Booms and Busts 16 years of pain

[Limper]

The timeline for recent boom/busts I've been able to put together goes like this.

Mid 90's: The baby boomers realized that although they have a nest egg the nest egg isn't enough to retire one.

Mid 90’s: 401k’s take off and people dump lots of money into the markets

Mid 90’s: Tech takes off

Late 90’s Tech is exploding and the dot com bubble is in full swing. Things get vastly overvalued and as the gains get silly people chase them up even higher. Y2K doubles the tech activity and the boomers go crazy. Companies based on the dot com bubble itself are created and it gets crazier as these companies based on an over inflated sector also go public and become over inflated them selves.

1999-2000 thing top and it becomes clear that what’s been happening is not sustainable.

2000-2001 Everything crashes in a bloody mess. Baby boomers are right back where they started but now they have less years to make their savings into the fortune they need to retire.

2002ish: The boomers notice their houses have been gaining and since they need outsized gains more now than before they start investing in houses.

2003-2005: Housing becomes the new expanding bubble and new investment products are created to capitalize on this. By 05 its become insane.

2006: Its getting totally nuts and inflation is has been gaining since 05 and the fed starts really cranking up interest rates.

2007: It gets really ugly as the wisdom of loaning people who can’t pay money collateralized by vastly overvalued assets comes into question. Unfortunately this cascades into all sorts of home loans since home values start falling. Now banks and mortgage companies have loaned folks 200k on something that is now worth 140k and the folks that loaned the mortgage lenders money start calling the margins on that at the same time people who borrowed more than they could really afford for things that are going down in value start to default and the burn continues.

Its rough but its pretty much whats been going on. If you have questions I can clarify

[Enk]

So all this is the fault of the boomers and ARMS?

I can get behind that.

[TiQuinn]

So all this is the fault of the boomers and ARMS?

I can get behind that.

Not just boomers. A lot of the people going for those subprime loans are first time homeowners who never would've been able to afford a house in the first place.

[Droid101]

Not just boomers. A lot of the people going for those subprime loans are first time homeowners who never would've been able to afford a house in the first place.

They shoulda stayed in an apartment.

Now they get to do that, AND they're bankrupt! Hooray!

[Enk]

Not just boomers. A lot of the people going for those subprime loans are first time homeowners who never would've been able to afford a house in the first place.

I don't have a lot of sympathy for people who took out subprime ARMs. We teach basic mathematics in school.

[Droid101]

I don't have a lot of sympathy for people who took out subprime ARMs. We teach basic mathematics in school.

Poor people don't go to school, duh.

[TiQuinn]

I don't have a lot of sympathy for people who took out subprime ARMs. We teach basic mathematics in school.


Neither do I.

"But I didn't understand the contract!!!" isn't a valid excuse and gets no pity from me. Contract signings on houses can take hours. You don't just accidentally forget to read the fine print on those things.

[Limper]

So all this is the fault of the boomers and ARMS?

I can get behind that.

Its also the trillions of retiement dollars that get dumped in mutual funds each year.

Home Equity loans played a very large part of the current squeeze as well.

Boomers were part of the problem since they weren't good savers, there are a lot of them and they have been chasing gains in order to make up for lost time. Each time they get knocked back to where they started cause they get greedy and don't get off when everyting is up.

At this point there is nothing they can do to make up for the lost time. They were 20 years behind when they precipitated the dot com fiasco and now they are 36 years beyhind, horribly in debt and pretty much fucked.

ARMs are part of the supporting businesses that cropped up to capitalize on the boom.

[NRG]

They shoulda stayed in an apartment.

Now they get to do that, AND they're bankrupt! Hooray!

You apparently haven't read the 2005 bankruptcy bill. It's not so easy to get out from under soul-crushing debt any more.

The history Limper presented seems pretty accurate. The real question is what it portends for the future.

NRG

[Limper]

You apparently haven't read the 2005 bankruptcy bill. It's not so easy to get out from under soul-crushing debt any more.

The history Limper presented seems pretty accurate. The real question is what it portends for the future.

NRG

Other than general greed I don't think we'll see another boom for awhile since the force behind the recent ones is pretty close to out of the game... least i hope so.

The boom in international stocks and companies that are international isn't really a boom but actual growth in the rest of the world.

[Janos]

While borrowers take some of the blame, Lenders, Banks, and Hedge funds all get a share of the blame for passing the buck around to drum up quick cash.

[doc]

So all this is the fault of the boomers and ARMS?

I can get behind that.

