thanks.  And I'm not in a bad mood about it or anything - it's just life.

>I just don't understand why a newly married couple would need to buy a new build 4k square foot home out in the 'burbs.

 

Well one of my friends who got divorced last fall said part of the problem was the wife was jealous of all her girlfriends whose husbands were all getting them into big new suburban houses.  Well now we know what kind of mortgages those were, don't we? 

 

The central issue is that recent economic expansion was based on expansion of credit -- credit that was backed up by stuff that only had value on paper.  That means the economy NEEDS to contract -- real estate values need to come down and companies and individuals need to get out of debt.  There is not going to be as much startup money for new ventures -- I was laid off exactly a year ago (last Feb) from a ridiculously high paying part-time job (about $30/hr) and that company went completely out of business in the middle of last year. 

 

So since the economy needs to contract (and I don't claim to know how much) people and companies need to be allowed to go bankrupt.  That's the only way the attitudes and expectations that don't match reality can be broken and the American economy can rise like a technicolor Phoenix. 

 

I agree with JM.  The combination of the pressure in "keeping up with the Joneses" combined with the fact that couples get pre-approved for a boatload more house than they "should" probably purchase (me and mr. rockandroller included, I was absolutely astounded at what we got pre-approved for when we went through it) = a couple buying way too much house, and often with one of these ARM loans (I know 2 people who did this, one is a single mom and was foreclosed on and lost her house, the other is working 2 jobs to pay for her house as she is putting her husband through school and he refuses to work while in school) that came back to bite them in the rear.

>I just don't understand why a newly married couple would need to buy a new build 4k square foot home out in the 'burbs.

 

Well one of my friends who got divorced last fall said part of the problem was the wife was jealous of all her girlfriends whose husbands were all getting them into big new suburban houses.  Well now we know what kind of mortgages those were, don't we? 

The central issue is that recent economic expansion was based on expansion of credit -- credit that was backed up by stuff that only had value on paper.  That means the economy NEEDS to contract -- real estate values need to come down and companies and individuals need to get out of debt.  There is not going to be as much startup money for new ventures -- I was laid off exactly a year ago (last Feb) from a ridiculously high paying part-time job (about $30/hr) and that company went completely out of business in the middle of last year. 

 

So since the economy needs to contract (and I don't claim to know how much) people and companies need to be allowed to go bankrupt.  That's the only way the attitudes and expectations that don't match reality can be broken and the American economy can rise like a technicolor Phoenix. 

 

 

These are the types of people I'm talking about.  Those keeping up appearances.  I bet all those couples are now in financial trouble.

 

My cousin mentioned to me that there are lots of private sales going on in beachwood near him.  Nobody wants to put a "for sale" sign in the yard, or the neighbors will know whats up.

 

Maybe it's not for me to understand.  I know in my mid twenties with no debt, I could have never afforded a hefty mortgage.  I wonder how these folks are getting by or is "getting by" in fact what is happening?

I can only speak to the folks I know, and so far none of them have been affected by the current economic conditions at all.  These are all the types of people I see shopping regularly at my PT retail job.  They're just continuing to run up credit, charge whatever they want and stick their heads in the sand.  I would say 90% of the people I know who are the big "joneses" house people all have higher paying jobs than me or my mr. and come from pretty well off families so they have a big feeling of cushion; whether it's really there or not, I have no idea since I'm not privvy to their personal finances.  But they're all still regularly getting new cars, going out to eat all the time, etc.  They all make pretty good money so maybe they are keeping that credit card debt paid off and only have the big-ticket items like cars and houses as debt so who knows, maybe they'll be fine.

I think parents "helping out" kids getting mortgages for condos and houses is in a way a big mistake.  It means a couple is immediately thinking past the house onto the next extravagant purchase instead of concentrating on getting the house paid off. 

 

MTS, you sound like you would love the Dave Ramsey personal finance radio show, and you appear to be using some of his jargon, which might just be coincidence.  He has people cut up their credit cards on-air and advocates almost everyone taking a second job. 

 

I think most people grossly underestimate how much an extra $5,000-10,000 a year can help their finances, especially since the time spent working is time when you can't be spending money in restaurants or whatever.  And if you work in a restaurant you get free food!   

I think parents "helping out" kids getting mortgages for condos and houses is in a way a big mistake.  It means a couple is immediately thinking past the house onto the next extravagant purchase instead of concentrating on getting the house paid off. 

