Rising Foreclosures are actually BULLISH for the economy - let me convince you in this thread

reply to post by rusethorcain


You keep repeating CHINA CHINA CHINA CHINA

You think they own us?

Foolish.. they buy OUR DEBT

They need us a whole hell of a lot more than we need them my friend


CHINA CHINA CHINA - whatever i hear on karl d.'s website.. CHINA CHINA CHINA

reply to post by sligtlyskeptical


I disagree because I think people that are being foreclosed on haven't been paying their mortgages for a long time. Using your example once the foreclosure hits they will be spending $900 on rent instead of nothing. If they had been spending that $1200, then they wouldn't be getting foreclosed on. So if anything a foreclosure means less money being spent in the economy because they folks now need to spend money to get a roof over their heads.



I think you read something wrong because it works out like this my friend

Instead of paying the 1200 mortgage, they are PAYING EITHER

1)nothing and squatting

2)paying less in rent somewhere else

This also takes in mind AMERICANS DO NOT SAVE, THEY SPEND

The extra money from the 1200 mort goes to WMT/CTCO/TGT (Examples)

So that equals 300 more in disposable income

reply to post by spookfish


what?

Originally posted by GreenBicMan
At first glance, I am sure you are calling me crazy. Perhaps the same people that were calling me crazy when I said we would have positive GDP growth this year. But again, let me prove you wrong. It will be easier to detail this in "example" form. I basically conjugated this after visiting a friends party for their kids this weekend.

______________________

1. Family is being f-closed on.

2. Family was still going to have a birthday party for their kids either way.

3. With the money that they are not paying the bank right now, they are spending on extra presents for their kids and extra food for adults at party (important)

____________________

Now, #3 is quite important, and this alone should tell you what I am getting at. It is the AMERICAN CONSUMER at its finest. While it seems totally outrageous that they would be spending more, they ARE! So this gets me thinking..

____________________

Foreclosures are GOOD FOR THE ECONOMY. We are weeding out the weak and the people that should have never have had this loan to begin with. Now I know certain circumstances apply in certain situations, but deal with me.

Now, using this same example. This Family will continue of course to spend well over their means, but they will be doing it in a RETAIL MARKETPLACE and NOT to a bank. This family will now be renting a house that is $300 cheaper a month, and YOU WANT TO GUESS WHAT THEY WILL DO WITH THE REST?.. Thats right, spend it irrationally.

In summation, NEVER DISCOUNT THE AMERICAN CONSUMER.

Multiply this by the number of homes being foreclosed on * .75 (the variable for the average american consumer) = BULL MARKET CONTINUATION TO ME

I look forward to an interesting debate if anyone would like to disprove my theory.

Lets start with this premise, on this planet the sun rises in the east and sets in the west I believe everybody can agree on that. Or to be more exact, the rotation of the planet toward the east gives the impression of the sun rising in the east and setting in the west. The reason I bring this up is what your saying and doing is to express a indisputable fact, and that is people will still consume regardless if they pay a mortgage or not. What everybody is trying to say is that your quality of life and lifestyle will diminish. Your also right about if Circuit City isn't hiring or out of businesss etc., then HH Gregg will hire or the warehouse that needs a forklift driver. The problem is that how many people will HH Gregg hire and also the warehouse. A business is only worried about making money for their shareholders and their stakeholders. So they don't care if you are needing a job or not. If they only need 2 people at HH Gregg, thats all they need so the rest of the 400 or so people can go pack sand. If that warehouse owner says sure I only need 2 people, but I will hire you for minimum wage and if you don't take it somebody right behind you in the 400 or so will jump on it.

You take the job and know your standard of living has diminished further, yea you can consume but your not buying the high end items or even able to afford insurance (because the warehouse owner doesn't have any). So instead of living in that nice overly priced house with the same high mortgaged that you got evicted out of after not paying for almost a year in mortgage, you go into a trailer or a rental in a neighborhood that leaves much to be desired. Then as you work that job you also get all that comes with being married and with a family that has to survive on a very low income (who are still consuming your correct on that), you know the fights with the kids over things and the wife over feeling trapped etc. etc.. And then being a low end job you have no choice to be living check to check. Then when the Warehouse owner decides to lay you off and such, you don't have that check anymore and must get welfare and foodstamps and assistance.

