I remember when liberals were bitching because Bush wanted to change the law to make it harder for people to declare bankruptcy.

They kept complaining that poor people will now be forced to *GASP* pay off their debts!

"Don't these people understand economics AT ALL?"

The answer is NO. Nobody is taught economics in school anymore, they're too busy being taught how to cherish their self-esteem. Everybody deserves nice big houses because they are SPECIAL. Let the good times roll... until they roll to a stop.

I am amazed by how many otherwise smart people are carrying mountain-sized debts and live way beyond their means. Lots of people actually think credit cards=free money.

I live by one simple rule: if I can't afford it, I don't buy it. Anything bought on my credit card gets paid off with the next statement. When it comes to big purchases like a car or house the magic number is 20% of the cost. If I don't have that, I don't buy it. As it is, I have never owned a home, mostly because I don't want to be tied down to one place yet. I'm too much of a traveling fool. But when I decide to do so I have already saved up enough for a decent down payment. What a concept!

The answer is NO. Nobody is taught economics in school anymore, they're too busy being taught how to cherish their self-esteem. Everybody deserves nice big houses because they are SPECIAL. Let the good times roll... until they roll to a stop.

Which is the real problem at the core of it all.

You can tell someone they're special as much as you want, but self-esteem and the ability to like yourself only come when you do something that makes you likeable.

Construction workers and people who work with their hands are often some of the most self-confident people you will ever find. Why? Because for each and every one of them, there's something out there, a house, a bridge, a custom car, that they can look at and think "Holy shit. I built that!"

Free markets create excessess, but the process is always self-correcting if occaisionally painful for investors. Developers have created a huge surplus of housing backed by lenders willing to lend to anyone. A house is no different than a widget. When you get a surplus of widgets, the price of widgets goes down. The price of real estate must go down until the surplus is worked off . . . around 2010 if I'm reading the numbers right. No big deal. If you're in a house, you still get the utilitarian use until prices recover. Lose your house, and it only reveals that you were just a renter all along. Caveat Emptor! One of the beauties of capitalism is that the process is utterly brutal. The markets are frantic, so what? Volitility is your friend. NOW is the time to place your bets for the next round. The market is about to test (for the thrid time) the Dow at 13,200. It should bounce again. Look for a climb by mid-winter to 14,500. If she goes lower, there's another support level somewhere down the line. Keep your powder dry (it's called cash reserves). But what do I know? I just teach government and economics to kids who can't sight read fractions. I'm going to institute a policy in my classroom that all students must attend with a catcher's mit on each hand. Works as well for calculators as it does for cell phones. If you need to be worried about something, consider the mind-numbed, drooling idiots who are supposed to pay your social security. Fat chance, that one. The only math practice they get is counting bong hits. Maybe I should just institute a policy of culturally sensitive math? Henceforth, all answers will be either (A) one, (B) two, (C) many, or (D) 30-06.

OTOH, the way the market has been going, if you have enough money saved up for a down payment, you might just buy a house from a distressed seller on very favorable terms. Maybe a foreclosure, maybe taking over their mortgage.

I don't know all the details because I've always been a renter. But it's my understanding that *if you know what you're doing,* there are profits to be made at either end of the market.

"Um yeah gimme the um McMansion, gimme 2 McGasGuzzlers, the McVacation, and side of McPlasmaTVs, and ya know what, while you're at it, go ahead and Super-Size me too. But um do me a favor, and leave off the Responsibility, that tends to leave a bad aftertaste, and gives me gas m'kay?"

"How am I gonna pay for it all you ask?"

"Why with Credit of course ya Mow Ron, I'm already leveraged to the hilt, and I'm just gonna borrow me a lil bit more is all so's I can make up the difference, honest injun."

"I mean Hell in the end, we both know ny kids are gonna pay for it. After they put me in the ground that is. It's not gonna be me nubikins, Didn't they teach you nuffin in HS?"

