Many Sad Stories of the Downwardly Mobile

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William Million
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Many Sad Stories of the Downwardly Mobile

Post by William Million » Sun Feb 05, 2012 2:54 am

Sat to hear of the casualties of the Great Recession:

http://finance.yahoo.com/news/goodbye-- ... class.html

Perhaps best reminder to live below means and not take on excessive debt. Biggest problem seems to be covering housing costs (whether rent or mortgage) when income drops.
Last edited by William Million on Sun Feb 05, 2012 9:09 am, edited 1 time in total.

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Re: Many Sad Stories of the Downwardly Mobile

Post by mwm158 » Sun Feb 05, 2012 3:12 am

Why are these sad stories? I prefer to see this as reducing inefficiencies.

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Re: Many Sad Stories of the Downwardly Mobile

Post by Valuethinker » Sun Feb 05, 2012 5:30 am

Beware there is a neo-Calvinist streak on these Boards (as in society generally) that misfortune results from individual bad behaviour and want of 'character'.

The reality of course is much more complex. People are sold into a world view that says if you save 10% of your income for retirement and live the 'American dream' you'll be alright. In another culture (China comes to mind) we'd save 50%.

Similarly the best laid financial plan is unlikely to survive: 1). long term unemployment 2). ill health making it impossible to work, particularly in the highest earning years (40s, early 50s) 3). forced retirement many years earlier than planned, (plus absence of other opportunities to work) 4). divorce, handicapped child or other family crisis 5). bad housing decision at top of bubble (ohh but for how many of us said we 'foresaw' the crisis, how few of us actually profited from same?).

This was studied with Stanford MBAs going into investment banking (so an elite amongst elites)-- and there are plenty of other prosaic studies.

The biggest single impact on the incomes *20 years later* of the MBA grads was *the year they graduated from MBA*-- 20 years later, the impact is still in the data. The year of your birth has similar impacts on your life chances.

This does not obviate the need for personal responsibility and savings. Historically Americans and Brits were crazy to gear up the way they did (but if housing prices always rise, a strategy of financial caution was also unjustified, or in fact foolish-- I've made more on my residential property than I ever have investing, and tax free to boot). Our parents would not have done so.

So you have to take personal responsibility for your life, but accept that not all misfortune is something you, or your neighbour, could have done something about.

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Re: Many Sad Stories of the Downwardly Mobile

Post by TA_Lurker » Sun Feb 05, 2012 6:57 am

mwm158 wrote:Why are these sad stories? I prefer to see this as reducing inefficiencies.


So you attribute none of these outcomes to things beyond the control of these individuals?

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Re: Many Sad Stories of the Downwardly Mobile

Post by richard » Sun Feb 05, 2012 7:12 am

TA_Lurker wrote:So you attribute none of these outcomes to things beyond the control of these individuals?

It's likely easier to ignore the plight of others, and especially the need to do something about it, if you treat others as impersonal objects ("inefficiencies") rather than human beings.

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Re: Many Sad Stories of the Downwardly Mobile

Post by Bob's not my name » Sun Feb 05, 2012 7:31 am

William Million wrote:Sat to hear of the causalities of the Great Recession
Where do I sit? And now I'm confused about what causality means.

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Re: Many Sad Stories of the Downwardly Mobile

Post by HongKonger » Sun Feb 05, 2012 7:35 am

Valuethinker wrote: People are sold into a world view that says if you save 10% of your income for retirement and live the 'American dream' you'll be alright. In another culture (China comes to mind) we'd save 50%.


Actually in China, you would work for way way way less than even a toilet cleaner in the US would accept, you would give 50% of your salary to your parents and you would save the rest like crazy.

That woman in the article who lives in a shelter is earning 4x the minimum hourly pay of here in Hong Kong - a place that has no unemployment benefit, or social security, or pensions..and where even a 200 sq ft run down apartment in a dodgy area will cost you close to US$200k. She is NOT hard up.

People need to turn their TVs off, get off their butts, and stop thinking the world owes them a living. ...if you want to buy everything at Walmart prices, you need to accept the salary that allows the retailer to make their 500% margin whilst still being able to sell that lovely piece of useless junk for a buck. Unless people are willing to pay significantly more for things, or accept significantly lower wages, jobs will never return to bloated has-been manufacturing economies.

