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Bear Sterns

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Just got bought for $2 a share. Wish I was the one who bought $50 puts on Wednesday (like a guy I know at work).

Oh well back to work on Monday...
 
Alan - it will be *very* interesting to watch the markets today. Emergency fed rate cut, Bear Stearns bought by JPMorgan, Venezuela now selling oil in euros ...

... and more folks are interviewed about their home mortgage "foreclosure", blaming it on the "sub-prime mess". The interview I just saw said she had a $200K mortgage, and last year took out two second mortgages totaling $200K to modernize her kitchen (!), then realized she couldn't make the payments on her $400K debt, on her office manager salary at a used car lot.

So she decided that she'd just walk away from the mortgages, and bought a brand new SUV <span style="font-style: italic">before her credit record showed the foreclosure.</span>

Somehow it seems that "sub-prime mess" doesn't have that much to do with the bigger problem.

the merry circus spins on.

T.
 
T !

I heard one on Saturday that is stunning. We live in a
320 home gated community of mostly professionals. 45 homes
are now for sale by owner. Usually there are 3 or 4 for sale.

The story: one neighbor is simply walking away from his home
and letting the bank have it. He's not even behind in his mortgage.
He got his house on a no money down, funky rate mortgage.

His home has fallen in price by maybe 20% to 30% so he's just
gonna walk away from it and purchase a bigger home for less money.

Our government is offering very special incentives for folks to
purchase houses. So he'll get a new mortgage.

unreal !!!!!!!!!!!!!

d
 
OK - Dale brings up something I've been puzzled by for weeks. You are paying on a mortgage. Your home drops in value 20% from when you got the mortgage. You "walk away".

(I assume "walking away" means stopping your monthly payments, and moving out.)

Someone please explain to me how walking away from the home/mortgage helps the (former) owner. You still have to live somewhere. You have to buy a new place, right? The guy in Dale's example really thinks he'll get another mortgage if he's just "walked away" from one? Jeez - what am I missing here?

If someone "walks away", isn't that person guaranteeing a major negative in his/her credit history? Instead of continuing to live in the house and waiting for the value drop to reverse?

Puzzled in Connecticut.
Tom
 
Dave - I read that too last week. Maybe the "I want it all - and I want it now" mentality is more prevalent than we thought.

By the way, here's the best description I've yet found on the current USA economic situation. Shows how the "sub-prime mortgage" meltdown is just a piece of the puzzle.

https://news.bbc.co.uk/2/hi/business/7073131.stm

Tom
 
We've considered moving away from California.
Our area hasen't been hit as hard as most.It's tempting
to buy something now while the prices are lower.

- Doug
 
AngliaGT said:
We've considered moving away from California.
Our area hasen't been hit as hard as most.It's tempting
to buy something now while the prices are lower.

- Doug
Click to expand...

Funny, I've been considering moving <span style="font-style: italic">to</span> California, if I could find a job that would allow me to pay rent and still eat, drive, etc.

I know a few people who tell me that I'm stupid for renting an apartment, and that I should be buying a house at my age (33). However, my lease is up in two months, and I've been laid off (my job ends April 5), so if I want to move, I've very little keeping me here except family. <span style="font-style: italic">So</span> glad I'm not a homeowner right now.

-Wm.
 
You don't just "walk away" from a mortgage. It WILL find you later. The bank will take over the house and sell it at auction. They will take the highest bid and sue the previous owner for the difference. It wil be more than just bad credit.
grin.gif
 
Scary, isn't it. The idea was to lower our contributions to the social security system, and put the difference into investment banks that seem to be a tad "loose" in their choice of investments. *Lower* the contributions to social security, then lower the social security monthly payments. Think about that.

Thank heaven that was given the ol' kabosh.

T.
 
Nutmeg, that's the best and simplest explanation I've seen on the debacle. The bubble was bound to burst. Most will cry for more intervention and some agency to beef something up (at our expense...). But, frankly, simply living within one's means, whatever the consequences, would have avoided this whole mess.

I've talked to my mother recently, her dob is 1939. Her father supported a family of four on $6/week working in the Ward-LaFrance fire truck factory. (Conceding that $6 1939 = approx. $6,000 2008) They lived a simple life, one car, same groceries each week, occasional car trip vacation. They saved, paid the mortgage off and tried to build savings (and wealth).

