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Old September 23rd, 2011, 09:09 PM
AR AR is offline
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Default Consumer debt

This just in. . .

Consumer debt for the second quarter is up 66% over the same period last year. This is mostly credit card debt, of course, and it seems that Americans have reverted to their old ways again.

So sad.
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Old September 23rd, 2011, 11:50 PM
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I can't find the most current quarter, but everything I can see points to the lowest household debt in many years. Mind citing your source?

Household Debt Service and Financial Obligations Ratios
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Old September 24th, 2011, 08:07 AM
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I also had read that it was down. We are in better shape, and if people are wise they will work at not having any debt.

Sadly, so many are out of work, and are probably depending on their credit cards to live.
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Old September 24th, 2011, 10:41 AM
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Originally Posted by 7x57 View Post
Mind citing your source?
Not at all. Here it is.

Q2 2011 Credit Card Debt Study

The first quarter was very promising; the second quarter pretty terrible.

For those who don't want to look at the gory details, here's their bottom line. . .

CONCLUSION: As was the case in the previous 2 years, consumers start reversing any debt pay down from the first quarter with a net increase in credit card debt in the second quarter. What is worrisome about 2011 is that the debt in Q2 2011 is a staggering increase of almost $18.5 billion, which is 66% higher than the increase observed on the same quarter one year ago and 368% higher than the increase observed two years ago.
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Old September 24th, 2011, 11:45 AM
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Originally Posted by AR View Post
This just in. . .

Consumer debt for the second quarter is up 66% over the same period last year. This is mostly credit card debt, of course, and it seems that Americans have reverted to their old ways again.

So sad.
That is a shame I had hear savings was up and thought may be we learned something. I guess not.

I was trying to teach a co worker about Opportunity Cost. Instead of bring his lunch from home he was buying it. So I estimated $5 difference between buying lunch and bring it from home. So he would save $110 per month if he didn't bring his lunch. Then I run an loan amortization table to show how much interest he would save if each month he paid an extra $110 towards his home loan. He would save over $33k in interest and shave 4.75 years off the life of the loan. He was amazed when he saw it. A week later I saw him in the lunch room. He had purchase his lunch instead of bring it from home. So I told him, I hoped the $33,000 burrito was real tasty. Because saving the interest is the opportunity he is giving up every time he buys lunch. I couldn't help myself. BTW excel has a template for loan amortization really easy to use.

You can lead a horse to water, but if he is an American horse he will refuse to drink the water and use his credit card to purchase special bottled water. It's embarrassing.
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Old September 24th, 2011, 12:06 PM
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Quote:
Originally Posted by AR View Post
Not at all. Here it is.

Q2 2011 Credit Card Debt Study

The first quarter was very promising; the second quarter pretty terrible.

For those who don't want to look at the gory details, here's their bottom line. . .

CONCLUSION: As was the case in the previous 2 years, consumers start reversing any debt pay down from the first quarter with a net increase in credit card debt in the second quarter. What is worrisome about 2011 is that the debt in Q2 2011 is a staggering increase of almost $18.5 billion, which is 66% higher than the increase observed on the same quarter one year ago and 368% higher than the increase observed two years ago.
Fun with stats.... If the previous year showed a decrease (which it did), even the smallest increase the following year (which it didn't according to my stats - federal reserve) would be INFINITELY higher in percentage gain.

Makes me wonder who's long gold.

Raw data if much easier to do your own analysis. Relying on other's analysis just gives you their spin.



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Sadly, so many are out of work, and are probably depending on their credit cards to live.
There's probably some truth to that.
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Old September 24th, 2011, 12:14 PM
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Originally Posted by AR View Post
Not at all. Here it is.

Q2 2011 Credit Card Debt Study

The first quarter was very promising; the second quarter pretty terrible.

For those who don't want to look at the gory details, here's their bottom line. . .

