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Old 02-10-2007, 00:45   #91
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. Signing off from this thread as I see we have cars on it now and its no longer relevent.
Using one post as an excuse to not explain your view's and reasoning when questioned sound's a bit like a cop out to me, but hey, your call.

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Old 02-10-2007, 01:35   #92
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cat1 - In post #66 you give us a little teaser and then say you aren't going to debate. Then you opt out a couple of posts ago. Feel free to do as you wish but as a professional currency trader you may have experience that would add to the conversation - As Dave says it's your call.

TaoJones - I really liked your post about the mortgage markets and I don't entirely disagree - there are going to be some failures. But again as you know I am not a doom and gloom guy. There will be failures and reposessions, the banks don't want to own homes so they will auction them. The $750k california house may go for $600k (or less). Great. The bank "loses" $150k plus the carrying cost and the outcome is the property market resets like it probably needs to. The guy who doesn't have to sell his $750k house won't, can't and will probably be pissed off that he can't refinance for that new deck he absolutely has to have - good news I say. He won't lose anything until he sells - so he won't.

In the meantime all the mortgage brokers are happy with the reposession sales cuz they make money when writing mortgages.

Hey - Same scenario can have different outcomes.

The post about our used cars and televisions going to Europe is ludicrous. So the people with the "strengthening" purchasing power are going to buy Bubba Smith's used plasma tv - just doesn't make sense to me.

Also we have to consider where some of the US's biggest and most durable goods are made. I am in aviation. Boeing's 787 order book is sold out through 2012. The 747-8 is selling well and Airbus is still lost in the woods - US aviation is a very happy place.
The content for these new generation airplanes is coming from all over the world through sub-contracts but remember the cash initially goes to Seattle. Throw in the avionics, interiors, engines, etc, etc etc. and we are at the front of a huge (and periodic) up cycle in this industry.

The point being is that economies are a lot more integrated than in the 70's. And... boy I hate to say this ... The oil supply is in different control these days. Carter was screwed in that regard. GW and his buds just went and took it. So they are playing high stakes poker, maybe, but holding a wild card.

I predicted a housing bust 2 years ago. Simply because a $750k 4 bedroom house made of matchsticks "doesn't make sense" in comparison to everything else.

I too think the dollar will strengthen in the next 12-18 months. Simply because a USD with the value of a peso doesn't make sense in a strengthening global economy.

The inderlying issue is simple, in my mind. Americans have to consume less. And by that I mean less crap. I hope Mr. and Mrs. Bubba have to decide between a piece of crap barbie doll made in China and a gallon of milk. Then we have to start protecting our technology better and continue to produce high end technological products that the world has to have.
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Old 02-10-2007, 02:37   #93
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. But again as you know I am not a doom and gloom guy. There will be failures and reposessions, the banks don't want to own homes so they will auction them. The $750k california house may go for $600k (or less). Great. The bank "loses" $150k plus the carrying cost and the outcome is the property market resets like it probably needs to. The guy who doesn't have to sell his $750k house won't, can't and will probably be pissed off that he can't refinance for that new deck he absolutely has to have - good news I say. He won't lose anything until he sells - so he won't.

.
I'm no D&G'er either and am fully prepared for a wash off of housing prises in OZ thanks in part to US subprime and as Ex-Calif says Mr and Mrs Bubba and the plasma (Thanks Guy's).

Subprime fallout has canned my latest project (not the boat) as the banks are touch gun shy here at the moment on anything that may appear marginal.

Anyway,

The bit that I can't understand in the US is this bit where if it all get's to hard for Mr and Mrs Numptie, they can pretty much drop the keys on the counter and walk away while the bank "loses" $150k plus the carrying cost .

Surelly if Mr and Mrs Numptie man'ed up to their responsibility and had to come to some sort of arrangement with the bank, not just throw up the hands and walk away, things would not have got to the stage they are.

This I believe is where Australia and other countries will hopefully survive a bit better as bankruptcy here is a much more serious thing, and people will do everything they can to avoid it.

