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95 kph
Are you prepared.............ARE YOU ?
BE PREPARED
Long ago as a young lad, I joined the Boy Scouts. One of the first things I learned was the Scout motto: Be Prepared. I asked our Scout master - what it means to, be prepared. He gave me an example: when going on camp out - take plenty of toilet paper and a shovel ...... Well that’s smart about the toilet paper, but..... a shovel......................Oh I get it.
Lesson learned: Some problems take two or more tools.
My parents bought me the scout uniform, but told me that any accessories would be my responsibly.
Boy, do I remember when the scout catalog came in the mail. WOW ! As you can imagine it was a treasure trove. And then I saw it: on page 9 ...... the official scout pocketknife. It had several blades and gizmos ... it could do 27 different things. Well I had to have it. I had some chore money saved up and had just enough to send for it.
When it arrived ...............I just had to show to my best friend.....Rooster was his name. Now we lived in the deep south and it was tradition to match two boys about the same age to be playmates and Rooster was only 6 months younger than I was and happened to be our cook/housekeeper’s son. We were a perfect match and got along quite well.... except for a weekly fight... common for boys our age. They used to call us - the Salt & Pepper boys.
Now Rooster didn’t have much money, but was an expert at trading and you’ll see how this comes into play. We would go to Crit’s War Surplus store to check his new arrivals.
He had a 2 story building with a large attic ... it was only 4 feet high and he would use us boys to straighten out the new items... we were just the right height.
As we were sorting the new stuff...... we saw it. Oh boy.....there it was all shiny and bright. Rooster grabbed it first .... he was always quicker ... Damn it ! BRASS KNUCKS. We had never seen a pair before, but Rooster knew right-away what it was. Crit used to give us something for straightening his attic and we could choose something that appealed to us. We got the knucks ... well rather Rooster got it.
I tried to talk him out of it, but to no avail... it was his and he was keeping it. We used to smack trees and boards with it ... Boy what a dent it made. then Rooster proposed a trade..
Yeah.. you guessed it ... my new knife for the knucks. Now we had both used the knife for carving our initials into trees, used the bottle opener and a few other things that I forget now.
The feeling of power that I felt when I used the knucks on something... it got to me and reluctantly I gave in and traded my official scout knife for it.
I still have those knucks in my desk drawer, but of course .....NEVER used them. They were shiny ... Car ... Boat ... etc... it can be anything. Don’t be fooled!
Lesson Learned: Keep your options open. I traded a 27 item knife that I used several of the gizmos for 1 pair of Brass knucks that I never used. I gave all I had for the knife and the knucks cost Rooster nothing. Don’t let the shine get to you.
As my dad worked for the gov. we moved after a year and I had to say goodbye to Rooster.
My mom suggested that since I was outgrowing my uniform, I should give it Rooster as he was shorter and leaner than I was and it would fit him for another year. Now I had never won a fight with him since I first knew him, but my mind was made up ..... this was it ... my last chance before we moved. I psyched myself for the final duel. Rooster knew it was our last go-round as well so we both knew it would come and it did. I gave him everything I had and boy he hollered UNCLE. I beat him. Boy, I sure did.
Well the day finally came where we were packed and got an early start. We drove the long road to the main hwy. and there he was standing by the side of the main road in our scout uniform. My dad stopped the car and I got out ... gave him a hug and said goodbye. He had tears in his eyes as did mine. We gave each other the 3 finger scout salute and as I got back into the car .... I asked ....Hey I really did win that last one didn’t I? Sure ya did he said.
Yeah....... Yeah ... sure I did. Scouts don’t cry ...no they don’t cry do they?
Even though this a financial prepare thread .... with what I fear is coming.... it’s time to renew friend and family ties......... and YES ...we ... the members of this forum... are family.
I’m a real estate guy and view the situation from that angle, but many of the actions taken would apply to everyone.
When you fly: the instructions for the oxy. masks read: ADULTS place your mask first and then help your child or young person place theirs. In other words - TAKE care of yourself first and that will enable you to help others!!!
STEPS TAKENIf we really do have another crash right around the corner, which is very possible, wouldn't it be more logical to keep your cash liquid -- rather than tying it up in your home ( or rental property ) which may continue to lose value... and which you may not be able to refinance when the crash occurs?
RE-FI’S
As part of my property portfolio I have 2 SFH that I re-fied. 2 years ago.... giving me my total cash back that I invested into these homes. I have them rented which covers my carrying costs ( PITI ), and now gives me very little cash flow, but I have NO MONEY tied up in them. I am now using that CASH to purchase REO’s at a price that gives me much better returns than I ever received before. My last purchase was a SFH for $25,500 and even after some minor re -hab costs gives me $850 rent a month. No mortgage on the property as I used my re-fi money to pay for it so most of the rent is free & clear increasing my ROI dramatically.
