Are you guys hunkering down money wise?

[LMTC]

They were risking what they were either living on, or would be living on within 5 years, by being in equities which is against every financial advice I've ever seen. They bet and they lost. What other verb should I use than 'deserve'?

You just changed the parameters. First you said "Anyone who was either; (1) Retired (2) Within 5 years of retirement", then you amended that to "what they were either living on, or would be living on within 5 years". The two are not necessarily the same. As I said, 40% of my net worth (or about 37 cents now :>) was in mutuals; primarily mutuals with good track records, funds in which I still have confidence. The only singular stock I own is Procter & Gamble. I did not expect to have to live on that money in the next 5 years. It was earmarked to begin drawing on it in 8-10 years, depending on circumstances, though as we all know we can't literally plan on the next breath. I sought many sources of financial advice around my first retirement, and the vast majority of what I was told was to keep that 40% actively invested if I could live off the other 60% for the next 5-8 years. I figured I could wait 8-10 and I kept it invested. I understand that what has happened was always possible, and I accept it as one of the risks, but I still don't think that equates to deserving it, at least not as I define deserve.

 

[MikePA]

You just changed the parameters. First you said "Anyone who was either; (1) Retired (2) Within 5 years of retirement", then you amended that to "what they were either living on, or would be living on within 5 years". The two are not necessarily the same.

For me...

Retired = Living on
Within 5 years of retirement = Will be living on

'Deserve' was harsh. 'What could be expected' would have been better.

 

[ultrarunner]

Why should there be consequences for walking away from a home? I don't see any problem with it. The lender and borrower both knew the rules of the game going in. It was a completely voluntary transaction on both sides. If the bank loses in the deal, whose fault is it?

I don't see why we should be bailing out either side.

Other than a ding in my retirement account, which I'm perfectly willing to wait out for the next 30 years until I retire, the only effect I've seen from the so-called 'crisis' is that gas is getting cheaper.

Integrity, there was a time when it was the norm that a man's word was his bond...

 

[NuBota]

MikePa can be very blunt - which I always appreciate, even in the times I may disagree.

I, on the other hand am generally verbose - and in this case agree. Regardless of how equity backed funds perform, IMHO, it is not prudent to count on that short term. Five years is a good number (I expect to be more conservative with 10) - the money you need to live on in that time frame should be in a low to no risk asset. You still contribute to riskier funds intended for the "out years", but continue to move more to cash as time goes on - hopefully on good returns. Heck, I'm a good ways from retiring, but have already moved a good chunk to cash. Funds and stocks that had big short term ROI, I move a good chunk (if not all) of it to "cash", 'cause I'm not willing to "let it ride".

If I'm in Vegas, start with a grand - get up to two or three grand - I cash out the net and re-start with a grand. I don't see Wall Street as being much different anymore.....

We're in this mess partly because of the need to "get rich quick and easy" and pure greed. Since I have never won even a charity raffle, I figure the first will never happen, and pretty much figure I will continue to work my arse off to satisfy the latter.

 

[Doc_Bob]

I should clarify. I was referring to our country and what may happen to folks in general. We are in good shape ourselves.

The past has always been worse.
Bob

 

[dmccarty]

I saw the WSJ article as well. What made no sense to me about leaving homes that were appraised less then for what they were bought is that just as the market goes down it can go back up. And will. If you like the home, the area, and your job pays the mortgage why take the credit hit?

Twas not but a few short weeks ago that the Chicken Little talk was about oil going to $200 a barrel. What is today's price of oil?

The financial storm we are in at the moment is serious. It COULD get really bad. But most likely it will not. The WSJ had an article last week talking about the Depression. 40% of the bank loans at the time went to buy stock. And that stock was leveraged. So people were borrowing money to play the market. When the market dropped, margins had to be met, and the ball started rolling down hill quick. Groucho Marks lost $240,000. He had to borrow against his house and life insurance policy to meet margin calls. He said/joked he would have lost more money but he did not have any more to loose. In 1929 there were very few financial institutions. And the Feds did nothing when the crash started and continued.

The Feds and other governments ARE doing something. I'm sure there will be plenty to critize when things calm down but the problem is not being ignored.

Later,
Dan

 

[BungeeII]

I haven't read through the entire thread but I thought I'd reply anyway.

To answer the original question ... YES!

The market does not scare me though, it's the government that does. The recent spending and likelihood of Democratic control of government has me worried sick my tax burden is going to increase... significantly. I don't have money to invest in stocks, I only have money to keep in my small business. The more I'm taxed, the less I can spend at work or at home. I suppose if I received earned-income credits, I'd be pleased as punch about this upcoming election. But, as a tax-PAYER, I'm scared frugal.

 

[tallyho8]

I can't believe that they are saying that the banks don't have any money to lend and so they have lowered the interest rate at the banks. It seems to me that they should raise the interest rate so more people would put their money in the banks and then have more money to lend out.

For safety sake I put my retirement savings in 5 year jumbo CDs and they are all maturing in November and now the banks are paying about 2 1/2% less interest than they were 5 years ago. With inflation higher than the interest rate I am losing money by having it in CDs.

I am considering buying a house and then reselling it with owner financing with 1/3 down and getting a couple percent higher interest than I would get with my money in the bank. I believe I could buy a house that needs some minor work and do the work myself and then even make a little profit on the sale. Naturally, I would buy one in a neighborhood where rentals do well so that if I could not easily sell it, or if I re-poed it in the future then I could use it as another piece of rental property.

 

[NuBota]

My biggest frustration is that there is no clear plan for the $700 billion bail-out. I'm afraid the money will simply become fingers jammed in the cracks while the dam still crumbles - and they'll need to find more fingers later.

Have read about some good ideas for the mortgage issue
1. Refinance EVERY mortage out there to 30 yr fixed 5.5% - estimated to cost 1/2 of the Paulson plan
2. Gov't subsidises the homeowner and requires a contract for a stake of future equity in the house

Not sure how viable these alternatives are, but at least it sounds like a fair "plan" to slow the flood of forclosures. Of course others in congress just want to grant relief to the homeowner - basically rewarding them for making poor choices. I think FDIC essentially did this with IndyMac - a house down the street from me is for sale by IndyMac - for $330K when the owner that "walked away" bought it for $420K. I'm guessing they offered this to the owner at this price (at least) before listing it to the public.

Would love to knock $90K off my mortgage - "just because". Very frustrating.....

 

[RobJ]

Even now, not all stocks are going down. In fact, it's a great time to buy stocks, cars and trucks given the prices.

Well a few days later 99.9% are going down. Technically it might be a good time to buy GM, if you didn't just sell it 3 months ago!!