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America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

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Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#111

Post by coryrc »

cc439 wrote: post #87
roymurdock wrote: post #39

Earlier quoted context omitted.

I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." There are at least 2 sides to every loan - the originator and the borrower - and it helps to examine dynamics on both sides of the table. Is the book in the US generally stacked towards originators? Certainly, as I argue, with financial literacy being so low, most home-owners wanting to do anything to avoid moving, and family/…

>If a homeowner considers their home an "investment" that means they should be willing to liquidate that investment This is a point which is missed by so many people. Every empty-nester I know and consider well prepared for retirement has made downsizing a key component of their overall strategy. I get sentimentality but there's as much sentimental value in retaining financial stability in one's later years. Sure, an…

Who should be paying their medical bills then?

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#112

Post by John23832 »

latj wrote: post #103
John23832 wrote: post #10

The title made me think that this was going to be about subprime auto loans, which are definitely in "crisis" territory. This whole mess (subprime auto, renovation, and home loans) comes from the increasingly rent seeking nature of Wall Street. It used to be that fortunes were both made and lost on Wall Street. Now, for large investors ("whales"), it's 3.5% or I take my money to another fund. If I don't have a consis…

The behavior you describe is the way every investor should act. And the behavior of the underlying fund managers, and the executives of the companies below- they're all acting the way they're supposed to be acting-- maximizing profit, minimizing risk. Its not the fault of whales, greedy fund managers, poorly managed banks, or ineffective governance. This is capitalism and it is working exactly as designed- to funnel…

I'm not saying that rent seeking behavior isn't encouraged by Capitalism. I'm saying that rent seeking behavior is screwing society up.

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#114

Post by John23832 »

retube wrote: post #78
John23832 wrote: post #10

The title made me think that this was going to be about subprime auto loans, which are definitely in "crisis" territory. This whole mess (subprime auto, renovation, and home loans) comes from the increasingly rent seeking nature of Wall Street. It used to be that fortunes were both made and lost on Wall Street. Now, for large investors ("whales"), it's 3.5% or I take my money to another fund. If I don't have a consis…

> It used to be that fortunes were both made and lost on Wall Street. They still are. Hedge Funds lose money and/or go bust all the time. Firms go bust. The stock market has only just recovered levels last seen over a decade ago. > it's 3.5% or I take my money to another fund When has any investor ever said "I want to lose money" ?

> They still are. Hedge Funds lose money and/or go bust all the time. Firms go bust. The stock market has only just recovered levels last seen over a decade ago.

I'm speaking about personal fortunes. Maybe I should have been more clear.

> When has any investor ever said "I want to lose money" ?

An investor losing money is different than an investor realizing that losing money is part of the game.

I'm saying that high net-worth individuals won't even consider losing money as an option anymore.

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#115

Post by antisthenes »

nommm-nommm wrote: post #91
NikolaNovak wrote: post #84

Earlier quoted context omitted.

Can you elaborate on the homeowners considering their home an investment - and why they shouldn't? I've moved from Europe to Canada 20 years ago, and I'm still coming up against it all the time - I consider home/condo a utility, a bill paid for purpose; it can go up, but it can also go down. EVERYbody around me thinks I'm crazy and that houses are #1 best investment ever.

Most Americans (and apparently Canadians) think their home is a very good place to park their entire net worth. Meaning they think its guaranteed to appreciate and appreciate faster than all other assets and investments a person has. They also tend to only look at raw numbers that look impressive unless you don't think about it too much rather than the whole picture. Grandma bought her house in 1970 for $10,000 and s…

> Most Americans (and apparently Canadians) think their home is a very good place to park their entire net worth. Meaning they think its guaranteed to appreciate and appreciate faster than all other assets a person has.

Most Americans have no choice, because you can't buy 1/3rd of a house or a room in a house, or a basement. You have to buy the whole house and very rarely will a family be able to outright get themselves into 2 mortgages on houses in a desirable area. In other words, you're painting a picture of choice where there is none. Renting has the same underlying problem - you alleviate yourself of depreciation risk, but you take on the risk of being at the mercy of the landlord and area gentrification and being priced out of it eventually.

> The American government also subsidizes home ownership in various ways which can play into the fantasy.

Not in as many ways as you think. It's rather the higher density urban areas that subsidize the suburban low density single family houses (most of which are very shoddily constructed).

> Its just not a great financial investment and every portfolio should be diversified even if it were.

Like I said earlier, most Americans don't have a portfolio of investments of any sort. Housing is a relatively stable asset for the risk-averse, and incidentally also provides you with a place to live.

> The reality is house prices stay about lock step with inflation on average over the long haul.

The reality is that discussing real estate prices without discussing location and separating structure value from land value is a gross and useless oversimplification. Look at property values in desirable urban areas: they far outpaced inflation and have recovered after the housing crash in less than 5 years.

