Large housing slump! Let the good times roll!

[DanS]

J.H.C.

Care to provide any details, PLATO?

I know you're probably not looking for any advice, but my dad is a wildcatter, another high-risk business. He didn't know any better (and didn't want to learn), but the need for a reasonable hedge investment in a non-related business was seared into my conscience from a young age. Almost everybody in the oil business went bankrupt in the 80s.

[PLATO]

After 20+ years of dealing strictly with subprime mortgages, it would be hard to imagine the proper hedge that would make me comfortable! haha.

Still, the error in judgment that I made was mirrored by the likes of Citi, Bear, and Merrill...so I'm not in that bad of a company.

Funny thing is that I think that the secondary mortgage market will experience a mini boom in the next 6-18 months. The write offs that have been taken are much higher than the actual losses that are expected...the timing was just good for "worst case" write downs. Once the investors realize that they are dealing with better instruments than they now think, then they will return to the market in a strong way. The investment banks will return massive amounts to the bottom line as profit as well.

It is also not like I am done just yet eithier. If the 6 month threshold is correct, then I can survive that. If it isn't then....

What most people don't realize is that this crisis really started in earnest in November 2006 and in some respects as early as October 2005. That's a pretty long time. The problem for me is that I didn't forsee the depth of what has happened.

The recovery will come in stages and when done it will still only be about 40-50% of what it was in the early 2005 peak. The thing for me is that it doesn't have to be a boom. I can find a way to make money at any level of activity here...it just needs to have SOME activity!!

Nevertheless, there are options. They are not as atractive as what could be doing this, but they will keep me going...I hope.

[Lancer]

$700,000. I never had that much to lose, sorry Plato. If you have the brains to get there once you can do it again.

[DaShi]

You all should have sold your beanie babies when the market was hot.

[Patroklos]

Do you not invest in teh stock market? No 401(k)?

10% of my pay goes into the Thrift Savings Plan, which is the military's version of a IRA. It has not taken a hit.

Even with the stock market where it is, whether or not you lose money depends on where you are invested of course. And just because your stock is down now, doesn't mean it always will be. If you can ride the slump out, and are invested in areas that can be expected to ride it out, patience will save you.

[DanS]

Originally posted by PLATO
After 20+ years of dealing strictly with subprime mortgages, it would be hard to imagine the proper hedge that would make me comfortable! haha.

I hear ya dude. If you were unable to handle this level of risk psychologically, this industry would have spit you out long ago. Also, you're sticking with a business that you understand and where you know how to make money. However, let me advance the argument a little further...

Looked at another way, you have deprived yourself of making opportunistic investments in this business, which in my view is almost a sin. If you had kept a little powder on the side, you could be pounding away right now.

By the way, what's the secondary market? Is it refinance?

[DanS]

The Thrift Savings Plan is a great program. However, as a rule, all of the available investment options within the program track the market by definition.

[Kontiki]

Originally posted by DanS
By the way, what's the secondary market? Is it refinance?

Securitization, presumably.

[VetLegion]

Originally posted by chegitz guevara
Sorry to hear that PLATO. Perhaps you should become a commie and take revenge on capitalism for destroying your wealth. You worked hard for that house, and now, through no fault of your own, speculators and corrupt practices have taken that all away from you. It ain't right.

You don't miss an opportunity to recruit, do you!

[Kidlicious]

Someone has to counteract all the DanS'es

[Kidlicious]

Originally posted by PLATO
I have you beat L.S. !!

I've lost about several hundred thousand dollars of net worth this year! If the secondary mortgage market doesn't show some sign of life in the next 4-6 months then I will be totally bankrupt!

Hang in there bud. Money isn't happiness.

[Arrian]

It helps, though.

Best of luck, PLATO.

-Arrian

[PLATO]

Originally posted by DanS


I hear ya dude. If you were unable to handle this level of risk psychologically, this industry would have spit you out long ago. Also, you're sticking with a business that you understand and where you know how to make money. However, let me advance the argument a little further...

Looked at another way, you have deprived yourself of making opportunistic investments in this business, which in my view is almost a sin. If you had kept a little powder on the side, you could be pounding away right now.

By the way, what's the secondary market? Is it refinance?

You are probably right that I should have done a few things differently over the years...eh, make that definately right. My career has spanned two marriages and has involved raising two kids. I put my ex wife through nursing school and supported her and her new husband while she was doing it (voluntarily I might add!) and have tried to give my kids the best environment in which to prepare them for life (best neighborhoods...best schools, etc...). Sure, I lived well, but I always had an eye toward saving some for a rainy day. Who knew it would be a monsoon!?!

The secondary market I am refering to is indeed the securitization market that Kontiki refers to. Primarily, for the last few years anyway, my living has come from assembling and selling large subprime loan portfolios. All is not terrible however...I am now working for one of the largest investment banks in the world. Still, there needs to be some outlet for loan packages or there is no money! (nice benefits though!!).

Originally posted by Kidicious

Hang in there bud. Money isn't happiness.

I sooooo agree. Money has always been one of the least important things to me. I've been broke before (although it has been a while) and I enjoyed life then too. It is no so much being broke that worries me...it is the process of going broke that is so bad.

Like I said earlier, I have my confidence in myself and my skill set. It is only a matter of time before things will change. And if they don't, I have my family and that's what it is really all about for me anyway.

Originally posted by Arrian

It helps, though.

Best of luck, PLATO.

-Arrian

Many thanks! And many thanks for everyone's well wishes.

It is just another phase of life...to be savored for the experiences and lessons that are to be learned. That which doesn't kill us makes us stronger!

[Kidlicious]

Originally posted by Arrian
It helps, though.

Best of luck, PLATO.

-Arrian

I don't know about that. In my life I can honestly say that I've been happier when I was poorer. That's more of an individual thing though. And Plato is right, getting poor sucks. It takes an adjustment.

[Vanguard]

Originally posted by PLATO


1) The bottom 40% of all taxpayers had ZERO federal tax liability last year due to the tax cuts as well. I would say, however, that the increased disposable money for the rich went into investments and may have marginally helped fuel the easy credit that was available...but only marginally.

It doesn't matter if they never have any tax liability. So long as the rich don't pay enough to close the deficit, the net result is that everyone else will pay for it in one way or another.

2.) Most (but not all) of the debt is war related. This incredibly helps a limited sector of the economy, but does little else across the broader economy. The North Virginia boom can certainly be attributed to this, but not the general run up in housing prices across the country.

Debt is a fungible, it affects the entire economy. Money is money, whether it is used to maintain health care or increase war spending. Of course, increased spending on the war undoubtedly affect certain sectors of the economy more than others. But that money is still owed by everyone (theoretically anyway).

3.) Generally accepted economic theory will tell you that goverment dollars injected into the econmy will produce $2 of activity fo every $1 the government spends. This is a general impact and not specific to the rich...that is a fallacy of propoganda. Increased economic activity may well mean increased profit fo the wealthy...it also means risk for them. In addition, it generally creates jobs for the middle and lower income brackets.

There are no generally accepted economic theories.

4.) Inflation is what will take care of the debt. The fed is already facing the dilema of inflation vs recession and they are going to opt for inflation if they can.

If we inflate out of the debt, how do we close the deficit? Who is going to lend us the money to continue government operations, when that debt will just disappear?