Sorry but it wears thin all the time hearing about how outsourcing to the East is the source of the West's downfall when actually, unbridled consumption and demand for cheaper everything is the root of the cause.

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Re: Many Sad Stories of the Downwardly Mobile

Post by TRC » Sun Feb 05, 2012 8:00 am

Yet another reason to pay off your house.

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Re: Many Sad Stories of the Downwardly Mobile

Post by itypefast » Sun Feb 05, 2012 8:15 am

They haven't paid their mortgage since 2009 and wake up each morning wondering if today will be the day they are evicted.


This is the part that ticks me off. They have gotten nearly 3 years of free mortgage. Where is the incentive to work? Lose your job and get free food, free healthcare, free education for your children and free shelter.

This isn't capitalism. I feel bad for people like this but you have to acknowledge we live in an imperfect world in which incentives matter. The road to hell is paved with the good intentions of helping people like this rather than forcing them to help themselves.

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Re: Many Sad Stories of the Downwardly Mobile

Post by Bob's not my name » Sun Feb 05, 2012 8:17 am

TRC wrote:Yet another reason to pay off your house.
That claim is routinely disputed here. Paying off your house reduces your liquidity.

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Re: Many Sad Stories of the Downwardly Mobile

Post by HardKnocker » Sun Feb 05, 2012 8:35 am

Awful. Very sobering stories.

Nothing is forever.
“Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.”--Warren Buffett

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Re: Many Sad Stories of the Downwardly Mobile

Post by nisiprius » Sun Feb 05, 2012 8:54 am

"The race is not to the swift or the battle to the strong, nor does food come to the wise or wealth to the brilliant or favor to the learned; but time and chance happen to them all."

One of parts that made me sad: "Talia went back to school to retrain as a Certified Medical Assistant because she heard health care is where the jobs are. But she still hasn't been able to find work." Parse that however you like, and make whatever guess about what "the rest of the story" behind it might be, that's someone who was trying.
Last edited by nisiprius on Sun Feb 05, 2012 10:30 am, edited 2 times in total.
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Re: Many Sad Stories of the Downwardly Mobile

Post by Bob's not my name » Sun Feb 05, 2012 8:55 am

Far be it for me to accuse CNN of shoddy journalism or having an agenda, but what's notable about these cases is what they don't report.

The NJ family case is the most striking. The breadwinner is in his forties and made $130,000, but apparently had a hugely unaffordable house and/or had no retirement savings to fall back on. Notice that they don't say when he lost his job, only that they stopped paying their mortgage in 2009. Think about that. When did he lose his job, 2006? In your forties with that kind of pay you ought to have several hundred thousand in your retirement plan. That ought to last you for years of low bracket living. CNN doesn't tell us how big the mortgage is, even though the foreclosure is the central point of the vignette.

The Mobleys, on the other hand, might be doing exactly what you have to do in hard times -- aggressively lower your cost of living. The missing facts here are: were they also undone by debt? I think it would strengthen their story to report that they had no mortgage or other debt and lived within their means, but two years of unemployment is still too great a drain. But CNN doesn't report that.

Most riveting detail: CNN is shocked to discover that half of Americans have below median income. That has to be fixed.

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Re: Many Sad Stories of the Downwardly Mobile

Post by stemikger » Sun Feb 05, 2012 8:58 am

Valuethinker wrote:Beware there is a neo-Calvinist streak on these Boards (as in society generally) that misfortune results from individual bad behaviour and want of 'character'.

The reality of course is much more complex. People are sold into a world view that says if you save 10% of your income for retirement and live the 'American dream' you'll be alright. In another culture (China comes to mind) we'd save 50%.

Similarly the best laid financial plan is unlikely to survive: 1). long term unemployment 2). ill health making it impossible to work, particularly in the highest earning years (40s, early 50s) 3). forced retirement many years earlier than planned, (plus absence of other opportunities to work) 4). divorce, handicapped child or other family crisis 5). bad housing decision at top of bubble (ohh but for how many of us said we 'foresaw' the crisis, how few of us actually profited from same?).

This was studied with Stanford MBAs going into investment banking (so an elite amongst elites)-- and there are plenty of other prosaic studies.

