I'm glad to hear that Alan Greenspan has finally come out (albeit in a nudge-nudge, wink-wink kind of way) and said the current economic optimism in the face of reality may soon end. The housing boom has been partially, no - mainly, responsible for the 'cheery moods' felt on US Main Street and Wall Street. As house values go up so do people's net worth - or so it would seem. With more and more people borrowing money against the increase in the net assets, they may have forgotten that 'a bird in hand is worth more than two in a bush'. Heck, you know what I mean.
People who borrow against some unrealized gain in assets may find one day that that asset's value has fallen. Thus, that is one reason I do not really think of my unrealized gains in the capital markets as true gains. I will leave my stocks in my portfolio. I won't live the high life based on my portfolio returns. Nah. Leave the money and give the portfolio to my kids. Future generations of children will need more money than our generation needs to live. Remember these points: (1) children in the future will have fewer government services (social security), (2) children face higher taxes (sales taxes, income and social security taxes), (3) children face higher costs in education, and the list goes on and one.
I'll have to try and live on my salary alone. Mind you, I am putting aside 33% of my net income (after taxes and rent) into investments. Not too much left after to live the high life. Oh well... nothing I can do now.
I hope that people who take out second mortgages or even third mortgages are using the money to invest either in education or business enterprises. If people are taking our more loans just to finance a higher standard of living (more vacations, bigger vehicles, more swimming pools, etc.) I hope the housing market crash puts them out on the street. Because that is where they belong.
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