 

MTS, you sound like you would love the Dave Ramsey personal finance radio show, and you appear to be using some of his jargon, which might just be coincidence.  He has people cut up their credit cards on-air and advocates almost everyone taking a second job. 

 

I think most people grossly underestimate how much an extra $5,000-10,000 a year can help their finances, especially since the time spent working is time when you can't be spending money in restaurants or whatever.  And if you work in a restaurant you get free food!   

 

jmeck.  You're correct.  My parents wouldn't give my brother a nickel.  My father, preach and preached about saving and investing.  It amazes me how little money and what bad credit my brother had at 25.  It took my brother and skank-in-law 5  years to get their individual credit together and save. 

 

Dave Ramsey, I don't even know who that is.  I just know I'm a penny pincher with most stuff.

I've been poor for so long I've developed a pretty good system for cheap living.  I'm used to it and I could do it indefinitely.  The problem with that is women aren't partial to squalor.  They aren't even partial to having less house than their friends have, as detailed above.  Ladies (I know there are so many on here), start listening to your cheapskate man.  He was right the whole time.

 

An extra 5k to 10k would seriously help most people.  Still, I'd prefer those restaurant jobs go to kids, because kids aren't qualified for much else.  My younger brother tried really hard in high school to find a basic first-job type job, and never could get one.  I think those jobs were crucial to my career development.  You learn critical things about working that you can't learn elsewhere.  If mid-career people in droves are looking to add restaurant jobs, that's another sign things are completely falling apart.  It robs the next generation (again) of experiences we took for granted.

I've been poor for so long I've developed a pretty good system for cheap living.  I'm used to it and I could do it indefinitely.  The problem with that is women aren't partial to squalor.  They aren't even partial to having less house than their friends have, as detailed above.  Ladies (I know there are so many on here), start listening to your cheapskate man.  He was right the whole time.

 

An extra 5k to 10k would seriously help most people.  Still, I'd prefer those restaurant jobs go to kids, because kids aren't qualified for much else.  My younger brother tried really hard in high school to find a basic first-job type job, and never could get one. I think those jobs were crucial to my career development.  You learn critical things about working that you can't learn elsewhere.  If mid-career people in droves are looking to add restaurant jobs, that's another sign things are completely falling apart.  It robs the next generation (again) of experiences we took for granted.

 

I couldn't agree more.

And if you work in a restaurant you get free food!  

 

I have worked in about 20 restaurants and in NONE of them did you get free food.  You're misinformed on that one.

At Brugger's Bakery we got free bagels

And if you work in a restaurant you get free food!

 

I have worked in about 20 restaurants and in NONE of them did you get free food. You're misinformed on that one.

 

Policy-wise, that has been my experience too, no free food.  But all restaurant workers get free food.  Sometimes it's burnt, that's all.  No problem.  Just hold your horses, we'll have another garlic bread out in 5 minutes.

Okay, maybe not at chains but I've gotten tons of free food at the non-chains I've worked at.  Now that I think of it, I don't remember getting free food almost ever at the chains (Frisch's Big Boy, Blimpie, Kentucky Fried Chicken [in that order]).  But I've gotten hundreds of free meals, pizzas, and drinks at the non-chains.  I'm sure it ads up to thousands in free food.   

 

But even when he starts putting his shares in again, the money situation won't change since my parents are the ones who are presently putting up his shares (there would be no way I could lay $900/month otherwise) but their funds are limited too.

 

 

$900 a month in Lakewood?  When is your lease up?  You should be able to knock a few hundo off your monthly rent by moving to another Lakewood apt.

I would say about 1/3 of the places I worked at were indies and not chains.  The big difference is that you were generally allowed to eat "mistakes" at the indies, but not the chains (this avoids the "sure, we'll make you another garlic bread, we dropped it") lie.  But I never got a free meal.

 

One chain I worked at had a free "staff" meal when they first opened that was served at 3pm every day, but the managers complained about the food costs, so the chefs just started putting up pasta with red sauce every day. Shortly after that the staff meal was completely cut, not so much from lack of interest (people will eat anything free) but assumedly even pasta with red was too expensive to give away.

