Thursday, January 19, 2006

FB Friday

Another week has gone by and it is time to look at some possible FB's. It has been a busy week and I'm ready for the about you!?!??

Let's get moving...

How about the borrower I looked at this week that had 11 mortgages on his credit report. The broker told me it really wasn't that bad because they had just sold 3 of the places, and were buying one new one, so there would only be 9 mortgages when it was all done. The borrower had credit in the mid 600's. The problem is that the remaining 8 mortgages totaled well over 4 million combined. I could tell from the credit report that 4 were neg-ams, 3 were interest only, and 1 had actually been paid down several thousand dollars. How did I know they were neg-am? Easy, on a credit report there is a column that says loan amount, and then there is a column that says loan balance. If the loan balance is higher than the loan amount, then wallah! know the borrower was making the neg-am payment. The other 4 mortgages were several months old, but the loan balances were the same as the original loans. Then there was the lone loan (ha ha) that actually had the balance paid down 10's of thousands of dollars. There wasn't really any way for me to know the LTV's of all those loans, but several of the loans were in the 600k-900k range and I assume they were in the 80-90% range. Aside from the problem that this person owned too many properties, and needing to do a stated income / non-owner occupied property / with I/O, they were also losing about 10k a month on the properties they were renting. Needless to say, I didn't need to get into all of the specifics with this one, as I knew I couldn't do the deal.

This situation took place not to long ago, and it is one of those situations where I was actually able to help an FB. There was nothing out of the ordinary with the file, except that they had a 1st, a 2nd, and a 3rd lein on the property. Ok, no big deal, the 2nd and 3rd were small loan amounts, there was plenty of equity, we'll just pay them off. Things got interesting when I got a call from my account manager on the inside. They informed me that when they pulled title, there were multiple (5+) hard money leins on the property! Somehow this borrower got behind on making payments to his hard money lender, so they just kept borrowing against their property to pay their loans. Fortunately for them, they had enough equity and a solid appraisal. It took some work on my part, but the deal made sense, and it really did help the borrower get back on their feet, and have a loan with a 'legitimate' lender again.

I looked at 2 loans today where the borrowers had the same problem...having 90-day mortgage lates, and then wanting/needing to refinance and pull 100k or more out. It doesn't take a rocket scientist to see what is happening when somebody can't pay their mortgage, and they want to refi, and pull out 100k or more. No matter what they say, what do you think they need the money for?!?!?

All in all, I'd say that activity is picking up some, but whether or not that translates into business is yet to be seen. Seems that people are waking up from the holidays and looking at credit card bills and the upcoming tax season. Seems that brokers are seeing mostly A-paper deals and some ugly subprime. I have gotten more calls this week than ever before with this question: "my borrower has a loan with your company, if they refinance it with you, will you waive the pre-pay penalty??" Unfortunately, the pre-pay penalty is generally there to compensate the investor, but there are some cases where lenders will make an exception, but not usually on the subprime side. It will be interesting to see how it all pans out.

I hope everybody has a great weekend!



Blogger WArenter said...

Back in the olden days (5 - 10 years ago), didn't you have to have pristine credit, and lots of assets with cash flow in order to be able to borrow several million dollars? But now anybody can do it?

1/20/2006 1:22 AM  
Anonymous Anonymous said...

Warenter, haven't you heard of freedom?

We are now free to take as much loan as we want. Soon we are all free of our assets and jobs also. It's freedom! It's liberating! It's wonderful, it's the american dream!

1/20/2006 1:41 AM  
Blogger Jim A said...

Why don't these people just sell? If you can't meet your mortgage, but you've got 100k equity, selling will cure your ills. I really don't understand what they're thinking.

1/20/2006 4:55 AM  
Blogger Silver Lightning said...

I think the reason they don't sell is that they still believe that their properties will continue to go up in value. Also they couldn't allow themselves to be renters what would the neighbors think? Everybody thought they were making the big bucks driving the new cars but come to find out they were refi junkies!

1/20/2006 5:27 AM  
Blogger Tyler Durden said...

Why don't these people just sell?

Because they can't sell under a certain price or they'll get nailed by a domino effect. Let's say he bought a house at 400k and needs to sell at 450k to cover the transaction and interest costs from flipping the house. If he sells at 400k he's 50k in the hole and probably can't absorb that hit, and every subsequent property he sells puts him further in the hole.