What the good times did (having a good paying job, nice house, nice neighborhood, savings etc. etc.) for you was mask and/or diminish many of the issues that come from the lowering of a family or a couples status in a society from a higher one. And so you can still consume and do whatever, but what happens is that the opportunity cost is your well being and your family well being emotionally and financially. You may look at this as objective as you can, but when you do it in reality and actually live it you will see how flippant it is to say it's okay and it's bullish for the economy. Somebody is winning thats for sure, but you may be the loser. You can still be correct and be consuming cans of tuna under an overpass that you bought with the little money you have.

[edit on 30-11-2009 by hoghead cheese]

reply to post by jefwane


I think this totally makes sense

IN MY EXAMPLE ALL THIS AMOUNTS TO GUYS IS THIS FAMILY HAS 300 MORE IN DISPOSABLE INCOME AND WILL SPEND THIS IN A RETAIL MARKET

WHAT THE # IS SO HARD TO UNDERSTAND ABOUT THAT?

THEN EVERYONE WANTS TO TALK ABOUT JOBS AND THIS AND THAT

ITS JUST THE #ING OP -

Its EASY SOMEONE HAS 300 MORE IN DISPOSABLE INCOME THEY WILL MOST LIKELY SPEND IT, WHY IN THE HELL ARE ALL YOU GOING INTO THESE TANGENTS ABOUT THIS AND THAT ITS CRAZZZZY

IM TAKING CRAZY PILLLSSSS!!!! AHHHH!!!! LOL

Just kidding guys, im right though, i dont see how you can debate this even, but either way its a good sample on what the general crowd thinks. I was not addressed you here btw JW

[edit on 1-12-2009 by GreenBicMan]

Originally posted by deepred

You have built your theorem around broad generalizations, both situational and behavioral and have forced the entire consumer base into classifications needed to support your theory.

To be fair, his is the same type of broad generalizing I hear from Wall Street analysts on TV. Their short sightedness and get rich quick (by dumping their trash on to someone else) schemes are now played on Main Street.

Someone who forecloses on their home and then goes out and spends the money on non essentials is not wise. This is only Bullish for people who can find a way to make money of this trend, and when the consumer does something else rash and stupid there will be another bullish trend for a small group of people to capitalize on.

This Bullishness is nothing more than a trade, it's not an indicator of long term sustaining growth for this country.

Money itself isn't lost or made,it's simply transferred... ...from one perception to another, like magic

[edit on 1-12-2009 by Amelie]

reply to post by hoghead cheese


I get where you are coming from bro, but really its just about the couple extra bones on the line to spend discretionarily (word?).... thats it.. and that will keep this thing going, I find that bullish

reply to post by Amelie


its not supposed to be my friend (regarding long term outlook on economy)

it is what iit is

One of the contributing factors to economic recovery from a recession is a gradual increase in foreclosures. At the peak of the recession unemployment is still on the rise, however the significant number of foreclosures caused by unemployment leads to increased disposable household income, in turn stimulating the economy and shifting aggregate expenditure to meet natural GDP levels.

reply to post by truthquest


dude all i am saying is this family has 300 more to spend a month

you think they will save or spend (avg consumer?)

you have your answer

reply to post by GreenBicMan


Like Jenny once said to Forest Gump, "Are you stupid or something?" and if you were in his shoes you would probably reply the same as he, "Stupid is as stupid does."

Look my brother, I've basically read through this entire thread and even though I'll give you an A for effort, unfortunately you get an F for critical thinking. There have been some great post provided throughout this madness of a thread, politely explaining to you the error of your ways.

What you need to understand is that it's time to leave the ego at the door. I get the fact that you look up to brokers, I'm pretty sure "Boiler Room" is your favorite movie, and most importantly I feel your pain, as you are slowly but surely realizing that your aspiring dreams of being some big shot broker on Wall Street is being flushed right down the drain. Trust me when I say money is not everything.