Have fun ;)!

Henceforth, all answers will be either (A) one, (B) two, (C) many, or (D) 30-06.

I like that.

You know who I blame (besides the people with houses they can't afford)? Realtors. They are working their hardest to talk sellers down to giving away their houses so they can get their quick commissions. (We're selling by owner. Realtors can suck it.)

Now. About renting from yourself the first few years. When Frank got the house, he got it on a 30 year mortgage, blah blah blah, and in 3.5 years, the principal had gone down maybe a thousand bucks.

So we refinanced March '06, on a 15-year mortgage (5.5% with our wonderful credit union), and ya know... In less than 1.5 years since refinancing, the principal balance has gone down about 13K. The principal goes down about $700-800 a month. It's a sweet, sweet deal. We will always only do low-rate, 15- or 10-year mortgages forever now.

And when we move, we'll rent until we find the house that we love at the price we love on a 15- or 10-yr mortgage.

Realtors can suck it.

Classy. Frank is so lucky to have you. :)

There's nothing really wrong with an adjustable rate loan. My father highly encouraged me to get one when I bought my house in Dec. 2006. For him, they work great. He runs a retail business and his income tends to flex with the times. If the economy is good, business is good, and interest rates are high. If the economy is in the dumper interest rates are lower.

He's kept track of the numbers over time and in the 25 years he's been running the family business he's come out ahead by taking adjustable loans instead of fixed loans.

It's risky, but if you're smart they can work for you.

Me? I went with an 80/20 fixed rate loan. My income doesn't flex with the times and I was smart enough to buy a house slightly lesser than I could afford on my current salary. This was a good thing as I lost my job the very next day I returned to work after buying my house! I'm making 15% less now, but I can still afford the mortgage.

Yes, I put $0 down on the house, which is silly, but I went into the deal pretty much debt free. This seemed to surprise the mortgage broker I worked with. When asked if I had any debt my only answer was that I had a car payment ($400/mo, 2 year loan on a 2000 Jeep Cherokee). No student loans, no credit card debt.

When he asked if I had any assets I answered "No, nothing other than a few grand in stocks." He prodded along... do you collect anything? Stamps? Coins? Well.. I have some guns. "How much are they worth?" I grabbed a pad of paper, a pen, scribbled about, and said, "Err. about 12-15 thousand dollars worth. 12 easy, street value."

Yeah, I didn't have a down payment ready, but at least I didn't waste my money while renting. :)

I bought my first house with a VHDA 2-for-1 buydown, which meant that the paments escalated after each of the first two years, and then flatlined for the next 28. The idea was to get you prepared for somewhat larger house payments over the next two years, but it had a ceiling. When the agent asked if I wanted an ARM, I asked for the details. They went something like this:

4 years at 4% (or so)

After that, the maximum that they could possibly raise the interest rate was 4% which meant, of course, that they were going to jack it up 4%. They could do this for three years which was, coincidentally, the time that I would be locked into my ARM after the low-low rate expired.

He was very nice guy, so I didn't call him a fucking imbecile. I didn't even ask him if he thought that I was one. I simply declined and went with the mostly normal loan.

I've since bought two more houses. Each time, I've gone through the same song and dance.

"Lookee at the bright shiny lights. They're so pretty! Please buy our ARM!"

Uh, no. And don't ask me again or I will go get a loan from someone else.

Neal Boortz mentioned a big scam in the Atlanta area from some years ago. It turns out that banks were giving people mortgages for 110-120% of the house value, which gave the buyers some cash in the bank. What happened, as you might expect, is that they used that money to help pay the mortgage until they had no more, at which time they defaulted on the loan. Nice gimmick. I used to work in financial services (bank, credit card company) and I think who ever came up with that scam should have been staked out on an anthill. Then again, I'm a firm believer in deterrence via excessive punishment.