Most chains are nasty about food costs and I don't blame them.  It's a tough, low margin business.  I remember there was always a tension between the front staff, who did relatively well on tips, versus the back staff, who made $4.25 an hour to be filthy and get yelled at.  I was always in the latter group.  Often the best victory we could hope for was that our cars would leak stuff onto theirs in the parking lot.   

Whereas the front staff get yelled at by the customers all day.  And grabbed.  And stiffed and have to make up the cost of the check out of their pocket. Both sides have it tough, for sure. The best restaurants I've worked at are the ones where FOB and FOH are not at odds, for sure, those were great places.  Now, back on topic!

OK.  I hope this economy results in a move back toward large-scale apartment living.  I've heard peeps about it, but haven't seen the trend really pick up steam yet.  If it does, that will steer money to fixing up all the old buildings in Cleveland, particularly in depressed areas of the east side.  It should also lead to new development being denser and better looking, and it will speed the reintroduction of urban retail.

OK.  I hope this economy results in a move back toward large-scale apartment living.  I've heard peeps about it, but haven't seen the trend really pick up steam yet.  If it does, that will steer money to fixing up all the old buildings in Cleveland, particularly in depressed areas of the east side.  It should also lead to new development being denser and better looking, and it will speed the reintroduction of urban retail.

 

I can't agree more! 

 

But even when he starts putting his shares in again, the money situation won't change since my parents are the ones who are presently putting up his shares (there would be no way I could lay $900/month otherwise) but their funds are limited too.

 

$900 a month in Lakewood?  When is your lease up?  You should be able to knock a few hundo off your monthly rent by moving to another Lakewood apt.

 

No doubt. I live in a two-bedroom apartment-style condo in Lakewood and I pay $743 per month total, divided up among mortgage, real estate taxes and maintenance fees. You can do better than that in my building now.... There's a condo in the basement selling for $19,000. It needs work, but if you could come with the down payment, you could get a home equity loan ($5K would do wonders) to fix up the place while you live there.

For 900 in Lakewood you better have a jacuzzi and all the trimmings.  Outside maybe the big gold coast towers, I didn't think Lakewood had anything that high.

Plus we have an indoor pool, indoor heated garage, party room, storage lockers, clean laundry room, etc. I thought I had a pretty good deal until that basement condo went into foreclosure and came on the market.

There are some apts that high, it just depends on the amenities.  My roommate and I split the top half of a Lakewood double for $800 in 2003.  But that included 2 garage spots, A/C, W/D, etc.  But you can easily find crappier doubles for $500-$600 and probably lower.

It's $900/month for a two bedroom.  I'm surprised we've been overpaying - that's something I may have to talk to him about.

Depends on the features, whether you're overpaying.  If that includes heat, and the place has AC, private W/D, maybe a dishwasher, and ample parking for both of you, it isn't a ridiculous number at all.  That's 450 apiece, which is about what I'm paying once you add in the ENOURMOUS gas bills.  900 plus gas, without some of those amenities, would be well above the typical Lakewood deal.  I was comparing your raw number with my raw number (650 for 2BR) when I initially freaked out. 

Retail sales rise 1%, first increase in seven months

Most sectors see healthy gain, stand in contrast to private-sector reports

http://www.marketwatch.com/news/story/Retail-sales-unexpectedly-jump-1/story.aspx?guid=%7B7551250B%2D322A%2D4A0C%2D8685%2D3308CB036D76%7D

 

I guess you take 'positive' news when you can get it. But, its interesting to see adjusted government numbers not equate to private retail numbers.

 

Ah, I see.  It's $900/month when you include all costs.

yesterday we touched on banks and credit card use.

 

I just opened a letter from Key.  It's telling me that the credit limit on my credit card has been increase by 15k.  :?

 

This is a credit card I've used a total of 8 times since the year 2000.  I use it once a year to buy something small and pay the bill off the next month, since I prefer to use AMEX.

 

I dont need a credit increase, but i wonder if this is happening to others.  Increasing credit card limits to consumers isn't going to help.

 

 

I've received letters on increases to my credit lines on all 3 of my chase cards.  I chuckled.  I too primarily use amex, and have specific recurring bill uses for the others just to keep them active.  Sometimes I think these people really just don't understand the credit cards as cash user.

I've received letters on increases to my credit lines on all 3 of my chase cards.  I chuckled.  I too primarily use amex, and have specific recurring bill uses for the others just to keep them active.  Sometimes I think these people really just don't understand the credit cards as cash user.

