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09-26-2008 | #1 |
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The economy: how fucked are we?
So just how bad is this economy really?
I'm not oblivious to the news and current events. Unlike most Americans, I'm also educated enough to realize what happens when the credit market drys up. But this industry doesn't have the real water cooler socialization that those in the "real world" face. It hit home for me tonight in an odd place. Lady who lived next door to us my entire childhood passed away, so I was at the funeral home paying my respects and seeing old friends from the neighborhood. All of them really sweating their job and the economy. Everyone asking each other if their work looked secure. These are nice middle class working class folks, the real meat and potatoes of the american economy, and they're scared shitless. It's been kinda feeling like the 70's:
This represents a huge shift of the control of our ecomony from Wall St. to the Washington bureaucrats. This gets more scary when you consider there's a very realistic chance a Marxist will be elected to be our next President. Not that the other choice is any better. Both suck. Only thing we're missing now is one more nasty event that inspires a run on the banks for withdrawals, and it's 1929 all over again. The President was on TV last night talking about the economy on the brink of collapse. So who is squirreling money away in a mattress already? I try to think long term, I'm well diversified and have a fair amount of my networth in land. But I gotta admit, this makes even me worry about not only what our cash flow may look like in 6 months, but the fact many of us may end up having to work well into our 70's if not til the day we die. |
09-26-2008 | #2 |
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Re: The economy: how fucked are we?
It is proof that in a free market economy, you are often dealing with a series of dominoes, not isolated islands of economic activity.
All of those things you mention are directly related, and come back to the housing credit crunch which initially started all this stuff. Car dealerships are closing because they can't get the short term debt covenants to allow them to have stock.. The banks fail because without money to lend, they end up short of income. Layoffs come when you have less clients (because the car dealers and the banks are closing), end so on. The injection of liquidity that the US government is looking at is there to put enough money into the system to buy up stale loans, to blow out the plaque from the financial arteries of the US system, and hopefully get people back on the correct side of the cycle. As a side note, if you can actually get financing, it is getting to be a good time to invest in real estate, if you can afford to hold it for 5 - 10 years.
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09-26-2008 | #3 |
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Re: The economy: how fucked are we?
A market correction was inevitble. All the artificially inflated asset values on the books had to eventually catch up with reality. It was only a matter of time. The only question is just how severe is that correction going to be, and just who is going to be going down with the ship. Bank investors and share holders for sure, and most likely some people with mortgages on homes that are way over valued.
There will definitely be side effects across other sectors, but the only sound long term solution is getting the numbers on the books back in line with actual assets.
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09-26-2008 | #4 |
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Re: The economy: how fucked are we?
A few years ago, my cousin bought a house down in Philly. She works as an Art Gallery Curator and has a Ph.d in Art History, what you would consider an intelligent woman. With the sub-prime stuff going on, she got a $220,000. mortgage on a $200,000. home! (something that just doesn't happen in Canada) She also had a really low interest rate for the first few years, and was up here bragging about it. Of course her big plan (like everyone elses) was to bank her extra money, and when her interest rate increased, buy down the mortgage. Well, like everyone else, she neglected to save, and has now lost her house (My Aunt told me just last week).
I feel that not only were the banks at fault for coming up with such a stupid idea as a sub-prime loan, people were at fault for buying into it! In Canada, if you put less than 20% down on a home, you have to take out government mortgage insurance (CMHC Mortgage Loan Insurance charges you 1% of the loan amount) to cover the risks of a declining housing market. That helps protect everyone involved, the homeowner and the lending institution. Since I hate giving anyone extra money, I have never purchased a home without having at least 20% down. I know not everyone is able to do that, but it did save me money in the long run. ---------------- As for investing, I have always been very conservative. I am not a gambler, so I've never done high risk stuff. I invest mainly in the manufacturing, land and natural resource sectors. I've always stayed out of technology and other higher risk areas. The recent downturns of both the DOW and TSX didn't affect me in the least. I know that higher risks bring higher rewards, but I'm just not that guy Thanks to Carol's website, we have more than enough money to retire very comfortably. We own 3 homes that are all paid for, and don't have single debt. We both have fully loaded RRSPs (registered retirement savings plan) and could actually retire right now if we wanted. The thing is, with an eleven year old son at home, we have to do something, so we just keep dong what we do. We did downsize a few years ago to get rid of the stress and pressure, and mainly work to stay busy and have fun. I do feel quite sorry for the people caught up in all this as people have seen their entire retirement plans go out the window almost overnight. I don't know what I would do if I had to start all over again at my age. |
09-26-2008 | #5 |
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Re: The economy: how fucked are we?
I think if a lender told people they could afford something they believed it. I find the whole they are giving mortgages away like candy hard to believe. I bought my condo during the boom and for a small mortgage less than the value of the condo. They gave me a upper rectal.Now I dont know if it was because I told them fixed rate or nothing but it was a bunch work to get one and I dont have bad credit.