Don't hate us cause we're old

- Late Boomer Doc

[Enk]

Don't hate us cause we're old

- Late Boomer Doc

I don't hate you because your'e old. I hate you because you're hippies.

[The Theocrat of Poon-Tang]

Crackerjack analysis, Limper. The tech bubble was hard to see out of at the time, but anybody with half a brain had to know something was going to give with the recent housing bubble. When people who could barely be trusted to own a car suddenly came up to me and said that they just bought a $300,000 home with a neat thing called a reverse mortgage or an adjustable rate mortgage, I knew it was only a matter of time before it all came crashing down. Hard.

The funny thing is seeing all the people who tried to capitalize on the housing expansion for profit get left holding the bag, too. People who "flip" houses are a great example of this. Some guy sold his home in out neighborhood to move next to a major road a few blocks away because he got a break on the Real Estate Taxes for 10 years (LERTA). His new house looks like ass, he has no back yard, and he still hasn't sold his house in our neighborhood - he is asking way too much, probably thinking the year is 2005 and not 2007.

[Droid101]

Damn, I thought this was a porn thread.

[Limper]

Crackerjack analysis, Limper. The tech bubble was hard to see out of at the time, but anybody with half a brain had to know something was going to give with the recent housing bubble. When people who could barely be trusted to own a car suddenly came up to me and said that they just bought a $300,000 home with a neat thing called a reverse mortgage or an adjustable rate mortgage, I knew it was only a matter of time before it all came crashing down. Hard.

The funny thing is seeing all the people who tried to capitalize on the housing expansion for profit get left holding the bag, too. People who "flip" houses are a great example of this. Some guy sold his home in out neighborhood to move next to a major road a few blocks away because he got a break on the Real Estate Taxes for 10 years (LERTA). His new house looks like ass, he has no back yard, and he still hasn't sold his house in our neighborhood - he is asking way too much, probably thinking the year is 2005 and not 2007.

The tech bubble was just as easy to see out of... companies making $200,000 dollars a year should never be worth $200,000,000 or be publicly traded, nor should there be companies thats sole purpose was to market these worthless idea companies and take them public.

All the same issues were there they just didn't show up at your office asking for tax advice.

[Ancalagon]

there is over a trillion $ in morgages having their interest rate recalculated this year, 200 billions of which are subprime. There is about a trilion in carry trade with japan that could be impacted. Finally, several large hedge funds are selling a lot of stocks in an attempt to "rebalance", causing decreases in stock prices. House values are going down, and retail is starting to take a hit.

It doesn't look good.

My gut feeling of waiting before buying has showed itself to be valid. House prices have stopped rising in Canada in July...

[Pigs in Space]

Global recession! Global recession!

WAAaaaa!

[Morbidity]

they just bought a $300,000 home with a neat thing called a reverse mortgage

Sorry just to be a pedant but I need to clarify what a reverse mortgage is. They couldn't have bought a home with a reverse mortgage. A reverse mortgage is where you own your home and the bank pays you either a lump sum or a monthly income. When you die the bank takes the house subtracts off your debt and whatever is left goes into the estate. There are usually rules that the debt can't exceed the value of the house, but some unethical finance companies in the UK haven't had this which resulted in UK's reverse mortgage scandals. It's a means of financing your retirement with your home whilst retaining the benefit of living in your home.

[Dr_Avalanche]

Global recession! Global recession!

WAAaaaa!

Yeah, what he said. Get your real estate market in order guys, my retirement funds are suffering. :mad:

[Limper]

Yeah, what he said. Get your real estate market in order guys, my retirement funds are suffering. :mad:

If you have a complaint send it to Ben Bernake.

Its in his hands now sadly and he seems to hate investors of any sort and want to see them in pain.

[doc]

I don't hate you because your'e old. I hate you because you're hippies.

I was a post hippy boomer, totally missed out on the Summer OF Love, but acid was still kickin when I was HS.

[Hastur T. Fannon]

Boomers? I blame the Genom Corporation

[Pigs in Space]

The way the aussie market was last year, 10% is just a correction.

[Ancalagon]

I am so happy my investments are pretty conservative... I've lost a bit of money, but it could have been much worse.

[Limper]

I am so happy my investments are pretty conservative... I've lost a bit of money, but it could have been much worse.

I'm down about 14k off the highs of the year.

[Morbidity]

%'s man, give me %'s. Maybe you only invested $14K, so a $14K drop is pretty awful.

I'm down about 15%, but hey it'll go back up again. None of the shares I have, have anything to do with the sub-prime market and some if it's just a normal correction. One of my shares is way down but that happened before the sub-prime stuff and is related to a change in interpretation of tax legislation, though I think the company is challenging the ruling.