As soon as appreciation stops these people are essentially bankrupt. The only way to buy 4M worth of house and survive is to sell them at profit, unless you're a basketball player or very highly paid.

If this guy goes bankrupt (which is the easiest way out for him), that's 8 more properties on the market, driving prices down and increasing the chance of another multi-home owner going under. It's kinda like a butterfly effect, but think "Mothra".

Then add in the losses to the lender of the mortgages, who in turn need to lay off people to try to stay profitable. Then these people are out of a job, can't make payments. Realtors are out of a job, can't make payments. A portion of the construction workers are laid off can't make payments. Then these people stop spending money, so the car dealerships and other commerces lay off people, who then can't make payments. Bang.

1/20/2006 6:11 AM  
Blogger panicearly said...

forgive me as this a bit off, but just a thought as i read your butterfly effect.
Even Best Case Scenarios can still be an FB. Imagine you make say 70K/year and bought a 400K house in 04 or 05. In 06 it drops 15% or 60k. you can still make payments so all is under control.
You get a job offer at another company for 105K/year but it requires a move . a 50% increase in pay, best case scenario right?
In order for you to move up in your pay, you have to fork out 60k plus closing costs. atleast 75k.
After income taxes it will take 4 years in you new higher paying job
just to break even. so even in this good scenario you are an fb. your flexibilty is gone even to take advantage of a good opportunity.

what would you do in this scenario?

1/20/2006 6:48 AM  
Blogger Rob Dawg said...

There's a complicating factor in California. You cannot buy smaller to lower your costs. My house for instance would cost the same in taxes as the current mortgage and taxes combined. So basically if I went from my current place to a sh@tb@x with no mortgage I'd still need to keep the equity in a T bond to pay the new taxes.

1/20/2006 7:06 AM  
Blogger Lou Minatti said...

How about the borrower I looked at this week that had 11 mortgages on his credit report.

SoCal, how does this happen? Seriously. I have a spotless credit record and when I bought my house 10 years ago for a comparatively piddling amount I had to provide everything except my blood type.

Where are the banking regulators? If the FDIC (my tax money) is insuring the safety of the accounts in these banks (hello, WaMu!) and they fail due to these absurd loan practices, this will cost ME money, even if we don't bail out the stupid homeowners.

What sanctions are there? Criminal? If not criminal, surely these assholes can be sued into poverty. I cannot express fully how much this pisses me off.

1/20/2006 7:52 AM  
Blogger mtnrunner2 said...

lou minatti - the banks don't hold the loans. The risk of these loans is transferred to the investors, such as pension funds and foreign central banks. These large organizations buy the mortgage loans, which are packaged as mortgage backed securities according to risk. They earn a higher return than they would on a T bill, and they feel it is secure debt, because they assume it is backed by the government. Every time I refinanced (for a lower rate), my loan was sold within 2 payment cycles.

My question is this: when these borrowers default, will we see a glut of headlines about corporate and government pension funds in trouble? Will the gov't bail them out?

When will the Chinese stop buying our MBSs?

I regret that I didn't know about the easy lending before. I could have made so much money flipping houses. I thought you needed a down payment to buy a house. I now know that painters, fedex drivers, dishwasher repairmen, and anyone smart enough to get a drivers license has obtained easy financing to flip properties. They've made lots of money.

Another Q: the commodity buffs say gold is the place to be. But since gold is no longer tied to money as a reserve currency, isn't it just another commodity? Couldn't it crash from its current $560 back to $280, as it did in the 1980's? Why would anyone put all their money in gold? Are the gold bulls like the RE bulls, that they are only promoting their own product, bec. they make money when someone buys it?

1/20/2006 8:31 AM  
Blogger AZgolfer said...


I can not believe the loan amounts this guy got either. 14 years ago when I bought my house I had to provide all kinds of documentation. I rented a room from my old room mate and he had not cashed my rent checks right away. I had to get a letter from him saying that he held the checks until it was conveniant to deposit them, not because I did not have the money to cover them. I have excellent credit and was only borrowing 85K.

