Ever had a dream just disintegrate before your very eyes? Options

[johns68]

Sorry, gotta dive into the rant ... both anecdotally and otherwise ...

My parents and in-laws were "depression babies". My father-in-law literally DID have coffee cans full of $100 bills buried in the orchard. His similar investment strategies saved him during Enron (they "only" lost a couple hundred K), and have preserved their estate today (down 10% or so ... incredible, given the current norm). My parents never believed in the market, investing their money in cd's ... "foolish" 10 years ago, but today? Brilliant!

Education ... America's political system is BASED on the common man being educated enough to participate in government intelligently. Research Thomas Jefferson and his concerns about the new republic. That level of education (formal or informal, it doesn't matter) has risen dramatically in the last 300 years. You are not supposed to base your vote on a candidate's skin color! Nor how hot his running mate is! C'mon people, we have a responsibility, and to shoulder it we must UNDERSTAND it! Not just listen to the f*cking media! Am I biased? I don't think so, but I DO spend my days teaching college Math and Statistics ... and open my Stat students eyes to misleading media reporting of statistics every single day! An election year makes my lectures easy ... "read the paper today?, let's analyze the bullsh*t!"

What happens in America still affects the world enormously... your vote affects America ... please learn something about the issues and the candidates' positions ... please vote intelligently ... /rant

[mitchntx]

to shoulder it we must UNDERSTAND it! Not just listen to the f*cking media!

I work in the media world ... corporate now, but for a few years, I was on a weekend ENG team for KLTV in Tyler, Texas.

Everyone should spend a few days following field teams from electronic or print media. Your eyes would be opened to a world of lies, deceit, sensationalism and back stabbing. I've seen sh!t you wouldn't believe.

If it has the term "news" associated with it, chances are it's more "opinion" or "bias" than "news".

/rant

Oh and Mike ... old man Mike ... thanks for the "pick-me-up" (IMG:http://www.frrax.com/rrforum/style_emoticons/default/nutkick.gif)

[mitchntx]

OK .. so lets look at this a diferent way ...

The 401K is taking a dump.

What if I were to take a loan against the 401K, short term loan (24 months), 7% interest (actual finance charges are 7% of the loan value) and pay off debt?

I am seeing this as it costing me 7% over 24 months to pay off multiple debt like a car, 2nd mortgage, small credit card, etc. This 7% doesn't appear to help much in the way of any single finance charge (but collectively it does) and it does free up cash flow.

And the 7% is a fixed amount that I'm losing, I realize, but it's a lot less than the 30% I've already lost in value. Am I seeing this wrong?

Some of you might see the market rebounding. and I do too. But not within the next 24 months. I think we are here to stay for a while.

[marka]

Howdy,

OK .. so lets look at this a diferent way ...

The 401K is taking a dump.

What if I were to take a loan against the 401K, short term loan (24 months), 7% interest (actual finance charges are 7% of the loan value) and pay off debt?

I am seeing this as it costing me 7% over 24 months to pay off multiple debt like a car, 2nd mortgage, small credit card, etc. This 7% doesn't appear to help much in the way of any single finance charge (but collectively it does) and it does free up cash flow.

And the 7% is a fixed amount that I'm losing, I realize, but it's a lot less than the 30% I've already lost in value. Am I seeing this wrong?

Some of you might see the market rebounding. and I do too. But not within the next 24 months. I think we are here to stay for a while.

I'm _far_ from a financial expert. I'm very likely wrong. But here goes anyway...

Taking a loan against your 401k turns your current shares into money... I.e. they sell them, and you actually realize the paper loss they're showing you.

Instead, if you just leave them alone, you have the exact same # of shares in whatever funds you did before, they're just currently worth less than they were. If you assume that this isn't a permanent downturn and that the economy will recover to the former level in say five years, their paper value will increase back to where it was and all you'll have lost was some hair on your head due to worry.

