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A few thoughts:
1. Bill Clinton passed the bill in 1999 to allow Fannie May to provide loans to people of low income “everyone in America should be able to own a home
2. Alan Greenspan lowered interest rates after 9/11 and encouraged people to take out interest rate only loans on TV. (He wrote a thesis on how people inject money into the economy when they refinance or buy a home) (Bernanke’s thesis was on the great depression and how the government should have not tightened money and should have taken a stronger position to help failing banks (how ironic)
3. The last time I checked Wall Street doesn’t lend money for people to buy a home. Banks do that. (How the American Real Estate industry is not involved in your comments escapes me) 3 out of the last 4 recessions in America were lead by a housing downturn- make that 4 out of the last 5 after the 3rd and 4th qtr numbers come out (thanks to congress’s inaction)
4. As far as I know Wall Street did not buy a house they could not afford.
5. I did not see Wall Street building too many homes in California, Florida, and Arizona.
6. Yes-Wall Street buys mortgages for investors and one could argue that they should have done better research on the paper
7. Yes -Wall Street (and Banks) use leverage in their business model- they have been doing this for years. (15 to 1 on banks – and because of Clinton law change in the 90’s 30 to 1 (plus) on brokerage houses.
8. If the mortgages were not marked to market like they were in the past these loans would not have to be written down until the actual default occurred. Right now all the mortgages are written down to 0 except AAA paper is written down to 40 cents on the dollar. Because of the mark to market the fact that these firms are being forced to sell their assets to deleverage their business is a big cause of the problem. and the ensuing panic has freezed up the credit markets.The 700 billion for the most part (excluding the political BS) was to help by buying the mortgages so the firms would not have to continue to deleverage- if the government owned the paper they would not be marked to market anymore.
I see this helping the overall world economy more than Wall Street – over 55 percent of Americans own equities – and many peoples largest asset outside their house is their 401k- this hurts everyone. Blaming Wall Street is an easy cop out- I am not sure what happened to Scott in his prior career to make him so jaded. But Wall Street did not create this problem. Do they have a part yes, is there greed in Wall Street yes- anywhere there is money there is greed and corruption even in Costa Rica (current political scanals). I guess it is fair to like the peaceful people in Costa Rica but to lump all of Wall Street together as bastards in your forum.
In my opinion what has been so disturbing is the single most consistent point for peoples decision is getting theirs at the expense of everyone else.
The Banks.
The consumer who needed more than they could afford.
The builders who over built.
The government – who can’t even agree to help save the economy because they want to be re elected.
The American people who don’t want to help out the people who over spent because they deserve what they get. This is opposite the kind of behavior that made this country great. We have had a great history of banding together for causes greater than ourselves. This is embarrassing and we deserve the negative outcome if we can’t help ourselves by helping each other.I work on Wall Street – I live below my means and pay my taxes- more than my fair share and have never been thanked by anyone. I never took out a mortgage I could not afford and will not walk away from my house. Wall Street really doesn’t feel they need congress’ assistance it will just be much more painful for everyone – worldwide without it.
Per Joseph’s comments:
1 Govt has F. May equals low mortgage rates (choice- at the expense of shareholders (20 cents on the dollar) they will help the credit crisis and the economy)
2 Govt will provide forbearance on homes in foreclosure and individuals that are upside down on their mortgage, as well as no income tax on the amount forgiven through 09. (At the expense of investors and tax payers we will bail out California, Arizona, and Florida – over 50% of the foreclosures are in these states)
3. People can refinance the lower amount at a low rate- more write downs – in 09 lower mortgage payments more cash into the economy.By the end of 09 issues solved – a huge transfer of wealth from the savers to the borrowers.
In 09 I wouldnt be concerned about inflation – If oil stays under 100- it will be how to get the economy going.
The head of China was asked a few years ago why they peg their currency to the US economy. He said Europe was too erratic – The people of the U.S. will consume at all costs and if they can’t consume their government will make it so they can.
Some thoughts from a CR traveler:
Since this conversation is getting interesting. From my perspective and other sources (news media inside and outside CR) there appears to be a difference between the Pacific coast beach markets and the central valley markets. I have not looked at houses in the central valley in person yet.
