[kenberg]

Let me explain where I think that we have a dearth of good information. It is in the area lying between the expert theory and the newspaper sob story.

For example: We get this magazine from AARP (I'm not much of a joiner but my wife signed us up). There is an article about foreclosure. One guy, it explains, bought his house in 1977 and refinanced with an ARM in 2007 to reduce his monthly payments. What??? What monthly payments? A guy who bought in 1977 should, in 2007, be throwing a party in celebration of his last monthly payment, if indeed the party wasn't held ten years earlier. There was another story of a woman who has lived in the same house for 38 years and has trouble with her mortgage. Again, what mortgage? This is not explained. Perhaps these people used their house as a cash cow, but the article doesn't say. Sure it's not good for them to lose their houses, but a few words about how this predicament developed would be welcome.

Then, otoh, we have the professionals. They are happy to explain it all, usually amounting to the fact that they are brilliant and all the other professionals are stupid. Economic theory often postulates the rational man (or the gender neutral rational actor). Well, a rational man who bought his house in 1977 has the mortgage paid off by now. We need a theory based on the irrational man. Less dramatically, we need a theory that takes into account how humans actually behave.

[mike777]

kenberg, on 2010-November-10, 08:15, said:

As I am sure you would expect, I won't be investing in any of that stuff. I don't understand it and I am more than content with my ignorance.

Are you sure you are not invested in any of this stuff. I just ask because many people have no idea how their pension plan is invested.

In any event if you live in a city or a state you and your family may be exposed to muni default risk.

In fact in the past election you may have voted for or against issuing even more muni bonds(borrowing money that you must pay back) in your local area.

[kenberg]

Mike,
As to what is in my pension funds, I am prepared to astound the world with my ignorance. When I get on a plane, the pilot flies it, Boeing or someone built it, don't ask me for details. I realize there is some risk here.

Every year, or maybe more often, I get massive documents explaining what is being done. I plan to read it all. Right after I finish Bertrand Russel's History of Western Philosophy, and then the Complete Works of William Shakespeare. And of course Kant's Critique of Pure Reason, can't skip over that. But I'll get to this financial stuff. It's on my list.

[mike777]

Speaking of foreclosures, the headline in my local paper this morning read "Ten schools will be closed".

This is due to either a lack of money or racism or both per the quotes in the article.

Foreclosures mean more than just losing a house. Cities and states are finding this out, today.