Rachel, now's the time to get into a house, lot's of motivated sellers!!! We paid our first house off (well within $10k of it) bought a lot and built our dream house (I'm in commercial construction). We now have over 50% equity and when we do sell we'll clear close to 1/2 a million. We both work, our fixed mortgage is $1,200. No car payments, no debt (except the mortgage). Now we do have two kids to put through college in 10 years though! Everyone isn't at the mercy of the loan sharks.

You have an IRA and you're calling other people names?

It takes a lot of trust to assume that the government will let you get your money some day. Until then, if you lose your job and need YOUR money, you will be penalized severely for it. So how is that smarter than an ARM?

My wife and I are SITCOMs (Single Income, Two Children, Oppressive Mortgage). Well, actually it's not all that oppressive. It's just that the situation's not helped by the fact that we have our daughter in private school. But that's the price you pay when you buy a house in an inside-the-perimeter Atlanta school district but you still want your kid to get a decent education.

Anyway, our first loan was a 30-year fixed, and if I had it to do all over again, I think I would have bought a house farther out and gotten the 15-year loan. We'd be done by now.

Here in CA, it's not the mortgage (everyone's pretty much got a jumbo) as much as it is the FREAKIN' TAXES! Even 1% on an assessed value of $600K plus is oppresive. And, the city still manages to go bankrupt without fixing me damn potholes!

The best advice I ever received for mortgages was to get a fixed rate, and then re-finance any time the rates drop by 2%. That way, you aren't re-financing too often, and you get to keep nice rates!

I hate to admit it, but you're absoutely right.

people tease the piss outta for living at home.

I'd rather be here and not in debt, than to be living alone and up to my ears in it.

I was there once, (in serious friggin debt... and it sucked.

Backruptcy is a beautiful thing. Lost my fucking job, (place went under) and I just didn't have any money, period.

go out from under about 18 grand in debt.

Never again, no fucking cards, no car payments, ever... debt cards and used cars for me, till I die.

If I cannot afford it. I don't buy it.

Simple rule that will keep you out of trouble.

-HL

The fact is, Rachel, that you're never going to make any headway by blaming stupid people (who subprime ARM victims are, by definition) for getting fooled by smart people (who bankers are, by definition).

It may be your fault for not locking the door, but that has nothing to do with the crime rate. The criminal just happened to get your house; if he didn't get yours, he would have gotten some other stupid person. The economy would still be in trouble. The criminal would still be a criminal.

In my opinion, ARMs disguised as as fixed-rates (which is the real issue, calling them fixed rates and bullshitting the gulls when you get them in your office) should be criminalized. Or even simpler: the contracts should be subject to alteration on the grounds of misrepresentation. So if you tell some dodderer or soccer mom that you're presenting them with a fixed rate contract, then that's what they get, whether it is or not.

If you don't like it, don't lie.

Basically, the banks push this on EVERY home buyer, without exception, so they're bound to rope in some people. Letting it carry on as some sort of property-owner's Darwinism project is just making our economy do hula hoops while driving ever more brainless moderates into the class warfare camp.

"You have an IRA and you're calling other people names?

It takes a lot of trust to assume that the government will let you get your money some day. Until then, if you lose your job and need YOUR money, you will be penalized severely for it. So how is that smarter than an ARM?"

Posted by Skyler

WTF are you talking about? The government has nothing to do with your IRA--it's like taking money out of a brokerage account when you want to withdraw. If it's a Roth IRA, she can take out as much as she wants, penalty-free, up to the amount contributed. Only the growth portion is penalized, if she dips into that before retirement.

Perhaps, maybe, she's got other investments that aren't all retirement funds. Lots of people have savings, lots of people have brokerage accounts and mutual funds that you can take money in and out of whenever you please. Retirement funds shouldn't be looked at as an 'emergency stash', which you seem to assume it is. A prudent investor will deem it untouchable until the proper time.

