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America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
141–150 of 194 posts
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#142The 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 ONLY thing that facilitates that is government intervention and market perversion.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#143Earlier quoted context omitted.
>Your home is NEVER and investment. A house that you own, maybe. But, I repeat, your home is never an investment. Can you expand a bit more on this? Usually it might not directly turn into an investment, but it does act as a 'savings vehicle' in many cases. For example when I moved to US a long time ago, the choice was between a 1200 rent and a 1600 mortgage (assuming I put a down of 25k or so). At that point it felt…
Everyone is born short housing. Buying your first house is covering a short position. Renting instead of buying is maintaining a short position. Buying your second house is taking a long position. (Copied directly from my other post in this thread [0], though if you do a search I've said the same thing several times.) [0] https://news.ycombinator.com/item?id=13376763
Others have elaborated further; here's Felix Salmon and Nick Rowe:
http://blogs.reuters.com/felix-salmon/2009/07/17/who-cares-a...
http://worthwhile.typepad.com/worthwhile_canadian_initi/2009...
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#144The 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…
Could just leverage up on some 30 year treasury bills for at least 9% annually. 3-4x leverage will get you that.
If you invested in 30 year treasury bonds six months ago, you have lost 15%. With 3-4x leverage you would have lost half of your investment!
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#145The 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…
Marx and other classical economic thinkers speculatively connected the fall in the rate of profit to increases in inequality and long-run economic cycles [1]. Essentially, the idea is that since the rate of profit exceeds the rate of growth, rent seekers (capital holders) tend to get richer and richer and own more and more of the wealth. This impoverishes all other parts of the economy and starves it of resources, ca…
The standard view of the business cycle is that the capital gets invested somewhere. When all the good places are gone, what's left gets invested in marginal places, and then in bad ones. That capital gets destroyed, because the bad ideas can't pay it back. That can result in a crisis, but more often in merely results in a recession.
So that's somewhat similar to Marx's idea, with two key differences:
1. Capital only grows by getting returns on previous investment. If capital "starves all other parts of the economy of resources", that means that capital is wasting the resources, which means that the capital is not earning a return, which means that it stops growing.
2. The end of the cycle doesn't have to be horrible. Marx hadn't seen much in the way of soft landings, but the Fed has gotten fairly good at them. (1929 and 2008 are exceptions, not the rule.)
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#146W/o paywall http://www.realtor.com/news/trends/americas-fastest-growing-...
You da real MVP.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#147Earlier quoted context omitted.
> We're going to keep going from crisis to crisis because banks can't say no, and the government(s) deems them too big to fail Consumers can say no, and if they had better financial education and/or financial prospects, maybe they would. The elderly woman in the article initially refused the $50k renovation to her 5 bedroom home, but then agreed because she thought the government was going to subsidize it for her. Th…
> I don't know the exact details of her situation, but it seems like perhaps the correct decision would have been to sell the house and move to a smaller, more efficient house if the current house is too expensive to maintain given the number of occupants and their age/level of income. I'm 24 and currently rent half a large house in the suburbs from a single guy in his 60s who needs the extra income to maintain the h…
California also has Proposition 60 (the property tax one, not the porn one) and Proposition 90 [0].
These allow a one-time transfer of the base year property tax values within the same county (and between some counties) for homeowners over 55 looking to change properties.
The rules are a bit more complicated, but it seems like it would apply to Ms. White's situation and prevent the issue you've brought up.
It seems very few people know about this.
[0] http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#148Earlier quoted context omitted.
Where are you getting 9% from annually with T-bills?
with leverage..... as aforementioned
It would be amazing if you could get leverage at rates below T-Bills. You are most certainly not at lower risk than the US government. It may be possible if you play duration arbitrage taking short term loans to buy long term treasuries. But then your playing a very dangerous game.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#149Earlier quoted context omitted.
Marx and other classical economic thinkers speculatively connected the fall in the rate of profit to increases in inequality and long-run economic cycles [1]. Essentially, the idea is that since the rate of profit exceeds the rate of growth, rent seekers (capital holders) tend to get richer and richer and own more and more of the wealth. This impoverishes all other parts of the economy and starves it of resources, ca…
The standard view of the business cycle is that the capital gets invested somewhere. When all the good places are gone, what's left gets invested in marginal places, and then in bad ones. That capital gets destroyed, because the bad ideas can't pay it back. That can result in a crisis, but more often in merely results in a recession. So that's somewhat similar to Marx's idea, with two key differences: 1. Capital only…
> that means that capital is wasting the resources, which means that the capital is not earning a return, _which means that it stops growing_.
What's interesting is that people might not notice for awhile that the capital isn't earning a proper return, and the realization can be in the form of a sudden price adjustment + crash (think tech bubble burst or housing bubble).
I think even standard economics is starting recognize this, even though the serious study of severe crashes has been somewhat neglected between WW2 and 2008. One problem is that data is hard to come by, given the rarity of the event. Another is that it's hard to come up with a good theoretical reason why asset prices can be persistently wrong for so long.
> (1929 and 2008 are exceptions, not the rule.)
What if it turns out that severe crashes to the tune of 1-2 a century are a rule? How many data points would we need to see before economists would be convinced?
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#150Earlier quoted context omitted.
with leverage..... as aforementioned
It would be amazing if you could get leverage at rates below T-Bills. You are most certainly not at lower risk than the US government. It may be possible if you play duration arbitrage taking short term loans to buy long term treasuries. But then your playing a very dangerous game.
Would be amazing right
Four child replies deep and someone mentions that leverage could be dangerous, might be a new record folks!
Ironic if you are successful then poor people that can't even lock up $1,000 for a few years will say you are a rent seeking mess.