Comments on: What A Dutchman Buying Tulips in 1637 Has To Do With Your Finances Today

By: Trent

Trent — Sun, 25 Feb 2007 16:49:29 +0000

Lazy Man: the problem is that not everyone else is contributing to their 401(k) or to a Roth IRA. If you really believe that, then you need to expand your horizons a little. For example, I’m the only one of my siblings who is doing it, and my wife is the only one of her siblings doing it. Even scarier? None of our parents are doing it, either.

By: Lazy Man and Money

Lazy Man and Money — Sun, 25 Feb 2007 16:43:41 +0000

To the bold point of “following the behavior of everyone else has only one result: serious financial losses”, I would be careful about that. The credit card example works, but should I not contribute to a 401K plan with matching funds because everyone else is? Should I not participate in a Roth IRA because everyone else is? Should I get out of get out of stocks and invest in tulips now, because everyone else is in stocks and no one is in tulips now?

I think the real answer is to evaluate the ideas behind the decisions. It’s easy to see that the math behind carrying a credit card balance is not your friend.

By: phil

phil — Fri, 23 Feb 2007 06:21:38 +0000

Actually, we’re in the midst of a bubble collapse right now: the housing bubble which was driven up by making shaky loans to lots of people who really shouldn’t have been given loans. All those exotic negative-amortization, interest only, ARMs worked when home prices were going up at double digit rates, but now it would appear that the music has stopped in this game of musical chairs.

At this point 23 subprime lenders have gone under since early December 2006 and now investors are even getting worried about the Alt-A and prime mortgage area. All of this is leading to tightening lending standards which means that people are not able to refi out of their ARMs they took out a couple of years ago. It also means that there will be about 20% fewer qualified buyers in an already slow housing market. Interest rates are heading up and housing prices are heading downward.

I’ve been following this pretty closely for the last few weeks (prior to that I was actually thinking of buying a house; boy, am I glad I put those plans on hold!). So friends, here you have a chance to watch another bubble collapse very similar to the NASDAQ collapse of 2000. I recommend a few blogs/articles that are covering this:

http://calculatedrisk.blogspot.com/ (read the comments, great source of info)

http://ml-implode.com/ (lists 23 subprime lenders who have gone under)

http://www.safehaven.com/article-6972.htm (gives quick background of what’s happening)

http://buttonwood1792.blogspot.com/ (all around market info)

http://piggington.com/ (mostly covers what’s happening in So. Cal, but they’re about six months ahead of the rest of us)

http://www.housingwire.com/ (mortgage news)

By: Mário Marinato

Mário Marinato — Thu, 22 Feb 2007 22:20:46 +0000

Great text. And think that those tulips exist not only where money is the main subject. Whenever there’s a hype, there might be one of those flowers hidden somewhere.

As said Brazilian writer Nelson Rodrigues, every unanimity is stupid.