1/20/2006 8:56 AM  
Blogger slo-ca said...

mtnrunner2 said:
"I regret that I didn't know about the easy lending before. I could have made so much money flipping houses."

Did the flippers make a lot of money and take it off the table is the question. Most flippers kept rolling the $$$ into new flips and won't get out in time, just like the dot-bomb crash. And the flippers who did get out will owe massive taxes because they don't qualify for the personal residence exclusion.

We decided to sell a rental property we've had for 15 years and even at the reduced capital gains rate (which flippers won't qualify for) we're looking at $76k in taxes owed. So I wouldn't be too eaten up with envy, frankly.

1/20/2006 9:29 AM  
Blogger drwende said...

Back in the olden days (5 - 10 years ago), didn't you have to have pristine credit, and lots of assets with cash flow in order to be able to borrow several million dollars? But now anybody can do it?

Two speculators I watch in our hinterlands...

One currently owns 8 rentals, all of which have to be losing money unless some other shenanigans are going on. For down payments, she sold three older rentals (bought in the early 1990s and held until they regained value), then refinanced her primary residence (in a much more expensive region) to cover the other down payments. Didn't banks used to dislike having the down payment come from a loan? But it gets better -- 7 months later, with higher interest rates, she did a second refi. I think this one is to cover her losses. She's on the hook for around $3 million in mortgages, possibly more.

But #2 is better. He's a realtor. Has been buying frantically for the past year, occasionally swapping various partners' names on and off deeds. My conservative estimate is that he's losing $10,000 a month. He has a dozen or so mortgages (it takes a spreadsheet to keep track) and just bought a $700,000 new home from the builder. He also "bailed out" a over-leveraged client of #1 by getting his name on their mortgage.

I shake my head. I'm writing fiction about the bursting bubble, and my MADE-UP characters are doing LESS wacky things than what I see in real life.

1/20/2006 9:49 AM  
Blogger DCgirl said...

panicearly -

Assuming the guy in your hypothetical was responsible and put down 10-20% and got a "normal" mortgage (i.e. 30 year fixed) then I would advise him to keep the property as a rental and rent in the area with his new job. The rent would not cover his mortgage but with his higher income - he should be able to afford the mortgage and renting.

Of course renting out a property is a major pain but if he can hold the property long term - he'd be able to ride out the storm.

If he doesn't want to hold long term - I would advise him to put it on the market as soon as possible and to price it below the comps to get attention. Losing 60K in 2006 is MUCH better than losing $100K in 2007.

1/20/2006 10:09 AM  
Anonymous Anonymous said...

I don't believe how people could assume that there are no risks at all. Don't they ask themselves what if? What if property values took at 10%+ decline in 2006, wouldn't all those happy flippers lose it all! Amazing how people can get to such a gambling level.

If you put a frog in a pan full of water, then put the heat on underneath. The frog will cook to death without even feeling it.

The heat is coming !

1/20/2006 10:21 AM  
Blogger drwende said...


Someone did the frog experiment for real. The frog jumped out. Frogs can't rationalize themselves into believing that if they just stand the heat for a couple years, everything will return to normal.

Today's Sacramento Bee included realtors rationalizing that the huge number of expired listings in December (exp = 86% of sold, up from 12% a year ago) all belonged to people who were just testing the market and didn't really want to sell, so those houses won't be listed in the spring.

Oh, and a professor saying that the $400k houses will remain at that price. Never mind that they were $200k three years ago... and that Fair Market Value Rent is still consistent with the $200k value.

1/20/2006 10:55 AM  
Blogger WArenter said...

I remember when, if you got the down payment from a family member they had to submit a letter stating the money was a gift, not a loan.
I talked to a guy who does neg-am loans for seniors for a large bank, he wasn't the least bit concerned about all the loose credit. He told me the banks have looked at the ability to pay and the intention to pay (credit score) and statistically these people pay, so no problem!

1/20/2006 10:57 AM  
Blogger drwende said...

I remember when, if you got the down payment from a family member they had to submit a letter stating the money was a gift, not a loan.

Yeah -- we had to document up the wazoo when we bought a house in 1999. And we had great FICOs, were buying a less expensive house than we sold, and could have qualified for triple the mortgage. (I talk about renting because we sold in 2002 and moved cross-country.)

