How do you think losing the AAA rating will effect you on a personal level?

[eliza61]

True enough, but the flip side of that coin is that we didn't have the immense run-up in prices prior to the recession that we saw prior to the housing crash. A 30% drop in prices after a 100% gain in the previous decade is market correction, not the sky falling.

Very true but by your own chart you can see that market correction is going to be on going for the next few years. Personally I think it's going to be the next 10 years. Look at the data from 1998 to 2008, you can see that, that rate of value was artifically high. I can't think of any investment vehicle that will give you a spike like that in 10 years!!

I think (and I am in no way a professional, I'm speculating based on information just like every one else) that this correction will be ongoing and in stages (and we're seeing some of that now). first you get rid of the effect foreclosures have on your markets, unfortunately you also see an erosion of value due to the slow down in the new home building sector and a flood of "for sale" inventory further depressing the home values, then you see the normal market correction.

Now most of the time you may have 1 out of the 3 occuring. Unfortunately for us (the US economy) we've got this trifecta of events happening at the same time.

I realize that I'm in the minority when I say that this market correction is a good thing. I realize for many people their net worth is tied up to their home values, this is especially true for many seniors but hopefully we can "bottom" out and then return to sane, normal rates of growth.

 

[eliza61]

I am no mood to argue so I will leave it at that. They created the housing bubble. They will also devalue all currencies. I can't wait to revisit this thread in a few years and see who was right on this.

LOl,
that's cool. I didn't really think we were arguing though. Anyway I've pretty much been here, done that. Like I've said before, so far in my life time I've heard

"letting Blacks vote will destroy the country"
"letting gays get married will destroy the country"
"we'll be a muslim country"

And yet we keep rolling right along.

 

[Princesca]

I think that market correction is always a good thing, but...

I ALSO think that if we don't change the way we behave, market corrections only cause us pain upon pain. It boggles my mind that some lenders are still offering mortgages with zero down, or no documentation. Also, Fed tinkering with interest rates tends to create bubbles that pop, leaving us only desperate to find another bubble to replace the one that popped, and to breathe life into markets again.

Total devaluation of the dollar is highly unlikely, but I do believe times are going to get more tough. Things are not really as bad as they are made out to be, however. I believe that we are already pretty much in a depression... it's just that nobody's putting that name to it. And, while people are having to cut back, and live more frugally, we don't have people dying in the streets. People always raise the spectre of the Great Depression, and while that was a true disaster for some, there were plenty of people who got by just fine with some common sense and ingenuity. They lived life as they always had, just without bells and whistles.

Another thing I think is interesting is the seemingly growing trend of families becoming single income. It wouldn't surprise me if this becomes more of the norm than it has been over the past couple of decades. At this point, we don't really have a job market that can support a strong prevalence of two-income families. And I'm not sure that's a bad thing. I miss working sometimes, but life is undeniably easier for my DH and I with one of us at home taking care of errands and bargain shopping for everything.

 

[ilovemk76]

But padawan,
Every event is some thing this country never faced before. We never had a civil war that almost DESTROYED the country before or after. We never had a depression before, we never had a world trade bombing before either. All these things were once in a life time occurances that we survived.

I have a deep understanding of what the global market is going through, I daresay as good if not better than most simply for the fact that I've got players in the European markets.


The interest rate on treasury bonds actually went down today, so all the doomsayers who said that uber inflation would take hold were wrong (so far, tomorrow is another day) Translation: inverstors were buying treasury bonds today as opposed to stocks so their faith in the dollar is still there. because t bills are back by the usa
http://latimesblogs.latimes.com/mon...tock-market-meltdown-sp-credit-downgrade.html

The Euro fell today way more than the dollar vs the swiss franc. No they dollar can become devalued, in fact it has done so many times in the last century but as a general rule those cycles don't last lifetimes, I think the longest was in the 70's with the gas embargo.
But then the dollar can also become over valued. We saw that recently with the ridiculous growth on the housing market.

So do you know what would need to happen for hte dollar to be "worthless"?

I'm probably one of the few who feel the housing market needed to collapse and reset itself. The exponetal, skyrocketing, double digit rates on increase on housing values was phoney and unsustainable. What happen was totally man made. We (country) got greedy and now when the market tanked and is resetting itselfm hopefully we'll get back to modest steady rates of growth.

Totally agree that we can no longer play "kick the can" on our debt problems.

DH and I had said the housing market was out of control. I remember many in NJ who would tell us how much their house had gone up that month. Really? They thought there was not end.

I knew it was out of whack when a home a manual laborer bought on one salary now required two professional salaries to purchase.

In some area the cost of houseing was 10xs the salary of the people who lived there. Normally that number was 2.5xs. How much higher could it go? What did they think that people would be buying a house that required 100% of their income to pay the mortgage and then get government aid to live?