CONCLUSION: As was the case in the previous 2 years, consumers start reversing any debt pay down from the first quarter with a net increase in credit card debt in the second quarter. What is worrisome about 2011 is that the debt in Q2 2011 is a staggering increase of almost $18.5 billion, which is 66% higher than the increase observed on the same quarter one year ago and 368% higher than the increase observed two years ago.
Fun with stats.... If the previous year showed a decrease (which it did), even the smallest increase the following year (which it didn't according to my stats - federal reserve) would be INFINITELY higher in percentage gain.

Something as small as an extra $100 a month for the average household in electrical (read cooling) expenses could shift the average from saving (or paying down debt) to incurring debt.

Makes me wonder who's long gold.

Raw data if much easier to do your own analysis. Relying on other's analysis just gives you their spin.



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Sadly, so many are out of work, and are probably depending on their credit cards to live.
There's probably some truth to that.
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Old September 24th, 2011, 05:40 PM
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Regardless of percentages, how they're figured etc., is to me immaterial. An increase is still an increase regardless of the percentage. Now it could be made up by primarily the unemployed, but looking at retail sales (i.e. things such as Starbucks, I-Pods, etc0., that doesn't appear to be entirely the case.

In short, sadly it appears we're still not learning. Ah well, when we really tank (and that could shortly happen for a myriad of reasons), maybe everyone will finally get the message that, "I want it and I want it now!" is not the proper path to pursue. I know because I was for almost three decades one of those, "I want it now" types. After I learned the error of my ways, it took us another decade to get "out from under." Such a situation, at least in my case, will never recur.

Todd
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Old September 24th, 2011, 06:03 PM
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Regardless of percentages, how they're figured etc., is to me immaterial.
Todd
How do you take a material number and manipulate it using 100 power (percentage) tools and say the results of the manipulation are "Immaterial".

You have to go back over 15 years (4 presidential terms) in almost EVERY category to find a time when we had lower household debt to income. When people play with Year Over Year percentages they can literally make a mountain out of a mole hill (and they have here.)

The lower the number the lower the percentage of debt to income (Low number = Good)