[Limper]

%'s man, give me %'s. Maybe you only invested $14K, so a $14K drop is pretty awful.

I'm down about 15%, but hey it'll go back up again. None of the shares I have, have anything to do with the sub-prime market and some if it's just a normal correction. One of my shares is way down but that happened before the sub-prime stuff and is related to a change in interpretation of tax legislation, though I think the company is challenging the ruling.

Its about 10%.

It hurts and some of my accounts took a bigger hit but they were more agressive so its to be expected.

I'll live though and since most of the stuff I wanted shares of has now fallen into a range I want to buy them at its not all bad... in the long run this is the opp I've been living for... in the short run it feels like I'm getting beat up.

[Morbidity]

Ahhh yes, now the exciting question. When is the time to buy in? That's the part I hate, deciding when it's finished correcting so I can buy in and ride the market all the way back up.

[Limper]

Ahhh yes, now the exciting question. When is the time to buy in? That's the part I hate, deciding when it's finished correcting so I can buy in and ride the market all the way back up.

Anytime a good solid big comapney like Bank of America or General Electric are down more than 10% and its not really for a good reason I buy some shares.

I hold onto cash and wait... if they go down more and there still isn't any direct reason I buy more.

I'll keep buying into the slide so long as its just going down cause everyting else is and not because the sector is having trouble until I run of of capital.

Most of the time I have a note book with my ideal buy prices (what I feel ver good paying) for various stocks and I use it as a play book in times like this.

[TiQuinn]

If you have a complaint send it to Ben Bernake.

Its in his hands now sadly and he seems to hate investors of any sort and want to see them in pain.

How do ya figure?

[Limper]

How do ya figure?

Well they just lowered the window rate and the futures are exploding so as I was saying its in his hands.

I take back my comment since he acted on the problem that was developing.

America is addicted to cheap and easy credit at all levels of our society... the feds rate hikes made us go cold turkey and it was spinning out of control in withdrawl... a slight lowering of rates is like methadone it eases the pain and allows a softer transition to a more reasonable use of credit.

This should keep hope alive for all the 401kers and investors and while credit will still be tight it will be available and some companies may not go under.

Most of the bad companies are already dead.

[TiQuinn]

America is addicted to cheap and easy credit at all levels of our society... the feds rate hikes made us go cold turkey and it was spinning out of control in withdrawl... a slight lowering of rates is like methadone it eases the pain and allows a softer transition to a more reasonable use of credit.

This should keep hope alive for all the 401kers and investors and while credit will still be tight it will be available and some companies may not go under.

Most of the bad companies are already dead.

So far, I've been pretty cool with Bernanke's handling of the situation. There's a danger between letting things take a hard landing and giving people who made bad and risky investments a free pass. It was just over a year ago that the Dow Jones was at 10,000 versus the nearly 13,000 it is today (after the drop). I always keep that perspective.

[Limper]

So far, I've been pretty cool with Bernanke's handling of the situation. There's a danger between letting things take a hard landing and giving people who made bad and risky investments a free pass. It was just over a year ago that the Dow Jones was at 10,000 versus the nearly 13,000 it is today (after the drop). I always keep that perspective.

Given how pervasive the subprime issue is I'd perfer him to have been a bit more proactive.

I'd also like a bit of legislation to deal with predatory lenders (at least fix the loopholes) and some of the shadier aspects of the crisis.

[Janos]

Most of the bad companies are already dead.

Countrywide, Ameriquest, and Argent survive. Those are the three worst (and ultimately big ringleaders). New Century was a distant second.

[Droid101]

Countrywide, Ameriquest, and Argent survive. Those are the three worst (and ultimately big ringleaders). New Century was a distant second.

My old company, ResMAE, still lives as well. They're behind those big companies on volume, but are better on cost to originate.

[Ancalagon]

I'm down 4% - again, *very* glad I chose a conservative portfolio.

An interesting bit I read on wikipedia

This is a prime example of the argument that central bank behavior destroys the myth of the free market:

So far, the economic pundits and CEOs have applauded the Fed's intervention as a “constructive” way of staving off an impending credit crisis. Are these the same “experts” who always sing the praises of unregulated “free markets” while condemning any government intervention? Yes. The investment banks and fund mangers love “free markets” when it means eliminating the rules that prevent them from gaming the system. But they don’t like it so much when their shabby Ponzi-rackets start to unravel. Then they’re the first in line to beg for a bailout. That’s what’s happening right now. The Fed is keeping the stock market afloat by increasing liquidity at the banks. [21]