And medical transcription, especially if you're good at it, seems pretty much recession-proof if you ask me. People will always be going to the doctor, so your whole what-if scenario falls pretty flat. An IRA, of *any* kind, is a much better investment than an ARM. Hell, a mortage isn't even an investment--the house is. The mortgage is just a tool.

Mikey

Well, for a little perspective....there are over 44 million mortgages in the US today. Of them, 14 percent are "subprime". Of these, only 13 percent are late on their payments, with the vast majority working with their lenders to stay ahead. Foreclosures are indeed up for sub-primes; .6 percent this year, as opposed to .5 percent last year. (See Jerry Bowyer's article in National Review Online, yesterday). The "crisis" in the sub-prime mortgage industry is largely an emotion-driven reaction by people not actually in the industry.

Subprime mortgages are distinguished, in many cases, only by the credit history you must show; not good credit, just that you've got history. That's it. 0 down payments? Stated income? these are all available in the prime market, too. Sure, there were bad loans made, and people overextended. But capitalism is brutal, and this problem is self-correcting if we let the market system work. Freedom means freedome to fail, too.

I used sub-prime lending to buy my house in Hawaii. Oahu real estate is naturally high (limited supply of land, to start with) rather than the puffed up values in many areas of California, for example. The sub-prime lending let me finance $620K without a huge down payment, and without the dead horse of PMI. I knew the rate would ratchet up at 2 years, so I positioned myself to refinance at that time in the prime market. Three years later, the house is worth about 250K more than I paid. There is nothing inherently wrong with sub-prime lending, and in fact it has allowed many honest, hardworking people to buy houses who could not have otherwise. The deadbeats must be allowed to fall out on the wayside.

Delinquency rate for July 2005 - 3.08%
(This was before the subprime holocaust)

Delinquency rate for June 2006 - 3.98%
(after)

That is an increase of 0.90% in a year. Yes,
LESS THAN ONE PERCENT!

Hardly qualifies for mass panic in my book!

Not all of us are bad people. We have a fixed rate, but since buying the house our property insurance and home owners insurance have skyrocketed. And that's why we are having tremendous difficulty making our mortgage. Florida sucks.

by property insurance, I meant property taxes.

100% agree with you. We knew that fixed rate was the only way to go, to make sure we could make the payments. We usually put an additional $110 or more to principal, plus I got a killer 5.25% interest rate back when rates were at their lowest. "SCORE" I also am not a math genius, but jeez, it doesn't take one to figure this out. needless to say, $535 a month on a $250K house which is no mcmansion (but who needs that?) is all we needed. Since we are in No. Californication, property is still kinda cheap because we aren't in the "prime" real estate sector. I lurve that there were all these speculators that invested that are now losing their shirts. serves them right. This doesn't affect me, cuz when we bought this house, property values were really low, so even with the down trend, we are still way ahead. HAHAHAHAHA SUCKERS.

Ahh, Rachel. Thank you!

I'm sure the folks who bought my old house in So Cal for well over a half million $ (we bought it for $160K in '97) are those of whom you speak (they did get their HS education in California). They were a "couple" but as of yet unmarried and had to do a consolidation loan or 2nd to afford the first.

Hmm...

I'm sure someone at New Century held a gun to their head while exercising their "predatory practices."

"I think I would have bought a house farther out and gotten the 15-year loan. We'd be done by now."

Any loan, can be a shorter term than it would be if you only make the "minimum payment". For that matter, any long term loan can be reduced to a one month period, if you make one really huge payment. When we nearly paid off our first house, the 30 mortgage was paid off (within $10k) in 7 years. We then built our new house, sold the old one and used the equity to pay down the construction loan. We have a 30 year note now (well, it's coming up on a 27 year now!) but we'll make extra payments and so on, we're about to go to the pay half every two weeks program, so we won't be making payments for the entire loan period. I believe the rule is, if you pay just one payment a year extra, a 30 year note is reduced by 11 years. Einstein said, (jokingly) I understand everything about mathematics, except compounded interest!!

