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I couldn’t finish the article. It dredged back up the insecurities and feelings of personal and professional failure in the aftemath of the financial crisis fr

by settsu 8y ago

I couldn’t finish the article. It dredged back up the insecurities and feelings of personal and professional failure in the aftemath of the financial crisis from watching my home value being decimated and small businesses tanking, those being the bread and butter of my growing freelance design & development. All the time, financial, and emotional investments completely sunk while watching the rich, entitled Wall St set have their billions of dollars in gambling debts paid off with my tax dollars. (And then to come to the realization that I probably had that home to begin with largely thanks to the real estate gambles they were making back in ‘02…)

josefresco 8y ago
I've composed 3 lengthy replies to you describing my all-too-similar experience but deleted each because of the pain, and mountain of venting that can't be conferred in a simple comment. All I can say is that - I feel you brother. Been there, was screwed, my wealth was transferred (via real estate) to an older generation. I was left to rebuild my life and have yet to full recover. The one thing that remains in my head 10 years later: "Markets can remain irrational for longer than you can remain solvent" -John Maynard Keynes
- akudha 8y ago
  Is there a solution to this at all? What can a normal person do to protect themselves and their loved ones? I am not talking about voting, running for office etc, though that is probably the correct, long term fix. But short term?
  - josefresco 8y ago
    My mistake (with hindsight) was not being more cautious. I needed a home to start my family, and moving hundreds of miles away (which would have made me jobless) to a depressed region just to find an affordable house was out of the question. My wife and I were told that real estate was a "sure bet". I distinctly remember my mortgage broker telling me "I can't promise you anything, but real estate prices have been going up for 12+ years straight" Everyone a generation older than us were living in (and selling) houses that were skyrocketing in value. We felt that if we didn't buy now, we'b be priced out of the market forever. That being said, there wasn't a single person in my wife (personally or professionally) who could have warned me. It was either keep renting or jump in.
    - CodeCube 8y ago
      Just to ++ this sentiment. This echoes my situation back then as well. The only thing I can think that _might_ have helped me in hindsight, was a combination of better consumer protections (I got that loan with zero down ... and they glossed over the details of the adjustable rate mortgage); and also just wish I would have had better financial literacy. I take full responsibility for my own situation and the outcome. The only thing I can do now, is incessantly knock the knowledge into my kids. Hopefully when it comes time for them to "make their own mistakes", they can at least learn from our experience.
      - josefresco 8y ago
        "I got that loan with zero down ... and they glossed over the details of the adjustable rate mortgage" Stupid me! I saved 20% like a dope and watched it go poof! I'm kidding (not really), but they also "glossed over" my income statements, which I could have made up because I was self-employed. I also got stuck with an ARM, which I thankfully dropped before rates starting climbing. The ARM was sold to me based on the "fact" that my home value would skyrocket, and I would re-mortgage before rates increased. "I take full responsibility for my own situation and the outcome. " Everyone burned like you and me does this. We own it, because that's the right thing to do. It's the ones who made out like bandits who don't and won't own up to the damage they caused.
        settsu 8y ago
        > Everyone burned like you and me does this. We own it, because that's the right thing to do. It's the ones who made out like bandits who don't and won't own up to the damage they caused. Same. Painful, expensive lesson that I own up to for my part (mostly, blissful ignorance…)
      - LarryDarrell 8y ago
        >I take full responsibility for my own situation and the outcome. This pisses me off (not at you! just the sentiment). Every one around you (people you trust and respect) says buy a house before you can't afford it. Your experience is housing prices rising for 10+ years. Nothing in your environment suggests the party is nearing a close. Society creates a system where home ownership becomes not just a way to keep a roof over your head, but an investment. Moreover, it becomes one of the few investments attainable by the middle and lower-middle classes. Mortgage brokers abandon all pretense of due diligence and devolve into a sophisticated scamming machine. They offer financial instruments to people they know cannot fathom the consequences of. They advertise and amplify the societal pressure to get in now before it's too late. You are not a rational super-human. No one is. (Any one who thinks they are just lucky, and humans are awful at understanding luck) I don't blame anyone who signed their name to a ARM one bit. To do so is to completely ignore the intense societal and economic pressures of the time. We used to understand that moneyed interests were not interested in the welfare of every one else. We used to ban snake oil. I don't know what changed. Maybe it was Reagan and Chuck Norris movies.