LINE OF CREDIT
Back a few years ago I read in RDPD and other real estate books about the importance of having a line of credit or lines of credit. Now I’m a cash guy and had my own, but I secured both a business and a personal line of credit. The business one had never been used since I obtained it. I ran across an inexpensive REO - to make a long story short ... I used the credit line for the purchase and minor re-hab. Total $ about $32,000 - flipped it for $62,000. I did a chicken-little and got the bank to knock off another $6,000. I was proud of this because I used NONE of my own funds - used the banks funds to purchase their REO and make my profit. Cost was 3.25 % ( $ 260.01 interest paid for 3 months) Paid it off at the second closing. In and Out - NO money out of pocket. REO purchases that have CASH as the purchaser --- GETS the banks attention. CASH TALKS to banks.
I am keeping a good amount of cash in the bank for future purchases -- doesn’t matter the interest paid - It’s only there for the liquidity use. Also, I’m a LA guy and remember the riots - KEEP POCKET CASH maybe $2,000 or so. $50.00 bills can work wonders!
“These are the best of times and the worst of times” it’s up to us to make it THE BEST and I’m going to do just that. How about you?
Lets all now work together to post some our solutions to what’s coming. We are all on different hills and will address the problems from different perspectives. I would like to hear from some of you that are in different fields to see how you are going to cope.
280 kph
95 kph
Re: Are you prepared.............ARE YOU ?
***************** NO PLANS ??? ***************
1. Either No one belives that our economy is going SOUTH
Or
2. No one has any plans to prepare??
I need your help guys!
70 kph
Re: Are you prepared.............ARE YOU ?
"If we really do have another crash right around the corner, which is very possible, wouldn't it be more logical to keep your cash liquid -- rather than tying it up in your home ( or rental property ) which may continue to lose value... and which you may not be able to refinance when the crash occurs?"
depends on how it crashes. if we experience a deflation, then yes, it will be good to have lots of cash around.
on the other hand, if a hyper inflation is in the future, it will be best to buy as much as you can buy with CREDIT. imagine a 100% inflation.if you bought a house for $50,000. You would need only $25k to pay it off.
if inflation happens, then all that cash you hold will lose tremendous value, but tangible assets won't lose value. Houses will go up in value, but not because of a Bubble, but to keep up with inflation. you may not make great money, but you can hedge against a loss by having some assets. That's the real reason to buy gold, it's not a way to make incredible amount of money, it's a way to hedge and balance out your other investments...
Personally, I'm not worried about WWIII or the GREATEST DEPRESSION ever occuring. I will survive and prosper even in the worse of circumstances, cuz I don't expect things to be easy for me.
95 kph
Re: Are you prepared.............ARE YOU ?
Actually I think that we are in agreement. It's all in the TIMING. Re-Fi's give you the best of both worlds. Keep ownership - benefit from Infla. Cash out *** for lower prices in new property. I envision defla. for the next 6 mos. to a year in real estate. We have 60,000 foreclosures coming after the first of the year - JUST in Florida.Originally Posted by EastWind
"If we really do have another crash right around the corner, which is very possible, wouldn't it be more logical to keep your cash liquid -- rather than tying it up in your home ( or rental property ) which may continue to lose value... and which you may not be able to refinance when the crash occurs?"
depends on how it crashes. if we experience a deflation, then yes, it will be good to have lots of cash around.
on the other hand, if a hyper inflation is in the future, it will be best to buy as much as you can buy with CREDIT. imagine a 100% inflation.
if inflation happens, then all that cash you hold will lose tremendous value, but tangible assets won't lose value. Houses will go up in value, but not because of a Bubble, but to keep up with inflation. you may not make great money, but you can hedge against a loss by having some assets. That's the real reason to buy gold, it's not a way to make incredible amount of money, it's a way to hedge and balance out your other investments...
95 kph
Re: Are you prepared.............ARE YOU ?
Here's the latest!
The odds of another huge stock market dip in 2010 or 2011 are huge. The odds of another recession in the next 10 years are also huge. Heck, the odds of double-dip recession in 2010 or 2011 are very substantial.
Fundamentally, a huge wave of boomer retirement is coming up, and those retirees will be drawing down funds and lowering lifestyles, not contributing and consuming more. Moreover, global wage arbitrage still has not played out and there is huge downward pressure on wages and jobs.
Structurally, unemployment will remain high for a decade. And finally, consumer attitudes towards debt and risk have reached a secular peak and have turned.