I doubt you would hear of it much in Japan either, to much pride and loseing of face.

A good lesson to be learned there me thinks

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Old 02-10-2007, 05:10   #94
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The bit that I can't understand in the US is this bit where if it all get's to hard for Mr and Mrs Numptie, they can pretty much drop the keys on the counter and walk away while the bank "loses" $150k plus the carrying cost .

Surelly if Mr and Mrs Numptie man'ed up to their responsibility and had to come to some sort of arrangement with the bank, not just throw up the hands and walk away, things would not have got to the stage they are.
Bankruptcy is one of the powerful tools that has helped the United States become one of the most, if not the most, entrepeneurial countries in the world. Thomas Jefferson declared bankrptcy like 3 times. It allows failure and a fresh, albeit not usually easy, start. The system must work as OK there always seems to be venture capital for new ideas.

When everyone is scared and VC dries up, we tend to hurt a little more.

Mr & Mrs Numptie if they do dump the house are usually bankrupt and what follows is at least 7 years of terrible or no credit. A really good lesson for them.

Bankruptcy should not be a get out of jail free card.

Oh, and I don't feel too bad for the banks - They have some, really, really, really smart guys that pretty much know how much they have to hedge. The interest rates that Mr & Mrs Numptie pays or anyone else for that matter include not just cost of the money, but also cost of the risk.

I have some money friends in private credit (read credit cards) they can model interest rates by anything you want. Post code 12345 is X risky. Postcode 23456 is Y risky. Z percent will default with and average amount of blah, blah, blah. We will be able to sell this bad debt at 10 cent on the dollar to the secondary collection market.

The secondary collection market is where the real bottom feeders dwell, but hey - they are making money too...
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Old 02-10-2007, 06:31   #95
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Mr & Mrs Numptie if they do dump the house are usually bankrupt and what follows is at least 7 years of terrible or no credit. A really good lesson for them.

Bankruptcy should not be a get out of jail free card.
You say that Dan, but maybe I'm getting my info wrong.

What you describe is what it prety much is in OZ as well yet from other articles I get

Comment is free Editors' Blog: How far can the markets fall?

As US house prices fall it makes economic sense for homeowners to default on their mortgages and hand back the keys to the lender. Unlike in this country, defaulters in America bear no individual financial responsibility for the remainder of the debt.


This was a 2 second search, and I know when I have put in the right word's I have found plenty of examples where this appears to be the case, though not in all states it would seem.

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Old 02-10-2007, 06:33   #96
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Bankruptcy in Canada is almost a free ticket, not that we have a lot of it right now. Not sure if the whole country is the same but in Ontario, you liquidate assets and in 18 months you are fini, free and clear. And the credit card applications keep on pouring in all the while. No, I haven't been there, thank god, but my best buddy was through it a while back. If it wasn't so easy and such a great option people would have to deal with their responsibilities instead of just walking away. Get credit cards, buy stuff, sell stuff to friends, go banko, repeat.
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Old 02-10-2007, 08:14   #97
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I'm no D&G'er either and am fully prepared for a wash off of housing prises in OZ thanks in part to US subprime and as Ex-Calif says Mr and Mrs Bubba and the plasma (Thanks Guy's).

Subprime fallout has canned my latest project (not the boat) as the banks are touch gun shy here at the moment on anything that may appear marginal.
Cat man do, you might want to take a look closer to home for the source of your credit problems

"
The Australian economy may be healthier now than it has been for 20 years, perhaps longer. But this doesn’t mean families or individuals are necessarily doing it easy. Rising housing costs have placed enormous additional mortgage and rent burdens on many people. Personal debt is at record levels.
The ratio of personal debt to income in Australia is one of the highest in the world � higher even than America and the UK. For every $100 we earn, we owe $130. Credit and charge card debt account for $26 billion of the debt." from Real Esate - Home

