Financial "gurus" who don't suck

[Nords]

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Originally Posted by audreyh1 Might take a while to happen though......* You never know.*

Eventually everyone will be "right"!

[audreyh1]

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Originally Posted by REWahoo! And even easier to be way too early on perfectly logical (and inaccurate) predictions...

LOL! Too true!!

Audrey

[Nords]

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Originally Posted by Hydroman However I do not see why one would "hate" anyone who advocates paying off your debt.

I watched Ramsey's "Debt always bad, no debt always good" schtick on one of Oprah's money episodes. *I think the guy had his tail feathers scorched by his millionaire bankruptcy and has decided to stick to a short, simple, clear theme-- whether or not it makes sense in all situations.

There are times when debt is bad and there are other times when it makes perfectly good sense. *Ramsey doesn't bother to make that distinction and in fact is even a little insulting about homeowners or others who choose to arbitrage their returns through debt. *I think his audience would be better served if he let the math, the statistics, and the probabilities speak for themselves.

[jondoh]

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Originally Posted by Nords There are times when debt is bad and there are other times when it makes perfectly good sense.

Borrowing money to purchase depreciating consumer items is financial lunacy. If the loons who do so had intelligently considered the opportunity costs of debt, they'd not be in debt.

Homes are, generally, a mildly appreciating, though on occasion highly volatile, asset. Prudently applied, borrowed money can be appropriate for buying a residence. But considering a mortgage an investment rather than an expense, and considering a home an ATM rather than a place to live, and believing that home values always go up, can be costly.

Over the next two years $2 trillion in ARMS and $600 billion in HELOCs will reset. Millions of home "investors" will receive a valuable education in foreclosures, bankruptcy and regression to the mean.

[Nords]

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Originally Posted by jondoh But considering a mortgage an investment rather than an expense, and considering a home an ATM rather than a place to live, and believing that home values always go up, can be costly.

Depends on your time frame, and you have to do the math.

We have a 5.375% 30-year mortgage that's invested in the S&P600 Small-cap Value ETF (IJS). At this point we could probably beat that mortgage rate with CDs but we're willing to give three decades of reinvested dividends & share appreciation a chance to do their thing. We started in Oct 2004 so there's only about 28 years of runtime left.

Depending on the amount of the mortgage and one's retirement portfolio, the mortgage money boosts the size of the portfolio and thus improves its FIRECalc survivability despite the higher withdrawals.

But the primary consideration is being able to sleep at night.

Again Ramsey completely skips over all of these aspects in his simplistic "debt bad" diatribes. It's like telling a dieter that they can never eat chocolate again-- good luck with that approach!

[al_bundy]

i don't like ramsey, but i would never take out a mortgage on a home to invest the money. Stock market was good last 30 years, but 1930 through the early 1940's it was flat. 1970's were also a bad time. Future risks include potentially less stock buyers than sellers and the whole mystery of social security and medicare.

i know someone who took a bath in the dot com bust and retired last year with $100,000 in savings. Plus side he owns his home outright in an area of low property taxes. He hasn't worked in a year because social security covers living expenses and trips to whole foods.

[Nords]

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Originally Posted by al_bundy i don't like ramsey, but i would never take out a mortgage on a home to invest the money. Stock market was good last 30 years, but 1930 through the early 1940's it was flat. 1970's were also a bad time. Future risks include potentially less stock buyers than sellers and the whole mystery of social security and medicare.

Well, if it disturbs night-time sleep then that's a good reason not to get a mortgage.

I'm not sure what risk is at stake when you can beat a mortgage rate with FDIC- or NCUA-insured CDs.

But look at the math.* As for the data-mining, run a 30-year mortgage through FIRECalc.* Keep in mind that most stock market "flat" periods do not include the reinvestment of dividends in their returns calculations, but FIRECalc does.* FIRECalc doesn't use any of the last 29 years (because they're not complete 30-year periods) and otherwise the odds are in the investor's favor.* But that's just history.

If we're going to base our investing decisions on future uncertainty then we'd all be living in bomb shelters surrounded by bottled water, gold bars, shotgun shells, & MREs...

[bpp]

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Originally Posted by jondoh Borrowing money to purchase depreciating consumer items is financial lunacy.*

Bit of a tangent, but it once occurred to me that once one takes out a loan, it no longer matters what it was for, at least on the balance sheet. (Of course if you don't pay it back, it determines what gets repossessed). A debt is a debt, and whether an asset appreciates or depreciates doesn't depend on how it was financed. Money has no memory, and doesn't remember what it was spent on.

For example, if I am buying a house with a plasma TV, and decide not to include the plasma TV in the mortgage because it is a depreciating asset (actually, I consider houses depreciating assets too, but that is a different issue), I am going to have to reduce the downpayment by the cost of the TV so that I can buy it "cash," and increase the house loan amount by the same amount... which really amounts to the same thing as putting the TV on the mortgage, in the big picture.

Not that I disagree with you about people getting themselves in over their heads. Just something that occurred to me once (probably about 20 years later in life than most people realize it).

[jazz4cash]

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Originally Posted by HaHa Terry Savage, who writes for the Chicago Sun-Times. Not exactly a guru, since she doesn't tell you what to do. She does deliver timely heads-ups on changing laws, products, etc., as well as answer readers' questions. Ha

I think she substitutes for Bob Brinker on his "Moneytalk" program. I thought she was pretty good. Brinker is #1 for me, exept he's starting to bore me...I've been listening for many years