Mark

[pknowles]

The Fed came out and lowered interest rates yesterday to try and free up some money for loans. It will take some time to work through the system, but it seems like you should be able to get a good rate on a short term loan assuming any bank wants to loan money to anyone. My mom just borrowed some money against her house (she has 70% equity, so it's not too risky) to pay off her car and credit cards. For her it was smart because her car loan and credit card interest rates were much higher. She is now holding onto an extra $300-400 a month, so short term it's good. However, she effectively took her short term high interest debt and traded it for a lower interest longer term one. Unless she pays it off early, I'm sure she will end up paying more $$$ to interest over the life of the long term loan. However, she has more short term cash flow. For her it was smart because she needs the cash flow to cover the raising cost of food and buy heating oil to heat her house this winter even though long term she will be worse off.

Mitch, your situation is different with a short term loan. Come up with a basic plan of how long it might take you to pay off these debts as they are and be realistic, then use some of the online loan calculators with amortization tables and compare what you pay in total interest and monthly payment to what you will pay for the short term loan. Depending on the rates you might be able to come out ahead in the short and long term, but most of the time people are trading one for the other unless they have crazy amounts of credit card debt or received really bad interest rates. Then you have to decided which is better for your circumstance. When you are armed with the rough numbers then go talk to the financial adviser at your bank. If your armed with the numbers they can't push you into a loan that hurts you and gives them the cash flow. It's just like buying a car, you do your research before you go to the dealer.

I'm 29 (young and stupid), FWIW and no financial adviser. But, I don't see how doing your homework and being armed with information of your own can be bad as long as you are realistic about how much you can pay toward your debt each month. It's how I figured out what I needed to do to buy my Camaro (started saving in 99 while in College) and it's how I figured out what debts to pay off first so my wife and I can buy a house next year when the market should be low. I like using http://www.bankrate.com/brm/mortgage-calculator.asp for a loan calculator. You can change the interest and term to what ever you want, so it can be used for credit cards, car loans, etc. The only difference is that the default numbers are set up for home mortgages, but they are easily changed.

[sgarnett]

Re the media, on any situation in which I've had inside knowledge, the biased or inaccurate reporting has been astounding.

My acid test is to apply my belief that NOTHING is black and white. Regardless of my own biases, if I'm not hearing "both" (at least) sides of a story, and some apparently conflicting information, then I'm not hearing the whole story.

[mitchntx]

Taking a loan against your 401k turns your current shares into money... I.e. they sell them, and you actually realize the paper loss they're showing you.

Mark

I'm no expert either ...

But I thought they were just taken out of play ... in other words, you were getting no dividend or growth from them.

[FBody383]

Any one read or watch Richard Fuld being grilled over his "severance" from Lehman?
The arrogance of these CEOs ...

I'm a little closer to this than most of you; be glad to add some color in person. Waxman put up a slide that showed his annual earnings over the last several years. Fuld's testimony was that the majority of his compensation was in Lehman stock. Fuld is a self admitted "Lehman Lifer" having started at the company in the late 60s. Helped build a formidable company until the company's actions and the weight of market dysfunction around mortgage lending blew it up.

Astronauts, surgeons, quarterbacks and CEOs typically are "big" personalities; it is part of what makes them great. Doesn't mean they're not worth what they're paid. Do they make more than you or I? Probably. Anything wrong with that? Probably and usually not.

That is exactly the problem. People, CEO's included are taught to buy buy buy and live right now, never thinking about the long term. CEO's and sales people live for bonus' without regard for what the future holds.

Certainly a generalization, but probably fair.

In the late 1920s on a few percent of houses had mortgages on them, today only a few percent don't. Your great grandparents probably would not have borrowed money for anything. Today's college graduates will use credit for fast food.

You are dead on that people are taught to consume and use debt to do so. It is a great failure of our public education system and our society. It is our collective fault for putting legislators in office (PTA, school boards, city, state, federal) that perpetuate deficit spending.

Everybody comes to their own decisions; I'm a saver by nature and have sacrificed other lifestyle choices to make contributions for my retirement. My current DD has 173k on it and will be on the road for several more years. Only debt the wife and I have is the house.

I didn't get there overnight and I ain't going back.

[FBody383]

Taking a loan against your 401k turns your current shares into money... I.e. they sell them, and you actually realize the paper loss they're showing you.

Mark

I'm no expert either ...

