CHESSNOID

The US super Tuesday primaries were very enjoyable to watch. It was like the Superbowl of politics. OK, that’s exaggerating it. Regardless, I am glad more people are voting and that we have a good selection of candidates to vote for. I hope whoever wins is in favor of withdrawing the troops. Our current economy is tied into that resource draining war that has pushed us into a recession. The faster we withdraw the faster we can recover financially.

The market has had 3 down days in a row. Normally when they are this severe, a bounce is in order. The after hours news of some major companies doesn’t look like it will support that pattern. Cisco had a great quarter but analysts see the writing on the wall based on the previous techs’ forecasts. After hours Cisco stock has fallen 7.97 % in price. This is one of the stocks I accumulated since 2000 after the dot com crash and sold late last year because of the economy falling into a recession and increasing housing foreclosures. This stock like all the stocks I sold all went up after I sold, but now all are15-20% below than what I had sold them for. I am still in cash and waiting for technical signs to start re-investing long term.

Prudential insurance company reported fourth quarter earnings fell 16 % and their stock fell 6% in after hours market trading.

The economy is in a recession right now and more economists are starting to acknowledge it as more reports start to come out. Of course it will never be official till after the fact, but we all know when we go shopping by the costs of everything from the price of gas at the pump to the milk in the grocery stores, and the layoffs of either friends, or friends of friends, and even family members and relatives. We really don’t need the media or our government to tell us if we are in it or not. Our wallets tell us. Once you acknowledge this problem, you can prepare yourself better to minimize its short and long term effects. I think as we near the actual Presidential election, this will be the number one issue in America as foreclosures continue to break records and the recession is in full effect.

On a lighter note, I signed up for this new site called Updown.com which you invest play money of a million dollars in the actual stock market. It’s a way of learning how to invest. It is fun and a great way to see if you can make money in a down trend stock market. Hopefully, my results will be decent enough to publish. One thing about play money, it is easier to take risks that I normally would not take. The site is free to play if you are interested. In the 3 days I have participated, I have been able to increase the value to $1,012,543.63.  The site will actually pay you money if you refer people or make money, but I haven’t read on how to do that. I am in it for the novelty of testing my investing skills.

Lastly, I read an article about people walking away from their mortgages altogether because they are upside down on their loans and their payments are going up. Many people seem very exact in their opinions on why this is just morally wrong, but I don’t really agree with it being so black and white on this issue.

Lenders are afraid that borrowers may find it’s worth the hit to their credit scores, if they can drastically reduce their housing expenses. Someone with good credit and a $600,000 home in a town with cratering real estate prices could buy a similar house nearby for $450,000, and then let the other $600,000 mortgage go into foreclosure.

The stage is set for this kind of thing particularly in California, where huge numbers of buyers used low or no-down deals to buy homes. The trend has even spawned at least one new business, San Diego-based YouWalkAway.com, which for a fee of $1,000 purports to guide clients through the process of ditching their mortgages. It launched in early January, and says it has already signed up 180 clients.

California is a bit of a safe haven for these borrowers, since banks that repossess and then sell a foreclosed property for less than the mortgage that was owed on it cannot come after borrowers for the difference - as long as it’s the initial mortgage, one that has not been refinanced. So if a borrower owes $200,000 and the bank sells the house for $170,000, the borrower comes out of it debt-free.

And for many homeowners, the prospect of becoming debt-free is growing increasingly alluring.

I personally view this a business transaction and that you really do have to do what is best for your family. In an LA times article, a commenter wrote:

“I am one of these people. My condo has dropped in value from $520K in 5/06 when I bought it to $350K now. My ARM payment will probably go up $900 per month in June.

“Despite all this, I would be willing to stay if the bank would refi the loans to a 30 year fixed, but since I’m not a ‘hardship’ case they’d apparently rather foreclose. I guess the only way I could qualify for loan mitigation is to get my boss to fire me, stop making payments, and wreck my credit. In fact, my bank won’t even talk to me until I miss a couple of payments.

“I have purchased a cheaper place in a nearby area now, while my credit is good, and will stop making payments on house #1 after house #2 closes. I know the foreclosure will be on my credit for 7 years, but I will have saved a lot of money.

“I realize I agreed to the deal when I signed the mortgage papers, but I am within my rights to walk away from a bad deal and suffer the consequences, just as many corporations write down billions of dollars of debt, lose money for their shareholders, and lay off people as a result of their bad decisions.

“I don’t really understand why people view a business decision by a homeowner as a terrible moral lapse. However, when large lending institutions, with access to more sophisticated information than any consumer could imagine, make mistakes affecting thousands of people worldwide, they are not excoriated and vilified with the same righteous zeal.”

I believe this is very common in California with all our crazy housing bubble prices. In the past I would have thought this was morally wrong, but with the way the market is and possible bank and mortgage company bailouts by our government, I have really changed my opinion. What do you think?