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09-26-2008 | #6 |
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Re: The economy: how fucked are we?
Much will depend on what happens this weekend with the bailout package. They may be overstating the problem but Wall Street believes it. If by the end of business on Monday there is no deal the markets will go apeshit.
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09-26-2008 | #7 | |
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Re: The economy: how fucked are we?
Quote:
You cannot trust the free market system to function unregulated. After all, the "free market" is a bunch of gambling addicted morons. Why would you trust your future to an addict? If you read back on Oprano, when I was going round with Mike AI over Iraq, I said then that the war could not be won and it would be costly. Its like your personal finances, if you overspend in one area, you will crash financially. The US could never afford the war in Iraq and it is at the root of this mess. You may disagree, but the trillions spent in Iraq would certainly have kept the US prosperous and out of this mess. GW Bush will go down in history as the worst president period. He was a bully. He got the US into an unwinnable and costly war and now he is using the same bullying rhetoric to bail out his crooked pals. But here is the big winner. Haliburton (Cheney) made huge amounts of money out of the war and this administration and when they saw it all going south, they moved all their operations to Dubai and the Dubai stock market. That never even raised an eyebrow. Sometimes I despair when I see the wreckage of a once great nation and Russia just wringing its hands in delight as Putin gets ready for his next maneuver to blindside a crippled America. I'm not sure if the 70's felt this bad. Maybe. |
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09-26-2008 | #8 |
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Re: The economy: how fucked are we?
Why do you think that Russia, Iran, Venezuela, and all their other commu-dictators are flaunting their "power" so much right now? They know the US is currently fucked solid, with an endless commitment in Iraq, an economy getting the burst bubble treatment, and a President in the White House that makes a lame duck look like an olympic athlete. Dubya is in full "deer in the headlights" mode right now, almost comical to see if the situation wasn't so fucking important.
Economy? Well, short term sucks, middle term gentle vacuum, and longer term okay. If (and when) the bailout happens, things should turn a little more liquid, and things should be okay. However, there are still huge numbers of shitty loans out there that are entirely upside down, and have little chance of recovery under the current situation. If something is worked out so that these properties don't go into foreclosure or that some sort of revaluing and write off can occur, then I think that things will turn better. Overall, I predict a huge increase in the number of American girls willing to do porn, work as strippers, and become escorts, which should lower the payouts and make porn more profitable once again.
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09-26-2008 | #9 | |
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Re: The economy: how fucked are we?
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09-26-2008 | #10 |
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Re: The economy: how fucked are we?
You aren't joking, man! With the porn biz in crisis too, for all kinds of reasons (file sharing, tube sites, consolidation, credit card fraud, the economy, proliferation of new studios & programs, the closing of retail stores etc) there is less high paying work for the girls who get accustomed to the porn lifestyle, so the girls that know me are texting me and emailing me non-stop for extra work. I already started low balling a few of them to get them to do multiple scenes for a package price, which is actually good for both them and me in the long term, since I will be able to up my shooting schedule for my own movies and sites hopefully in between shooting for my clients. Talent costs had skyrocketed like crazy the last few years and it was getting really hard to turn a profit as an independent director and producer or studio owner.
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09-26-2008 | #11 | |
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Re: The economy: how fucked are we?
Quote:
Like the russia of old, they have lots of bully power, but much of what is behind it is half asses and as dangerous to them as it is to anyone else.
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09-26-2008 | #12 | |
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Re: The economy: how fucked are we?
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09-26-2008 | #13 |
Fat Fucking Nobody
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Re: The economy: how fucked are we?
Yup, a Russian doesn't take a shit without a plan.
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09-27-2008 | #14 |
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Re: The economy: how fucked are we?
You have to fix the housing market before the rest of the economy will come around. it's easy to blame Bush for all of this, but root cause really goes back to 1995.
It's called the Community Reinvestment Act. It was modified in 1995 by Clinton. Go look it up and read it. But for those with short attention spans, basically it has the fed pushing for loan approvals based more upon need and less upon sound underwriting principles. So millions of loans were written in the coming years to people with a marginal ability to pay. Most of these were ARMs. Then the dotcom bubble bursts, 9/11 hits, jobs are lost and interest rates go up. Suddenly you have loan discounters like WaMu in a world of hurt with all of these loans not being repaid. We all get to pay the price now. |
09-27-2008 | #15 | |
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Re: The economy: how fucked are we?
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conventional wisdom is your mortgage payment should be about 1 week's pay. If you're young and expect your income to increase as your career progresses you might sneak up toward 2 weeks pay....never more. I was approved for an amount that would've barely left me enough money left over to eat Ramen Noodles. I was wise enough not to take it and I bought something that was much less than even what I could easily afford. I sleep well at night as a result. The approval process was strict, it was the amount they were willing to approve you for, especially with ARMs, that was jacked up. Right now the credit market is pretty dry. It's not going to be easy to get a lone without good credit. And even then you'll do best at a small local bank. |
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