Is the credit crunch that bad ??

[mercoutlaw]

We also need to take into account that people often live well past their means, which has an overall negative economic response in a rather whimsical economy such as the US is currently experiencing when the USD is at a 1:2 ratio with many of our market neighbors. That coupled with the cost of living increase and relatively stagnant incomes drives people to further live beyond their means. Now, is this indicative of a recession? I won't say yes, but we are definitely in a bit of a financial crisis anyway one looks at it. Fortunately, I live close to work. I stopped driving anymore than I need to and walk to the grocery store if in need of minor food stuffs unless I am already out. We as the consumer can take back some control if we make it a mass effort not to let the politicians decide our values for us.

[Joe Kutz]

I would just like to point out that it really isn't most people living beyond their means. I had linked to the story a year or so ago (yes...this issue was already coming up back then) and it cited the actual data regarding personal debt and who has it. If I recall correctly it was only around 10% of the US population had unsecured (credit card and other similar debt) of over $5,000. When the media and other agencies toss about the numbers of $8K or whatever being the average debt held by a US citizen - it isn't true. They take the total unsecured US debt (companies borrowing money, banks who borrow money and everything else) and divide that by the US population.

 

Again, the market tends to be motivated by a handful of idiots who scare easily and like to jump on the band wagon of the next big thing (which creates bubbles and bursts). When these idiots are fund managers of companies that have $500 billion invested in the market...a small buy for them will swing the market a 50-100 points even if there isn't a reason for it. Case in point in the beginning of June one of the firms said they expected $200 per barrel oil by the end of August. During the next week oil jumped $20. Why? Because one of the big companies said it will hit $200 so the little scavengers who follow their lead wanted a piece of that action (since oil was only at $120 or so at the time - 40% profit in 3 months isn't too shabby). Now if I were more cynical, I might think that the big firm who made the statement was deliberately trying to manipulate the market for their own benefit (and in reality I DO think that they were). If politicians would like to do something useful - they would pass a law that makes it illegal to yell fire in a crowded theater (or in this case recession in a contracting market...or $200 oil when there isn't anything to indicate that would happen - the current markets are more motivated by fear than by market indicators, at least till the chickens get chased away and are burying cans of money and gold in their back yards - then the actual economy is allowed to work again). Instead, here is $300 billion for a few yutzes who can't figure out that they will not be able to afford a $3000 mortgage payment making $800 a week. Another few billion to give money back to help keep those yutzes in their house for a month longer. Several billion more for banks which are ran by idiots.

 

Anywho, while I wouldn't recommend using credit cards for anything which was not an emergency - the numbers don't reflect a lot of the scary statistics that news and politicians toss around.

___________

 

Found that link:

http://moneycentral.msn.com/content/Bankin...arts/P74808.asp

 

And the thread from last year:

http://www.reapermini.com/forum/index.php?showtopic=29449

[mercoutlaw]

I realize your point and have extensive schooling in the economics. You are spot on as far as I'm concerned. However, I tend to shy away entirely from government studies (or government cronies putting out 'research'), and have looked over a number of independent studies and a few University studies in my area including my Alma Mater. I think the truth is somewhere in between what we are told, and what we can actually study. I don't mean this as an argument towards you, just that things are not clear cut in either direction, and that it overall is hurting everyone. Again, as you pointed out, it comes down to personal resposibility (of course some do fall on rough times out of their hands and there are some exceptionally greedy SOB's out there) but in much of the market people don't realize that they can manipulate on a very small level of their own that can have an overall positive effect on their lives.

[Joe Kutz]

I agree with that aspect - I just don't agree with the common "A lot of people live beyond their means" statement. Media likes to throw that about, as do politicians and it just doesn't hold water. I very rarely trust government studies - however I do trust government numbers. They tend to be pretty good at census taking and taxing (taxes being a big GDP indicator). And I never trust a politician...ever.

 

I also believe that if more people would change their habits, there would be an overall positive effect on the economy in general. Waisting less money at the higher levels of government to deal with bad business decisions would be a great place to start. After that, I have always strongly believed in buying only what you have cash on hand to afford. The last time I used credit in any form was when I purchased my first house back in 95 or 96. Since then I have not taken out a loan, charged a purchase or anything else (the end result is a credit score which is non-existent...but I could honestly care less about that).