"Here in CA, it's not the mortgage (everyone's pretty much got a jumbo) as much as it is the FREAKIN' TAXES! Even 1% on an assessed value of $600K plus is oppresive."

Hell, here in Texas we have a "property tax crisis", the Governor tried to do something about it but the retard democrats left the state and went to New Mexico to stymie the vote. We pay over 3% (so don't bitch about the 1% in CA). When we built our new house we got hit with a property tax of just under $16,000 a year! Hell, our mortgage payments are only $14,400 a year (if we only paid the minimum payment)! How f#$%d up is that? I'm not sure what kind of response I'll get from y'all, but I think Rick Perry is awesome, our property taxes have gone down more than a few hundred dollars for the past two years and will do so for at least one more year. If he hadn't run into the "Hillary Clinton" types in the Texas Legislature, he would have further reduced our burden (he tried to reduce the property tax by 33%). Retirees can't afford to live in Texas because of the property taxes.

Mightysamaurai... the problem with the bankruptcy "reform" bill wasn't particularly that it forced people to pay their debts more. No, it helped credit card companies avoid some of the consequences of their own very unwise business decisions. Send a $1,000 limit credit card to every new college student you can find, the day they start college? Pretty stupid. The risk of the debtors going bankrupt is part of the cost of doing business, which the creditors need to calculate when making lending decisions.

Credit card companies issued all those cards under particular bankruptcy rules. Then, when they saw that they had made some stupid decisions and extended too much credit, they tried (successfully, alas) to change the rules in their favor, to help cut the losses caused by their own decisions. (I'm not forgetting that the debtors are responsible too, just pointing out the creditor's own responsibility.) Now, credit card debt is put at the same level in bankruptcy as child support obligations. If you've got a person whose bad decisions have left him with limited funds, and he's got $5 left to be distributed among his creditors, then I think the $5 should go to the children, not to the credit card company, which shares responsibility for the loss, having made a very bad decision to extend him credit.

Um Skyler, you might want to Google "IRA". The government has nothing to do with it, like Mikey said. My IRA is in a Fidelity mutual fund and is a Roth, so I can take my money out tax-free whenever I want since I've already paid taxes on it. DUH.

And also like Mikey said, I have job security up the wazoo and will never be without a job unless I physically can't do it, which is why I have good health insurance and lots of money stashed away.

Anyway, uh yeah, an IRA is a hell of a lot better and smarter than an ARM. And really is comparing apples to oranges.

Unless things have changed even more than I thought, and that's entirely likely, the government will not allow you to withdraw money from your IRA before you reach 60 something years old without a substantial penalty in the form of a tax. And yes, this is true even when you already paid the tax on the money going in. It's even worse than a 401k.

Taxed going in, taxed coming out, and penalized on top of it.

Not a good deal.

Rachel, you may want to think about renting etc again. The way I see it, shelter is a sunk cost, because you have to pay for somewhere to live regardless of your circumstances. So at that point, you can either pay $1,000 a month for an apartment (the going rate in Houston) and other than shelter gain nothing, or $1,000 a month for a house and earn property. Not to mention the tax breaks for home owners! Same goes for leasing cars.

On another note, the whole "negative savings" rate thing is a scam too. most of America's wealth is tied up in their houses. Just because you have $100,000 of debt that you're applying your would-be savings to doesn't mean that you're losing money in any way. You're just using it to buy equity for yourself.

But I do appreciate your ire at economic stupidity. I feel the same way!

PS Skyler you're being ignorant. 401(k)s are like free money if your employer matches. Most do either 50 cents on the dollar or one-to-one matching up to 6%. Not to mention the fact that 401(k)s are tax-deferred...so you only pay taxes on the way out, when (presumably) your income will be reduced and you'll be in a lower tax bracket.

IRAs can be tax deferred or pretaxed (regular vs Roth). No IRA taxes you on the way in and the way out.