 

The funny thing is, I got a new card last summer, I never activated it.  So you send me a letter increasing my credit limit for a card that's not even in use?  strange.  I guess the banks are trying to get folks to use those cards so they can make money of those monthly fees.

I've received letters on increases to my credit lines on all 3 of my chase cards. I chuckled. I too primarily use amex, and have specific recurring bill uses for the others just to keep them active. Sometimes I think these people really just don't understand the credit cards as cash user.

 

The funny thing is, I got a new card last summer, I never activated it. So you send me a letter increasing my credit limit for a card that's not even in use? strange. I guess the banks are trying to get folks to use those cards so they can make money of those monthly fees.

 

I also got a new card last year that I never activated, and Chase recently sent me a letter saying they were increasing the credit limit on it...

So I'm not the only one who thinks this is crazy.

So I'm not the only one who thinks this is crazy.

 

No, it seems a little ridiculous to me as well

Speaking of credit increases, I just completed a cash-out refi yesterday on a house I bought 3 years ago.

 

(the cash-out was relatively small and will be used to partially pay for a future new roof and new kitchen on the old place.)

 

Point is, cash-out refis still exist for people who bought late in the housing bubble if they are financially sound overall).

Speaking of credit increases, I just completed a cash-out refi yesterday on a house I bought 3 years ago.

 

(the cash-out was relatively small and will be used to partially pay for a future new roof and new kitchen on the old place.)

 

Point is, cash-out refis still exist for people who bought late in the housing bubble if they are financially sound overall).

 

well you're reinvesting in your home and adding to its value.  a new roof can typically add $1 to $1.25 for each $1 spent.

article from MSN money today using the "Great Recession" moniker...

 

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20090212&id=9604512

 

"Great Recession" seen lasting 3 years, experts sayFebruary 12, 2009 9:53 AM ET 

 

"All Thomson Reuters newsNEW YORK (Reuters) - The current recession will last at least three years and possibly longer absent a revival in credit markets, according to investors who specialize in distressed debt and bankruptcy.

 

"This is going to be a three- to four-year disaster," said Michael Psaros, managing partner at KPS Capital Partners, at a restructuring conference in New York.

 

The United States is going through a "Great Recession," which will provide investors in distressed assets with unprecedented opportunities, he said.

 

...

I thought a "Great Recession" was a "Depression"?

article from MSN money today using the "Great Recession" moniker...

 

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20090212&id=9604512

 

"Great Recession" seen lasting 3 years, experts sayFebruary 12, 2009 9:53 AM ET

 

"All Thomson Reuters newsNEW YORK (Reuters) - The current recession will last at least three years and possibly longer absent a revival in credit markets, according to investors who specialize in distressed debt and bankruptcy.

 

"This is going to be a three- to four-year disaster," said Michael Psaros, managing partner at KPS Capital Partners, at a restructuring conference in New York.

 

The United States is going through a "Great Recession," which will provide investors in distressed assets with unprecedented opportunities, he said.

 

...

 

CincyDad,

You should check for copyright issues!!!

Thank you UrbanOhio financial analyst C-Dawg.  ::)

You can't have a depression and hyper-inflation - they have dramatically different effect on how the economy goes down the drain.

 

There are some baselines that simply will prevent this from becoming exactly like the last one, especially the fact that the fed gov't is nearly 20% of GDP which is about 4X of the 30s.

 

A key difference between a recession and a depression is that a recession doesn't end up creating a new normal whereas a Depression is almost by definition a 'new' lower normal.

well you're reinvesting in your home and adding to its value.  a new roof can typically add $1 to $1.25 for each $1 spent.

 

The price of the house got knocked down about $10k due to the age of the roof.  It needs replacing soon (probably at $10k given this roof).  Same with the kitchen - 30 years old and not set up well.  My wife jokes that I bought a house that was $100k more than I could afford, but that extra value had to come from all the fixing up I needed to do.  My reply joke is that I bought a barn and land, and they through in the house for free.

 

Of course, roofs are depreciating assets, and need to be replaced every 30 years or so.  So if I spend the money on a roof and stay here 30 more years, then I'll be back in the same boat again.

 

 

You can't have a depression and hyper-inflation - they have dramatically different effect on how the economy goes down the drain.

 

There are some baselines that simply will prevent this from becoming exactly like the last one, especially the fact that the fed gov't is nearly 20% of GDP which is about 4X of the 30s.