 

If people would educate themselves on how much credit actually costs them, they might be less likely to use it. But even more to the point, if people were shown how much not using credit could save them - they would be more inclined to save as opposed to buy now/pay later (even in regards to cars and houses). Various formulas for determining how much a house will cost you by the time it is paid off place it at 4 to 5 times what you actually got the loan for (including interest as well as costs of ownership like maintenance, taxes and similar fees). If a young person were to take and stash away a bit of money in a mutual fund or similar account, they would likely be able to pay cash for their first house. Once you are no longer paying rent or a mortgage, it money becomes a lot easier to find in your budget and you are less affected by the overall economy. Your cost of ownership drops substantially, and you are placed in a much better position to retire early (perhaps to a state like South Dakota), while most other people are still trying to make ends meet paying other people interest and being in a much more vulnerable situation.

_______________

 

Just a quick example, if someone were to buy new car ($15,000...$300+ per month) and pay for it for 5 years - they will end up with a car that might have a trade in value of $5,000 and have spent somewhere around $18,000 dollars for it. At the same time if you were to buy a good used car (say an early 90s Toyota or Honda) and drive it for 5 years while you put $250 into a poorly performing mutual fund you will end up with a little under $18,000 in cash at the end of that time (an average fund would yield around $20,000). This gives you an extra $50 per month of money you can use for other bills, and at the end of the time period you can trade in your beater and the cash on a new car and be clean and clear on it. Now you have a nice new car, and you can continue putting your car payment into savings. Drive the new car for 10 years. And you will be sitting on around $40,000 when you get ready to trade that one in (again, an average fund would be somewhere around $55,000).

 

You can work the same numbers dealing with the difference between a mortgage payment and rent for an apartment. Get a room mate early on, and save more.

[mercoutlaw]

Bravo, friend! I totally agree. Take the power away from the people who want to control it through financial power and return it to those who should control it (the people) and educate them as to how. We may disagree on the one quote, but I see a great deal of common ground on the rest.

[Joe Kutz]

I guess I just tend to be a bit more...annoyed I guess...when people toss around bad terms regarding the economy and other issues without cause. When I left home, I had a suitcase of clothes and a 25 year old pickup. Around 20 years later - I am sitting comfortably on around 100 acres of land...in a house that is paid for...with 4 more houses which are also paid for and earning me income...a half dozen cars that I have for fun...and money in the bank that will allow me to live without ever working again. I think about that, and than I hear a speech about how hard it is, and how bad things are. I just don't see it. I started with less than most people, and am in a position now that many people will never reach - however everyone could reach it. A bit of self control and planning goes a lot further than hand outs or even hand ups.

[mercoutlaw]

I would love to know your secret, then! Because I work incredibly hard, put myself through college, and will be paying back student loans for years. I've never gotten a hand out, but no matter how hard I work I've never attained that kind of luxury! I am only 27, and maybe you didn't hit the paydirt until after that, but I see a whole lot of struggling in the world around me, and nobody's making the kind of money you've got going. My parents own a 15 acre farm, my dad has a Master's degree and teaches at a local university, but faced many layoffs in other jobs, especially after more than 20 years of back breaking labor at his first job out of high school. The man has worked hard to raise a family and still works full time and teaches, is careful with money and still aren't there. I don't mean to sound rude, but it's hard to see the bottom from the top sometimes. Not everyone has the knowledge or ability in their market or surroundings to make it big. Yes, you did, but maybe you are the exception to that rule. As far as "everyone reaching it," I don't know where that conclusion comes from, because if everyone could, then there would be no class structure in our society, something that those in power would NEVER allow to happen!

[tombwalker]

For each person who succeeds in life there are ten that have not and been the reason why the former has succeeded.

 

It is a fact of life that we can not all be winners. The secret is to want what you have, not get what you want.

 

I live by this edict

 

The only certanty in life is death.

How you get there and how much fun you can have on the way

Is only limited by yourself.

 

I should point out that I wouldn't go out of my way to cause a detriment to others to attain this state of being. I just make the most of what I have into that which is required.

[Joe Kutz]

I would love to know your secret, then! Because I work incredibly hard, put myself through college, and will be paying back student loans for years. I've never gotten a hand out, but no matter how hard I work I've never attained that kind of luxury! I am only 27, and maybe you didn't hit the paydirt until after that, but I see a whole lot of struggling in the world around me, and nobody's making the kind of money you've got going.

 

27 was around the time that everything was ahead of the game. I didn't have any expenses other than groceries, gas and utilities and I began putting about 3/4 of my income into investments. I started investing at age 13 at the advice of a 60 some odd year old farmer I was working for - at that made a big impact on my life. By the time I graduated high school I probably had more in savings than most people ever have.