The biggest single impact on the incomes *20 years later* of the MBA grads was *the year they graduated from MBA*-- 20 years later, the impact is still in the data. The year of your birth has similar impacts on your life chances.

This does not obviate the need for personal responsibility and savings. Historically Americans and Brits were crazy to gear up the way they did (but if housing prices always rise, a strategy of financial caution was also unjustified, or in fact foolish-- I've made more on my residential property than I ever have investing, and tax free to boot). Our parents would not have done so.

So you have to take personal responsibility for your life, but accept that not all misfortune is something you, or your neighbour, could have done something about.


Well said.
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Re: Many Sad Stories of the Downwardly Mobile

Post by Bob's not my name » Sun Feb 05, 2012 9:00 am

nisiprius wrote:"The race is not to the swift or the battle to the strong, nor does food come to the wise or wealth to the brilliant or favor to the learned; but time and chance happen to them all."
I prefer:
I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.
Or Orwell's parody of modern English:
orwell wrote:Objective considerations of contemporary phenomena compel the conclusion that success or failure in competitive activities exhibits no tendency to be commensurate with innate capacity, but that a considerable element of the unpredictable must invariably be taken into account.

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Re: Many Sad Stories of the Downwardly Mobile

Post by Cosmo » Sun Feb 05, 2012 9:19 am

richard wrote:
TA_Lurker wrote:So you attribute none of these outcomes to things beyond the control of these individuals?

It's likely easier to ignore the plight of others, and especially the need to do something about it, if you treat others as impersonal objects ("inefficiencies") rather than human beings.


I agree. I would also like to add that karma is a b.....

Cosmo

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Re: Many Sad Stories of the Downwardly Mobile

Post by William Million » Sun Feb 05, 2012 9:27 am

HongKonger wrote:
Valuethinker wrote: People are sold into a world view that says if you save 10% of your income for retirement and live the 'American dream' you'll be alright. In another culture (China comes to mind) we'd save 50%.


Actually in China, you would work for way way way less than even a toilet cleaner in the US would accept, you would give 50% of your salary to your parents and you would save the rest like crazy.

That woman in the article who lives in a shelter is earning 4x the minimum hourly pay of here in Hong Kong - a place that has no unemployment benefit, or social security, or pensions..and where even a 200 sq ft run down apartment in a dodgy area will cost you close to US$200k. She is NOT hard up.

People need to turn their TVs off, get off their butts, and stop thinking the world owes them a living. ...if you want to buy everything at Walmart prices, you need to accept the salary that allows the retailer to make their 500% margin whilst still being able to sell that lovely piece of useless junk for a buck. Unless people are willing to pay significantly more for things, or accept significantly lower wages, jobs will never return to bloated has-been manufacturing economies.

Sorry but it wears thin all the time hearing about how outsourcing to the East is the source of the West's downfall when actually, unbridled consumption and demand for cheaper everything is the root of the cause.


Hong Kong is a great place with an awesome economy and hardworking population, but the future of the U.S. is not following Hong Kong back to an earlier stage of economic development.

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Re: Many Sad Stories of the Downwardly Mobile

Post by stevewolfe » Sun Feb 05, 2012 9:38 am

Bob's not my name wrote:
TRC wrote:Yet another reason to pay off your house.
That claim is routinely disputed here. Paying off your house reduces your liquidity.


Why does it have to be one or the other? What I hear here all the time is do both. Save and invest and maybe put a little extra on the 30 year to make it a 15 year, etc.

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Re: Many Sad Stories of the Downwardly Mobile

Post by verbose » Sun Feb 05, 2012 10:02 am

Maybe it's just the article's framing, but it seems like it's time for these families to stop idealizing the past. They are anchoring on past earnings. The family waiting to be foreclosed on must be living with an incredible emotional burden. I wonder if it would help them to sell almost everything they own, buy a reliable used van, load up the family and leave New Jersey. The article makes it sound like these people are paralyzed. And I think in some ways they are.

I feel bad for them. I've never been in this situation and I hope I never will be.

