Biggest corporate fraud in the world.

Dave Taylor said:
OMG you can’t use your cc and take on more debt 🫣
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I don't know what percentage of consumer transactions are via credit card, but it has to be over half. If that were to shut down all of a sudden, it would be total chaos, particularly in a situation where people also couldn't access cash easily. Totally unrelated to any judgement about household debt.
 
soundz said:
I'm guessing by "withdrawing 1000s in cash" they're not asking for physical cash from Schwab or Etrade or whatever, but cashing out whatever investments and transferring to checking or savings account.
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It's been a minute but I think he told me they were having their spouses withdraw money. I'll bet banks in Westport keep more cash on hand than my little credit union.
 
I remember when Hurricane Sandy hit and most local pizza and other food places that had power, were not able to use CC machines. Cash was king when it came to getting food. Not an alarmist or prepper, I think we only keep around $100 in cash around the house.
 
ebarker9 said:
I don't know what percentage of consumer transactions are via credit card, but it has to be over half. If that were to shut down all of a sudden, it would be total chaos, particularly in a situation where people also couldn't access cash easily. Totally unrelated to any judgement about household debt.
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Exactly right. Remote transactions would be functionally impossible. I buy stuff from Europe all the time - good luck with that. Hell, I venmo'd @Dave Taylor just last week!
The latest Federal Reserve payment study estimated that one in five U.S. transactions are made with cash, less than are made with credit or debit cards, but much more than are made with mobile payment apps, which account for 3% of all transactions.
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Source
 
Dave Taylor said:
So if your dividend pays 5% vs the 3.75% mortgage is it really beating it when the interest is front loaded? This is just a question.
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depends, the front loaded interest did provide a tax deduction way back in the day.
Mentally, a mortgage might be considered a forced savings account, with a fee - the fee is your 'rent'

-----

just to make it easy - say I had

$100,000 in the market
and a $100,000 mortgage balance

Keep the money, get the market return on the stock, and use the div (taxed at a preferred rate)
I got 3.375% mtg - the total interest on the mortgage for the first year is $3,200 - approx $800/mo payment
so lets say the interest covered it in the first year. and every year after that.
but I still have to pay the principal.

Your point may be that i couldn't invest the $100k and draw on it to pay the mortgage over 15 years w/o putting money in?
absolutely true. $$ would be gone in 6ish years, with a bunch of years left to pay.

This is why it is a disciplined savings account - if i did pay off the mtg, would I still have the discipline to
invest the $800/mo mortgage payment, or would i waste it on H&B ?
I'd waste it.

Probably the same if the rate was 6%, it just increases the contribution each month.
I'd have to think about it more, but I'd think it depends on cash flow more than total savings over time.
as soon as ya can't afford the cash flow, it's over.

in the end, the interest is covered (cause of the great rate/term I have) - the house gets paid off,
the house increases in value, and the principal I started with increases in value.
My monthly cost is the total payment less the dividend post-tax,

This doesn't work without an income stream - if you want to retire, get out the pencil and figure it out,
you'll probably want to pay off the mortgage and match cash flows after that.

Also mortgage rates higher than the market return + real estate appreciation are tough to evaluate.
I have a friend who had a 30 yr interest only loan. They basically rented their house for 10 years, and
sold it at a 50% profit. it was their primary home, so no tax on the sale, and a huge tax deduction each year.
(pre increase in the std deduction) - not sure i'd have the guts to pull that one off - but hey - they got a win.
 
Patrick said:
depends, the front loaded interest did provide a tax deduction way back in the day.
Mentally, a mortgage might be considered a forced savings account, with a fee - the fee is your 'rent'

-----

just to make it easy - say I had

$100,000 in the market
and a $100,000 mortgage balance

Keep the money, get the market return on the stock, and use the div (taxed at a preferred rate)
I got 3.375% mtg - the total interest on the mortgage for the first year is $3,200 - approx $800/mo payment
so lets say the interest covered it in the first year. and every year after that.
but I still have to pay the principal.

Your point may be that i couldn't invest the $100k and draw on it to pay the mortgage over 15 years w/o putting money in?
absolutely true. $$ would be gone in 6ish years, with a bunch of years left to pay.

This is why it is a disciplined savings account - if i did pay off the mtg, would I still have the discipline to
invest the $800/mo mortgage payment, or would i waste it on H&B ?
I'd waste it.

Probably the same if the rate was 6%, it just increases the contribution each month.
I'd have to think about it more, but I'd think it depends on cash flow more than total savings over time.
as soon as ya can't afford the cash flow, it's over.

in the end, the interest is covered (cause of the great rate/term I have) - the house gets paid off,
the house increases in value, and the principal I started with increases in value.
My monthly cost is the total payment less the dividend post-tax,

This doesn't work without an income stream - if you want to retire, get out the pencil and figure it out,
you'll probably want to pay off the mortgage and match cash flows after that.