BUT WAIT! In my yahoo mail, Countrywide is now running BIG animated ads promising "4 out of 5 applicants approved. The page it links to offers subprime, no-doc, 125% LTV seconds, debt consolidation... everything risky. How desperate is a mortgage lender when they run big banners in yahoo mail?

1/20/2006 11:07 AM  
Blogger SoCalMtgGuy said...


The banks are driving forward by looking through the rear view mirror.

They see the low default rates, and keep lowering standards and lending away.

They will probably be thinking twice in 2007-2008 when they start seeing what they have been "driving through" in their rear-view mirror.

Also, the banks would NEVER rationalize something that was making them lots of money at the moment. After all, every other bank is doing it, so it can't be wrong!


1/20/2006 11:28 AM  
Anonymous Anonymous said...

Mtnrunner2 -- To address your question on gold. You said" But since gold is no longer tied to money as a reserve currency, isn't it just another commodity? "

This is a complicated issue, but those of us who own gold would say that "gold is in fact money" The US $ is THE reserve currency but that could be coming to an end soon. Alot of the recent action in gold has been spurred by foreign buying. Think about it this way--- considering the fact that many of these countries are holding huge amounts of $'s because of their trade surplusses with us they are starting to wonder why they should hold the bag and watch their holdings decline in value,which will inevitably happen as the US inflates its currency (creates more $'s out of thin are--which is what the Fed does).Thus gold is viewd as an alternative--really the only currency not controlled by politicians. My suggestion is you go to Jim Sinclair's site and look around. he is known as Mr Gold and does a great job educating on his site.

1/20/2006 11:56 AM  
Anonymous Anonymous said...

Here's a great article that proves exactly what this blog has been saying all along - borrowers don't know what they're doing!

1/20/2006 12:12 PM  
Blogger grim said...

Centex Home Sale Ad Parody

You'll get a kick out of it.


1/20/2006 4:38 PM  
Blogger Jim A said...

The lack or risk premium in the current low interest rates on mortgages compared to the fed funds rate reminds me of the old blonde joke:

Accountant: According to my figures, at these prices you LOSE money on every sale.

Blonde Businesswoman: That just shows that you don't know anything about business, we make up for it in volume.

1/20/2006 4:51 PM  
Anonymous Anonymous said...

Hey, by the way I think the word you are looking for is 'voila' not 'wallah'. ;)

1/20/2006 5:21 PM  
Blogger Stephanie 81 said...

LOL @ the following:

-Grim's ad parody

-SoCalMtgGuy saying "wallah" instead of "voila"

1/20/2006 5:42 PM  
Blogger WArenter said...

"The banks are driving forward by looking through the rear view mirror."

Yes, I think you're right. With house prices increasing & interest rates low, everything has been full steam ahead, no problems. Once this fiasco is over it will probably swing the other way and getting a loan will require a DNA test to see what hereditary diseases might take you out before the loan is paid off.

1/20/2006 7:46 PM  
Blogger mtnrunner2 said...

anonymous2 - I poked around jim's gold site, and he conveniently charts gold since 2002. He excluded the low price of the 1980's where gold was under $200/oz, I think. My greatest fear: gold is the next bubble, and commodity and stock bubbles can crash overnight. Gold can retreat back to $200/oz, as it was not so long ago.

If the dollar loses value, what good will gold do? I can't buy Coach handbags with gold. Nor car insurance nor pay my rent with it. So it is only another commodity, subject to the whims of the traders, who buy and sell based on political fears. I sold my dream house, and I'm not about to lose all the money by chasing gold. It's going into a CD, FDIC insured, earning 4.5% interest. Now that's as safe as I can get. Any objections?

Can anyone guarantee that buying gold is a safer place for my money over the next 5 years than buying an FDIC insured CD earning 4.5%, and 5% by this spring? Can any of you gold bugs guarantee that gold won't go back to $200/oz or whatever it was in the 1980's?

1/20/2006 8:20 PM  
Blogger yayatb said...

i put my gains on a foreign country's cd..paying 13.5% per anum. their currency will gain should the dollar fall..