Quarter DSR FOR Renter Homeownerl Mortgage Consumer
94q1 10.86 16.28 24.55 14.19 9.42 4.77
94q2 10.86 16.25 24.61 14.15 9.32 4.84
94q3 10.96 16.36 24.96 14.22 9.29 4.93
94q4 11.06 16.43 25.03 14.28 9.29 5.00
95q1 11.25 16.63 25.38 14.46 9.35 5.11
95q2 11.47 16.88 25.88 14.66 9.41 5.26
95q3 11.59 17.02 26.25 14.76 9.36 5.40
95q4 11.67 17.10 26.67 14.80 9.29 5.50
96q1 11.69 17.08 26.59 14.80 9.20 5.60
96q2 11.73 17.08 26.48 14.84 9.16 5.68
96q3 11.80 17.15 26.74 14.90 9.13 5.77
96q4 11.87 17.23 26.97 14.97 9.10 5.88
97q1 11.83 17.21 26.90 14.97 9.09 5.88
97q2 11.86 17.27 27.09 15.02 9.11 5.91
97q3 11.89 17.28 27.18 15.03 9.07 5.95
97q4 11.85 17.19 27.13 14.95 8.99 5.95
98q1 11.73 16.98 27.20 14.72 8.82 5.89
98q2 11.76 16.96 27.42 14.68 8.74 5.93
98q3 11.76 16.94 27.70 14.63 8.67 5.95
98q4 11.81 17.01 28.06 14.65 8.65 6.01
99q1 11.88 17.10 28.27 14.72 8.67 6.05
99q2 12.03 17.28 28.82 14.85 8.72 6.13
99q3 12.16 17.41 29.15 14.96 8.76 6.20
99q4 12.13 17.32 29.18 14.87 8.74 6.13
00q1 12.03 17.12 29.02 14.70 8.65 6.05
00q2 12.20 17.26 29.38 14.82 8.70 6.11
00q3 12.36 17.39 29.73 14.93 8.73 6.20
00q4 12.59 17.66 30.44 15.13 8.83 6.30
01q1 12.67 17.73 30.48 15.20 8.84 6.35
01q2 12.86 17.98 30.89 15.41 8.97 6.44
01q3 12.73 17.78 30.96 15.19 8.88 6.31
01q4 13.11 18.26 31.05 15.71 9.14 6.57
02q1 12.96 17.99 30.36 15.54 9.02 6.53
02q2 13.01 18.00 29.86 15.65 9.10 6.55
02q3 13.18 18.16 29.49 15.91 9.28 6.62
02q4 13.25 18.20 28.93 16.05 9.41 6.65
03q1 13.27 18.15 28.34 16.12 9.48 6.64
03q2 13.21 18.02 27.67 16.09 9.47 6.62
03q3 13.15 17.88 26.90 16.07 9.47 6.60
03q4 13.21 17.92 26.60 16.19 9.57 6.62
04q1 13.24 17.93 26.19 16.28 9.66 6.63
04q2 13.20 17.88 25.76 16.31 9.71 6.60
04q3 13.36 18.03 25.57 16.53 9.87 6.66
04q4 13.32 17.94 25.41 16.47 9.92 6.55
05q1 13.68 18.39 25.48 16.97 10.31 6.66
05q2 13.80 18.51 25.34 17.14 10.48 6.65
05q3 13.69 18.38 25.23 17.01 10.42 6.59
05q4 13.78 18.47 25.19 17.13 10.58 6.55
06q1 13.73 18.40 24.98 17.09 10.67 6.42
06q2 13.78 18.48 25.06 17.18 10.84 6.34
06q3 13.88 18.61 25.19 17.31 11.02 6.29
06q4 13.87 18.66 25.38 17.34 11.08 6.26
07q1 13.85 18.67 25.09 17.38 11.16 6.23
07q2 13.88 18.75 25.35 17.43 11.21 6.22
07q3 13.96 18.85 25.30 17.55 11.30 6.25
07q4 13.89 18.75 25.01 17.48 11.25 6.23
08q1 13.62 18.41 24.81 17.11 11.00 6.12
08q2 13.22 17.92 24.38 16.62 10.68 5.94
08q3 13.35 18.16 25.07 16.77 10.76 6.01
08q4 13.41 18.36 25.57 16.90 10.86 6.04
09q1 13.42 18.49 25.84 16.97 10.94 6.03
09q2 13.13 18.22 25.54 16.69 10.80 5.89
09q3 12.98 18.14 25.67 16.56 10.74 5.82
09q4 12.71 17.87 25.52 16.27 10.61 5.65
10q1 12.27 17.36 25.10 15.75 10.31 5.44
10q2 11.94 16.98 24.75 15.35 10.09 5.27
10q3 11.73 16.74 24.40 15.14 9.98 5.16
10q4 11.55 16.55 24.04 14.97 9.88 5.09
11q1 11.24 16.26 24.01 14.63 9.67 4.96
11q2 11.09 16.09 23.96 14.44 9.54 4.90

(sorry the chart didn't index correctly; but my above link will take you to the fed website where this data was taken)

Last edited by 7x57; September 24th, 2011 at 06:15 PM.
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Old September 24th, 2011, 07:15 PM
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Credit card debt is a bad thing unless you really need to charge something that you cannot live without. The only thing that Rob and I had to pay off on time was a refrigerator. We only use our charge cards when we know we have the money to pay the charge when the bill comes in. The only good thing about charge cards is that many offer air miles or discounts on products or services. It seems that people, of the previous generations, learned that if you can't afford it, you don't buy it!
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Old September 24th, 2011, 07:21 PM
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7x57,

I am certainly not as educated nor a statistician as may you well be. I'm just using the basic fundamental that if something changes from the year before, it well......changes! It may not be that big, it may not be that persistent, it may not even be that significant (and I hope it's not). Nevertheless, a negative change remains a negative change.

That is what I meant as "immaterial."

I always was taught that "statistics don't lie." I also learned that statistics can be manipulated.