But I thought they were just taken out of play ... in other words, you were getting no dividend or growth from them.

What's funny is part of the market issue is the concept of "mark to market." The reason you know the value of your 401(k) or any other investment is that there is a closing price to value it. As long as there is a bid/ask you can ascribe value.

Borrowing within your 401(k) reduces the amount investable but also creates other issues. If you separate from the company with an outstanding balance and can't pay the loan back, I believe it's treated as an early withdrawal subject to ordinary income tax as well as a penalty. Should be very low on your list of ways to raise capital; should probably get more familiar with Ebay first.

[98_1LE]

Yes, a 401k loan simply takes the money out of the market. The funds "borrowed" will not grow or shrink in value. The interest goes back into your account.

When things are good, a 401k loan is not the best plan IMO. When the market sucks, well.... I believe the money I yanked from my brokerage account 2 weeks ago and bought an M3 with is better invested now than then. Even if I overpaid 10% for the M3, I already broke even. (IMG:http://www.frrax.com/rrforum/style_emoticons/default/wink.gif)

YMMV

This post has been edited by 98_1LE: Oct 9 2008, 02:44 AM

[bsim]

There is absolutely no reason to ponder the value of anything until the hour that you're selling. That's the ONLY time it matters.

[mitchntx]

There is absolutely no reason to ponder the value of anything until the hour that you're selling. That's the ONLY time it matters.

Brad, will you PLEASE stop interjecting logic in this dialogue.
We are discussing finance, stock market and market values.
Logic has no place here.

Don't make me ban you. (IMG:http://www.frrax.com/rrforum/style_emoticons/default/nutkick.gif)

[FBody383]

I believe the money I yanked from my brokerage account 2 weeks ago and bought an M3 with is better invested now than then.

Now that's a proper use of funds.

[marka]

Howdy,

Taking a loan against your 401k turns your current shares into money... I.e. they sell them, and you actually realize the paper loss they're showing you.

Mark

I'm no expert either ...

But I thought they were just taken out of play ... in other words, you were getting no dividend or growth from them.

How could they do that, without converting the shares to money / selling them? The shares can't just sit there, but not gain (or lose) value... Their value is set by other stuff.

Beats me how it works. I'd love for someone who actually knows how it all goes together to explain it.

Mark

[bsim]

Oops, sorry Mitch. I gets b!tched at at work for logical thinking too.

(IMG:http://www.camaromustangchallenge.com/images/avatars/catholic.jpg)

This post has been edited by bsim: Oct 9 2008, 03:55 PM

[bowtieboy]

Anyone take a look at the market today .(IMG:http://www.frrax.com/rrforum/style_emoticons/default/gr_cry.gif)
.......I should have taken Chuck's approach and purchased a used car (IMG:http://www.frrax.com/rrforum/style_emoticons/default/biggrin.gif)

[sgarnett]

I really screwed up. Even though the 1999 Miata Sport I bought earlier this year was clean with relatively few miles, I didn't sell nearly enough stock to buy it. (IMG:http://www.frrax.com/rrforum/style_emoticons/default/smile.gif)

This post has been edited by sgarnett: Oct 9 2008, 11:56 PM

[PeteL]

Pete's rules for investing:

• If you need the money in the next two years it shouldn't be in the stock market. This is the same reason you shouldn't track a car you can't afford to total.
• Never try to time the market (One exception: If you were prescient enough to sell airline stocks short on Sept 10, 2001, then time away baby)
• Diversify
• Diversify some more
• Don't listen to anybody's advice on investing, especially mine

[bsim]

Brad's investing advice = Do the OPPOSITE of everyone else.

Stocks are down = sell gold, buy stocks.
Stocks are up = sell stocks, buy gold.

Remember that old saying about buying low and selling high?

[CMC #37]

Brad's investing advice = Do the OPPOSITE of everyone else.

Stocks are down = sell gold, buy stocks.
Stocks are up = sell stocks, buy gold.

Remember that old saying about buying low and selling high?

The coin shop in my nearby town has had a run on people buying gold now. Silly peeps! (IMG:http://www.frrax.com/rrforum/style_emoticons/default/rolleyes.gif)