They're very good deals.

IRA's may not be taxed in and out (perhaps I had a bad accountant when it hit me many years ago), but you most definitely get penalized heavily for early withdrawal. It's better to control your own money rather than allow the government to tell you what to do with it.

If your 401k involves free money then it is a good deal, of course, but not otherwise.

And, k2agro girl, being a good deal is an opinion, not a matter of ignorance.

Rachel,

Nice smackdown on Skyler there. I am kind of holding a little teensy grudge against him for his remark in the comments section for your post on the accidental shooting of the kid in Noble, OK by the police:

"It's important to remember that the United States Supreme Court ruled a few years ago that police departments are allowed to exclude smart people from being police officers.

It's not polite to remind cops of that to their faces. But we all still know it's true."

I don't know Skyler, don't know his education level etc., but I'd be glad to match my IQ scores against his any day.

To the point of the thread, I bought my house last year, after being divorced, and I also got the hard sell on some of the more creative financing options to allow me to "buy more house". I had no desire to do so, since it was just me (and my 2 dogs) and refused to go down that road.

I can see where it would be tempting to a first time home buyer, or a young person or couple just starting out, who would be easy to convince that they would probably have more income when the payments went up and thus would be able to deal with it. unfortunately, that is not always the case.

Oh, and sorry I didn't follow up on the promised comment on that accidental shooting, but when I got home that night I interrupted a burglar entering my house through my bedroom window. No, I didn't get the opportunity to "rid the community of a problem" since he got out the window and out of sight before I could do so, dammit. But, at least I I stopped him before he got more than a foot or two into the house, so I am only out the screen that he cut, and the two lightbulbs he broke out to darken the exterior of the house (and the price of the new alarm system I'm having installed Monday).

I caught on to what was up, when I entered and Charlie, instead of being in the way when I opened the front door, was standing at the opening to the hall leading to my bedroom, barking his ass off. (Big wimp that he is that was as close as he would get to the intruder.)

Skyler, you're part right and part wrong. I can't withdraw the entire value of the IRA until I'm 59 1/2 without paying a 10% penalty (and income taxes on the EARNINGS portion).

But I can withdraw all of my CONTRIBUTIONS at any time for any reason without paying any penalties or taxes. And that's what I meant when I said I could take my money back out any time I want without paying a penny for it. The earnings are another story but my contributions at this point in time far exceed any earnings they've made.

Retrocop, HOLY SHIT! Glad the fucker didn't have time to steal any of your stuff or hurt you or Charlie. Not that he would've had much luck with that, I'm guessing. Who's a good boy? Charlie, that's who.

Just a few quick comments:

01. Most of the subprime lending went not to McMansion buyers, but rather to first-time buyers who couldn't afford to own at all. That is why the home ownership rate reached an all-time high recently. In any case, both classes of buyers helped keep the housing industry humming while the rest of the economy was in the tank, and prevented the '01 recession, exacerbated by 9/11, from being a real barn burner. So let's not be too hard on them; we owe them a lot.

02. As someone noted above, the default rate hasn't increased drastically. It needn't have gone up at all if the Fed weren't busy fighting an imaginary core inflation problem with the blunt instrument of rate hikes.

03. In any case, the current market gyrations are based mostly on the impact of speculation, not actual economic reality. Hedge funds, in particular, can profit if the market goes up or down, just as long as it goes somewhere. So they tend to leverage their contacts to stampede it in one direction or another and make money on the turns. Unless they goof up and go bankrupt, then they cry for a bailout (a la Long Term Capital). And no, we don't all benefit from their actions; to get into a hedge fund you have to qualify with some astronomical net worth and then plonk down your million bucks on the barrelhead. Their hyperactivity makes the market much more trying for the traditional "buy and hold" investors (which most of us are). Personally, I'd make them maintain loss reserves to reduce the amount of risk they take (kind of like banks), and I'd eliminate calls and puts too, as they tend to heighten risk (through encouraging over-leveraging) and exacerbate instability, without providing any actual, you know, capital for actual companies to work with to provide goods and services. But that's just me.