That is not a backdrop for a huge bull market in equities. Pension plans better figure this out and act accordingly or they are going to dig themselves an even deeper hole.
295 kph
Re: Are you prepared.............ARE YOU ?
Perfect. That's what we're planning for.
Yep, most recessions are "W" shaped. Almost impossible to do it any other way, as things cycle up and down-- you get an up quarter, and then things go down a bit. Normal.
Not so sure about this. I think most boomers will continue as they have been--working later in part b/c they like it, and in part b/c it supplements their income. Part of the current wave of entrepreneurialism is directly tied to boomers looking to build themselves businesses they can do while being "semi-retired" (all of this is only my opinion).
I'd love to hear more about this, Cat Man Du
I'd also like to hear more about this. I think we're going to enter a time where productivity goes up (per person), but unemployment stays high for those who don't want to increase their productivity (ie, work 3 jobs to make a living)
Please clarify: Are you saying consumers are now risk averse and don't want credit? Or are you saying something else?
Yup. I think we've pretty well established that those who do Mutual funds and rely on their pensions are gonna get hosed, and have-- repeatedly-- since the late 1990s.
It all comes back to:
Use this info, incorporate it into your PLAN, and make adjustments as more data becomes avail.
At least, that is what we're doing.
-Russ H.
95 kph
Re: Are you prepared.............ARE YOU ?
Quote:
Originally Posted by Cat Man Du
Structurally, unemployment will remain high for a decade.
I'd also like to hear more about this. I think we're going to enter a time where productivity goes up (per person), but unemployment stays high for those who don't want to increase their productivity (ie, work 3 jobs to make a living)
Agreed.... which will keep unemployment high for those who don't and good for the employers as they don't pay benefits.
50 kph
Re: Are you prepared.............ARE YOU ?
Cat Man Du:
RussH:Moreover, global wage arbitrage still has not played out and there is huge downward pressure on wages and jobs.
GreenHouses:I'd love to hear more about this, Cat Man Du
I think you're right there CatManDu... I'm sure there's only going to be more companies that replace staff in western countries with employees in second and third world countries... which adds to unemployment and / or puts downward pressure on salaries in western countries. Not across the board but in certain job types and industries. This will see spending power decreased in western countries, therefore downward pressure on top lines and bottom lines for companies.
About a month ago I remember reading a rather telling comment by the head of the European Central Bank... can't remember it word for word, but essentially saying that the days of riding on the coat tails of US consumers are over.
Cat Man Du:
RussH:Structurally, unemployment will remain high for a decade.
GreenHouses:I'd also like to hear more about this. I think we're going to enter a time where productivity goes up (per person), but unemployment stays high for those who don't want to increase their productivity (ie, work 3 jobs to make a living)
I think more and more there will be the need to do more with less. This will be assisted in part by new technologies that help people become more efficient in the workplace and some of this will mean more pressure and longer hours for those who are employed. One person will do the work that used to be done by (for example) three people. Some jobs will go offshore but baby-boomers will start leaving the workforce, freeing up positions that will not all be replaced.
95 kph
Re: Are you prepared.............ARE YOU ?
GreenHouses:
I think more and more there will be the need to do more with less. This will be assisted in part by new technologies that help people become more efficient in the workplace and some of this will mean more pressure and longer hours for those who are employed. One person will do the work that used to be done by (for example) three people. Some jobs will go offshore but baby-boomers will start leaving the workforce, freeing up positions that will not all be replaced.
I'm going to agree with Russ on this one, but they will still draw down on their stocks and pensions and savings, because they have to.
Originally Posted by Cat Man Du
Fundamentally, a huge wave of boomer retirement is coming up, and those retirees will be drawing down funds and lowering lifestyles, not contributing and consuming more.
Russ said:
Not so sure about this. I think most boomers will continue as they have been--working later in part b/c they like it, and in part b/c it supplements their income. Part of the current wave of entrepreneurialism is directly tied to boomers looking to build themselves businesses they can do while being "semi-retired" (all of this is only my opinion).
95 kph
Re: Are you prepared.............ARE YOU ?
Quote:
I'd love to hear more about this, Cat Man Du
GreenHouses:
I think you're right there CatManDu... I'm sure there's only going to be more companies that replace staff in western countries with employees in second and third world countries... which adds to unemployment and / or puts downward pressure on salaries in western countries. Not across the board but in certain job types and industries. This will see spending power decreased in western countries, therefore downward pressure on top lines and bottom lines for companies.
We are seeing the middle-class disappear.
95 kph
Re: Are you prepared.............ARE YOU ?
See Questions above!Perfect. That's what we're planning for. HOW ?