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Re: Many Sad Stories of the Downwardly Mobile

Post by heyyou » Sun Feb 05, 2012 10:14 am

People are not any different now than ever. All history will repeat at some point, both the good and the bad. Try to teach your children to not dig too deep into consumerism, alcohol, fast driving, etc. It is the magnitude or pervasiveness of a problem, not its existence. Greed will always be with, and within us. RE never losing money was just more marketing by those who profited from someone believing the hype.

In retirement, I'm so grateful now to have learned some hard financial lessons in my 20s and early 30s, instead of in my 50s or later. No doubt, I have more to learn.

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Re: Many Sad Stories of the Downwardly Mobile

Post by Kenkat » Sun Feb 05, 2012 10:20 am

It is easier to attribute others' misfortune to something they have done wrong rather than acknowledge that sometimes you are the victim of circumstances outside your control. I believe it is a defense mechanism - in effect, saying "oh, that could never happen to me - I wouldn't allow myself to be in that position because I made all the right choices".

There's a reason most people are familiar with the phrase "there but for the grace of God go I".

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Re: Many Sad Stories of the Downwardly Mobile

Post by Bob's not my name » Sun Feb 05, 2012 10:28 am

If "grace of God" means "avoiding reckless debt", then we agree.

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Re: Many Sad Stories of the Downwardly Mobile

Post by Liquid » Sun Feb 05, 2012 10:30 am

Leverage is a killer of the middle class and wealthy alike.

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Re: Many Sad Stories of the Downwardly Mobile

Post by blevine » Sun Feb 05, 2012 10:33 am

Bob's not my name wrote:
TRC wrote:Yet another reason to pay off your house.
That claim is routinely disputed here. Paying off your house reduces your liquidity.


Paying off your house would do more damage to your liquidity if you had a bigger mortgage than you can truly "afford".

I purposely bought a house I felt I could "afford" and resisted temptation to move up to a larger home over the years.
When I was starting out, bought a small apartment, lived in it longer than one would expect, waiting until I could
make a sizable down payment on a home I could be happy with for many years. I delayed gratification when I was in my 20s,
and continuously since then while staying in a home that is sufficient for my needs, but not extravagant.
I fix what must be fixed but don't renovate for the sake of keeping up with the neighbors, avoiding 2nd mtg.
I kept cars longer, took less expensive vacations, so I could pay down my mortgage faster than the original 30 year term.
All this is pretty common amongst BH posters, but I don't think so of the public at large.

I waited to make the final payment, until after the decision was not a major liquidity problem for me.
At that point, the house was worth more than double the loan balance, could have easily borrowed more and
financed some nice upgrades, new car etc, but chose to pay off. Still have the same 2 cars I had when I made
that decison, but I am happy with that decision. Saved thousands in interest, and avoiding having that cash
at risk in a poorly performing decade for stocks.

Yes, one must balance liquidity with debt reduction, but avoiding excessive consumption, with a goal of reducing
the term of your mortgage seems smart to me. Not easy to do, unexpected problems can derail such a goal,
but most people in the US don't even seem to have such a goal, as they were sold on the idea of cheap and easy loans
to finance their wants, not needs.

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Re: Many Sad Stories of the Downwardly Mobile

Post by trudy » Sun Feb 05, 2012 10:35 am

There's not enough information in that article to know what was going on in each case.

I too get highly annoyed at people who live like grasshoppers, but anyone who thinks disaster is avoidable for the prudent is living in a bubble. In my own case, I got laid off in my fifties in a technical field, excellent education, kept up to date, hard worker, and I couldn't get a job. I was told more than once I was too old. And forget about any action about age discrimination, unless you have well into five figures to risk on a he said she said legal scenario.

Now, I'm not starving, because I always saved like a miser, but I "retired" 10-15 years earlier than I planned and with significantly less of a financial cushion than I planned. If I'd been forking out for kids' college educations or there were medical problems, I'd have been up the creek.

As to my job expectations, I'd be happy to have any job I even vaguely enjoyed or thought was worthwhile, even minimum wage. But no one wants people 60 and older unless its Walmart.

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Re: Many Sad Stories of the Downwardly Mobile

Post by nisiprius » Sun Feb 05, 2012 10:39 am

Bob's not my name wrote:If "grace of God" means "avoiding reckless debt", then we agree.
Where do you see "reckless debt" in those stories? Talia and Adam, I can't tell one way or another. Income dropped from $130,000 to zero, and has been zero for two years. Not only is there no evidence of "reckless debt," but even if they were drawing unemployment compensation for a while and even if they had six months' emergency fund, it would be gone by now.

