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Bloviating Zeppelin: Living Beyond Our Means

Bloviating Zeppelin

(in-ep-toc'-ra-cy) - a system of government where the least capable to lead are elected by the least capable of producing, and where the members of society least likely to sustain themselves or succeed, are rewarded with goods and services paid for by the confiscated wealth of a diminishing number of producers.

Wednesday, March 14, 2007

Living Beyond Our Means

The US stock market tanked yesterday, roughly 2%, over fears revolving around sub-prime (loaning to applicants who are less-than-perfect) mortgage lenders and homes foreclosed on weak owners.

This is nothing new and should come as absolutely no shock whatsoever. In this case, both parties are at fault, not one or the other.

New homeowners are to blame for insisting that they get into a brand-new 2,900 square foot, two-story home in a beautiful neighborhood, and then go out and acquire a brand new Chevrolet Tahoe Z71, a Honda Gold Wing, boat with trailer. They don't wonder how they managed to wedge themselves into a $597,000 home with NO MONEY DOWN? Are they that stupid?

Lenders are to blame for failing to identify the new and aspiring homeowner/family, for failing to perform sufficient financial backgrounds on them, for overselling potential properties, for twinking the loan system sufficiently to sell an oppressive loan and for failing to understand the human psyche and the motivations for applicants to want to own a home at, now, all costs.

I am failing to generate even one tear for anyone on either side of the equation.

To the potential homeowner: if it all sounds too good to be true in terms of getting you into a huge home -- well, it probably is.

To the lender: so you managed to hook one more potential for an overstuffed and underfunded loan. Goodie. Now you can watch your investments tank because you were greedy and stupid.

This no shock whatsoever. And I watch it every day at work: new employees jabbering about their brand new home in an exclusive part of town whilst I watch them drive their new Hummer H2 or their Land Rover or their Chrysler 300 Hemi.

All stupid things will catch up to you. No matter who you are.



Blogger BB-Idaho said...

Never have understood the stock market: subprime loans are but a segment, yet the entire market seems to react. I agree, there is enough blame to go around, and for once nothing illegal is involved, just, as you correctly note, poor

Wed Mar 14, 08:57:00 AM PDT  
Blogger Ranando said...

Well said and a post everyone should read.

Young couples are getting in line for these No-Interset Loans, bad mistake. It will be their down-fall.

I learned at a young age and to always live with-in your means,and always have.

I've alway said that one of the most important things kids should be taught starting in the first grade is how to handle their money. It is what we use on a daily bases as we go through life.

The stock market has been good to me over the years. Remember, stocks are for the long term.

Once again, great post.

Wed Mar 14, 09:34:00 AM PDT  
Blogger Jenn of the Jungle said...

It's a big "problem" here in San Diego. All those condo conversions. Peopl are eating it now. I have no pity for them. Stupid is as stupid does.

Wed Mar 14, 12:34:00 PM PDT  
Blogger Bloviating Zeppelin said...

BBI: me neither, but investors are apparently touchy creatures. But poor judgment shouldn't traumatize an entire market.

Ranando: you hit the nail on the head sir -- the market is for the LONG term and everyone expects to kill in the short term.


Wed Mar 14, 02:01:00 PM PDT  
Blogger Bloviating Zeppelin said...

Jenn: condo conversions? Ecchh! Paying a "house" price for what is essentially an apartment?


Wed Mar 14, 03:42:00 PM PDT  
Blogger A Jacksonian said...

What is fascinating about how the market reacts to this is that it is a small, indeed tiny fraction of all loans and the entire suite of Non Performing Loans on the personal side isn't much above 1%, with most of that being credit card debt, not mortgages. So call it a fraction of the entire economy that is depending on those loans.

What does it say about a Nation that has 30% of its GDP based on NPLs? For that is China making the 'no money down' loans *here* look like chicken feed when they are shoveling money at individuals who can't even keep a business running. At that 30% is the low end, conservative estimate. Japan was sitting at 10% or so when its bubble burst. The Asian Tigers were at 12-15% when their's burst.

Even the S&L scandal was not much as GDP goes. Its been long decades since the Roaring 20s. In China they are heading into 1929.

Thu Mar 15, 10:43:00 AM PDT  
Blogger Best Interest said...

They most likely got the boat loan from these folks:

Thu Mar 15, 05:47:00 PM PDT  

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