Todd
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Old September 24th, 2011, 07:31 PM
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Quote:
Originally Posted by ToddDH View Post
It may not be that big, it may not be that persistent, it may not even be that significant (and I hope it's not). Nevertheless, a negative change remains a negative change.

That is what I meant as "immaterial."

I always was taught that "statistics don't lie." I also learned that statistics can be manipulated.

Todd
Thanks for the response Todd. Consumer debt is lower TODAY than any other time in the last 15 years in every Federal Reserve measurement* (Renter, Homeowner, ect.) Tell me how that's a negative change for the average American. The facts are material.

*data listed above
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Old September 24th, 2011, 08:23 PM
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7x57

You are absolutely correct and at the same time you made my point. It may be materially lower BUT it is still higher than the previous month.

If that continues then at some point even the statistics would change. I sincerely hope they do not and I hope you continue to be be right. Nevertheless, I am worried about the ultimate result.

I defer to your knowledge and your expertise, neither of which I possess. You don't know how much I want you to be correct and me wrong (which is more than a distinct possibility).

I repeat for the umpteenth time, you're corresponding with only a high school graduate. That fact, in and of itself, gives you a hell of an edge! And believe it or not, I'm voting for you!

I've always said, my expertise is in law enforcement and on that subject, believe me, I know my stuff and then some. But as most on these boards know, I research like you'd never believe. That DOES NOT by any stretch of the imagination mean I'm correct or even close. In this case, I honestly and truly hope, you are correct.

To paraphrase Paul Motter, the editor of this site, I put forth my opinion, period and that is what discussion is all about. I also deeply appreciate opposite views simply because while I may not agree, it provides me an additional means of education. Oh, and more than one time, I've admitted I'm wrong and the person espousing the opposite view is right. Having said that, when it comes to history, especially military history..............well, you'd best better lay all your cards on the table.

Todd
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Old September 24th, 2011, 08:35 PM
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Quote:
You are absolutely correct and at the same time you made my point. It may be materially lower BUT it is still higher than the previous month.
Friend, you are incorrect. It's not been lower in over 15 years, not last quarter or any of the previous 60 quarters or 240 months has consumer debt been lower. The rate of decline has slowly tappered off and that could be an anomoly or it could be a sign of cost of living increasing (inflation) or more spending (which isn't always a bad thing in moderation). Americans on average have never paid off debt as quickly nor saved at this rate. A reason to celebrate the discipline of our neighbors and nation, not decry it for heaven's sake.

I won't for a second underestimate the thought speed of a cop, Todd. I too appreciate the discussion. I'd like the facts to be noted though.
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Old September 24th, 2011, 08:48 PM
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So noted!

Todd
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Old September 24th, 2011, 11:09 PM
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This is almost funny (because nothing about this subject could really be funny).

Of course overall debt is down from a number of years ago. You don't have to post columns of numbers to figure that one out. Don't know about you, but I remember a few things. . .

1. I used to get no fewer than 10 credit card offers a week. Now I get none. Well, maybe a couple a month.

2. When the first round of bad times hit in 08 the credit card companies took a hit and got very scared. Turns out that in their zealousness (read "greed") they had granted many of their customers far larger credit lines than their circumstances warranted, just like their friends in the mortgage business did. Their customers, in turn, maxed out those lines so that when the troubles came they could not be repaid. Tremendous write-downs ensued, along with the cancellations of oodles of cards and credit line reductions to oodles more.

3. Many of the people whose cards were cancelled cannot get them replaced at all, partly because

4. The unemployment rate is 9%, with foreclosures and bankruptcies moving along in step.

So yeah, of course, the dollar amount is less than it was mostly because it is capped by lenders who, unlike their customers, seem to have finally learned the definition of "risk," at least temporarily.

But the important points here are the ones made by people like Kat and the very expensive lunches that her workmate eats: people still have no idea what is meant by time value of money; they still want instant gratification; they still have short attention spans; and they still have entitlement mentalities. Oh yeah, and they're not predisposed to learn very much. So they actually do things like invest their kids' college savings with baby food companies--who throw in life insurance policies too! Now there's a deal!

