Times are tough all over

[tw]

Originally Posted by Pico and ME

This is why I am fretting about my simple savings account. Everyone I talk to tells me not to worry, its protected by the FDIC,

If government runs out of cash (and cannot borrow more from foreigners), then it will print money. You will have that money whether in a bank or under a mattress. And if the government prints money, your cash depletes in value equally whether in a bank or under a mattress.

Worry not about your bank. Worry more (or prosper) about what happens when the markets finally find a new value for America. This market crash (and the resulting upturn) is about discovering what America was really worth. The American economy was clearly overvalued due to so much bad equities. This market crash is finance markets desperately seeking our actual net worth AND for economic forces to take revenge for the money games.

In the short term, this is a stunning opportunity for people like me who never get out of markets, but saw this coming, and got out completely many months ago. For others who stayed put, expect to lose at least 20% because the American economy (like housing prices) was probably at least 20% overvalued.

Typically, markets overshoot in the downturn, and then rise up to what is a corrected market value. Obviously, everyone with cash is waiting for this market to find that bottom (at least a 35% downturn), then ride the wave back up to a new and lower American economy value (probably something below 20%).

When will it end? We don’t know. Too many shady institutions have not yet been punished by economic forces. One such possibility is hedge funds who I suspect are currently getting corrected which would explain the latest multi-hundred point market drop.

Worry not about your bank account. Worry more about how this economy, your job, and your government services may/must change now that America is revalued.

[DanaC]

1) Home ownership changed from being the American Dream to the American Expectation.

This is the biggie for me. This is the huge cultural shift that fed the rest. It happened here too. Owning a home became an expected part of being an adult; renting meanwhile, became stigmatised at all but the highest levels (executive let). Council housing (social housing projects) which had been the mainstay of working-class housing for a long time became associated with the underclass.

When I was a kid, one of the first things most of my friends did when they hit 18 was get their name on the Council's housing list. Unless you were pretty well off this is what you did when you grew up.

I know lots of people have said to me over the years, why don't I buy a house, instead of throwing my money away renting. Answer? I have never felt financially stable enough to risk taking on that level of debt and potentially having my home taken off me. I rent, I dont accrue more than a few hundred in debt and if I end up unemployed I can claim help with that rent. Whatever the economic climate there will always be landlords. I don't need to own a house, I just need to be able to live in one.

[tw]

Originally Posted by DanaC

I rent, I dont accrue more than a few hundred in debt and if I end up unemployed I can claim help with that rent. Whatever the economic climate there will always be landlords. I don't need to own a house, I just need to be able to live in one.

This works as long as you have other investments. One reason that home ownership is encouraged: a home is the only investment that so many have. The home mortgage *requires* him to invest in something. If you don't have a mortgage, then you should be investing continuously in some other equity.

Mortgage makes it easy for one to accumulate some wealth by forcing homeowners to keep making those payments - to keep investing in their net worth.

[jinx]

Originally Posted by DanaC

When I was a kid, one of the first things most of my friends did when they hit 18 was get their name on the Council's housing list. Unless you were pretty well off this is what you did when you grew up.

This is what happens here, with generation after generation being dependent on welfare. I didn't realize it was the norm in the UK.

[DanaC]

Originally Posted by jinx

This is what happens here, with generation after generation being dependent on welfare. I didn't realize it was the norm in the UK.

Welfare? I am talking about social housing. All that means is that the landlord (owner) is the local authority instead of a private landlord. Instead of it being run for profit, as a private landlord must, the estate is run to cover its costs, thereby leading to much lower rent and more secure tenancy status.

Setting aside the wealthy rental market, getting a council house was a step in between private rental and home-ownership. It was seen as an affordable and secure option for people who didn't have access to the kind of capital or credit necessary for home ownership (i.e most of the working-class). It wasn't a solution to an underclass problem, or a way of housing the unemployed, it was a solution to the shortage of habitable housing stock in postwar Britain and quickly became a settled institution in British culture. Council housing didn't take on the stigma and connotations it has now until well into the 1980s, maybe even the 90s.

[TheMercenary]

Originally Posted by DanaC

Council housing didn't take on the stigma and connotations it has now until well into the 1980s, maybe even the 90s.

Same goes with our public housing. I really think it is due to a change of the generations from one of those being greatly appreciative of the help provided and among whom they had great pride and a sense of selfworth and work and changing to one of a generation of entitlement, hand outs, and dependency on the system based on some stupid idea of imaginary wrongs to a narrow group of people.

[DanaC]

Originally Posted by TheMercenary

Same goes with our public housing. I really think it is due to a change of the generations from one of those being greatly appreciative of the help provided and among whom they had great pride and a sense of selfworth and work and changing to one of a generation of entitlement, hand outs, and dependency on the system based on some stupid idea of imaginary wrongs to a narrow group of people.

Not all those wrongs are imaginary, Merc. Whether or not they're relevant is an argument to be had.