A quick google search also shows that your bankruptcy laws are pretty similiar to the US, declaring bankruptcy allows you to 'walk away' from your debt just like us. The quote you took was comparing UK foreclosure to US foreclosure, in which the US puts some of the risk on the back of the lender to make a good loan. The UK puts all the risk on the borrower. Most of the time the value of homes goes up, and the lender profits by selling a foreclosed home because they got 20% down in the beginning. The lenders took unreasonable risks here in the last few years by making bad loans with no money down in a bubble period, they have a responsibility to ensure that the loans they make can be repaid as well as the borrower.
You make it sound as if we have the ability in the US to just ignore any debt that we don't want to pay. It's not like that.
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Old 02-10-2007, 12:02   #98
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TaoJones - I really liked your post about the mortgage markets and I don't entirely disagree - there are going to be some failures. But again as you know I am not a doom and gloom guy. There will be failures and reposessions, the banks don't want to own homes so they will auction them. The $750k california house may go for $600k (or less). Great. The bank "loses" $150k plus the carrying cost and the outcome is the property market resets like it probably needs to. The guy who doesn't have to sell his $750k house won't, can't and will probably be pissed off that he can't refinance for that new deck he absolutely has to have - good news I say. He won't lose anything until he sells - so he won't.
I know you're not a Doom & Gloom guy, Dan, nor am I. One of my favorite sig lines on this Forum is that of S/V Elusive (Thomas). It reads:

"The pessimist complains about the wind;
the optimist expects it to change;
the realist adjusts the sails." - William Arthur Ward

It is pointless, and futile, to make plans based on pie-in-the-sky dreams of how things could be or pining for how we fondly remember them being in the past, true or not, but if one merely observes how things are, in the present, and does so day in and day out, over time a pattern will reveal itself. If a person can set aside preconception, cultural bias, fear, greed or anything else that can distort his perception of reality, then he has given himself an excellent opportunity to be prepared for what comes next.

But even having accomplished all of that, it means nothing if he does not take the vital next step - he must act!

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In the meantime all the mortgage brokers are happy with the reposession sales cuz they make money when writing mortgages.
Based on the admittedly small sample I know personally, most are now former mortgage brokers.

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. . . but remember, the cash initially goes to Seattle.
Well, Chicago.

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The post about our used cars and televisions going to Europe is ludicrous. So the people with the "strengthening" purchasing power are going to buy Bubba Smith's used plasma TV - just doesn't make sense to me.
Peter Schiff's essay mentions Maine-caught lobsters being sold in Europe, not the discarded consumables he mentions in the next paragraph. And yes, those items will indeed be sold in countries with currencies that are strengthening against the dollar - but think Mexico, Central and South America, perhaps some parts of Africa.

Mr. Schiff is also correct that the exportation of such items is almost irrelevant in terms of the impact on GDP, as they aren't being manufactured in America for export, and no manufacturing jobs are created in their production.

These goods were already manufactured, almost exclusively overseas, bought on credit, imported into the US, and subsequently will be sold off to consolidators who will export them to poorer countries whose currency is rising as the dollar falls. It is the equivalent of a national garage sale.

I'm fully aware that many of us on this board are older, and our interest in yachting implies a certain financial achievement, so the foregoing may seem hard to believe. Keep in mind, though, that there is a vast underclass that lives paycheck to paycheck.

The slightest hiccup in their earning ability, or an unanticipated expense (the loss of purchasing power is very much like any other unanticipated expense, such as medical emergency, auto accident, arrest, etc.), can force them to sell off even prized possessions if that's what it takes to put food on the table.
~ ~ ~

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, has considerably amended the Bankruptcy Code. The use of bankruptcy in the US is much less liberal now, and those who seek to erase all of their debts through a bankruptcy filing now must wait eight years before filing again.

Ironically, because they cannot file again in that time frame, they are deemed to have excellent credit.

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Old 02-10-2007, 12:19   #99
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A tip of the hat to you financial gurus. I've learned a lot from reading this thread, but I'm left with a very nagging question, which TaoJones summed up quite succinctly: I must act! But, how?

