February 24th, 2005
|10:36 am - To all the amateur economists predicting the apocalypse...|
What is your suggestion for us regular folk who don't crunch numbers as well as you?
I've seen a lot of posts in a variety of forums discussing various dangerous warning signs that our economy is in trouble. I'm not quite sure what action these people expect us to take though.
I mean, should I take a less expensive vacation? Sell the house and live on ramen because bread will soon be $10,000 a loaf? I'm guessing something in between.
I understand the urge to send out a warning, but a warning that has no context just isn't that useful. It is like those government terror alerts. Today's color is: AMBERGRIS. I mean, so what? If there isn't anything you can do to change it, then the warning isn't really serving any purpose is it?
Financially, I'm rather conservative, having been through a bad period in the past. I could go many months without a paycheck. My truck is paid off in a month or two, I carry nearly no credit debt. The luxuries I do pay for monthly can be cancelled without penalty.
What else can anybody do?
|Date:||February 24th, 2005 03:51 pm (UTC)|| |
Then you're good. Don't sweat it.
The problem is that basically the economists don't have any good advice. "Don't be poor. Minimize your debt. Invest in stuff that will go up in value. Buy low, sell high." It sounds like you are in pretty good shape; you own/have partial equitiy in real estate, have little actual debt and a moderate "debt" (meaning the amount of money you can borrow).
The warnings serve two purposes as far as I can see: one, it covers the economists' asses. "But we warned you! See, we are useful!" Second, fear drives people to expert help, just as it has you...So the economists, or their retail side the financial advisors, get more business: "Let us help you invest your money, because otherwise you will be POOR and people will LAUGH AT YOU!" In this they are much like the OHS warnings.
|Date:||February 24th, 2005 07:09 pm (UTC)|| |
I think, although I'm not much for doomsday scenarios, the people who are likely going to feel some squeeze in the future are people with very large debt, like people with second and third mortgages as well as massive credit card debt and massive payments on the SUV, in particular those people with adjustable rates. Many, many people fell into the "adjustable rate" trap where mortgage brokers and credit card companies offered super low "Introductory rates" which then become adjustable rates after a few years. The Adjustable rates are usually linked to the prime rate, which is already on the way up, and likely to continue to rise. The worst part is that people senselessly end up taking equity loans and car trade-in payment plans where their outstanding debt is larger than the value of their home or car. Those are the people who, in my opinion, should be quaking in their financial boots. They would be if they had any sense at all, but then, they wouldn't have gotten themselves into this mess if they had had any sense in the first place. But people are suckers and fall for the "something for nothing" offers the creditors were happy to profer. I'm considering investing in reposessions and foreclosures. I do think that's where there's going to be a lot of action in the next few years.
FWIW, it sounds like we're in similar situations - no credit debt, no car payments, and saving a decent amount in various retirement plans. One detail you didn't mention was your mortgage type. If it isn't fixed rate, you might want to look into that. Mine is fixed, and while it wasn't the lowest rate that was being proferred for a while, it is fixed, and now below what is being offered, so I feel pretty good about that.
|Date:||February 25th, 2005 04:37 pm (UTC)|| |
Mine is a 3/1 ARM, with 2+ years before the first adjustment. I've been seriously thinking of switching to a fixed 30 though, locking in a 1/2 or 3/4 % lower rate than I have now.