I urge you to wake up to this madness, find a hot girl to romance, go take an art class...do something instead of holding on to this delusional industry called the stock market. My god man, do you not have any compassion for those out there who have lost everything? Not the scumbag hedge funders but the slowly rotting middle class family that is literally having its head chopped off.

If you wanna pimp something, pimp gold, silver or precious metals. Hell, commodities would even be a start. At least those are real things, concrete, something with substance.

You see what you better realize quickly is that overnight the term "banker" or "broker" or "financial analyst" have become synonymous with a pecuniary thief.

I've got more respect for a damn sky line burglar. Sure he's robbing from his fellow man but even he has more respect than to disguise himself in a fancy brooks brother suit and claim to be respectable.

You're young and seem to have a good head on your shoulder so I hope you realize the errors of your thinking.

reply to post by tedpi


Tedpi

I salute you

reply to post by OnTheFelt


dude what?

what does that #ing have to do with anything?

i am talking 300 more in disposable income and you write me something i refuse to even read past the first paragraph, please dude, edit that and respond to my op

On a more serious note. Who cares? from a practical point of view this can't even be used for predicting purposes of where things are going. Unemployment causes high levels of foreclosures. Because there is a delay between when a person loses their job and when the foreclosure is statistically accounted for. This indicator is more lagging than the already lagging unemployment rate. If unemployment is peaking now (according to you) then foreclosure rate will peak sometime in 6 months from now.

Now, in case you are just interested of coming to a better understanding of how the economy recovers (and unpractical). Then I have two good points meant as constructive criticism in your endeavor:


1. you base this whole thesis over one case, extrapolating to all other foreclosures.
2. If you read so much you would know that the macro effect is much more important than what happens to a few select families. How do you know this is happening on such a scale to have a significant net positive impact on recovery?

reply to post by tedpi


I dont, its a theory I came up with, and I used a variable .75

Its just that, nothing like im going to submit this for nobel prize in econ.

I think its easy more disp income, more spending = bull market continues (retail market/consumer driven)

Its just one thing in a myraid of others

I guess you could say this is a contrarian indicator or something I dont know..

Im just saying.. thats all.. thats all this thread was ever supposed to be.. it evolved into something else though

[edit on 1-12-2009 by GreenBicMan]

[edit on 1-12-2009 by GreenBicMan]

a ok, my bad my bad. but then even though it's interesting there's nothing to discuss really. You have set your variable no one can challenge it, and no one can challenge the argument that more disposable income spent is bullish. So yes I agree given your assumptions you are right on a micro level. There is no flaw in logic at all.

On the overall effect of foreclosures and when more assumptions are considered (like all implications psychological, and bank capital reduction, etc.) you are incorrect. It is not bullish beyond the micro level.

reply to post by tedpi


what?

no it doesnt work like that

either

a) these people that are not paying as much in this mortgage are spending more in the economy for a long time to come

or

b) you disagree


Id hate to unsalute you

[edit on 1-12-2009 by GreenBicMan]

reply to post by tedpi


by the way the variable makes no difference, its just a placeholder

reply to post by GreenBicMan


When the actual foreclosure occurs, the cycle ends, and the consumer now has $900 less each month to spend on non essentials than they had during the previous year when they didn't pay the mortgage. My point is that the actual foreclosure reverses the excess income advantage that one had from not paying the mortgage. As a result foreclosures are not good for the economy under your theorem. It is the people that have yet to be foreclosed on that reap the benefit and their day is coming soon, zapping that $900 right out of the economy again.

reply to post by sligtlyskeptical


pays 900 in rent

pays 1200 for mort

pays more also I am sure for insurance and all this other stuff I currently do not have to pay luckily

I do not want to talk about that though

my point is many are getting foreclosed on and no matter what most likely their disp. income will go up bc paying less in rent for the time being and still love to spend money like dey' drink from my cup or somethin'

am i still missing your point prob? ill reread