Like probably many others, I'm in "decent" shape, certainly enough to be able to take off in what should otherwise be the peak earning years in my profession, and go sailing for a long time. But, part of the whole cruising plan, from the financial perspective, was to have enough in the investments to be able to live off the earnings and still not dip into the principal. Actually, we're hoping to still be able to add to it, rather than take from it.

So far, we've been following the advice of a financial planner and doing pretty darn good, consistently getting from 12 to 18% annual return on investment for the last five or six years, some years even better. (We don't do any individual stock picking -- that has always been a disaster; if one of us "likes" a stock, then run away from it as fast as you can!)

Obviously, I want to first, protect my assets as much as I can. But, I'd also like them to grow. I'd also like them to contribute to positive solutions for our societal problems. (We have invested in a couple of the "socially responsible" funds, and they've done pretty well.)

So, any advice for someone who is definitely not a financial guru? (Bear in mind, I'm not asking for specific choices -- I wouldn't put you on the spot like that -- but rather overall strategy.)

Thanks.

ID
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Old 02-10-2007, 13:29   #100
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exchange rates

these types of things are good in the end. prices of land and real estate are dictated by only two things, the ability to buy and demand. as banks bring their lending practices back to the point they were in the late 90s, housing prices will fall to what they were in the late 90s. As to boats, look to a lot of manufacturers who were barely profitable before go bankrupt. This type of pressure tends to weed things out nicely. ID, I would look at the boats you like and start charting ones which you would like to buy but believe are over priced. You'll find they keep dropping their price until they finally sell. When we bought our first catamaran in 1996 there was a boat where the owner paid too much for her new and was trying to recoup every penny. We ended up selling our first cat in 2003, and the same boat was still trying to be sold. Boat brokers tend to get boats to sell by promising unrealistically high prices, and then the boat sits with no one even coming to look at it for 6 months until that brokers contract to sell has expired. The owner realizes they've paid slip fees and maintanence fees for nothing and drop their prices to something more realistic and get another broker.
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Old 02-10-2007, 14:06   #101
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t... Boat brokers tend to get boats to sell by promising unrealistically high prices, and then the boat sits with no one even coming to look at it for 6 months until that brokers contract to sell has expired. The owner realizes they've paid slip fees and maintanence fees for nothing and drop their prices to something more realistic and get another broker.
Doesn't sound like boat brokers, as you describe them, understand what's in their OWN best interests.
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Old 02-10-2007, 14:08   #102
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Gord - no kidding. Many also don't seem to recognize that they operate in a reputation-based economy....
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Old 02-10-2007, 14:09   #103
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Ours certainly didn't!!!

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Doesn't sound like boat brokers, as you describe them, understand what's in their OWN best interests.
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Old 02-10-2007, 14:11   #104
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You guys don't have any idea about cost of living, housing costs and general prices, because you don't live in the Uk - our only benefit at the moment is the strong making holidays abroad cheap and buying any goods in US$.
A packet of 20 cigarettes in the UK is the equivalent of $11.00 (I don't smoke thank god) a pint of beer is about $6.00, Petrol and Diesel is about $9.00 a gallon, where I live in the SW of England a small 2 bedroom apartment looking over a marina will cost you about $1,400,00.
Our water is charged at $3.00 per cubic meter into the house and $4.50 per cubic metre out (drains) my monthly water bill for 2 adults is on average $120.00 and a Big Mac Meal is $7.50.
Average wages in my area are about $30,000 per annum, from which you can see makes it very difficult for even the above average earner to afford a decent boat especially when marinas are charging about $240.00 per foot per annum.
If you go bankrupt in the Uk, again you will have terrible trouble in getting future credit.
Finally after all the doom and gloom above it is a great country, 4 very different seasons, lots of enviable history, beautiful cruising grounds, green lucious countryside and even rain sometimes!!
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Old 02-10-2007, 14:22   #105
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I'd think not all areas of the UK are the same. I was talking to someone living in Wales a while back. According to him, the specific city (forgot the name) where he lives has incredibly low cost of living, but also incredibly low wages. He may have been overstating it a bit, but according to him, you could live a fairly comfortable life there for the equivalent of just a couple thousand USD a year.
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