ALL of it – and pay attention, you will discover something interesting. http://theautomaticearth.blogspot.com/2011/11/november-25-2011-deleveraging-there.html
Do you remember all the years that banks and mortgage companies advertised what they unabashedly called 'teaser rates' to get people to borrow money? Those 'teaser rates' were come-ons. You signed an ARM and your rates began to skyrocket. When you could no longer afford the payments, the banks repossessed your home, kicked you to the curb, and re-sold it to someone else for the same sort of deal.
That wasn't an accident and it's the main reason banks were not willing to modify mortgages. It's done in the used car business all the time and here's how it works. You are a car dealer – or a mortgage broker. You buy something at auction for the cost of back taxes or, with cars, something that runs but isn't especially sexy. You have it detailed and tuned up and then you sell it to someone with no job or no credit and take enough down payment to cover your purchase cost. Now you aren't out of pocket and the buyer, who you graciously finance, is stuck for years payiing payments which go right into your pocket. If they default a month or two, you repo the car, charge them towing costs and an extra payment and give the car back to them. You WANT them to do that every once in awhile, so you can make a few extra bucks and be a nice guy by giving the junker back to them.
Houses and cars, it all works the same way – except with cars, YOU want to carry the paper and with real property, you want to bundle it, because you know it's toxic, and roll it to some dumbass mutual fund. So….eventually there are trillions of dollars of crappy paper being secured by billions of dollars of equity. But the purchaser holds all that paper on their books at par, AND LEVERAGES AGAINST IT, knowing it isn't worth shit. Then they take it to Freddie Mac and sell it or borrow aginst it, AT PAR, and now the taxpayers are stuck with TRILLIONS of dollars in debt that isn't collateralized. When it goes south, the government uses YOUR tax dollars to pay off YOUR property that has been stolen from you. Who gets hurt? You do.
Let's go one step further. The crunch is coming. No one can stop it. Your gold and silver isn't going to be worth a damn because THE MARKET MAKERS DO THE SAME THING WITH IT! And when they get all your money at the bubble-rate, they will simply pop the bubble. I have no idea why people can't grasp this, but they can't. No one gives a damn about the 'market'. Most of the serious money goes OTC so the people can write their own rules and aren't regulated. The 'market' is just entertainment for people and yet another way to get their money.
OK…all of the serious financial advisers tell you to get out of debt. But THEIR companies aren't out of debt. They are leveraged 50:1. They want YOU to get out of debt to pay them their usury – if you don't, they will implode. And they ARE imploding. So a better financial strategy might be to go as far into debt as you can at 4% or less and get YOUR liquidity out before another major company tanks and takes you out with it. YOUR debt, at 4%, is cheaper than the SOVEREIGN debt of the following countries:
And VERY CLOSE to the bond yields of:
France and Austria.
The central banks of these countries cannot de-leverage. The countries are going broke at BEST and probably going to war. They want YOU to pay them to keep the charade going a few more months until they can figure out how to steal the rest of your money. And if you think, for one second, that your money in the bank, or stock market, or precious metals is safe, you are ~WRONG~!
When the crunch comes, it will affect EVERYONE. The banks are not going to hire thousands more people to robo-sign documents to steal your house because there won't be any buyers. You can just tell them “You want me out of my house? Send a SWAT team. They can pick through the ashes and look for my body. OR, YOU CAN GIVE ME A MORTGAGE MODIFICATION OF 60%.” Does that dound familiar? That's what GREECE IS DOING RIGHT NOW! The bank won't have much choice BECAUSE THE CDS they bought to cover their bad debt is no good and they don't want a pile of ashes where your house used to be. The insurance companies won't pay THEM because there isn't that much money. So who will be screwed? Not you. But do it while you can because once money locks up, you are out of the game.
You aren't gaming the system, although Wall Street (et al) is. And you aren't doing anything illegal, although Wall Street (et al) is. You are just getting YOUR cash out of the gamed system while you still have it – and if the economy doesn't crash, you can put it right back in.
The time to do that would be right now – before the DOW drops below 11,000 and keeps going.90% of success is showing up. Getting the math right is the other 50%.
Aut viam inveniam aut faciamaut viam inveniam aut faciam.