I am confident that given the return of easy credit, the numbers would soar to their previous levels, and then some.

Had a good laugh today. One of our sons is in the process of buying a house and he was telling us that the paperwork for his mortgage is really onerous. "How so?" I asked. "Well, hell, they actually want me to prove that I make what I told them I make. What a pain."

Yeah. Them lenders sure can get petty when they're scared. Of course, there's no reason for them to really be scared. After all, if they get into trouble, we'll bail them out.
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Old September 25th, 2011, 12:31 PM
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Thanks for the friendly debate AR. It's a nice warm up before football.

I'm having difficulty with the multi-quote function, so I'll just color code if that's okay.
Quote:
Of course overall debt is down from a number of years ago. You don't have to post columns of numbers to figure that one out. Don't know about you, but I remember a few things. . .

Did ja even look at the columns? They contradict what the writer of the article is trying to argue. They contradict you as well. It's really enlightening to look at this data, not some smuck's skewed analysis of it.


1. I used to get no fewer than 10 credit card offers a week. Now I get none. Well, maybe a couple a month.

That supports the lack of (or less) opportunity to get into debt problems. Good thing!


2. When the first round of bad times hit in 08 the credit card companies took a hit and got very scared. Turns out that in their zealousness (read "greed") they had granted many of their customers far larger credit lines than their circumstances warranted, just like their friends in the mortgage business did. Their customers, in turn, maxed out those lines so that when the troubles came they could not be repaid. Tremendous write-downs ensued, along with the cancellations of oodles of cards and credit line reductions to oodles more.

Credit card companies never took a major whallop. Banks mired in Sub-prime mortgage secularization took the bath. Several went under on just this one bad bet. The trigger for this was one particular collateralized debt obligation stuffed with undocumented loads called "Abacus" going bad and the ABX index (all the other sub-prime collateralized debt obligations) which was severely short sold (more shares borrowed and sold than were even available.)

3. Many of the people whose cards were cancelled cannot get them replaced at all, partly because the unemployment rate is 9%, with foreclosures and bankruptcies moving along in step.

That's another good thing to have less opportunity for the undisciplined to dig debt holes. How that was ever allowed to happen is ridiculous.

So yeah, of course, the dollar amount is less than it was mostly because it is capped by lenders who, unlike their customers, seem to have finally learned the definition of "risk," at least temporarily.

Yes, the dollar amount is lower than anything we have seen in over 15 years. There is no 66% jump. Everything else is speculation on your part.

But the important points here are the ones made by people like Kat and the very expensive lunches that her workmate eats: people still have no idea what is meant by time value of money; they still want instant gratification; they still have short attention spans; and they still have entitlement mentalities. Oh yeah, and they're not predisposed to learn very much. So they actually do things like invest their kids' college savings with baby food companies--who throw in life insurance policies too! Now there's a deal!

There are ants and grasshoppers in life. More ants today IMO, but like bellybuttons....we all have our opinion.

I am confident that given the return of easy credit, the numbers would soar to their previous levels, and then some.

Based on what, a gut feeling? anecdotal evidence? I walked to school uphill both ways and these punks today don't know the value of a dollar syndrome?

Had a good laugh today. One of our sons is in the process of buying a house and he was telling us that the paperwork for his mortgage is really onerous. "How so?" I asked. "Well, hell, they actually want me to prove that I make what I told them I make. What a pain."

No or Low Doc loans were certainly foolish and congress creating federal mandates that required Freddy and Fannie make those risky loans is something we should investigate. I couldn't agree more with you.


Yeah. Them lenders sure can get petty when they're scared. Of course, there's no reason for them to really be scared. After all, if they get into trouble, we'll bail them out.

Bailing them out was a huge mistake, but knowing how the trap was created by the likes of Goldman Sachs helps you understand there was some stuff that makes that bond scandal of the 90s look like Milk (there's a pun here) money theft.