  - e40 8y ago
    When I got my mortgage in 2001, I was offered 3x the debt I would take on. Three times the debt. I told the broker that was insane, and she just said it was very, very common. Nope, not going to do that, I said. She thought I was silly. About 5 years later (not due to the 2008 crisis), I would have lost my home had I done the 3x. As it was, I was able to weather the storm. In financial matters, be very conservative. That is my advice.
    - eftychis 8y ago
      This. Always consider what happens if you lose your investment/ what is your worst liability. Be skeptical about assuming that events (e.g. different kinds of securities crashing) are independent. That is one of the usual assumptions asset managers persuade the world and perhaps themselves that has been a factor in multiple crises. Finally, I am a big proponent of Graham's approach that the risk you can take is proportional to your time investment and focus, i.e. analysis and research you have done. Markets change. The idea is to be able to survive the russian roulette in the process. You might be able to afford some debt now, but will you be able to in the future, if e.g. your currency crashes? For instance, several profitable Turkish businesses are on the hook now, as they signed U.S. dollar based loans. Tip1: If a position on a security appears hot now, and people commonly buy it, it is probably overvalued. Tip2: Learn to skip opportunities. Invest in areas where you have done your research and know. Tip3: Assume the person in front of you always has a financial interest in convincing you to buy or sell -- except if they have a fiduciary responsibility to you by law (and still pick advisors carefully).
  - toss1 8y ago
    Do not ever, and I mean EVER, mistake a banker or finance person as a friend or ally with your interests in mind. I've had bankers who were very friendly, and whose entire marketing pitch was how much they were there to help the small biz/startup turn around and pull things like call loans early because their other Real Estate dept f*ked up and lost tens of millions in the state -- even tho we were in an entirely different business sector (software/ networking) and had a PERFECT payment and reporting record. A medium-large biz I did some co-development project had an interesting story from it's early days decades ago. The President was going to the bank for an expansion loan, and was turned down because they said the business was too uncertain. A few days later, he found out that an employee went to the same bank and got a loan for a motorcycle no problem because his paycheck was regular. Since this was obviously stupid as his paycheck depended on the same business, he vowed then and there to not use bank leverage to grow. The biz now owns a good portion of a town not to far away, and has plants all across the US and several other countries. Keep them at great distance, and use them absolutely as little as possible.
    - astura 8y ago
      In general, if someone is trying to sell you something, treat them as a potential advisory. (That includes real estate agents.)
  - astura 8y ago
    When you're young, I don't think there is much of anything you can do. When you're working in a career, this is what I think helps you weather storms: 1) Have a basic understanding of finance. Understand stuff like APR, adjustable rates, compounding interest, 401ks, IRAs, ETFs, index funds, etc. 2) Build an emergency fund. 3) Never invest money you're going to need in <5 years. That means you'll have cash in hand, that also means you might have a lot of cash in hand if you're saving for a down payment on a house or saving for a car. You're giving up possible returns but in turn gaining security. 4) Live below your means. That might mean trade offs, learn what the best way to spend your money is for you, it will be different for everyone. (If your living below your means and are happy don't let others tell you you are spending your money "wrong.") 5) Work to reduce your debt. Try to work towards paying cash for most purchases. A lot of unaffordable things look affordable when you only look at monthly payments. That being said, debt can be a useful tool when used properly. 6) Insure everything that you need to insure, but don't over insure. 7) Don't treat the house you live in as an investment, unless it's a multifamily home you're going to rent out the other unit(s), it's an expense. Houses have some magical money sucking abilities. 8) Never let other people push you into homeownership, it should be something you want to do. 9) Build strong interpersonal relationships. 10) Practice radical acceptance. Let go of fighting reality. Accept your situation for what it is. When you fight reality you turn pain into suffering. Disclaimer, this is just my opinion.
  - icu 8y ago
    1. Don't have any debt whatsoever. 2. Diversify income streams. 3. Have 6 months' worth of expenses in liquid savings. 4. Build a solid neighbourhood/local community.