 

[ilovemk76]

I agree with Eliza about the housing market needing to collapse. I felt that way about the bailouts, too. Bailing out banks that took unacceptable risks creates a moral hazard, disadvantages banks that played it safe, and merely kicks the can down the road.

Yes, America is in rough economic waters, but...

Countries are now far far far far far more intrinsically linked than they were during the Depression. All of our economies have been inextricably intertwined, by design. Just like we developed a policy of "mutually-assured destruction" with nuclear weapons, so we have with our economies. If America falls, so does the rest of the developed world, with obviously disastrous consequences. So countries are not going to let America fall. They may kick us when we're down, throw a little mud in our eyes, or snicker behind our back, but China has no vested interest in seeing the US fail. If we go, so does a vast majority of their export market.

But I still argue that we need to right our ship and get our economic house in order. One day, China will conquer its burgeoning unemployment problems and its own people will be in a financial position to consume more of the goods China produces. When the Chinese people are lifted up en masse out of the general poverty they're now in, THEN we become a lot less important. That's essentially what Peter Schiff, an economist who predicted the mortgage market collapse, has been warning about.

It is inevitable that China will be a bigger consumer country than we are. They have 4xs the population of our country. India is right there with them. Between the two countried they have about 1/3 of the world's population.

 

[Princesca]

I have to admit, I am one of the people who believed a house was the best investment you could ever make. Fortunately, because of timing, it proved true for us, but it could have easily gone the other direction.

It's funny how much is just accepted as fact when it is anything but. Sometimes I feel like Neo from the Matrix, after taking the pill.

 

[ilovemk76]

Do you really think the preppers haven't thought of this? Pretty sure they stocked up on ammo too. I certainly wouldn't try to mess with a prepper!

While I wouldn't get carried away by fear, I think it isn't out of the realm of possibility that hyperinflation could occur in this country, especially if they do another QE. If you look at historical situations with hyperinflation the conditions here could lead into that direction if we're not careful.

It will take more than a few bullets to stop the masses from taking their stuff. They will kill a few but will lose in the end. There was a show where they showed some preppers. On set had stands etc. setup. Problem there are only two familys, ie 4 adults, to watch all their stuff 24 hours a day 7 days a week. When will they have time to tend their water wells and crops?

 

[Princesca]

I admit that DH and I have bought a gun, but it isn't really for personal defense - I wouldn't try to stop a human being with it. It's mainly for killing small game if we needed to, and for target practice. I enjoy going to the firing range. A perfect day for me would be afternoon tea then the shooting range - am I weird?

Anyway, if it comes down to the point when ordinarily peaceful citizens are shooting each other for food, that will be the point that I'm not sure I'll want to stick around anymore.

That's not usually the scenario that gets passed down, though. Most of the survivalist stories I've read tend to envision a future where people from the city spill out into the more rural areas, for their land and resources and farms, and people in those communities end up banding together in small feudal states. Human beings are not really genetically equipped to be lone wolves for long. I think we we always seek community/civilization - safety in numbers and all that.

 

[ilovemk76]

I have to admit, I am one of the people who believed a house was the best investment you could ever make. Fortunately, because of timing, it proved true for us, but it could have easily gone the other direction.

It's funny how much is just accepted as fact when it is anything but. Sometimes I feel like Neo from the Matrix, after taking the pill.

DH and I have always said a home was a place to live but not an investment. We also knew that a large mortgage was not desireable just to get a tax write-off but a paid off home was invaluable when hard times hit. One can sell a paid-off house and move, if the need arose. A huge mortgage can tie you to that house.

 

[Princesca]

Fortunately, we did at least have the sense to only ever buy houses that we could afford on one income. But because of the economy over the past several years, and having my eyes opened to the perils of fiat money, I now pretty much question EVERYthing.

 

[OceanAnnie]

True enough, but the flip side of that coin is that we didn't have the immense run-up in prices prior to the recession that we saw prior to the housing crash. A 30% drop in prices after a 100% gain in the previous decade is market correction, not the sky falling.

Perception is king, not "my" perception but on the whole. We don't know where the bottom is and there are no definitive answers in play. There are no long term solutions on the table.

The sky is falling? No. Our leadership is failing us. It's been failing us for a very long time. Not just this administration.

 

[fakereadhed]

Perception is king, not "my" perception but on the whole. We don't know where the bottom is and there are no definitive answers in play. There are no long term solutions on the table.

The sky is falling? No. Our leadership is failing us. It's been failing us for a very long time. Not just this administration.

I agree!

 

[ICF]

If you have the money -- yesterday would have been a good time to buy....

Lots of cheap stocks out there, and if you have the time there's a very good chance you'll make some nice returns.

 

[eliza61]

Market gain backed 400 of the 600 points it lost yesterday (surprise, surpise0.
Feds say they will kept the interest rate where it is for the next two years. So everyone worrying about their interest on loans skyrocketing have a bit of breathing room
Price of oil is down to 79.00 bucks a barrel.

