My Way Lending

The safety net is almost gone, the nest egg is cracking.

Many Americans have recently found themselves changing retirement plans after losing a substantial amount of home equity as the housing market and the overall U.S. economy struggle. These folks face years of living on fixed incomes from pensions, 401Ks or IRAs, and Social Security, but don’t have the time to recover their losses.

Homeowners who’ve tapped their home equity, then spent it like yellow-and-blue Monopoly money, find themselves with no more funds to extract. Some have been laid off, relinquished their home in a foreclosure, or lost pensions after their employers’ business failed. Ideas of a comfy retirement full of relaxation and travel have been abandoned.

The good news is about 30 percent of homeowners have no mortgage at all. So even though their properties are probably worth less now than a few years ago, these people can tap into that equity cushion if necessary.

The bad news, however, is that about one in six with a mortgage now owe the bank more than their homes are worth, according to Moody’s economy.com. Most of these are property owners who purchased their homes within the past few years, or refinanced their properties and siphoned off too much equity.

Knowing that, it’s time for Americans to explore other options other than relying on home equity as a fail-safe, especially if they have no other retirement investments or savings. Options include downsizing their home, selling assets, postponing retirement by working longer, and signing up for a reverse mortgage. These decisions require heavy thought because each has its challenges and risks.

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Post from: Reverse Mortgage Loan Blog

Plan B for retirees who counted on home equity

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What Darwin actually said was a lot more inspirational considering where we are now. “It is not the strongest of the species that survives, or the most intelligent that survives. It is the one that is the most adaptable to change.” ***sigh, my hero***

Although I have never worked in retail anything, some of my best friends are retail customers and a few have asked for my opinion on others’ advice, most recently Suze Orman’s.

Ms. Orman’s seminal work “The Dangers of doing nothing in 2009″, Costco Connection Magazine January 9, 2009, is now available without charge at the checkout counter. In it she recommends loading up on stocks to be positioned to ride the wave up, which she’s sure is coming, along with the spaceship, I guess.

IMO, her recommendation is irresponsible. However, she’s not alone in advising retail customers to stay in stocks, the large brokerage departments (as you remember, all the big ones went bankrupt, were absorbed by banks, or restructured and became banks themselves to get on-going bailout money) are making the same recommendation for 2009. As a matter of fact, it was their recommendation for 2008 also, which they repeated so persuasively and with such wrong-headed confidence that I’d cringe at their humiliation if I thought they felt any.

Here’s how their advice worked out:

Courtesty of Bloomberg

Caption: After the 1987 crash the Dow finished up about 2% for the year, so 2008 was far, far worse.

We see that the market finished the year up off November lows. This could be due to a bear market rally, the fourth wave up according to Elliott Wave Theory, or some other technical pattern that will correct soon. Or, according to retail brokers and advisers, it’s because the bottom is in and stocks are about to zoom up because . . . because of what? . . . because corporate profits are about to soar. ***that must be it***

Also, note that each time there’s been a substantial uptick, it’s off lower highs.

Apparently, the Fed and Treasury would like to bail out every entity listed on any of the exchanges, including the foreign banks and central banks they’ve been slipping money to under the table. They can’t save them all, for one, and for two, the money they’re giving away has to be paid back at some point. None of this benefits the economy, corporate prospects, or the stock market. After each multi-billion dollar bailout, the stock market stabilizes briefly then resumes its decline. So, stocks will continue trending lower and if prices don’t fall fast enough to reflect reality, the markets will settle things up and crash.

For investors who thought they were well diversified by owning foreign stocks, here’s what happened to their portfolios:

Courtesy of the Wall Street Journal

Whoops, they forgot the Russian stock exchange, which was down 72% and it wasn’t even open every trading day:

Caption: It’s the oil, ??????.

OMG, the humanity. . . I mean, would you look at those skid marks.

This is the worst performance since the first depression and reflects a very unhealthy world economy. There is no beneficial event of sufficient magnitude within the realm of imagination that could turn this around anytime soon.

mg dungan

A few selections including two massive pieces in the NY Times about the meltdown:

• The End of the Financial World as We Know It (NY Times)
• How to Repair a Broken Financial World (NY Times)
• Madoff Paraphernalia, of All Sorts, Landing on EBay (NY Times)
• 44 States Face Huge Budget Shortfalls (Global Economic Trend Analysis)
• Woefully Misleading Piece on Value at Risk in the New York Times (naked capitalism)