by settsu 8y ago

josefresco 8y ago

I've composed 3 lengthy replies to you describing my all-too-similar experience but deleted each because of the pain, and mountain of venting that can't be conferred in a simple comment. All I can say is that - I feel you brother. Been there, was screwed, my wealth was transferred (via real estate) to an older generation. I was left to rebuild my life and have yet to full recover. The one thing that remains in my head 10 years later: "Markets can remain irrational for longer than you can remain solvent" -John Maynard Keynes

akudha 8y ago
Is there a solution to this at all? What can a normal person do to protect themselves and their loved ones? I am not talking about voting, running for office etc, though that is probably the correct, long term fix. But short term?
- josefresco 8y ago
  My mistake (with hindsight) was not being more cautious. I needed a home to start my family, and moving hundreds of miles away (which would have made me jobless) to a depressed region just to find an affordable house was out of the question. My wife and I were told that real estate was a "sure bet". I distinctly remember my mortgage broker telling me "I can't promise you anything, but real estate prices have been going up for 12+ years straight" Everyone a generation older than us were living in (and selling) houses that were skyrocketing in value. We felt that if we didn't buy now, we'b be priced out of the market forever. That being said, there wasn't a single person in my wife (personally or professionally) who could have warned me. It was either keep renting or jump in.
  - CodeCube 8y ago
    Just to ++ this sentiment. This echoes my situation back then as well. The only thing I can think that _might_ have helped me in hindsight, was a combination of better consumer protections (I got that loan with zero down ... and they glossed over the details of the adjustable rate mortgage); and also just wish I would have had better financial literacy. I take full responsibility for my own situation and the outcome. The only thing I can do now, is incessantly knock the knowledge into my kids. Hopefully when it comes time for them to "make their own mistakes", they can at least learn from our experience.
    - josefresco 8y ago
      "I got that loan with zero down ... and they glossed over the details of the adjustable rate mortgage" Stupid me! I saved 20% like a dope and watched it go poof! I'm kidding (not really), but they also "glossed over" my income statements, which I could have made up because I was self-employed. I also got stuck with an ARM, which I thankfully dropped before rates starting climbing. The ARM was sold to me based on the "fact" that my home value would skyrocket, and I would re-mortgage before rates increased. "I take full responsibility for my own situation and the outcome. " Everyone burned like you and me does this. We own it, because that's the right thing to do. It's the ones who made out like bandits who don't and won't own up to the damage they caused.
      - settsu 8y ago
        > Everyone burned like you and me does this. We own it, because that's the right thing to do. It's the ones who made out like bandits who don't and won't own up to the damage they caused. Same. Painful, expensive lesson that I own up to for my part (mostly, blissful ignorance…)
    - LarryDarrell 8y ago
      >I take full responsibility for my own situation and the outcome. This pisses me off (not at you! just the sentiment). Every one around you (people you trust and respect) says buy a house before you can't afford it. Your experience is housing prices rising for 10+ years. Nothing in your environment suggests the party is nearing a close. Society creates a system where home ownership becomes not just a way to keep a roof over your head, but an investment. Moreover, it becomes one of the few investments attainable by the middle and lower-middle classes. Mortgage brokers abandon all pretense of due diligence and devolve into a sophisticated scamming machine. They offer financial instruments to people they know cannot fathom the consequences of. They advertise and amplify the societal pressure to get in now before it's too late. You are not a rational super-human. No one is. (Any one who thinks they are just lucky, and humans are awful at understanding luck) I don't blame anyone who signed their name to a ARM one bit. To do so is to completely ignore the intense societal and economic pressures of the time. We used to understand that moneyed interests were not interested in the welfare of every one else. We used to ban snake oil. I don't know what changed. Maybe it was Reagan and Chuck Norris movies.
- e40 8y ago