Also mortgage rates higher than the market return + real estate appreciation are tough to evaluate.
I have a friend who had a 30 yr interest only loan. They basically rented their house for 10 years, and
sold it at a 50% profit. it was their primary home, so no tax on the sale, and a huge tax deduction each year.
(pre increase in the std deduction) - not sure i'd have the guts to pull that one off - but hey - they got a win.
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Where does this conversation go if housing prices continue to drop? I know it's "just a pullback". But if it wasn't? I bought my NJ house for $223k in 2012. Previously it sold in 2006 for $270K but no garage. So basically the owners bought it for $270k, added a $75K garage and sold it for $47k less. Not all homes are an investment especially if you don't have time to hold. It was a savings account for us as we purely got lucky with covid money printer and it went from a Zillow $175k estimate in 2018 to $359 when we sold and now.
 
Your house is consumption, not an investment. (A second home could be an investment.) How much rent do you collect on your house? Most houses generate negative cash flow.
Yes, but we have to live somewhere, and that costs something. To the extent your house purchase exceeds how much rent you would pay (not how much you could rent the house for) you have diverted money from investment towards consumption, maybe hoping it will go up in value (and ignoring how much the foregone investments have appreciated at the same time.
I'm running a realtime experiment with two joint accounts. I started two same sized joint accounts 14 years ago. The first account bought blue chip dividend paying stocks. The other account bought my residence. Care to guess which is worth more today?
 
Fire Lord Jim said:
Your house is consumption, not an investment. (A second home could be an investment.) How much rent do you collect on your house? Most houses generate negative cash flow.
Yes, but we have to live somewhere, and that costs something. To the extent your house purchase exceeds how much rent you would pay (not how much you could rent the house for) you have diverted money from investment towards consumption, maybe hoping it will go up in value (and ignoring how much the foregone investments have appreciated at the same time.
I'm running a realtime experiment with two joint accounts. I started two same sized joint accounts 14 years ago. The first account bought blue chip dividend paying stocks. The other account bought my residence. Care to guess which is worth more today?
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Well considering that you probably bought blue chips at a good bargain in 2008 and your house at an absolute premium I would say the div stocks did better especially with DRIP set up. Housing didn't really crash until after the market crashed so this comparison sounds like it may be side weighted on the start.
 
Dave Taylor said:
Well considering that you probably bought blue chips at a good bargain in 2008 and your house at an absolute premium I would say the div stocks did better especially with DRIP set up. Housing didn't really crash until after the market crashed so this comparison sounds like it may be side weighted on the start.
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I didn't do a DRIP as I needed income to pay for real estate tax, upkeep, repairs on the home, which generates no income. So there is a substantial transfer from investment to residence over the 14 years. Still, real estate lagged dividend stocks.
 
soundz said:
When I lived in NJ I had Chase and never had any problems withdrawing large amounts of cash. But they don't have Chase where I live now so when I tried to buy a tractor, I just went into the bank thinking they would be able to give it to me. When I handed them the withdrawal slip, they looked at me funny and called the manager. And they discussed it for like 2 minutes and asked how much cash was where and was like, we can do it but it'll be all $20s. They had to take money out of 3 different drawers. Next time we ask you call whatever days in advance.

Also, their ATM only gives me $500 a day limit.

I'm guessing by "withdrawing 1000s in cash" they're not asking for physical cash from Schwab or Etrade or whatever, but cashing out whatever investments and transferring to checking or savings account.
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This is standard fare for any bank, you should call ahead with any withdrawal of $3k or more in cash. The boxes on the floor are limited in cash in case of robbery, it usually takes 15 minutes (estimated) to get into a vault - again to make it so they don’t get robbed.

If you went on a pay day and many people were cashing checks it is likely the teller boxes can get depleted.
 
Johnny Utah said:
This is standard fare for any bank, you should call ahead with any withdrawal of $3k or more in cash. The boxes on the floor are limited in cash in case of robbery, it usually takes 15 minutes (estimated) to get into a vault - again to make it so they don’t get robbed.

If you went on a pay day and many people were cashing checks it is likely the teller boxes can get depleted.
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100%. I was a teller for a couple years. On the holidays we maybe had $50k in cash on hand. Pointless to have more and all it creates is risk.
 
Dave Taylor said:
Where does this conversation go if housing prices continue to drop? I know it's "just a pullback". But if it wasn't? I bought my NJ house for $223k in 2012. Previously it sold in 2006 for $270K but no garage. So basically the owners bought it for $270k, added a $75K garage and sold it for $47k less. Not all homes are an investment especially if you don't have time to hold. It was a savings account for us as we purely got lucky with covid money printer and it went from a Zillow $175k estimate in 2018 to $359 when we sold and now.
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One thing with real estate that if your residence drops in price and you're selling at a loss, the house you're buying has also probably dropped in price. Only real issues are if you're needing to sell in an area where the house prices dropped more than the average and buying in a place that raised more than the average. Or forced to move and interest rates have jumped up, a spot where a ton of homeowners are in right now where they're trapped.

I bought a house last year moving from a rental. I bought it with the assumption house prices were going to drop after buying it (I think I bought on the market peak day) but knowing I'll be in the house for awhile and the potential value loss in the house will be way less than the money lost in rent.
 
cost of $200,000 home P+I with 30yr at 6%

$432,000

you've already been crushed by the interest load.
It would be nice if it wasn't a short term sale resulting in a loss - but over the long run, it really doesn't matter.
as Jim said - it is a cost, and some lucky people get +money out at the end.

i'm way upside down on my house - not just the interest. all the improvements to make it my house.
but then again, when i go to sell it, the non liquid asset moves up the page a few lines.
 
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