Oct
23
Magical Thinking
October 23, 2008 | 1 Comment
… were they thinking when they produced not just 1 but 2 or 3 children out of wedlock with no idea how to support them?
Magical thinking isn't limited to welfare queens. It's infected the whole country. When you put your money into the stock market and expect 12% returns on a stock that's selling for 30 times earnings, you're using magical thinking. When you buy houses at historically high prices hoping to turn a quick buck, magical thinking. When you buy a house you can't afford …
Oct
22
Fed Chief Pushes for Another Stimulus Package
October 22, 2008 | 2 Comments
… he supported another stimulus package. President push also supported another stimulus package. However, Bush wants the new package to be "targeted, temporary and timely."
What is the Plan?
Right now the plan is still taking shape. Any stimulus plan would have to go through Congress and the President. This could take some time. Democrats are pushing for increased unemployment benefits and funding public works projects (schools, roads bridges).
Republicans favor tax breaks for …
Oct
15
Why A Mortgage Increases Your Risk
October 15, 2008 | 1 Comment
… you comrade Bush ).
The banks failed ultimately because they ran out of capital. They had too much debt and no one would lend them any more money for fear of losing it.
Now relate this to your personal life. A mortgage is a loan against your future income stream with a a home as collateral. Your bank doesn't want your house, they want a steady stream of income at a guaranteed return (at least the smart ones do).
If/when you lose your job, how is your mortgage going to help you? …
Comment by Jeff: … you lose your job, how is your mortgage going to help …
Oct
14
A House is a Consumer Good Part 2
October 14, 2008 | 2 Comments
… by bank and real estate agent marketing) will say that a house is an investment. I will show why it's a poor investment.
The House as an Investment
The only way a house can be seen as an investment the appreciation angle. Unless you have a money tree in you back yard, your house isn't generating income.
When you purchase a home, you assume it will go up in value. The typical number is 3 to 4% a year. This 4% corresponds to the rate of inflation.
According to Robert …
Comment by Jeff: … is 11% return. However, you'll have to adjust that …
Oct
11
A House is a Consumer Good
October 11, 2008 | 2 Comments
… $1 million dollars in stocks/bonds/CD's/Land?
When's the last time you had to water your stock?
Comment by Jeff: … of the country is much more than I need/desire. …
Oct
8
Were You Diversified?
October 8, 2008 | Leave a Comment
Every morning in the locker room I hear the same thing. People talking about how much money they just lost in the stock market. The problem is these people are OLD. I really want to walk up to one of them and ask if they were diversified or if the stock market was their only hope for retirement.
I'm fairly fortunate (read smart). I am extremely diversified. Yes my retirement statements are just as bad as everyone else's (except for a few of my wife's …
Oct
6
Are Scandals Inevitable in Regulated Industries?
October 6, 2008 | 1 Comment
… This idea came to me as I was reading another chicken little article. It's interesting to note how the most dire predictions (and the schadenfreude accompanying it) comes from the international media. A lot of Western Europe is hoping the US loses its footing.
Note how Will Hutton characterizes the crisis:
This is a crisis that has been 30 years in the making - a Gordian knot of libertarian free-market fundamentalism, unregulated globalisation, the collapse of social and political …
Oct
3
Back To Basics
October 3, 2008 | 1 Comment
… think the next Great Depression is around the corner. I believe the likelihood of that is low. However, we should prepare for it.
We should save and invest like the Great Depression is around the corner. Why? Because it will keep our financial lives in order.
If you knew the Great Depression was coming in 5 years, would you buy a house with an adjustable rate mortgage that you couldn't afford, with the hopes of being able to pay for it in 5 years. Of course not, you know the …
Oct
2
Warren Buffet On the Credit Crises
October 2, 2008 | 2 Comments
… look them in the eye.
Common sense investing should protect us from the reach of fortune as much as possible. Markets will rise and fall and rise and fall. Is your boat (money) in a safe harbor (Cd's, bonds, savings) or is it riding the waves and shaking it's fist at the gods.
Diversification is the key. Your holdings in the stock market should probably be a minority percentage of your overall wealth. Or you could believe Wall Street. They've got risk covered. Err, …
Comment by Back To Basics - Wealthy Reader: … wisely. Save as much as you can. Don't spend [...]
Sep
26
Wall Street No Longer Exists
September 26, 2008 | Leave a Comment
… I'm just a mildly interested speculator. Sure I have money in the stock market but there isn't much I can do now.
The most important thing I can do is to limit my losses now. The second is to take this as a lesson. Risky investments (like the stock market) are risky for a reason. I'm not against people investing in high risk ventures, I'm against 401(k)'s who get people into such ventures. How many people would be in the stock market right now without 401(k)'s and Roth IRA's? …