The anonymous mother appears to have been renting.

As for the Morris County family living in a foreclosed home, we aren't given details, but he had a $130,000 job, a "6-figure, telecom job of 20 years," and he was living in in an area where the median income was $91,403. We just don't know what he paid for the house, so the default assumption would be "typical for the area." If he had posted his financial details in Bogleheads before losing his job, how many people would have said "obviously you have incurred reckless debt?"

As reported, all three families seem to be in trouble due to job loss, not due to "reckless debt," or if it was reckless debt we aren't given any information to conclude that.
Last edited by nisiprius on Sun Feb 05, 2012 11:17 am, edited 1 time in total.
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Re: Many Sad Stories of the Downwardly Mobile

Post by staustin » Sun Feb 05, 2012 10:40 am

most interesting... blevine, hong kong and value thinkers comments I find most insightful. "wasteful consumption".. very true. I've posted numerous times my weariness regarding being questioned, judged, looked down upon my by colleagues and neighbors for living in in the same small house these past 15 years, paying cash for small quality cars and living simply.... I simply could not imagine the stress and strain of it all. what a useless pursuit.

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Re: Many Sad Stories of the Downwardly Mobile

Post by lawman3966 » Sun Feb 05, 2012 10:46 am

If for nothing else, the article is memorable for the following statement:

"Nearly one in two Americans is now living on the lower end of the income scale"

I've seen some (undetected) bloopers on CNN before, but this is a classic. Even in lamenting the current state of affairs, they still manage to understate the case. In fact, FULLY on half of Americans are living "on the lower end of the income scale." If the article doesn't catch on in the business media, CNN could always offer it up the Comedy channel, inherency being one common comedic device.

If the innumeracy of the reporter prevails throughout our culture, I fear for the future.

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Re: Many Sad Stories of the Downwardly Mobile

Post by Liquid » Sun Feb 05, 2012 10:55 am

trudy wrote:There's not enough information in that article to know what was going on in each case.


From the video: "I had a 401k and saved here and there, we were doing fine." That does not sound like a strong financial plan to me. They appeared to be (over-)leveraged on their home, single income, minimal savings.

Conventional wisdom in this country is that massive home leverage is prudent, so we can have it NOW. We have the right to have everything we want NOW, TVs, cars, homes, boats, if wealthy yachts/planes. Well there is a little problem when risk shows up... :(

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Re: Many Sad Stories of the Downwardly Mobile

Post by Bob's not my name » Sun Feb 05, 2012 11:18 am

Poppy Harlow thinks median income is what you can make panhandling from the median on a busy street.

I watched the videos and, amazingly, they contain no further information, but they do reveal that some of the quotes attributed to the families are actually Poppy's words -- she's leading the witnesses. My favorite part is when she asks the kids what they'd most like to give their parents. I'm expecting "a job", but they all answer "a vacation."

The father says, "You have to decide whether to go on a date, or pay the electric bill." Really? That's a hard decision for you?
Last edited by Bob's not my name on Sun Feb 05, 2012 11:28 am, edited 2 times in total.

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Re: Many Sad Stories of the Downwardly Mobile

Post by nisiprius » Sun Feb 05, 2012 11:22 am

Liquid wrote:Conventional wisdom in this country is that massive home leverage is prudent... Well there is a little problem when risk shows up... :(
The conventional wisdom in this country has, for a while, been that debt and massive leverage are prudent, or at least smart, at all levels. Taleb was talking about this on the radio, and presumably in his new book. It's dangerous to try to summarize, but he says that economic theory always shows that using debt increases efficiency, so financial and economic theorists always advocate using it. Classic example (mine, not Taleb's) being Ayres and Nalebuff's "Lifecycle Investing," where they conclude young people should be, not 100% stocks, but 200% stocks (2:1 leverage), because their backtested models show it is beneficial. Taleb says debt does increase efficiency but increase fragility as well, and the numeric modelers consistent underestimate the "fragility" aspect.

