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How to accelerate the drop in house prices?
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2011 Oct 13, 12:07pm 34,779 views 136 comments
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My finance guy somewhat recently told me about some financial product - I think it was an annuity - with some ridiculously high guaranteed return. I forget the exact details but I asked him how such a guarantee was possible and he said he had no idea, and admitted that it sounded shady.
That's because you were talking to a salesman probably. If someone can't explain what a product is to you in terms where you can understand it, you probably shouldn't be buying it. It probably also has high fees.
But if you want to find out how, say, a variable universal life policy works, I did a write-up about it: http://patrick.net/?p=816374
But that doesn't mean an annuity is a Ponzi scheme or that it's fraudulent. You either don't know what "Ponzi scheme" means, don't know what "insurance" means, or something else is awry here if you're saying that. I'm also not sure if you understand how Social Security works -- you aren't saying anything substantive that's wrong with it, but rather repeating Rick Perry's talking points.
n the U.S. you couldn't even buy annuities before 1912
The fact that you probably Googled "annuity" before making this post (and found a savewealth.com article) says a lot...
If someone can't explain what a product is to you in terms where you can understand it, you probably shouldn't be buying it. It probably also has high fees.
I certainly didn't buy it. I didn't even ask for more details. Someone tells me I can get a guaranteed 18% YoY and I say "only in Zimbabwe".
But that doesn't mean an annuity is a Ponzi scheme or that it's fraudulent.
I said that insurance was a fraud.
http://dd.pangyre.org/i/insurance.html
[...] Social Security works -- you aren't saying anything substantive that's wrong with it
I've also said that Social Security isn't the problem, but Medicare is. Social Security, despite being called an insurance program or an entitlement, is just a tax. Get rid of it and replace it with welfare.
Googled "annuity" before making this post (and found a savewealth.com article)
I didn't research it much, but I prefer to understand the history behind something more than its immediate market impact. That article appears to have the date wrong - 1812 is correct, if this site is to be believed:
http://www.annuity-insurers.org/Resources/History/History-of-annuities.aspx
The primary benefits I've seen of annuities are their tax savings, and yes, aside from listening to Ed Slott, I've not any experience with them.
Social Security, despite being called an insurance program or an entitlement, is just a tax.
It is an insurance program. It is neither structured as an entitlement nor a straight tax. There are technical definitions for each of these things.
I said that insurance was a fraud.
That would be a minority position not supported by the law.
I certainly didn't buy it. I didn't even ask for more details. Someone tells me I can get a guaranteed 18% YoY and I say "only in Zimbabwe".
If someone told you 18% (I doubt they did), you should probably report them to some authority. However, insurance plans can be structured in a variety of ways. I explained variable universal life, which at first glance can look appealing to many people, but it tends to have very high fees in most forms.
If someone told you 18%, you should probably report them to some authority.
Why would I do that? Maybe the number was 16%. Maybe it was 12%.
Why would it make a difference if the guarantee was 4% or 400%?
Why would I do that? Maybe the number was 16%. Maybe it was 12%.
Because if they are guaranteeing you 12% YOY, they are probably a crook. It's not even close to plausible.
PockyClipsNow
2011 Nov 4, 10:30am
I was listening to the radio and I noticed someone (the Feds I think) was advertising "Having trouble making your mortgage payments? Help is available! Visit http://www.makinghomeaffordable.gov
So if you check out that link they want to keep everyone in thier home at taxpayer expense.
Who should we thank more for 'making home UNaffordable'? the D or the R?
They are even spending millions in your taxes to reach out to deadbeats to HELP THEM stay in homes they cant afford via Radio Ads.
Everyone at every level of the government/democrats are trying to re inflate house prices on taxpayer dime. IM REALLY TIRED OF THIS. We know its to bailout BANKS and they stupid loan owners are on the hook for a recourse mortgage on an underwater house if they actually Refi. Then they are screwed for sure until the BK. The banks sure do own the gov
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(Let go of the damn rope for Chrissakes!)
Several people sent me this today: How to Stop the Drop in Home Values
As if truly affordable housing were a bad thing! Sure, if you're a stupid bank that blew all its capital on stupid lending, and lower prices expose your stupidness, then that can't feel good, because you are after all the "experts" in lending. Though all that sweet taxpayer cash sure does sooth those wounds!
And if you're a stupid (yes, that's the right word) borrower who stupidly borrowed money to buy prestige and self-esteem at stupidly high prices, well, who exactly forced you to borrow that money? And does your life end if you have to go rent something you can actually afford, like the rest of us? Maybe you'd actually be happier without that albatross around your neck.
Martin Feldstein, the author of that article, says
What he does not say is that at a sufficiently low price, all those residential neighborhoods will quickly be filled will happy and reponsible people who don't need to borrow money to buy at that price. Patrick.net reader StoutFiles rightly says:
The key is to accelerate the drop in house prices by refusing to support stupid mortgage debt with taxpayer money. When houses become truly affordable, they will be bought with savings rather than debt. Demanding that anyone except the stupid banks and stupid borrowers pay for their own mistakes just drags down the whole economy.
If there were no mortgage debt, there would be no negative equity or foreclosures.
If there were no mortgage debt, the banks never would have had a mortgage debt crisis.
If there were no mortgage debt to compete against, your savings could buy a nice house.
Please write Obama and your Congressmen and ask for a complete end to mortgage debt subsidies, so we can accelerate the drop in housing prices.
#housing