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Sunday, Nov 8, 2009
Look on any American newspaper's web site, especially the business section, and it won't take you too long to find a link to one of those "teaser" mortgage ads. Ditto for just about any investment-oriented consumer web site. The very low monthly payment in the ad reflects a 1% rate and is good for only the first monthly payment, after which the rate goes up to one that is very profitable for the lender. Chances are the borrower will never recover from such a loan and will end up losing his or her house in a foreclosure. These types of ads are still running today. I saw this ad on the Washington Post's web site this morning and clicked on the link to the mortgage broker. In fact, a similar ad from the same broker, for a slightly different type of home loan, is running at the top of my Salon page right now as I type. Does freedom of press also mean freedom to run deceptive ads as well? Is any ad a good ad as long as someone makes money? I would lump all these deceptive real estate ads into the same category as those direct to consumer drug ads. But while the drugs ads could end up contributing to your early death (think of the Vioxx ads which ran on TV a number of years ago), the deceptive mortgage ads could end up merely destroying you financially. Both are not in the consumer's interest. But it's OK, as long as someone is making money somewhere in the grand scheme of things. So don't just blame Wall Street, or the real estate agents, or the lenders for our mortgage fiasco. The press deserves at least some of the blame as well.
curmudgeon 2 wrote:
If you are not in the stock market your investments will barely keep up with inflation.
That's baloney. My investments have been in fixed income only funds since 1997 and have kept up with inflation nicely. "Inflation" is a broad term and varies highly amongst products and services. Some will tend to purchase a certain spectrum of products for which inflation runs 5-8%. Others for which it will run lower (1-2%). Same with services. In my own case inflation has barely made a dent, but then I am not a "consumer", nor do I extract many services. (Medical - yes, occasionally - but no one is making out ahead of those, the answer is simply to save more)
The market can be a win-win situation, as opposed to gambling, because good companies increase their real value over time.
The problem, as a Financial Times report noted three yrs. ago, is that such companies can also "bleed red" and an ordinary investor wouldn't know (until too late) because it's not on the prospectus. Thus, one only obtains the most generic and general feedback and hence cannot make the correct investment decision when the time comes - as M. Skapinker has noted.
I also detest the Fed stepping in and cutting either the discount rate or the fed fund rate (as they are likely to do next month by 0.25%) to help speculators. If people wish to speculate in markets, fine - but take your goddam medicine (as in major corrections or downturns) without "Nanny Fed" coming in and helping your asses out.
When we in fixed income funds get slagged, as if the Fed lowers the main fund rate to assist you lot -we have to make do with less yield- and we can't piss and moan. We have to accept a lower return, even perhaps in an inflationary atmosphere. We get this without the Fed suddenly bumping up our rates. The speculators, having chosen to partake of the Wall street genie should take their medicine like men too. And NOT expect help from ANY quarter - especially the Federal Reserve.
Had the Fed not hit the chicken switch and cut the discount rate there's a good chance the Dow would have tumbled another 500 -800 for its full correction. And this is the price you pay for dabbling in the markets. But with the artificial boost given- now you can all get back to partying in your leveraged (on debt) bubble, while you leer and mock those of us in the fixed income investments.
All it tells me is you all are a bunch of molly-coddled babies.
IF a company is truly "good" and "increases its value over time" - then it will pay DIVIDENDS. To me this is the only certain way to assess company value. No dividends paid, then likley little or no value or they would deliver the goods each quarter.
The only genuine stock payoff is and remains dividends. Unless one is regularly receiving those one has no firm feedback on how well any enterprise or company is doing. Plowing money 'back in' is often what the scheisters want you to do, in order to disguise their own red ink.
Make 'em pay dividends or put the money into CDs.
I commend Mr Leonard for this article (and indeed for all his work) and for his curiosity for things that belong in "the other world". But I don't think derivatives are the real problem. For more than a decade, US consumption has been fueled by ever increasing debt, largely mortgage refinancing. With house prices no longer rising, that source of easy money is disappearing. People will now have to live with what they earn - that is, with much less than they used to. Their discretionary spending will dry up, since debt service, fuel and food will use up most or all of their income as of now. The subprime problems add to that, but they would have been manageable in a balanced economy. The point is that the economy may be doing fine in absolute terms, but it's not balanced. The people who produce don't consume and vice versa. That can't go on forever. Hence the stock market panic, the volatility on currency markets, etc. Everyone fears that the moment of reckoning has finally arrived.
Much of the initial coverage about Fort Hood turned out to be wrong. Is there anything wrong with that?
The accountability imposed by another country for the CIA's kidnapping and torture reveals much about our own.
Fox News' morning show plays to type, talking about whether Muslims in the Army should face "special debriefings"
The survivor and author is upset about comparisons some on the right are making to genocide
219 Democrats and one Republican join in favor of the legislation, which passed by a narrow margin
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