 

After that, I knew I didn't want to go into debt...so I joined the military. They paid for three degrees for me (2 bachelors and a masters). While in the dorms, I continued to drive the same vehicle I bought when I was 15 and saved more money. When I achieved the rank that I needed in order to live off base - I bought my first house on a loan. I didn't have enough money to pay for that first house outright, and the interest rate on the loan was lower than the funds I was invested in. I got two room mates who effectively paid the mortgage there. When I PCSed from California, I managed to swing some money around and left California with enough money to buy my house outright in Texas. Around that time there was a contraction/recession. From there I no longer had any mortgage or other loans - and saved even more. Purchased another house outright as a tax shelter (Clinton Tax hikes). Those two houses are still earning me income every month.

 

From there I did a few years in Florida before moving back to Texas - another house in Florida and a fourth house in Texas...again, all the rent I was collecting was being invested. Most of my income was being invested. Shortly there after I was retired from the military...but at that point I no longer needed to work.

 

While a lot of it was good circumstances, if most kids would start investing money from their first jobs and get in the habit of not borrowing money - the economics of saving become ingrained. I don't know too many people who actually do save...but I do know a lot of people who spend $200+ a month on tobacco or alcohol that could quite easily be saved. Get basic cable and save another $20 or 30 bucks. Set your insurance deductible higher and save another $20 or 30. Most people have money that they can save - they just choose not to. The longer you wait on starting to save, the less likely you are to ever start and the further behind the ball you will be when you do finally start (compounded interest and all that fun).

 

As far as having the knowledge...didn't have a clue till after I was looking for my first house (10 years or so after I started saving). I used an impersonal fund manager who I sent a check to every couple weeks and received a report from every quarter. Honestly I never looked past the first page (where it had balances and earnings). When I was looking to buy my first house, I became a bit more proactive in managing things...but that was because I was to the point where I had enough money saved up that the interest and dividend income was starting to kill me in taxes. At that point I hired an accountant to walk me through things - and I followed up with my own research. Now since it is my primary income, I have even more interest in what is happening in terms of the market and the economy - so I tend to spend a few hours each day going over reports and numbers from funds I am invested in, funds I might invest in, various stocks I own and the laws the government wants to enact in order to tax my investments from me.

 

While I agree, it can be a bit hard to see where you were from where you are - there are probably more people who see were other people are and say they can never get there. Old parable you know: "Give a man a fish, and he will eat for a day; Teach a man to fish and he will eat for a lifetime." I know I have worked hard to instill the same values of saving and planning into people who have worked in me - and that has lead me to come to my opinion that anyone can get there. Recently I ran into one of the first people I supervised when I was in the Air Force. He is 10 years younger than I am now (few years older than you) and he bought a vacation house out in Big Mountain, Montana. He quit his job last year and stopped by the ranch to thank me. He isn't the only one, although he would probably be the "student has exceeded the master" scenario. Most of them who listened to me ranting are in pretty good shape and will likely be retired by 50 at the latest.

 

...but faced many layoffs in other jobs...

 

Layoffs are another huge problem - but the solutions that many seek are wrong. Last year around this time the Unions were threatening strikes with the auto companies as they tried to renegotiate their contracts. This year after the added costs from that negotiation and the added pain from other economic idiocracy...Ford and GM are posting record losses and laying off a lot of those union workers who may honestly think the unions work for them.

 

Anyway - individual businesses will have a variety of issues to deal with, including poor management - bad timing - a fickle market. Some can be avoided, others can not. However union contracts tie the hands of companies. Environmental groups force factories to friendlier grounds (Mexico, China, India...). A layoff isn't fun for anyone involved. However laying off a handful of employees is a lot better than closing the factory down for the community.

 

As far as "everyone reaching it," I don't know where that conclusion comes from, because if everyone could, then there would be no class structure in our society, something that those in power would NEVER allow to happen!

 

I must still be too poor to receive my rich guy club membership card. Most the people who I know from share holders meetings could really care less about other people (not a harsh way...just indifferent). If everyone made a lot of money that would be fine with them. They do get a bit touchy when social engineering starts to come out of DC. Now if you want to get into the conspiracy of holding people down, there is plenty of cause that certain political people need to maintain the classes. If they no longer could blame the wealthy for problems that others face...they would no longer have any support for their programs or machines. It would also take away a lot of the white guilt that exists for people who have managed to get ahead but feel bad because they did (the same limousine liberals who are looking to hide the homeless in Denver).