  When I got my mortgage in 2001, I was offered 3x the debt I would take on. Three times the debt. I told the broker that was insane, and she just said it was very, very common. Nope, not going to do that, I said. She thought I was silly. About 5 years later (not due to the 2008 crisis), I would have lost my home had I done the 3x. As it was, I was able to weather the storm. In financial matters, be very conservative. That is my advice.
  - eftychis 8y ago
    This. Always consider what happens if you lose your investment/ what is your worst liability. Be skeptical about assuming that events (e.g. different kinds of securities crashing) are independent. That is one of the usual assumptions asset managers persuade the world and perhaps themselves that has been a factor in multiple crises. Finally, I am a big proponent of Graham's approach that the risk you can take is proportional to your time investment and focus, i.e. analysis and research you have done. Markets change. The idea is to be able to survive the russian roulette in the process. You might be able to afford some debt now, but will you be able to in the future, if e.g. your currency crashes? For instance, several profitable Turkish businesses are on the hook now, as they signed U.S. dollar based loans. Tip1: If a position on a security appears hot now, and people commonly buy it, it is probably overvalued. Tip2: Learn to skip opportunities. Invest in areas where you have done your research and know. Tip3: Assume the person in front of you always has a financial interest in convincing you to buy or sell -- except if they have a fiduciary responsibility to you by law (and still pick advisors carefully).
- toss1 8y ago
  Do not ever, and I mean EVER, mistake a banker or finance person as a friend or ally with your interests in mind. I've had bankers who were very friendly, and whose entire marketing pitch was how much they were there to help the small biz/startup turn around and pull things like call loans early because their other Real Estate dept f*ked up and lost tens of millions in the state -- even tho we were in an entirely different business sector (software/ networking) and had a PERFECT payment and reporting record. A medium-large biz I did some co-development project had an interesting story from it's early days decades ago. The President was going to the bank for an expansion loan, and was turned down because they said the business was too uncertain. A few days later, he found out that an employee went to the same bank and got a loan for a motorcycle no problem because his paycheck was regular. Since this was obviously stupid as his paycheck depended on the same business, he vowed then and there to not use bank leverage to grow. The biz now owns a good portion of a town not to far away, and has plants all across the US and several other countries. Keep them at great distance, and use them absolutely as little as possible.
  - astura 8y ago
    In general, if someone is trying to sell you something, treat them as a potential advisory. (That includes real estate agents.)
- astura 8y ago
  When you're young, I don't think there is much of anything you can do. When you're working in a career, this is what I think helps you weather storms: 1) Have a basic understanding of finance. Understand stuff like APR, adjustable rates, compounding interest, 401ks, IRAs, ETFs, index funds, etc. 2) Build an emergency fund. 3) Never invest money you're going to need in <5 years. That means you'll have cash in hand, that also means you might have a lot of cash in hand if you're saving for a down payment on a house or saving for a car. You're giving up possible returns but in turn gaining security. 4) Live below your means. That might mean trade offs, learn what the best way to spend your money is for you, it will be different for everyone. (If your living below your means and are happy don't let others tell you you are spending your money "wrong.") 5) Work to reduce your debt. Try to work towards paying cash for most purchases. A lot of unaffordable things look affordable when you only look at monthly payments. That being said, debt can be a useful tool when used properly. 6) Insure everything that you need to insure, but don't over insure. 7) Don't treat the house you live in as an investment, unless it's a multifamily home you're going to rent out the other unit(s), it's an expense. Houses have some magical money sucking abilities. 8) Never let other people push you into homeownership, it should be something you want to do. 9) Build strong interpersonal relationships. 10) Practice radical acceptance. Let go of fighting reality. Accept your situation for what it is. When you fight reality you turn pain into suffering. Disclaimer, this is just my opinion.
- icu 8y ago
  1. Don't have any debt whatsoever. 2. Diversify income streams. 3. Have 6 months' worth of expenses in liquid savings. 4. Build a solid neighbourhood/local community.