?
I remember when I was young, I always used to play a game of Monopoly with a friend of mine and it was odd that he was always able to win. It seemed like he always had more money than he should. Then one day (this is a true story), I picked up the board just before we started to play and there was $1000. He always claimed that he stored his money there, but as it turned out, he use to put extra money there before the game started. He was cheating. No doubt, he is now a financial tycoon on Wall Street.
This was a lesson that I learned early in life. I didn't lose because the other person was better. I lost because he cheated. You see ... when it comes to money ... People cheat.
[quote=TuborgP;24760668] Just look at BOA and how those investments have taken a hit from deadbeat borrowers./QUOTE]
The heads of BOA didn't lose any money. In act, they walked away with billions. The people who are paying for the deadbeats is everyone in the world as the Federal Reserve prints money to pay for the losses which in turn costs everyone else ... either in inflation (real inflation) or in lost savings via lost interest, lower wages, etc. The big boys made out with champs. Even the big boys who ran WaMu and Countryside walked away with billions. That is how the big boys play the game. BTW, that was all of our money they walked away with. That is where the 40% went.
It was inspirational and seeing folks in situations comparable to mine who were comfortably doing well in retirement was a motivation and a road map.
I hope you are really enjoying your retirement as millions around the world join the bread lines.
As for myself, I'll old the Champagne for some other time when it feels a little better to celebrate.
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