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Dr. Kalinda Rose Stevenson
Mortgage Relief For Underwater Mortgage Debt – Do You Qualify
By Jim Stevenson
Are you looking for home mortgage relief from underwater mortgage debt?
Well, you’re not alone. Today many people find themselves in a position where they would like to stay in their home but they can’t afford their current mortgage payments. Read more
Sphere: Related ContentTags: debt relief solution, Fannie Mae, Freddie Mac, HAMP, Home Affordable Modification Program, loan modification, Making Home Affordable Program, Mortgage Debt, Mortgage Debt Reset Program, mortgage payments, Mortgage Relief, NOD, underwater mortgage
The Gifts of Debt
Debt is both a curse and a gift. Debt can ruin you. Debt can also set you free to create a life of abundance. How is it possible that debt can have such different effects? Read more
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When Good Debts Go Bad
One of the most powerful ways to create financial abundance is to take on good debt. Good debt is money you borrow to finance investments. Good debt allows you to leverage OPM (other people’s money) to create wealth. Bad debt refers to money borrowed to buy something that will not bring a return on investment. My goal this week is to make the case that even good debts can go bad.
A good debt turns into a bad debt when you borrow money to invest and don’t make a return. In the worst situation, you even lose the borrowed money.
Are there any predictable reasons why good debts turn into bad ones?
One fundamental reason good debts go bad concerns timing. You invested borrowed money at the wrong time. Or you kept the borrowed money in the investment too long.
“In the real estate jungle, timing and strategy are the redwoods; everything else is a bonsai”.
Robert Campbell
Perhaps the most common piece of investing wisdom is to buy low and sell high. Whether it is the stock market, real estate, or another type of market, the ideal investment is to buy at a low price and sell at a high price. By following this strategy, you get the most return for your investment.
As with so many wise sayings, the concept is clear enough. The challenge is to be able to predict the high points and the low points.
“In the business world, the rearview mirror is always clearer than the windshield.”
Warren Buffett
I have been to several stock market courses, learning to read technical charts. It’s always easy to see trends when you are looking at the past. You can see the high points and the low points. It’s easy to identify exactly the right strategy for the situation when you are looking at what has already occurred.
Last week, I heard a fascinating talk about timing the real estate market. The speaker used charts and indicators to speak about California real estate. I live in the San Francisco Bay Area, where real estate prices have gone up and up and up and up. For several years, commentators have warned that prices are artificially high. They keep declaring, “At any moment, the bubble will burst and prices will drop.” Yet, despite these warnings, the prices keep going higher and higher.
Alan Greenspan made the same kinds of statements about the financial markets in the late nineties. He spoke of “irrational exuberance” driving up the prices of overvalued stocks long before the market bubble burst.
“Trends never end. They Only Change Direction.”
Robert Campbell
One of my favorite concepts is the “Law of Undulation.” C. S. Lewis originated the phrase in his book, The Screwtape Letters. The Law of Undulation means that everything and everyone operate in wave-like patterns of up and down and back and forth. Nothing stays the same and nothing operates in a straight line.
Lewis uses the Law of Undulation to claim that human beings tend to assume that the current situation will continue, no matter what the current situation is. Lewis speaks of the natural peaks and valleys of life, the emotional highs and lows. Yet when we’re down, we assume that we’ll always be down. When we’re up, we assume that we’ll always be up.
Despite the fact that everything in our natures and the nature of the world runs in wave-like cycles, our typical human inclination is to think that our lives are lived in straight lines. When we live with straight line attitudes in a cyclic universe, we don’t recognize the signs and signals that things are about to change.
Real estate markets also operate according to the universal Law of Undulation, with property values rising and falling at different times in different markets. Yet in hot real estate markets, it is easy to fall into the straight line trap and think that the prices will continue to rise indefinitely.
“Spotting the peaks and valleys of real estate cycles has always been the dream of both buyers and sellers. With the cyclical nature of the market, good times come and good times go, and then good times reappear again. The challenge for intelligent decision makers is to look for ways to profit from changing market trends, rather than just sitting back and – good or bad – passively accepting them.”
Robert Campbell
No one has an infallible crystal ball. You cannot predict with absolute certainty the results of any investment decision you make. However, you can improve the chances of your success considerably by understanding that change is the only constant. Ebbs and flows and ups and downs are the way of the world.
Good debts go bad when you don’t pay attention to trends and miss the signs that the trend has changed. Or worse, when you recognize that the trend has changed, but you hold on with the hope that the price will go up again.
This article was originally published January 25, 2005
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http://www.abundantlyalivenow.com/archive/AANN-2005-01-25.htm
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