[mercoutlaw]

Thank you for the exhaustive explanation. I may not agree with all of your perspectives, but it is difficult not to respect your logic and ideals on economic independence.

[Joe Kutz]

Just one more thing...

 

If you were to start investing $40 a week at age 16 in an average fund, by the time you were 50 you would have over 3/4 of a million dollars saved up. Normally I would recommend a lot more than $40 per week - but almost everyone can scrounge $40 per week (cost of a couple Starbucks a day...one fast food value meal per day...a carton of smokes...). Still at that point, you will be making enough money off the interest and dividends to stop working completely (between $50K and $150K per year). If you were to be a little more aggressive earlier on (say $50 or $80 per week) you will have between $1 and $1.5 million at age 50. Again - stop working and live off the interest and dividends.

 

If you start later in life (say 27...for some reason). $150 per week will get you to the 3/4 of a million dollar mark at age 50. With the 38 year average on returns, you would be looking at $92K per year to play with. Figuring more or less steady inflation between then and now...that would be the same purchasing power as $50K per year now. Not too bad if your house is paid off, kids are out and you avoid insane cost of living areas of either coast. Get a part time job working at a hobby store (trust me, you will want a part time job or risk going insane) and you are set for life - even with the bankrupted social security system...that I doubt anyone will be brave enough to try to fix before it is to late.

 

Now if politicians would go through and allow people to invest their social security deductions into their own funds - you could afford to meet these goals with almost no pain on your current lifestyle. You would also be able to retire 15-20 years earlier than social security allows for. You would also have 4 times as much income to play with once you do retire (by the time most people get there...they will be looking at probably 10 times more money due to the failed system). The end result? More people who are looking to find things to occupy their time. More jobs available to the workforce. Much more robust economy. You would also likely have a lot more upstarts as retired middle aged people look towards their hobbies and interests for jobs which they can use to occupy their time. Small business - innovation - the stuff that made the US what it is.

[mercoutlaw]

Very good points, and solid advice! Thanks!

[Nial ap Morai]

Just one more thing...

 

Now if politicians would go through and allow people to invest their social security deductions into their own funds...

 

Then what would all the politicians do if they were not sitting around figuring out ways to run my life?

Don't you know that they are all much better at managing my affairs then I am? I am just the average dumb citizen. I am to be herded like sheep, I am neither capable of taking care of myself, nor am I to be held responsible for the reprecussions of making poor decisions. So, therefore I am doomed to make the same mistakes over and over, or better yet I will make them on purpose because I can learn to manipulate the system and make someone else pay my debts..... Only the politicians can save us....help me help me.... [End of sarcasm]

 

Congress (regardless of party affliliation) will continue to screw up S.S. and health care until they themselves are forced to use the same S.S. and healthcare that the people they (supposedly) represent have to make due with...

[tanker22]

With all the stuff I've painted and sold I've noticed a couple things. Most of my sales go to Europe due in part to the good exchange rate for them, bad for us. Gaming miniatures in general, not collector items seem to do better over there as well. Historicals do well in the U.S but the economy as of late has taken a chunk out of sales in that area. Sold off my WWII and Viking army some time back but at maybe 1/2 to 3/4 what I think they should have gotten.

Example, almost the whole line of Mascot 90mm sold last week to two people overseas, one in France the other in the UK. I let these go cheap for the most part looking to just get out of them what I put in for the cost of lead plus a little extra and pulled in close to $700 for them.

Would have done better I think but someone got the link from CMON to ebay pulled. Guess they didnt care for naked girls tied up or something.

15mm Historical Prussans went to a guy here in the states for $155, about $50 less than I had hoped because he was the only bidder but had 10 watches on it almost the whole time. They wern't over priced, people just didnt want to fork out the cash in that amount right now with pulling their belts tighter.

So what I've started to do is tailor my painting to what sells in Europe now since they seem to be into table top gaming in fantasy and sci fi areas more. Also nudity pulls big prices there whether its game peices or stand alone minis.

Sad really but one of the old maxims of life applies here- You have to go where the moneys at.

[DavidVC04]

I sell more to Europe than here. The guy who's been buying all my ogres is in Greece. I've made a point over the last several months of selling internationally because of the economy here. I just state very explicitly that I will pack the items very well but that I do not hold responsibility for what occurs in transit or at the hands of customs agents. The latter fouled up some grave guard for a customer one time...grrr.