I visited Jaco and Quepos last October. Some of the Jaco beach front prices were 700k plus for a condo. When you look around at the town it still has infrastructure issues that will take a couple of years to create. A lot has changed from the prior 3 years and it is obviously in a state of change. In my opinion it did not make sense to buy the property – if I were to compare prices in other places with better infrastructure it did not make economic sense. I think someone is going to be left holding the bag in Jaco and if it wasn’t going to be the developers I did not want it to be me.
Per the real estate agent most of the properties were being bought by foreigners and over 80% of the properties were being bought by US citizens. I have to believe that many of these US investors are not buying the properties because they love going to Costa Rica. With the economic downturn in the US – that one could argue is still working itself out and could spill over into Europe later this year and into early 09. I have to believe that this area will not go unaffected in the next few years. I could be wrong but I would rather be wrong on this one with my money in my pocket. I have not seen the prices come down in Jaco but I have seen better deals in Quepos.
Not that Scott needs defending – I bought his book at the airport and have been a member of this site for about 2 years. I don’t always agree with his comments and have e mailed him personally when I have had a different thought. I have never met him but he has been polite with any difference he has been consistent with his advice: he has always said do your own research and come down before you buy, I felt like he has acknowledged the price difference between the pacific coast and central valley as well.
As far as bias’ go everyone has a bias that what makes life interesting – some people call them beliefs and much of them area attached to our well being (sometimes financial well being).
Regarding the baby boomers move to CR- The generation breakdown is below:
• 33 million Boomers 1 – Ages 54-63
• 49 million Boomers 2 – Ages 44-54– Less than 10% of US Citizens have a passport. I have not seen research on what percentage of boomers have a passport. That would leave us with a field of 8.2 million.
– Mexico, Panama, Nicaragua, Dominican Republic, etc – Also there are US Cities that are fighting for the same audience – Florida, the Coast of SC, The mountains of NC, Western states such as Arizona, have all been saying the same thing. I have been to these places and seen the development. I am not saying that these places overbuilt and I have not mathematically figured this last part out but I think there will be 10 people left in NY, NJ, PA and CA when this great exodus occurs.I have travelled many places including CR and i would disagree with blanket statements that crime is up everywhere. If anyone has been to NYC lately I would argue it is one of the safer places to be. There are young women on the streets alone at all hours. There are no real issues in the city with beggars etc. Many years ago I would not make that statement. I would agree that CR has an issue with growth and its infrastructure to manage crime.
Here is some information to help with your decision. The Global GDP was around 3.4% All countries. Latin America was above the averge for the last few years leading the global market at around 5.5% Asia non Japan and Eastern Europe were also above the average and above Latin America.
Going back to 1978 there have been 4 changes in the movement of the dollar. The movements are usually long in number of years (decade) and steep in percentage decline or increase (between 40 to 50% either up or down). The dollar is currently down about 30% and has been in a downward directional for about 5 years.
Some of the factors that control the dollar decline or rise – if it is not pegged by a country
1. Treasury Yields (the longer treasury yields compared to alternatives around the world Higher treasury yields would lead to a strong dollar),2. The government/trade deficit (larger deficits would lend to a declining dollar)For instance with China since the majority of their goods are conusmed in the US they pegged their currency to the US dollar. About a year ago they unpegged but so since they are in such a trade surplus to the US they still need the yuan to be cheap to the dollar to export.
I hope this helps with formulating a decision.
Thanks for your comments – the pictures were awesome and much appreciated. There seems to be a bunch of great towns in CR it will take some time to get aquianted. I dont want to get a place in a USA refugee containment and would like to have the opportunity to get to learn the culture and the people but I want to make sure that I dont end up being isolated either. I am planning on going down in the fall for a few days vacation and look at some property as well. This was helpful.
If that is interesting. I work with a number of CPA’s/business owners. An interesting practice that is used with some US businesses with family in China is to gift a certain amount of money (limit per person) to family members outside the US to avoid taxes and then at the end of the year bring the money back tax free.