04. Many good comments regarding 401(K)'s and IRA's, but k2aggie's comment about employer matches struck me funny, reminding me of Nelson Rockefeller's famous gaffe in the 60's where he said "take your average American family with an income of $100K" (at the time it was more like $20K). There are vast areas of the economy where employers do not match, or the matching vests over a period of years, or (as with the self-employed) there is no matching at all. I haven't done any recent research on the subject, but I'd guess that matching is more the exception than the rule these days. Plus, 401(K) and IRA investments tend to be buy and hold propositions, whose returns are being limited by speculation frenzy (see 03. above). So the picture is not altogether perfect.

Skyler, its nice that you think that calling me "agro girl" is effective in proving me wrong. That sort of insult hasn't bothered me much since...oh I don't know, maybe second grade?

Incidentally the government "tells you what to do" with your money whether you like it or not. Thats why they take the taxes out of your paycheck before you get ahold of it. An IRA is an Individual Retirement Account, not a savings account. If you want to access your money any time, anywhere, get a checking account...because often times savings accounts have limitations on the amount of withdrawals you can make.

For retirement savings, IRAs (and 401(k)s) are a great way to reduce your tax burden. And for that, they are a good deal, because the money is taxed either way. That's not a matter of opinion.

Thanks for playing, but you're wrong, and calling me a girl won't change that.

HT, you may be right about my ignorance as to matching and whatnot. I've been blessed with an amazing market for engineers for my first round of employment -- and every employer I've associated with does some sort of matching (some better than others).

But 401(k)s and IRAs don't always have to be stock or mutual fund based, and I believe you have a say in how the money is managed -- so take a cash position during this mess and avoid the trouble.

Incidentally I don't feel too badly for people who are self-employed when it comes to retirement accounts. They have much better 401(k)s and IRA options than the vast majority of employed people, provided they're making enough money to utilize the increased percentage maximums. And self employed 401k plans allow you to borrow against your own account, tax free and penalty free. Wish I could do that with mine...

k2aggie: I was not trying to say that you were "ignorant", just that you were extrapolating from your own very fortunate experience and being a tad over-optimistic as regards the rest of us.

I do strongly suggest, however, that you reconsider your thinking about "taking a cash position during this mess". That is market timing, and it almost never works for the little guy. If you feel lucky enough to time the market, my advice is to go buy a lottery ticket and wait until the feeling passes. One of the things that tilts the playing field towards the big players is the tendency of smaller investors to "buy high and sell low". Taking a cash position now gives you a better than 50% chance of doing just that.

Unless you are a hedge fund manager, of course, and in a position to actually influence the markets with well-timed statements of panic. In that case, put all your money in cash (or short positions; aargh) and then make that call to CNBC to set up the interview with Cramer.

Sorry agro boy, I assumed incorrectly that you were a girl.

And again, it's a matter of personal opinion as to whether you want to reduce a tax burden now or later. You're assuming that your taxes will be less onerous in the future.

Retrocop - Give your doggy a good steak! :) Or some ice cream if he prefers. Glad you're okay!!!

I do NOT understand why this is such a big deal. We were never even OFFERED anything other than a 30 or 15 year mortgage. We got a VA loan for our first house (where we still live) with no down and reasonable payments. I don't remember our broker guy bugging us to do anything we didn't want to do. If there are bankers and lenders out there pressuring people who obviously can't think for themselves I think both parties are to blame. As my mom says, it takes two to tango. I never would have gone for a non-fixed rate. That's what refinancing is for.

We've since refinanced three times in 5 years. Our house has gone up over $100k in value in that time and we have not taken out all the equity in any of those refis. We improved our home with the refis...new fence, new windows, new fireplace.