I don't know what it's like over there, but over here most of the social housing is now owned by not for profit companies rather than the state. It was sold off in the 80s and 90s. The reputation the estates sometimes have for anti-social behaviour, drugs and nightmare neighbours is partially a fair one. But the reputation is down to a minority of the tenants. It's amazing what absolute chaos a relatively small number of people can cause. In terms of unemployment, the reputation is again partially a fair one. But higher unemployment than the national trend still amounts to a minority of the community. What is problematic is the high percentage of unstable, unskilled, low-paid sink jobs. But even then, that isn't the whole story. Most people on 'council' estates are just like everyone here: trying to get by, making sure their families are fed and happy, hoping their kids will do well and attending parents evenings, making good and bad decisions and coping with the consequences. They just rent their house from a social landlord.

[Sundae]

Originally Posted by jinx

This is what happens here, with generation after generation being dependent on welfare. I didn't realize it was the norm in the UK.

Just to reiterate what Dana said - council housing was the standard option after the war for working class people. It was really appreciated because private landlords didn't labour under a fraction of the regulations they do now and renting was always a gamble. With the council as your landlord you were not going to be kicked out without notice, have your rent doubled or live in somewhere hazardous to your health.

Certainly, living in London - or on its outskirts - you had to have property in the family if you weren't renting.

My Grandad lived all his life after the war in council accommodation. Syill does - his bungalow is council owned, built specifically for pensioners as part of a new estate in the 1980s. He worked hard all his life in low paid, low skilled jobs and now has a decent standard of living as he was lead to believe all the years of paying in Social Security. He's better off than many single men his age living in their own houses. He won't leave anything behind for Mum or Uncle Jim, but again his generation and his class never expected to, and his children certainly don't expect it.

I grew up in a council house. My parents still live in it now, although they bought it in the 80s. Mum says she wishes she'd never bought it because the repairs and maintenance would still be paid for by the counil if they hadn't, and it probably needs rewiring. They are on a list for sheltered housing with a housing association (like Dana says, private associations fulfil this need now). As Dad gets older, they'd like to move somewhere where he doesn't have to worry about stairs, DIY or gardening.

It is a different culture here. We pay higher taxes, so hard working people will take help that's offered without the same stigma as in America. Yes, council housing did get a bad name in the end, but certainly things like child support and state pensions are seen as rights, not welfare.

[Cicero]

I'm with you (Dana). The only way I will do it is if it is paid for all in cash plus some for renovations. This is not going to happen until I win the lottery.

And:

My husband and I can't stay in one place for long enough to really make it worth it. Not for now. When we are older and have the cash we might think about it. And by then maybe the dollar will be worth something again. Dunno. I love not worrying about the upkeep of the entire property when the pace at work gets too heavy.

I live in a place I could not afford to own. It's awesome and I love it. It really doesn't have to be mine for me to get pleasure from it.

[Pico and ME]

Cheap gas actually started all of this.

Well, thats what Kunstler says.

[Undertoad]

The greedy* homeowners that took ARMs are now again being greedy* by defaulting when their home loses value, instead of just sticking with the program and paying until things get better.

*in this context, "greedy" means behaving pretty much like everyone else in the culture.

[Cicero]

Originally Posted by Undertoad

The greedy* homeowners that took ARMs are now again being greedy* by defaulting when their home loses value, instead of just sticking with the program and paying until things get better.

*in this context, "greedy" means behaving pretty much like everyone else in the culture.

Are you refering to my post about greed in some way? Or are you calling homeowners greedy with a hint of sarcasm, or are you seriously saying homeowners were greedy? This is hard for me to read, if you are serious or not.

[glatt]

So is anyone else willing to admit that they rode this market down? We've got a couple Dwellars who say they saw this months ago and got out before the crash. I remember a thread back a few months ago where lookout asked if we were positioned where we should be. I don't know if that was supposed to be a subtle warning, but I ended up taking a long view after reading that thread and staying in the stock market.

So did you all get out months ago? Or don't any of you have 401ks?

I know it's tacky to talk about personal money, and I'm not asking for any details, but is anyone else wincing when they look at their 401k accounts? Or am I the only dummy?

My 401k is down 31% from one year ago, and I've been pumping money regularly into it for that entire year, so when you consider that, it's even worse.

[tw]

Originally Posted by glatt

I remember a thread back a few months ago where lookout asked if we were positioned where we should be.

Maybe it was Fall 2007 that I posted a warning of a serious market problem. I cautioned about unloading all credit card debt and setting up for an economic downturn. In Fall 2007 it had become obvious that a downturn was inevitable. I could not say if it was immediate or due to happen in a few years. But I do remember posting that caution especially with having no outstanding balances on any credit card.

It still applies. What happens in equity markets adversely affects jobs and Main Street some years later. Again, no way to know how severe that downturn will be. But that downturn will occur and will not be on George Jr's watch.

[glatt]

Originally Posted by tw

Maybe it was Fall 2007 that I posted a warning

Yes, but tw, you've been warning of the collapse ever since I came to the Cellar years ago. Why should I have given that one post any more weight than the others?