Not saying that we dont have a long road ahead but for the near future the downgrading of our rating is a minor blip.

I repeat, I am in no way even remotely suggesting the economy is good.

Today just ended on a positive note.

 

[Disneefun]

If you have the money -- yesterday would have been a good time to buy....

Lots of cheap stocks out there, and if you have the time there's a very good chance you'll make some nice returns.

ITA. I bought a lot when the market crashed last time and I'll buy a lot now. In a very short time the last time my portfolio completely rebounded and then some -- by quite a lot, actually. I'm years away from retirement, so I'm shopping the "clearance racks."

There was an analyst yesterday in some article I was reading who said something like, "If you're watching the markets and you feel like throwing up, that's probably a good indication that it's time to buy." I agree.

 

[OceanAnnie]

Market gain backed 400 of the 600 points it lost yesterday (surprise, surpise0.
Feds say they will kept the interest rate where it is for the next two years. So everyone worrying about their interest on loans skyrocketing have a bit of breathing room
Price of oil is down to 79.00 bucks a barrel.

Not saying that we dont have a long road ahead but for the near future the downgrading of our rating is a minor blip.

I repeat, I am in no way even remotely suggesting the economy is good.

Today just ended on a positive note.

I am happy today ended on a positive note. I'd love to see many more.
Hopefully a lot of wisdom and action (in short order) will go a long way.

 

[OceanAnnie]

Interesting article:

Economic Uncertainty Leading to Global Unrest

"...Here's a look at what's happening around the world and how economic downturns are bringing protestors into the streets."

The article outlines unrest in the following countries:

Great Britain, Israel, Spain, Greece , Portugal, The Philippines, China, Syria.

It does give one pause.

http://www.cnbc.com/id/44073673

 

[dvcgirl]

Market gain backed 400 of the 600 points it lost yesterday (surprise, surpise0.
Feds say they will kept the interest rate where it is for the next two years. So everyone worrying about their interest on loans skyrocketing have a bit of breathing room
Price of oil is down to 79.00 bucks a barrel.

Not saying that we dont have a long road ahead but for the near future the downgrading of our rating is a minor blip.

I repeat, I am in no way even remotely suggesting the economy is good.

Today just ended on a positive note.

Well, I'm happy that the market ended as high as it did today, but the Fed's statement certainly doesn't make me feel great. For them to come out and say that their plan is to keep rates essentially where they are for the next two years.....well, clearly, that's not great news. For them to say that....well, they see some serious weakening in the economy.

At least they didn't say that they have plans to increase their balance sheet any further.....that would only mean the possibility of higher inflation down the road (which we will eventually see.....but I don't think we'll see hyperinflation or anything close to that).

In the end, the statement was designed to do exactly what it did....to direct movement of money and the "flight to safety" back into the equity markets.

One thing for sure....things are far worse in Europe.

 

[eliza61]

Interesting article:

Economic Uncertainty Leading to Global Unrest

"...Here's a look at what's happening around the world and how economic downturns are bringing protestors into the streets."

The article outlines unrest in the following countries:

Great Britain, Israel, Spain, Greece , Portugal, The Philippines, China, Syria.

It does give one pause.http://www.cnbc.com/id/44073673

In the end, the statement was designed to do exactly what it did....to direct movement of money and the "flight to safety" back into the equity markets.

One thing for sure....things are far worse in Europe.

It's really funny because my dh and my in laws are Portugese . They have a totally different attitude than we do over here.

They are fully aware that they are in deep debt but rarely will you hear anyone in lisbon & Paris (where we went this summer) decry that the country is going to end or money is going to be wothless. They have a totally different type of living so it's hard to compare apples to apples.
The average citizen seems more involved there than we are here though. Most of the unrest though is because they don't want the austerity measures being forced on them.

So in that we have in common, every body agrees there is a problem but no one wants to be the one to sacrifice. Its going to be interesting to see how we cut the deficiet without cutting medicare, reorganizing social security or ending tax breaks.

 

[ilovemk76]

It's really funny because my dh and my in laws are Portugese . They have a totally different attitude than we do over here.

They are fully aware that they are in deep debt but rarely will you hear anyone in lisbon & Paris (where we went this summer) decry that the country is going to end or money is going to be wothless. They have a totally different type of living so it's hard to compare apples to apples.
The average citizen seems more involved there than we are here though. Most of the unrest though is because they don't want the austerity measures being forced on them.

So in that we have in common, every body agrees there is a problem but no one wants to be the one to sacrifice. Its going to be interesting to see how we cut the deficiet without cutting medicare, reorganizing social security or ending tax breaks.

We need to cut every program, end tax breaks and raise taxes by eliminating many deductions.

Last quarter medicare was just shy or one trillion dollars and it has been going up each quarter as more and more people age into the system. We cannot sustaiin paying 4 trillion dollars per year on just one aspect of the federal government.