The impact of Financial Bubbles
If there is anything that the tech bubble and the housing crisis has taught us, it should be that Financial Strategies must be long term. Yes you can make and lose money with short term trading. However there must be a foundation for the long term. In other words a plan for saving and where future income will come from when you want to no longer have to work. Annuities can provide this plan and prevent short term trends from putting a plan off course.
The housing bubble taught us that you have to manage the amount of debt you assume. You cannot expect prices to always head up. The idea that as housing prices fall people are paying more for a house than it is worth is sad. However, the thought that the consumer should let the house go into foreclosure is entirely against the reasons most people buy homes. If it was an investment then I would agree with the cut your losses philosophy. However, with a house the investment for most people is the ownership of the home not just the asset itself. The ownership is more than just equity. It has an intangible characteristic that should override the idea that a person would cut their losses as the asset lost value. The idea that people cutting their losses are ending in foreclosure is a headline catcher. Those ending in foreclosure have deeper rooted issues. The loss of a job, bad debt management, or just plain financial chaos.
The truth behind the housing debacle is that homeowners lost the ability to tap into the equity in the house which was a big phenomenon as interest rates continued to be forced down by the Fed. Yes this benefit of homeownership disappeared and yes before the benefit left it led people away from debt management and into positions where they thought financial decisions had no consequences. Even money managers made bad decisions in the auction rate markets which resulted in huge sums backed by home equity ending up on their balance sheets. With zero demand for these securities and having supported markets as market makers the managers found debt backing up on their books. This portrayed the lack of integrity at these financial houses as they placed their interests ahead of their fiduciary responsibilities. I will be glad to discuss these and many more financial topics with you tailored to your individual situation. Visit
my website at www.jimmerrick.metlife.com
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