Ten years after the crisis, the contagion has spread to democracy itself
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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…)
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
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.
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.
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.
Same. Painful, expensive lesson that I own up to for my part (mostly, blissful ignorance…)
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.
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.
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).
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.
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.
2. Diversify income streams.
3. Have 6 months' worth of expenses in liquid savings.
4. Build a solid neighbourhood/local community.
Financial crises foment authoritarianism. In 2015, a trio of German economists studied financial panics in 20 advanced economies dating back to 1870, and concluded that they almost always result in major gains for “far right” political parties after a lag of a few years. The most pressing question for policymakers facing a banking meltdown is not, “How do we restore our banks to profitability?” but, “How can we prevent social collapse?”
It's survival mode, not even women and children first. So before the dust settles, or even earlier when the economy is clearly imbalanced, unstable and listing off to one side, they expect people to think about the extremists this is going to bake over the next half decade. Never going to happen.
Business people, accountants, financial operators, their minds do not work this way.
But there's easily multiple folds or layers that all add together to produce such an effect. And part of it is age brackets. If this is a fifteen year cycle, it's partly generational, and as much about the ritual of hand-off as it is about who is actually landing in the driver's seat.
But the roughest part is the polluter's mindset of those who set up the meltdown. They're definitely there to say: not my problem; so long, suckers!
Immediately prior to that there's probably some mild discussion about incentives driving performance. Why perform at all, if not to reap rewards? And immediately prior to that, there's probably a period with a good record of following the rules, aging out and retiring uneventfully.
So, if the process seems to havea natural rhythm, it's probably because human mortality means good teams eventually kick the bucket, and upstarts fill their shoes with less integrity. The faces change, but the story doesn't.
As is noting perverse incentives and adverse selection.
It furthermore claimed that the major political upheaval only became apparent at the next minor economic crisis, because political scenes reacts to a major or a minor crisis by switching between two dominant schools of thought, and once both schools of thought are shown to be incapable of dealing with the situation, society forces them to be replaced with a different dichotomy.
This certainly pattern-matches what’s going on in the UK at the moment. I’m not sure about the USA — although most of the Americans I know think poorly of Dem and Rep alike, that’s a massive sampling bias on my part because my American partner is a volunteer for the Green Party.
Personally I think the last economic crisis was major, but there was no great political upheaval after it. The bad actors were propped up with bailouts, the advisers that really drive politics remained in power.
Which makes me think the next crisis will be even more major, because we haven't solved any of the underlying problems. This is kind of like with a bug caused by technical debt. We implemented a workaround that will cause much bigger failures than the last one instead of refactoring.
Wall Street continues to take on obscene amounts of debt from the government for essentially no interest, see Quantitative Easing, so that they can avoid paying even more taxes on their even greater profit. This is also fueling bubbles in other wealthy assets as everything is actually just leveraged debt. The prospects of another financial crisis is just as real as it was 10 years ago and again the lower-middle class will be left to hold the tax bill while the fat cats get fatter.
The real issue is the extraction of wealth from citizens by Wall Street, Wall street builds nothing, absolutely nothing. They claim they provide liquidity, but yet when things look bleak, that liquidity dries up as they run and tighten up on credit. When they going is good, it's all about wealth extraction, they extract it from 401k, pension funds and from every day transaction between average investors trying to make an investment. The entire world of HFT is a joke. They have turned the market into something worse than a casino. In Vegas, you really know your odds, at wall street some of the instruments that are being pedaled shouldn't even be allowed in a video game.
When Lehman Brother's tanked they were one of the highest leveraged at 38:1, and current legislation allows 20:1 which many were originally operating at. If you look at any wealth asset, real-estate, wine, art, etc. these are all artificially high making the leverage crisis exponentially worse because when it comes time to shore up accounts these people don't actually have the value their writing in their books.
Most of these retirement funds have to prove some basic stress solvency, but they're doing it with leveraged funds and debt. Thus when a downturn happens and it comes time to pay back the middle class we will have to bail them back out. We're paying twice! Student loans almost certainly will be the next bubble, Wall Street already sells these as an asset backed security (see SLABS). At over a trillion in value with the rules written against students when mass defaulting happens the whole system will come down again with individuals having absolutely no protection, and no one willing to fight for them.
The oath family popup is awful.. Either agree or 'manage options' which leads to a load of crap. I'm not agreeing, or drilling into all those options.
Also, when you hit back, it brings you to the same page.. Thats some dodgy shit.