1/20/2006 10:05 PM  
Blogger mtnrunner2 said...

yayatb - In my MBA finance courses, we learned that higher yields are due to higher risk. Investors must be compensated for the additional risk they take by getting a higher yield. Oh my gosh - what kind of risk are you having to take to get 13.5%? Is the account not insured? Is it due to political instability?
Keep in mind that pension funds are chasing higher yields by buying MBSs, and we know how risky those are - yet I bet they are getting less than 10%. Anyone know? Yikes - be careful with those high yield investments.

1/20/2006 10:45 PM  
Anonymous Anonymous said...

A little bit of Interest Only, a sprinkle of Negative Amortization and a dash of an ARM and WALLLAH!!! Juan the Mechanic get the keys to his new 700k home in Fontucky California. I mean VOILA.

1/21/2006 12:14 AM  
Blogger ocrenter said...

"How about the borrower I looked at this week that had 11 mortgages on his credit report. The broker told me it really wasn't that bad because they had just sold 3 of the places, and were buying one new one, so there would only be 9 mortgages when it was all done."

Socal, this senario sounds just like the extreme flippers on my blog. seems like they are all over the place!

1/21/2006 12:53 AM  
Blogger Karen said...

Yesterday, in my mail, I received a flier from the local Remax agent and a mortgage broker with the headline, "Give us 5 minutes to show you how to sell your townhouse and buy a new home with NO MONEY out of pocket and your payments could be the same that you are paying now!"

With this completely stunning headline are three photos; one of a very nice townhouse up the street from me (about $350k), and two more of single-family homes in the $700k-800k range.

Egads! Now, how in the world is someone in my neighborhood (average income about $80k) going to afford a house costing three-quarters of a million dollars, much less with the same payment and no money out of pocket?

Unethical doesn't even begin to describe this scumball agent and broker.

1/21/2006 9:32 AM  
Blogger yayatb said...

mtnrunner2-- Agreed..risk/reward..I also took that on my upper division MBA GE class. My investment is in a third country that I came from, have internal contact, and is very familiar with its political and economical conditions. It has passed the bottom of its crisis in 1998-2003 and its only going to improve...especially when the US econ is yet to be predictable... again I am fully aware of both risks and reward...maybe in 2-4 yrs I'll come and invest in the US again...let's see..Gold is over hyped. Emerging economies is the way to go...

1/21/2006 10:12 AM  
Blogger Obiewan said...


All investments inherently carry some amount of risk, as you likely know already. I bought gold because I am convinced that the dollar will lose its value in the near future, once purchasers of US securities realize that the greenback is not worth the paper it's printed on. I agree with you that gold may be the next bubble, and if you are willing to profit from it the reward will be handsome.
I bought 60 oz @ $422, then sold 30 oz @ $562 (yesterday), for a profit of $4200. I then used the money to buy me a motorcycle. So you see, gold can buy stuff...

1/21/2006 10:27 AM  
Anonymous Anonymous said...


you decide.


1/21/2006 10:47 AM  
Blogger jack mehoff said...

It seems to me the housing bubble is the creation of Generation X, the kids who buy houses with no money down, no interest, you know the rest. Mention this theory at your own risk. These little folks are easily pissed off but the good news is they can't refute the claim. They need to learn how to work, save and buy a house the old fashioned way.

1/21/2006 4:04 PM  
Anonymous Anonymous said...

The lack or risk premium in the current low interest rates on mortgages compared to the fed funds rate reminds me of the old blonde joke:

Accountant: According to my figures, at these prices you LOSE money on every sale.

Blonde Businesswoman: That just shows that you don't know anything about business, we make up for it in volume.

Funny. I didn't realize that the CEO's of F and GM were blond women.

1/21/2006 5:32 PM  
Blogger ff2017 said...

Housing Bubble is the creation of the irresponsible policies of Alan Greenspan run federal reserve by pumping inconsiderablw amount of money into the financial system, cutting short term rates (creating that steep yield curve of 2002-2004). In actuality it's really more of a credit bubble that is causing all forms of asset inflation whereby the housing sector is the most visible component.

Also don't blame the GEN X-ers. The older ones graduated from school to face the early 90s recession. The younger ones had to graduate and face the tech bust.

It all goes back to the most privileged and spoiled generation, the baby boomers. The ones with the financial means to refi and spend to keep the Y's nice and pampered.

