Coffeeman Posted August 10, 2007 Share Posted August 10, 2007 HE of course was saying that it was time to sell many of the mortgage companies like Countrywide, home builders like KB Homes and banks like Washington Mutual among others Seems a little late to do this now - tough choice. Locking in losses or holding on too long for even worse ones..... Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted August 10, 2007 Share Posted August 10, 2007 How can there be a person alive who hasn't gotten themselves into a good mortgage by now unless they still can't qualify. I mean, it's not as if rates just dropped out of nowhere. They've been pretty damned low for a while now. A friend of a friend apparently still has a 12% mortgage he never bothered to refinance. I have to believe there are a ton of these folks, plus there's the people belatedly realizing their mortgage payment is about to double because that ARM that looked so good at the time....... Quote Link to comment Share on other sites More sharing options...
Bill Swerski Posted August 10, 2007 Share Posted August 10, 2007 (edited) Given that the wife and I are looking to buy sometime next year, I'm not liking this news. F'n idiots jacking up the interest rates. I have to believe there are a ton of these folks, plus there's the people belatedly realizing their mortgage payment is about to double because that ARM that looked so good at the time....... And it's not just mortgages. We're at the tail end up paying off a variable-interest signature loan whose rate has doubled over the past year and a half. From now on, it's nothing but fixed-interest for us. Edited August 10, 2007 by Bill Swerski Quote Link to comment Share on other sites More sharing options...
muck Posted August 10, 2007 Share Posted August 10, 2007 A friend of mine deals in interest rate derivatives for corporate buyers ... he tells me the desire to lock-in fixed rates generally makes fixed-rate loans mathematically 'more expensive' than they should be given that the probability of the next move in rates being up is 50% and the probability of the next move in rates is down is 50% (i.e., nobody really knows which direction rates will go next). But, he and I both concede that "knowing the worst case" as it regards your interest costs is worth more than what can be easily quantified in an excel spreadsheet... ...food for thought... Quote Link to comment Share on other sites More sharing options...
muck Posted August 10, 2007 Share Posted August 10, 2007 (edited) I assume this refers to 'shorting' stocks, among other strategies. While I understand the concept, betting (and hoping/praying?) that someone else's company will perform poorly seems like a ticket to instant (bad) kharma to me. 'Instant kharma's gonna get you...' Money is money, but still..... Options and derivatives get to be too complicated, and seem too close to gambling versus investing in the long run in a company I beleive in. Just my $.02....... That's only one way to do it. What about making a loan that is collateralized by something? If they don't pay, you take the collateral. If they do pay, you get the interest. At what point in that process do you hope/pray the market goes up (or down)? You don't. All you want is that the interest payments get made ... and if they don't, that the collateral retains enough of its value that you can be made whole in liquidation. That set of risks is VERY different than hoping that GE will go up (or down) in price...and doesn't involve any of this bad mojo that you seemed to be worried about. Again, there are LOTS of ways to invest capital that are not dependant on the stock market moving around. Edited August 10, 2007 by muck Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted August 10, 2007 Share Posted August 10, 2007 A friend of mine deals in interest rate derivatives for corporate buyers ... he tells me the desire to lock-in fixed rates generally makes fixed-rate loans mathematically 'more expensive' than they should be given that the probability of the next move in rates being up is 50% and the probability of the next move in rates is down is 50% (i.e., nobody really knows which direction rates will go next). But, he and I both concede that "knowing the worst case" as it regards your interest costs is worth more than what can be easily quantified in an excel spreadsheet... ...food for thought... Predictability has a value of it's own, for sure, which is why those of us with nice fixed rates are the best situated in this crisis (if that's what it is). I'm not sure it's true that the chances of rates going up or down is always 50% - surely the nearer you get to zero, the more likely it is rates will move up? I know technically that may not be the case but in a sensible reality it is. Quote Link to comment Share on other sites More sharing options...