My point is, there were not unhappy, but quite content.
 
dar100 said:
Nutmeg, frankly, simply living within one's means, whatever the consequences, would have avoided this whole mess.
They saved, paid the mortgage off and tried to build savings (and wealth).
Click to expand...

And THAT, Dave, is the key to a successful life and early retirment.
Living within your means.

d
 
Tinster said:
dar100 said:
Nutmeg, frankly, simply living within one's means, whatever the consequences, would have avoided this whole mess.
They saved, paid the mortgage off and tried to build savings (and wealth).
Click to expand...

And THAT, Dave, is the key to a successful life and early retirment.
Living within your means.

d
Click to expand...

Why is that so hard, for so many, to grasp???
 
Unfortunatly I have very mean means... We live in a very low cost home that we own, I have 3 cars, one paid, one almost paid and cheap payments, one newer but has low payments. we don't live extravigantly, but rising costs are putting me behind. Savings account wiped out. bills steadily coming in, costs rising all the time. Everything is going up but my pay. (course that's why I'm job hunting right now.)
Our area isen't known for big $$$ jobs, and the chain stores are popping up all over. I don't see how the local economy is gonna hold out when 80% of the people aroud here work in retail stores for $10 an hour or less
 
We live in an instant world. Need to send a message, e-mail. Need to lose weight, stomach stapling. Need a car, zero down and low lease payments for 5,6,7 years. Want a house, 80% at 6% and 20% at 11%. Payments may or may not go up. Whatever. I'll deal with it later. None of this working out, just walk away and start over. Hey , the government owes us!!! :eeek:
 
...Well it worked for Bear Sterns! And the Savings and Loans a while back. An interesting read is "Free Lunch".
 
Dale: <span style="font-style: italic">Living within your means</span>
Dar100: <span style="font-style: italic">Why is that so hard, for so many, to grasp???</span>

Ain't it the truth. But when you look over the last 20 years or so, at the way young people are conditioned to "want stuff" ... not so hard to grasp, I'm afraid.

Neighbor's son turned 16, parents buy him an Italian sports car. Takes private sports coaching lessons (tennis, golf, etc.) plus a different sport every day after school. Has *never* done any outdoor work - dad does it all. Rented a $100/hr stretch limo so 16 year old can impress his 18 year old girlfriend.

Other neighbor is 30 but acts 15; drug/alcohol addiction, no job, punk rocker, owns the house but his parents pay his mortgage each month. Throws garbage out the door to rot.

Parents often don't teach their children the value of work; instead, they just give them stuff (or cash, or credit cards and make the payments). Good grief - 12 year old girls in makeup wearing skirts that you'd never approve on your wife. Joke about it? Not very smart.

"Bling" is cool. If you brag about the "stuff" you've got, and your kids think that's the important thing in life - well, guess what - that's the direction the kids will go. Buy more toys, regardless of your age, your kids will want more toys too. Hopefully they're learning to work for it, but I'm afraid that's a dying trend.

Whatever stuff children see in their home, they usually think that's the norm - the baseline below which they'll never drop.

The Federal Reserve can't guarantee loans to *every* investment bank that's shaky. But Bear Stearns most likely isn't unique, and its employees have lost a huge portion of their retirement and their security.

T.
 
Mike - that's the fun part. No one. They "under-write" - they don't give out money. In crisis cases (we're not there yet ...) they can "print" money, but they're really reluctant to do that, as it can cause more price inflation.

JPMorgan Chase provided an unspecified amount of funding to Bear Stearns for an initial period of 28 days, and those loans will be effectively insured by the Fed. Note the Fed didn't provide the funds; it's guaranteeing that Morgan won't lose them if the deal proves to be a loser.

Lots of folks like to blame "the fed" for problems, and sometimes they're right. But we're not "bankrolling" the fed any more than we're "bankrolling" the national park service, or the US Military.

But "the fed" doesn't toss buckets of "our money" around. The US Treasury has none of our money left anyway. It's been borrowed to finance "the good life".

T.
PS - watch investment banks Lehman Brothers and Goldman Sachs today. They'll announce their earnings. Not good.
 
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