Don't blame the homeowners and the government while letting the LTCMs and the AIGs off the hook.
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Re: Many Sad Stories of the Downwardly Mobile

Post by blevine » Sun Feb 05, 2012 11:27 am

One important comment that probably was lost in my long post about avoiding a large mortgage
and then paying off earlier than 30 years (without causing liquidity problems) was this :

Not easy to do, unexpected problems can derail such a goal,
but most people in the US don't even seem to have such a goal,


I realize many lose their job, have unexpected medical expenses etc, and it's just horrible
what can happen. I was merely replying to the comments about NOT paying off a mortgage.
It has huge benefits, is very difficult to achieve, and as I implied, not possible due to circumstances.
But living within your means and avoiding excessive debt, particularly on the roof over your head,
is something that the youth should be taught so they have a fighting chance later in life.
Would rather live in a modest home without fear of eviction or a modest car without fear of being reposessed.
Hard to act on this concept after you are already in your 50s+, have the debt and face age discrimination
during a weak economy. That was my point. Start young and do the best you can.
I was lucky enough to have parents who taught me these values, and trying to teach my kids too.
Even my parents, eventually gave in and mortgaged a retirement home that was "paid" for, so they could
trade stock in the dot com era. I tried to remind them what they taught me. Temptation is so great in this
country due to our cultural biases to take excessive risk. Great reward potential,
but large downside, as we are experiencing now as a nation.

For those already facing issues, wish them well in getting back on their feet.
I have friends and relatives suffering and have often reached out to help them in some way.
But easier to help the young before they get in such trouble, than those already in the trouble.

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Re: Many Sad Stories of the Downwardly Mobile

Post by burgrat » Sun Feb 05, 2012 11:28 am

lawman3966 wrote:If for nothing else, the article is memorable for the following statement:

"Nearly one in two Americans is now living on the lower end of the income scale"

I've seen some (undetected) bloopers on CNN before, but this is a classic. Even in lamenting the current state of affairs, they still manage to understate the case. In fact, FULLY on half of Americans are living "on the lower end of the income scale." If the article doesn't catch on in the business media, CNN could always offer it up the Comedy channel, inherency being one common comedic device.

If the innumeracy of the reporter prevails throughout our culture, I fear for the future.


That is classic! That reminds me of a famous George Carlin quote:

Image

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Re: Many Sad Stories of the Downwardly Mobile

Post by Muchtolearn » Sun Feb 05, 2012 11:33 am

mwm158 wrote:Why are these sad stories? I prefer to see this as reducing inefficiencies.


Good lord. Thank goodness most of us have an emotion called empathy.

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Re: Many Sad Stories of the Downwardly Mobile

Post by HongKonger » Sun Feb 05, 2012 11:35 am

William Million wrote:
HongKonger wrote:
Valuethinker wrote: People are sold into a world view that says if you save 10% of your income for retirement and live the 'American dream' you'll be alright. In another culture (China comes to mind) we'd save 50%.


Actually in China, you would work for way way way less than even a toilet cleaner in the US would accept, you would give 50% of your salary to your parents and you would save the rest like crazy.

That woman in the article who lives in a shelter is earning 4x the minimum hourly pay of here in Hong Kong - a place that has no unemployment benefit, or social security, or pensions..and where even a 200 sq ft run down apartment in a dodgy area will cost you close to US$200k. She is NOT hard up.

People need to turn their TVs off, get off their butts, and stop thinking the world owes them a living. ...if you want to buy everything at Walmart prices, you need to accept the salary that allows the retailer to make their 500% margin whilst still being able to sell that lovely piece of useless junk for a buck. Unless people are willing to pay significantly more for things, or accept significantly lower wages, jobs will never return to bloated has-been manufacturing economies.

Sorry but it wears thin all the time hearing about how outsourcing to the East is the source of the West's downfall when actually, unbridled consumption and demand for cheaper everything is the root of the cause.


Hong Kong is a great place with an awesome economy and hardworking population, but the future of the U.S. is not following Hong Kong back to an earlier stage of economic development.


I wasn't suggesting it was (and we actually pay a hell of a lot more for our products here than in the US), but you just can't have it all. But if nothing changes, then nothing changes.