Coffeeman Posted August 10, 2007 Share Posted August 10, 2007 That's only one way to do it. What about making a loan that is collateralized by something? If they don't pay, you take the collateral. If they do pay, you get the interest. At what point in that process do you hope/pray the market goes up (or down)? You don't. All you want is that the interest payments get made ... and if they don't, that the collateral retains enough of its value that you can be made whole in liquidation. This sounds interesting. If this not a bond, then I am really lost. Bonds have done so poorly lately that I have lost all interest in owning them, at least for now. If its something else, please tell. I can only be embarassed to a point, then it becomes kinda humorous.... Quote Link to comment Share on other sites More sharing options...
muck Posted August 10, 2007 Share Posted August 10, 2007 This sounds interesting. If this not a bond, then I am really lost. Bonds have done so poorly lately that I have lost all interest in owning them, at least for now. If its something else, please tell. I can only be embarassed to a point, then it becomes kinda humorous.... Consider it a "privately negotiated bond". You don't want to lend to people, but you do to businesses. Lending to people invokes a TON of laws you want to avoid. Lending to businesses involves less red tape (just make sure to perfect your position). Occasionally, you can get equity in the deal, too... When you say your bonds have done poorly, how do you own them? In a mutual fund (or some other pooled vehicle like a comingled trust or a partnership) or directly? Quote Link to comment Share on other sites More sharing options...
muck Posted August 10, 2007 Share Posted August 10, 2007 (edited) What about owning insurance products purchased at a discount from the face value? What about owning tax liens? What about drilling an oil well? Owning harvestable timber? ...etc... Again, there are scads of ways to allocate capital that have very little dependance on the broader stock (or bond) market performance. Edited August 10, 2007 by muck Quote Link to comment Share on other sites More sharing options...
Coffeeman Posted August 10, 2007 Share Posted August 10, 2007 Consider it a "privately negotiated bond". You don't want to lend to people, but you do to businesses. Lending to people invokes a TON of laws you want to avoid. Lending to businesses involves less red tape (just make sure to perfect your position). Occasionally, you can get equity in the deal, too... When you say your bonds have done poorly, how do you own them? In a mutual fund (or some other pooled vehicle like a comingled trust or a partnership) or directly? This is probably getting into PM territory, but if others can learn, so be it. I have about 5% (formerly 20%) of my work 401k in PIMCO, with the guru in Newport Beach, BIll Gross. I guess its a mutual fund, but not sure. Sounds like you're describing a venture capital or angel investor-type setup, investing in some local business that need cash. And it sounds very risky, the smaller/newer the company involved. Why wouldn't they get a bank loan? If I don't have millions to play with, (i.e. to diversify) how is this done without the real possibility of losing my shirt and getting a divorce from my wife?? Quote Link to comment Share on other sites More sharing options...
muck Posted August 10, 2007 Share Posted August 10, 2007 Regarding Bill Gross ... he manages a ton of money. What you're invested in is probably a mutual fund. Regarding making loans to private businesses ... you probably can't do what I'm describing within a 401(k) ... you can (sorta) via an IRA account, but you can't manage the partnership ... someone else has to (do to IRS rules / regs about using your own IRA money to own a business venture that provides you with income). Regarding risk ... is it risky for you to lend $0.60 against a piece of real estate worth $1.00 ... where you get a 10-12% interest rate (or better)? Finally ... what I'm discussing can be done by any ol' investor (generally not with 401(k) money, though) ... it can take quite a long time to really learn how to do what I do for a living, so either be patient, read a ton, meet with a lot of private investors who lend money to businesses and be willing to give it a shot if/when you want to start ... or ... find someone else that you trust that you can leave the details to and invest your money with them. As with any investment, only co-invest with people you can trust (or in deals where you control the collateral if you're not sure if you can trust your co-investors or not). Quote Link to comment Share on other sites More sharing options...
cre8tiff Posted August 10, 2007 Share Posted August 10, 2007 It truly is Black Friday, now that DMD gunned Quimby, UiG and twiley's avatars. Quote Link to comment Share on other sites More sharing options...
Brewer Posted August 10, 2007 Share Posted August 10, 2007 It truly is Black Friday, now that DMD gunned Quimby, UiG and twiley's avatars. W-T-H? I'm grabbing a torch. Quote Link to comment Share on other sites More sharing options...
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