As for gold and guarenteed investments, SoCal posted earlier, there are no guareentees in investments, one will just have to do their own DD.

As far as a bubble, since the 70's the dollar has lost 75% of its purchasing power. So $500 gold now, is the same as $125 gold then, I would hardly call an ~84% drop from gold at 800 then, to an 1970s inflation adjusted $125 a "bubble"

1/21/2006 7:55 PM  
Blogger ff2017 said...

re: 13.5% CDs and higher risk.

Theoretically assuming you are buying the equivalent of a bank cd in the foreign currency, it should be the most "risk free" possible investment in that country's currency (assuming similiar FDIC type insurance for argument's sake) The key is not the size of the nominal return by the real return. Assuming say an inlation rate of 13% you'd be getting a real return of just 0.5% if inflation is higher say 16%, then your return would be equivalent to the negative 2.5% rates that we in the US got from 2002-2004. Heck even with the 4.25% Fed Funds rate we have now, we're still chugging along at negative real interest rates of ~1%.

SO that 5 year 4.5% CD discussed in an earlier comment is LOSING 1/2% a year. Heck Oct-Dec inflation was running at 9% So (s)he'd be losing even more.

1/21/2006 8:07 PM  
Blogger mtnrunner2 said...

ff2017 and objewan- gold was $589 in 1981, $397 in 1982, $305 in 1985.

If $589 is like $1500 today, then gold has been cut into 1/3 of its value. I find this very risky business, this gold that can rise and fall like a balloon. It's another bubble, but unlike a house, it falls within seconds like a stock.

Also, it is not a "safe haven". No matter how inflationary or devalued the dollar, I cannot pay rent with gold, and if I own gold, and need to sell it to pay my rent, I could lose half my principal. Gold was $288 in 1998. Very risky stuff, this gold.

obiewean - You were LUCKY obiewan to sell gold high after buying low. But you could have been unlucky as well, and have been holding it on the way down. The fact that you made money is not because of the nature of gold, but of the rules behind the game of trading commodities.

If gold was really such a safe haven and a good investment, it would only go up. But that it does not do.

The only safe haven is an FDIC insured CD, and that is only as safe as the ability of the government to back the banks. But a CD is much safer than gold, because you can go back to the time of FDIC insurance and compare CDs and gold, and it's easy to see that you could have lost money in gold, but not in a CD.

1/21/2006 11:01 PM  
Blogger yayatb said...

inflation aside...if the currency of a foreign country's is stable to the us $..then it is considered at par (since buying $1 is the same today as 6 months from now)..However, you are no longer connected to the risk of a falling $ fact it is an advantage to hold other currency... If you want a sure min risk investment, then the US cd @ 4.7 is good enough..but I think you might want to have a safer (non $) and higher return. Gold was good a year ago...I'm not sure now.. but if you do dd on other investment options, you might find one that will best fit your risk/reward tolerance.

Here is an article about the trend of US investor shifting from US investing to other countries...

"U.S. investors have been putting their money where the growth is. In 2005, they put more money into international stock funds than domestic funds for the first time in more than 20 years, according to Merrill Lynch.

It looks like that trend is continuing. During the four weeks that ended Jan.4, 2006, investors pulled $2.07 billion out of U.S. domestic equity funds, while they invested $802.5 million in international stock funds, according to a report by Bank of America."

good luck on your investing.

1/21/2006 11:41 PM  
Anonymous Anonymous said...

Regarding gold:

Please remember that EVERY paper fiat currency has lost ALL of its value. Every one. No exceptions. The same is coming to the US Dollar. Buy your CD's at your own risk.

Gold has been money for 5000 years. That speaks for itself.

Why did gold drop in terms of dollars in the 1990's? The central banks were selling (or leasing) their gold to drive down the price to convince 'investors' that the dollar was a safe currency. It is becoming more obvious that they are running out of gold to sell or lease, which explains the price rise over the last four years.


As for gold being cheap, that doesn't prove it's a bad investment; it proves that NOW is the time to buy. You ever heard of buy low and sell high? Gold is going to $4000 and silver is going over $200. Then the US dollar collapses, and then we use gold and sliver as money.

1/22/2006 7:42 AM  
Blogger iron56 said...