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Re: Many Sad Stories of the Downwardly Mobile

Post by bluemarlin08 » Sun Feb 05, 2012 11:38 am

Well said muchtolearn.

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Re: Many Sad Stories of the Downwardly Mobile

Post by mwm158 » Sun Feb 05, 2012 11:43 am

I see far too many people sit back and do the bare minimum to get by. They think they are entitled to their paycheck and don't push to excel or to expand their skills. I have worked in my current job for 2.5 years. When I started I was put to work on a project that was absolutely doomed to be a miserable failure and everyone knew it. I knew right away if this project was successful, it would be a HUGE gain in combat capability. Things finally fell into place to where I could start working full time on it a little over a year ago. I dedicated literally my entire year last year to completing this thing. 80+ hours a week, every week, with no help from anybody else. I not only completed what they orginally wanted, I ended up adding a whole lot more to it. It's being fielded 3 years ahead of schedule. I've made quite a name for myself in a short period of time. I have been promoted, I have gotten all sorts of awards, I have had rooms full of fighter pilots come shake my hand.

With all these defense budget cuts, I keep hearing about BRACs and the possibility of my base closing. How worried do you think I am about losing my job? When it comes to the jets I work on, everybody knows me, contractors, military, the guys with the money...and I have built myself an invaluable reputation.

The fact is, we make our own luck.

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William Million
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Re: Many Sad Stories of the Downwardly Mobile

Post by William Million » Sun Feb 05, 2012 11:45 am

lawman3966 wrote:If for nothing else, the article is memorable for the following statement:

"Nearly one in two Americans is now living on the lower end of the income scale"

I've seen some (undetected) bloopers on CNN before, but this is a classic. Even in lamenting the current state of affairs, they still manage to understate the case. In fact, FULLY on half of Americans are living "on the lower end of the income scale." If the article doesn't catch on in the business media, CNN could always offer it up the Comedy channel, inherency being one common comedic device.

If the innumeracy of the reporter prevails throughout our culture, I fear for the future.


In recovery, CNN can proclaim that half of all Americans are now at the higher end of the economic spectrum.

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Re: Many Sad Stories of the Downwardly Mobile

Post by rpike » Sun Feb 05, 2012 11:49 am

lawman3966 wrote:If for nothing else, the article is memorable for the following statement:

"Nearly one in two Americans is now living on the lower end of the income scale"

I've seen some (undetected) bloopers on CNN before, but this is a classic. Even in lamenting the current state of affairs, they still manage to understate the case. In fact, FULLY on half of Americans are living "on the lower end of the income scale." If the article doesn't catch on in the business media, CNN could always offer it up the Comedy channel, inherency being one common comedic device.

If the innumeracy of the reporter prevails throughout our culture, I fear for the future.


But here in Lake Woebegone 90% consider ourselves middle-class :-)

There is an interesting chart in Everything We Know About the Long-Term Unemployed that shows the growth in the long term unemployed in this recession.

From past personal experience I know what this is like. have had my job (or department or company) eliminated 4 times in the middle third of what I hope to be a 45 year career. For the 1st I was in another job and higher paid within 1 month. For the 3rd and 4th I also ended up in higher paid jobs but it took 3-4 months. However, the 2nd time was more than twice as long as the other 3 combined and well past when UI ran out (no 99 weeks then!). The job I finally ended up with was at a significantly lower pay such that even the subsequent increases have not yet brought me back to the real earnings I had 10 years ago.

Despite immediately eliminating or curtailing the obvious luxuries such as eating out or buying coffees, your expenses jump maybe $1000 per month as you now have to cover the full unsubsidized cost of your family's health insurance premiums. And UI, at least until it runs out, covers no more than 2/3 of your expenses [but stretches your 3-6 month emergency fund into 9-12 months].

At some point employers (and family, friends, neighbors) start assuming there must be something wrong with you if you are still unemployed. With no job you cannot refinance your mortgage even if rates are lower and your payment would decrease. If you have a HELOC, the lender will probably pull it once they find out (job loss = material change in conditions).