Please clarify: Are you saying consumers are now risk averse and don't want credit? Or are you saying something else? They Can't get it!
It all comes back to:
Use this info, incorporate it into your PLAN, and make adjustments as more data becomes avail.
At least, that is what we're doing.
-Russ H.
295 kph
Re: Are you prepared.............ARE YOU ?
I can only share what we are doing. Everyone needs to make adjustments to their own PLANs, which will all be different.
First and foremost, we are not planning on investing in the stock markets. We have no money in the markets right now. As I've stated on many prior occasions, I know only one thing about the markets: That I lack the expertise and emotional stability to properly invest in them.
So we've done real estate instead. Taken it from a $40K investment in 1995, to owning over $8,000,000 in business real estate. LOTS of debt (OPM) on that-- but none of it is short term ARMs or subprime.
All of our PLANs revolve around developing our B&Bs. We have planned on flat growth (ie, same sales as the year before) for our entire B&B development plan.
When we have a few years of sustained growth (as we did in 2005-2008), then we adopt the newer/higher numbers for 2 years from now. In other words, we chose the 2007 numbers as targets for 2009, and we originally had targeted 2008 numbers for 2010.
Our current adjustment to our PLAN does NOT use the same numbers for 2010 as 2008. It's lower.
However, we do have 29 rooms today (and we had 12 rooms last year at this time). So even with lower rates/occupancy, we should still pull ahead next year-- even if it's not a barn burner.
In other words, our conservative forecasts/planning are even more conservative-- but at the same time, while they allow for occupancy and rate declines, we still have HIGHER overall numbers, due to the fact that we:
1. No longer have hundreds of thousands of $$$ each year in contractor's costs, and
2. Have 29 rooms that can generate revenue, instead of 12 (or 16, as we had from Feb 14 on this year).
However, as more data comes in, we will continue to adjust-- if the economy improves, we will raise rates. If it goes up and down (I expect this), then we will roll up and down w/our rates.
And if it goes down further, we will lower rates as we get into the year.
But again-- that's just for us.
Everyone has their own specific changes that they will do to roll w/the changes.
-Russ H.
PS For what it's worth, in the past 4 weeks, I've seen more people getting credit cards at places like Home Depot and Target than I've ever seen before. Each and every cashier offers it-- and you get approval in a few minutes. I notice because instead of having people go over to the credit dept, cashiers are now handling credit card applications as part of their regular routine-- while others are in line. It does take about 5 minutes for the whole thing-- from the time they offer the credit card, to filing out a very short application, to the time they are approved (looking very surprised), and leaving. But again-- that's just an anecdotal story-- something I'm seeing-- not a reflection of any statistics or numbers across the US.
95 kph
Re: Are you prepared.............ARE YOU ?
I bet that the limit is LOW.... $500 maybe $1,000 ..SMART on their part.
Rep!!!!!!!!!!!!!!!!! to you for such a detailed answer!
295 kph
Re: Are you prepared.............ARE YOU ?
We change our PLAN continuously. Used to be we changed it every few months. Since Sept 08, it's been every week. No kidding.Our current adjustment to our PLAN does NOT use the same numbers for 2010 as 2008. It's lower. When....did you change this?
Actually, except for a $500K SBA loan we got this year, we've been paying on all of the other loans for years. So there really is a massive reduction in monthly outgo (at least $50K-80K/mo less right now).1. No longer have hundreds of thousands of $$$ each year in contractor's costs, and
But, you have the mortgages. now so out-go is still up-there.
From our bookings, mostly, compared YTD to prior years. And from general economic indicators, reports, etc.However, as more data comes in, we will continue to adjust-- if the economy improves, we will raise rates. If it goes up and down (I expect this), then we will roll up and down w/our rates. What kind of data....where from?
The Home Depot charge cards had $3,000 limits. No payments for 1 year (we got 3 of them-- one for our biz, one for me, one for my wife). Will pay them off in a month or so when we get funding from our next loan, or (worst case) when the extra $$$ come in (by March).For what it's worth, in the past 4 weeks, I've seen more people getting credit cards at places like Home Depot and Target than I've ever seen before. Each and every cashier offers it-- and you get approval in a few minutes. I notice because instead of having people go over to the credit dept, cashiers are now handling credit card applications as part of their regular routine-- while others are in line. It does take about 5 minutes for the whole thing-- from the time they offer the credit card, to filing out a very short application, to the time they are approved (looking very surprised), and leaving. But again-- that's just an anecdotal story-- something I'm seeing-- not a reflection of any statistics or numbers across the US.
I bet that the limit is LOW.... $500 maybe $1,000 ..SMART on their part.
-Russ H.
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