The market always corrects itself and it has volatility. People panic and make it worse (or better depending on the emotions running) which affects those of us who aren't illogical gits. We'll hang in there and things will recover just fine. There's no recession and I doubt there will be anytime soon.

There are so many moving parts at work here it's difficult to deal with them all at once. There's the "house as investment" phenomenon--especially in the last decade or so, I've seen people advising one to buy at the outer edge of what they could afford (if not more than they could afford), so they could have a gazillion dollars to retire on. My reaction: You could get hit by falling space junk tomorrow. Buy a house you can afford and have a life, instead of being a prisoner in a fancy house now so you can afford to be a prisoner in a fancy nursing home 40 years from now.

It's also true that lenders were peddling ARMs and whatnot pretty hard in 2003-2006. I remember a radio spot circa 2004-05 making the claim, "You always lose when you pay a fixed rate." I used it as an informal case study (Is this ethical? Why or why not?) in the first session of the graduate business ethics/corporate governance course I was teaching at the time.

Then too, some have got an otherwise affordable mortgage, but they also have $1,000 per month in car payments sitting in the driveway (and I don't judge, because we had two car payments, though they came to only about $550 between them) and $40,000 in credit card debt.

HT,
Don't sweat the ignorance. I know I'm ignorant about a great many things; the revelation doesn't bug me.

I'm a believer in the IBD (or, William O'Neil) method of making money -- which is sort of "buy high, sell higher". I'm only "in" the market when I think its stable. Instead of fighting those big hedge funds, I try to piggy back along their success. Works pretty well for me at least; I had a net 32% return last year.

Castro,
There may be a recession -- its hard to say. Jim Cramer certainly thinks so. Although its been theorized that he's just continuing to stir the stuff up in order to make money on the volatility, or even that as a liberal he's on board with the "hating Bush is more important than loving America" plan and is encouraging an economic downturn to help the Left out in '08. I don't know. Anyone who professes to understand the market is stupid or lying or both.

Rachel,
I honestly don't know why this bothers you so much. By and large the market only affects those in the market...unless this causes a huge downturn, which I tend to doubt. The only thing that would really "hurt" America would be a big enough down turn that it would force up unemployment or cause massive inflation (or deflation). But I don't really see that happening.

Um, I have no idea why you all are jabbering on about IRAs, mortgages, retirement and so forth.

I have it on good authority that US Ship is close to sink. Its all for nothing.

The upside is the housing market is excellent in Pakistan. Just last year over 10,000 new caves were carved.

Oh my god thank you. "Exactly" and all that. I don't understand it.

Wait a minute. Jim Cramer a Liberal? He may not be a dyed-in-the-wool Conservative, but I'd hardly call him Liberal.

Wait a minute, you meant that other analysts out there are saying that, right?

Car: cash on the barrelhead.
Truck: cash on the barrelhead.
House: walked in, said "this is the house we want and this is the mortgage we want to finance it, kthxbye"

We could probably make out better by actually learning about and taking advantage of various Lending Fu tactics, but I still get irritable when I contemplate the fact that I owe anybody any money at all. It's a personality tic, but one that's kept me clear of a lot of money trouble.

I don't particularly have a problem with people who are horrible with numbers- in all honesty that would be the pot calling the kettle black- all I have a problem with is the attitude that there is no moral duty or obligation on the part of a debtor to a creditor. No matter what slime they may be personally, they are paying for your nightly shelter. That's nontrivial.

LabRat, I don't see anybody standing up for the proposition that debtors owe no moral duty or obligation to the creditor. But the creditors deserve no sympathy if they've knowingly, greedily made bad business risk decisions. This is particularly so where they encouraged, pushed people to take out loans which were too big for their budget. Sure, the person still owes the debt, but the creditor shares in the responsibility. If they didn't want to take such a large risk of default, they should have had different marketing techniques and made different decisions.