I don't think we really disagree on much. The only point I can think of might be whether or not the facts matter. If you want to ignore those and focus on the feelings you are having that's fine with me, but it only takes a few minutes to gather the information used to write the hit piece you linked and only a few minutes after that to discover it's a hit piece that was probably written two years ago and recycled now. The next question is WHY?

Thanks again for the friendly debate AR. Have a great Sunday.
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Old September 25th, 2011, 05:54 PM
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This fall under the "for what it's worth department."

I this afternoon watched a financial program where to synopsize to the extreme, the following point was made.

Yes, Americans are paying down their credit card debt. But that is only because many have subprime (underwater mortgages) and they're terrified of losing their homes. To help with that, they are using every method, especially government assistance, to hold the line on their mortgages. To do that, they're making sure their credit card balances can support them if the roof caves in and that is why consumer debt is falling.

In short, things are far worse than most of us imagine and the worst part is, that it's happening to the all important middle class.

I'm not saying if this is correct or not simply because I'm not a financial expert whatsoever. I'm only stating what I heard on a TV financial forum.

Todd
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Old September 25th, 2011, 06:16 PM
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Oh, I freely admit that it's partly gut, and my gut feeling has two principal aspects at this stage.

1. I trust the various markets -- and especially the credit markets -- less and less, because big parts of them are dark, have no formal exchange, are unregulated and unknowable. I understand the basics of how things are supposed to work, but finance is not my business. I have invested all my life in things I basically understood, with gratifying results. I no longer believe I understand a lot of what's going on, and I question the good faith and fiduciary scruples of those who are operating in this netherworld. It's only natural. As a result I generally view those who move the money around with cynicism, suspicion and disdain. And I act accordingly.

2. I trust my fellow Americans -- as a whole -- even less. They have been making the wrong personal financial decisions for as long as I can remember, so this is nothing new. They were screwing up even back when the decisions were easy for anybody who was paying a little attention. Now that the decisions are much harder--and their options are often far fewer--they haven't got a chance. The predatory segments of the credit markets know this, and do everything they can to ensure that these people continue to screw up, because every game must have a winner and a loser. (That's the cynical way of saying that for every buyer there must be a seller).

And in all of these numbers, as I see them anyway, there is no sign that the public has "caught on" and is trying to alter its generally foolish positions on personal finance. Until somebody convinces me that they are changing out of enlightenment rather than necessity, the glass will be more than half empty for me.

I enjoy the conversation too.
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Old September 25th, 2011, 07:05 PM
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I apologize if I come off as argumentative. That's not my motivation to keep posting on this thread.

Subprime is not "underwater", although many today are. Part of the problem we have been working though are those who strategically default on their deep underwater mortgage. The problems with strategic defaults is two fold. I don't have any numbers in front of me for those with mortgages that use social assistance (nor do I know where to start looking), but we are probably paying more as a nation for those who strategically defaulted and put the mortgages back on the originator (fannie and freddy ect.) who we then bailed out. The second problem is the flooded housing industry. We have had a glut of homes for years. Anyone who has thought about selling their home in the last few years knows what I'm talking about. It's a buyer's dream if one can find financing.

Subprime has lower standards than jumbo or prime mortgages. I was an ideal candidate after I left my job as a civil servant to become an independent contractor. As a civil servant I had 5 years of documentation of excellent pay. I had low debt and high credit. I was a "prime" candidate for a fairly low rate mortgage. When I became a contractor I had no more documentation of current work history and while I was paid multiples of my teacher's pay it was all over the map, so to speak. I had to cover travel expenses, so my credit card balance was (I paid in full every month) very high if one was to take a snapshot. At that point I was the perfect candidate for a sub-prime loan. I was a higher risk mortgage which would theoretically pay a higher rate. Had I worked as a contractor for enough time to establish a long work history and used a debit card to cover my work expenses (or become a LLC) I might have qualified for a jumbo loan.

I agree things are pretty bleak. I also think that might be the perfect time to make a modest move into the markets if you have a tolerance for a little (or a lot) risk.
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