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#116

Post by John23832 »

tormeh wrote: post #109
John23832 wrote: post #102

Earlier quoted context omitted.

I'm not saying you can't make money by buying and selling houses, but the average person's home is not an investment.

Well, it is if you plan to sell it and move to a cheaper place once you retire, using the profit to fund part of your retirement. That's well inside the definition of retirement saving.

Using a layman's definition, yes. However, strictly speaking, the average person's home is not an investment.

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#117

Post by randomtossr88 »

John23832 wrote: post #10

The title made me think that this was going to be about subprime auto loans, which are definitely in "crisis" territory. This whole mess (subprime auto, renovation, and home loans) comes from the increasingly rent seeking nature of Wall Street. It used to be that fortunes were both made and lost on Wall Street. Now, for large investors ("whales"), it's 3.5% or I take my money to another fund. If I don't have a consis…

Humans have a tendency for unwavering "belief". The obvious is belief in deities.

Our other institutions are just as vulnerable to being treated as infallible. Our economics are, and basically "putting all our eggs" into a global financial system over which we have little say, is this thing we have to keep believing in. "The debt, the debt!" not considering that if humans in the future really need to for survival, an imaginary number on paper can be waved away. We have to believe these things matter.

And it isn't just laymen that are victim to unwavering belief. Very smart people can also be convinced of bullshit.

And the rest of us just have to nod and smile in agreement. What other choice is there?

I think we're in a period of social adjustment from the previous 100 years into the next. The last one was the great depression, leading into ww1 and ww2, after an era of extreme growth in wealth inequality (guilded age).

Our population grew, but not enough were brought along. A number of us have backslid (my personal buying power has decreased despite raises, anyone in the $100,000/yr realm has power than equivalent pay in the previous generation). Like religions not accounting for non-believers, the system thinks its these folks fault, not its own.

Maybe it's time we start considering resets in our social structures every few years. Jefferson argued for one in the Constitution.

And maybe it's time we heed Adam Smith's advice and fight for equality of outcomes, not just opportunity (a notion we believe exists, but the reality that we are a society where everyone has equal opportunity is laughable). Cause it seems to me, it would do a lot to avoid these lopsided social structures if we're all kept on the same page materially.

Game theory suggests it is a good idea when talking about community policing: https://aeon.co/essays/game-theory-s-cure-for-corruption-mak...

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#118

Post by nommm-nommm »

antisthenes wrote: post #115
nommm-nommm wrote: post #91

Earlier quoted context omitted.

Most Americans (and apparently Canadians) think their home is a very good place to park their entire net worth. Meaning they think its guaranteed to appreciate and appreciate faster than all other assets and investments a person has. They also tend to only look at raw numbers that look impressive unless you don't think about it too much rather than the whole picture. Grandma bought her house in 1970 for $10,000 and s…

> Most Americans (and apparently Canadians) think their home is a very good place to park their entire net worth. Meaning they think its guaranteed to appreciate and appreciate faster than all other assets a person has. Most Americans have no choice, because you can't buy 1/3rd of a house or a room in a house, or a basement. You have to buy the whole house and very rarely will a family be able to outright get themsel…

> being priced out of it eventually

This applies to home ownership as well. Taxes can increase to where you can't afford to live there anymore.

> It's rather the higher density urban areas that subsidize the suburban low density single family houses (most of which are very shoddily constructed).

I'm not sure I understand what you mean. I am talking about, mostly, income tax deduction that applies to everyone. There's also the 30 year mortgage and VA loans and (I think) FHA loans.

> most Americans don't have a portfolio of investments of any sort.

Many times it because they put all their income into their house because they believe it is their house that it the key to building them wealth!! My only point was this is a common misconception. Housing is for living in, unless its an investment property that generates cash flow but that's not what we are talking about.

Buy a house, or rent, there's tradeoffs. There's pros and cons of both. Its different for everyone at different times in their lives. As I said, a house is a great place to live in! My only point is the American/Canadian mindset that buying a house is the ultimate way to build wealth is false. It might, if you are really lucky, but don't bet on it. Especially don't bet your future on it!

Yes, you have to buy housing, you need somewhere to live. A house is a good choice for many. A house may be cheaper than renting. It's just not a guaranteed generator of wealth like most people believe. You shouldn't disregard funding your retirement to buy a house. You shouldn't stop saving to buy a house. Diversify your assets.

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#119

Post by tn13 »

John23832 wrote: post #10

The title made me think that this was going to be about subprime auto loans, which are definitely in "crisis" territory. This whole mess (subprime auto, renovation, and home loans) comes from the increasingly rent seeking nature of Wall Street. It used to be that fortunes were both made and lost on Wall Street. Now, for large investors ("whales"), it's 3.5% or I take my money to another fund. If I don't have a consis…

This is one area I think government ought to play its basic role. However given that government its self has been predatory with out money it is hard to expect that they will do anything other than bailing wall street out.

Baptists and bootleggers!

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