patrick.net

can someone check IPs and ISPs etc?

If this akr's story is legit, then I too feel sorry for him and I'm saddened by how little he learnt from this site. He and his family are buying a home they cannot truly afford. They will see their savings and living standards suffer for many years compared to renters with similar income and family structure.

And akr better hope that his job position is permanent and smooth financial sailing for the next ten years. He's placed himself in a very precarious financial situation and will have a much harder time staying afloat than if he had been a JBR.

astrid Says:
If this akr’s story is legit, then I too feel sorry for him

Don't bother. If the story is true, then this guy is a GF who has bought into the notion that he is 'living life on his own terms' - by taking out a suicide loan to buy a depreciating asset at the peak of a market cycle. The separation of a fool and his money is predestined, and is not a cause for concern.

Posting here to 'prove' his maverick-hood, is nothing more than whistling past the cemetery.

SP

If this akr’s story is legit, then I too feel sorry for him and I’m saddened by how little he learnt from this site.

This guy gets to enjoy his home. If he is comfortable about the purchase, there is nothing wrong and nothing to be sorry for.

I feel sorry for vegetarians.

All else being equal, a 40 yr is a better deal than a 30 yr at the same rate.

If it does not have prepayment penalties.

Huh?

Who added the graphic? Excellent work.

Whatever happens happens. i’ve just chosen to live my life by a certain set of rules and feel that i’ve compromised myself by listening to those who, in my view, have an irrational fear of losing everything.

Yes, terrible the way the data-driven views expressed on this blog have so horribly warped your vision to the extent that you waited a WHOLE YEAR before realizing your dream of lifelong debtorship, using a 10/40-year I/O lead anchor. If you had taken the leap last year, you could easily have paid an additional 15-20% more than today. Who are WE to caution you against strapping those weights to yourself and jumping overboard.

Such hubris... I am truly ashamed for my lack of "vision" and impulse. I always insist that economic fundamentals justify price and make sure the purchase "pencils out" for my budget before leaping. I am constitutionally averse to accepting soul-crushing debtloads on a whim, without some form of risk-reward calculations. Clearly, I am mentally defective and am gripped by irrational fear. The fact that buying now may saddle me with an illiquid albatross near the peak of an enormous bubble is irrelevant.

Thank, you for setting me straight, "akr" (twin of Face Reality?)

Btw, thread graphic courtsey HARM-X Industries, Ltd.

@jose,

Huh?

Long CD and short MBS, anyone?

H.Z., some months back we have several threads on arbitraging & hedging against the bubble (RE-proof 'safe' investments, shorting, ETFs, futures, options, etc.). I don't have all the links handy, but if you peruse the archives (pre-April 06), you might find some useful information.

@jose,

Thanks for your "clever" commentary on the how renters are REALLY dumb. We get it. Let's move on.

Low cost shorting for individual investors is the hard part.

Are there MBS ETFs?

Suppose there are, but can you invest the short proceeeds without paying margin interest?

I think it depends on the broker. 2x margin is probably not enough on the short side anyway.

@jose,

Your crushing satirical piece on the mindset of a renter has pushed me over the edge. My sense of my own manhood is so threatened that I'm now girding my loins to sign on to a 10/40 for a condo lest I be considered dumb. Thank you for your clever ad hominen argument. It deftly and elegantly counters the over-reasoned economic arguments presented here that favor of renting. Why think rationally when steely resolve and courage are all that's needed to make million$ in real estate?

Here's my wallet, RE agent. Sign me up, devil the cost.

With a fixed return of 6.5% wouldn't there be a significant opportunity cost exposure to interest rates? At some point you would be better off not taking on the debt to CD purchases and instead investing the alternative cash flows derived from not paying on the debt at a much higher return. I don't think this is a pure arb. And it's definitely not worth the complications for anyone with less than a couple million to plow into the game.

HZ

I understand. So it is a pure arb excepting t. And the t risk is purely a variable -v- fixed risk, so it could be plugged with an additional hedge.

Say one borrows 400K at 5.8 and buys CDs at 6.5 resulting in about 2800 a year in free money, minus tax complications.

I wonder what is the after-tax rate differential though.

For those who cannot maximize mortgage interest rate deduction, this does not worth it at all.

Moreover, taking a HELOC to buy securities (CDs) may not be deductible under AMT.

t is not really that big a risk, because if the ARM goes up, you can always cash the CDs early and pay off the loan that way.

You are risking losing some of your gain though.

Doh, didn't mean to post my name on that. Can you change me back to "Jimbo" on that post before Google grabs it?

I am not trying to hide or anything, but I try to keep my name off of Google, especially when posting something controversial. You never know when a future employer might go searching for something...

cd's are callable? Has this ever happened? I dont understand.

DataQuick "Bay Area Home Prices Decline"

http://www.dqnews.com/RRBay1006.shtm