The hardest part is the uncertainty of not knowing how long it will last and where you will end up on the other side. Do you tell your kids they have to drop their favorite activities (music, gymnastics, karate, school trips, etc.)? If you knew it would only be a few months, you would gladly stretch to avoid depriving them, but what if it'll be 1 year? or 2? or more? Do you risk more of your rapidly dwindling savings on a training program that MIGHT eventually get you another job?

Rick

P.S. While my kids certainly wanted to restore things we had had to cut, they understood the association of job earnings with spending. I believe my daughter said something to effect of "I want my daddy to find a new job so we can eat out at restaurants again."
Last edited by rpike on Sun Feb 05, 2012 12:01 pm, edited 1 time in total.

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Re: Many Sad Stories of the Downwardly Mobile

Post by Rob5TCP » Sun Feb 05, 2012 11:55 am

mwm158 wrote:
With all these defense budget cuts, I keep hearing about BRACs and the possibility of my base closing. How worried do you think I am about losing my job? When it comes to the jets I work on, everybody knows me, contractors, military, the guys with the money...and I have built myself an invaluable reputation.

The fact is, we make our own luck.


There is a good deal of truth in what you say. However, several factors mitigate much of what you state. One, not everyone is as bright as you. Two, if you broke your legs two days into the project, all your good intentions/hard work would not have come to fruition. Three, your industry decides to outsource all design projects to save money. This is followed by others in the industry. Your area(s) of expertise becomes a commodity.

Yes, hard work and perseverance go a long way to aiding ones future. But, luck is needed as well. As someone mentioned earlier, the time period you are born (unfortunately only known in hindsight) also goes a long way in determining how financially successful you will be.

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Re: Many Sad Stories of the Downwardly Mobile

Post by Liquid » Sun Feb 05, 2012 12:03 pm

nisiprius wrote:
Liquid wrote:Conventional wisdom in this country is that massive home leverage is prudent... Well there is a little problem when risk shows up... :(
The conventional wisdom in this country has, for a while, been that debt and massive leverage are prudent, or at least smart, at all levels. Taleb was talking about this on the radio, and presumably in his new book. It's dangerous to try to summarize, but he says that economic theory always shows that using debt increases efficiency, so financial and economic theorists always advocate using it. Classic example (mine, not Taleb's) being Ayres and Nalebuff's "Lifecycle Investing," where they conclude young people should be, not 100% stocks, but 200% stocks (2:1 leverage), because their backtested models show it is beneficial. Taleb says debt does increase efficiency but increase fragility as well, and the numeric modelers consistent underestimate the "fragility" aspect.

Don't blame the homeowners and the government while letting the LTCMs and the AIGs off the hook.


My blame is more for conventional wisdom than for any particular party, but yes you are correct to point out the other actors.

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Re: Many Sad Stories of the Downwardly Mobile

Post by mwm158 » Sun Feb 05, 2012 12:06 pm

Rob5TCP wrote:There is a good deal of truth in what you say. However, several factors mitigate much of what you state. One, not everyone is as bright as you. Two, if you broke your legs two days into the project, all your good intentions/hard work would not have come to fruition. Three, your industry decides to outsource all design projects to save money. This is followed by others in the industry. Your area(s) of expertise becomes a commodity.

Yes, hard work and perseverance go a long way to aiding ones future. But, luck is needed as well. As someone mentioned earlier, the time period you are born (unfortunately only known in hindsight) also goes a long way in determining how financially successful you will be.


They can't outsource what I do :)

Whether this project was successful or not, I would continue to work hard at anything I do. Hopefully not with such long hours anymore, but I would be giving myself the best possible chance of staying ahead and not ending up like the people in the article.

Also, keep in mind that I work alongside about 30 other engineers in this particular area. They all knew what I was trying to accomplish, and none of them wanted to be involved. They wanted to just sit back and collect their paychecks. They had an opportunity to excel and be a part of this, perhaps setting themselves up for the future. They chose to do nothing.
Last edited by mwm158 on Sun Feb 05, 2012 12:10 pm, edited 1 time in total.

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Re: Many Sad Stories of the Downwardly Mobile

Post by investnoob » Sun Feb 05, 2012 12:10 pm

Ugh. Lets all sit around and pat ourselves on the back for knowing just how well our financial plans are laid out.

I'm guilty of this, also.

At this point, these articles don't do anything other than entrench people into their own biases/perceptions.

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