It would be foolish to put all one's assets in gold. But it's equally foolish to put them all in CDs. Macroeconomic fundamentals certainly indicate there could be a collapse of the dollar, and some insurance against that possibility is prudent. The sorts of economic policies (think "printing press") the US has been running have ended in hyperinflation in other countries at other times (think Weimar Germany), and if there's a foreign crisis of confidence in the dollar it could happen here. mtnrunner2 needs to take a broader historical perspective.

Yes, you'll get your 4.5% return. But if it takes $100 to get a cup of coffee you won't have come out ahead. Very risky stuff, this fiat dollar.

(And yes, I have some assets in I-bonds. But I also have some in precious metal. Diversification is important because nobody knows what's going to happen.)

1/22/2006 9:41 AM  
Anonymous Anonymous said...

Centex seems to be having problems unloading their properties. They are offering discounts up to 25% in

SAVE $105,000 - Centex Close Out - NOW $294,000 - NEW Single Family
Home in Martins Crossing - 4 Bedroom, 2 Bathroom, 2 Car Garage - 1,695 sf. - BEST DEAL OF THE YEAR!

SAVE $65,000 - Centex Close out - NOW $239,000 - NEW Town Home in Lexington Lakes - 3 Bedroom, 2.5 Bathrooms, 1 Car Garage - 1,777 sf - BEST DEAL OF THE YEAR!


1/22/2006 11:12 AM  
Blogger mtnrunner2 said...

yayatb - foreign equity funds are good for my retirement account, but not for money I will need in 2 - 5 years. Also, in the next recession, as the US consumer pulls back on spending, asian economies will be hurting and their stocks will fall. In regard to foreign currency CD, I trust the euro, but it is paying only 1.x % interest. Iceland pays over 6%, but that implies a higher risk. I don't know why they pay so much, so I'm going for the safe bet. I don't want to lose even 1% of my housing money - I just sold my custom built home, and if I invest foolishly, it will all be for naught. I cannot do that. If I'm going to lose it all, it would be better to stay living in it, and lose it w/ loss of equity.

Anon gold - an interesting link. I read it. Am cautious of conspiracy theories. Also, gold has been up and down since the 1980's (that's as far back as I looked), and I can't say for certain that each fall is related to central bank sell-off and eaach rise is related to investor purchase mania. How many rises will be prevented by central bank sell-off? They are smarter and more powerful than me. If they can manipulate the market like this, I will for sure stay out of it. Also, no matter how devalued the dollar gets, will we have a time when we can pay rent with gold? I didn't say gold is cheap - it's very expensive right now. Perhaps the next bubble. Commodity bubbles, like stock bubbles, can pop in a flicker of a computer switch, and are too risky for me. I appreciate your ideas though.

1/22/2006 4:56 PM  
Blogger mtnrunner2 said...

I know I'm off topic with my gold questions, but I don't want to be another f@cked homeseller, having sold my custom home to prevent equity loss, and then losing all the money in a speculative investment. The safest investment, where you won't lose principal (but the least potential for upside) is a CD. My mother put all her money into CDs in 1980, and I desperately tried to get her to buy stocks. But hey, she still has all her money. And if the gov't goes bankrupt and the bank goes under, I think having gold won't help much. I say that because we need humans to keep electricity flowing, groceries stocked, trucks moving to fill warehouses, gas stations filled with gas. If none of those people get paid, why would they work, and what good is it to the few people who have physical gold? So a situation of utter upheaval would render gold useless anyway, so I'll just live in the practical reality for now. So I'll be another unf@cked homeseller for now.

1/22/2006 5:02 PM  
Blogger iron56 said...


You may want to look at Chapter 7 of Otto Friedrich's Before the Deluge: A Portrait of Berlin in the 1920s (Harper & Row, 1972) on the German hyperinflation. In fact the people who got wiped out were exactly the sensible middle-class folks who'd put their savings in banks and in other mark-denominated assets. Those who prospered were those with hard assets (incl. gold) and foreign currencies. History is not on your side when you claim that "a situation of utter upheaval would render gold useless anyway."

Btw, the destruction of the German middle class (and the searing memory thereof) was a factor in the rise of Hitler less than 10 years later.

1/23/2006 5:01 PM  

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