 

A key difference between a recession and a depression is that a recession doesn't end up creating a new normal whereas a Depression is almost by definition a 'new' lower normal.

 

 

I have to agree with dmerkow on this arguement.  Yes, things will get pretty bad.  Ohio has been used to that for 30 years (with breaks) but much of the country has not. [side note -  I talk to people in NYC area who can't believe how bad its gotten, but truth is, it's not any worse than Ohio. ]  But you have to remember that each national economy must be judged to some extent as it compares to other national economies.  Yes, all can go down (and will), but major parts of the rest of the world will go down faster than the US.  Europe, for instance, where RE was an even bigger bubble (Spain, England) and of course, England has been devestated by the credit crunch as well.  China and India will probably due better than the US, and the US will probably due better than most other economies (Canada & Australia may fair slightly better than the US).

 

But I think the drop in the US will be buffered to some degree by the drops in the rest of the world.  China and India are so dependent on the US for their economic (and polical stability) that they will try to stay in sync with us.

 

Overall, I see the dollar holding up compared the Euro and other currencies.  Not that it should, but I think it will.  As to inflation, I see that creeping back up due to the flooding of the economy with printed money.  But a lot of that new money is going into banking black holes right now, never to see the light of day.  There will certainly be no wage inflation over the next 5 years.  There will certainly be no commodity inflation while the world economies are depressed.  However, as the banking system begins to stabilize (2 years away?), all these extra dollars will stop disappearing and will pose a major inflation risk.  IF the FED begins to soak up the extra dollars (something Greenspan forgot to do starting in the mid '90s), then inflation will be contained. If not, then we will need another Volker in 5 years.

 

Things will get bad. But not 1930s style bad. And where in the world could you run to that things will be significantly better?

You are far too young to be so pessimistic!

You are far too young to be so pessimistic!

Hell, Im far too young to be that pessimistic and I'm damn near twice his age.

I'll also agree with Dmerkow.  I've not been following this thread since it doesn't sound like it would be very optimistic.  I personally believe that recessions aren't bad.  They can just be better planned and worked through.  Expansions are a time for maximizing profit.  Recessions are times of maximizing value and controlling costs. 

  Otherwise, I think very few people have an idea how long this will last.  The problem isn't so much that we're in a recession is that we're still in the middle of a banking/credit crisis.  I personally feel Ohio is in better shape to handle a recession since if the dollar is falling in value the amount of goods that will be shipped out of Ohio will increase dramatically, which will take Ohio right out of a recession.  Ohio has a lot of high value products that sell very well when the dollar's value is low. 

  One other expectation as this wears on is that people will start coming back to Ohio from California and other states that are having it worse off.  So people that had houses that were worth $500,000 now find themselves in a house worth $250,000 and sell and come to Ohio and find they can get into a much nicer home for $175,000

Now here is some shocking news. I and others have been talking about this for at least a year or two. M3 is overwhelming M1 and M2 on the balance sheets. :wink:

 

America's Biggest Banks Are Zombies

 

"(Newser) – In the corridors of Wall Street and Washington, a worrying consensus is growing: Some of the nation's largest banks are in fact insolvent. If banks reassessed the value of the complex mortgage-backed securities that taint their balance sheets, they would outweigh all assets on hand, writes Steve Lohr of the New York Times. For some experts, that means that only full-scale nationalization and a sell-off of the toxic debts can end the crisis.

 

...

 

Source: New York Times

http://www.newser.com/story/50718/americas-biggest-banks-are-zombies.html

 

Can't hardly believe this is news in Feb 2009.  But it will probably take dozens more such articles before there is widespread acceptance of how messed up things are.

Holy Chit!!

 

Where we go from here? Start planting our own gardens for food? The internet would suffer too with people canceling their service in order to keep up with other bills. People will cancel their cable subscriptions, Cell phones and sadly even health insurance. Technology is in danger too.

Holy Chit!!

 

Where we go from here? Start planting our own gardens for food? The internet would suffer too with people canceling their service in order to keep up with other bills. People will cancel their cable subscriptions, Cell phones and sadly even health insurance. Technology is in danger too.

 

HUSH!!  HUSH!! 

Where we go from here? Start planting our own gardens for food?

 

There are worse things than growing your own food. :)  It's just kind of tough to do year-round here.