"SHOW ME THE MONEY" VIEWS on HOW to make MONEY GR

[Bretsky]

INTERESTING ARTICLE THAT I DON"T UNDERSTAND THAT WELL FROM MSN MONEYCENTRAL

Jubak's Journal
The 7 next big things in tech

The biggest winners in technologies are the ones that change the game completely, sending rivals to the scrap heap.

Want to find the next big thing in technology? Follow the destruction.

No truly big change takes place without overturning traditions, sending competitive rules to the dustbin of history, and destroying formerly flourishing companies. Avoid the victims and own the agents of change and you'll retire richer, buy that house in Tuscany, and still send the kids to the college of their choice even if they don't win that lacrosse or flute scholarship.

Today I'm going to help you along to those goals by giving you my list of seven disruptive technologies that are cutting a wide path of destruction. It should get you started in putting together your own list of destructive opportunities.

Change is a good thing. A faster and more powerful graphics chip sends me to the store to buy a new PC … to buy new games that take advantage of the chip … to upgrade my display so I can see the full glory of those new graphics. See the news
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And that's all good news for Nvidia (NVDA, news, msgs), which made the graphics chips, for Electronic Arts (ERTS, news, msgs), which distributed the games, and for Dell (DELL, news, msgs), which sold the display. A steady stream of new products -- what we often call progress -- is the lifeblood of technology companies.

And, as I wrote in my last column, "What's the matter with tech stocks?," when this kind of change-as-usual dominates the technology sector, the sector tends to do well, driving the stock market as a whole higher.

But too much change is a bad thing. It can make obsolete a company's entire product line. I'd tell you to go ask minicomputer maker Digital Equipment, except that, well, it's out of business. It can force a wrenching shift in direction that crushes a company's momentum for years. Just think of how long it has taken IBM (IBM, news, msgs) to come up with a strategy to replace the tiny mistake it made when it let Microsoft (MSFT, news, msgs) grab control of the new operating system for PCs. (Microsoft owns MSN Money.)

Obviously, disruptive change creates huge problems for investors. But disruptive change also presents huge opportunities for investors. EBay (EBAY, news, msgs) and Google (GOOG, news, msgs), for example, have done pretty well by investors by rearranging the landscape for online retailing and advertising.

Once you've identified a promising patch of destruction, how do you find the profitable opportunities? I'd offer three general rules:
Look for companies that actually have a plan for profiting from the disruptive shift in technology. Innovation is neat, but for investors it's not nearly as important as a profitable business plan.


Don't pay too much. Yes, it's notoriously hard to value the stock of a truly disruptive technology company. More than 20% of the readers who responded to my pre-IPO survey on Google thought the stock was worthless. But since the odds are that at least 30% of the stocks that you pick as disruptive opportunities will head south, the key is not to pay so much for them that the successful picks can't put your portfolio comfortably in the black.


Don't ignore established companies that are willing to cannibalize their existing business in order to reap the potential profits of disruption. Since these companies aren't betting the store on the disruptive technology, the returns to you, the investor, won't be as high as with a home-run-or-bust bet. But the losses won't be as large either.

Now, on to my disruptive opportunities.

The "Cell" microprocessor. A product of a joint venture between IBM, Sony (SNE, news, msgs) and Toshiba (TOSBF, news, msgs), this chip will power Sony's PlayStation 3 and high-definition TVs from Sony and Toshiba. The chip combines nine cores, a big leap from the two-core chips just being introduced by Intel (INTC, news, msgs) and Advanced Micro Devices (AMD, news, msgs), to provide extremely fast rendering of computation-intensive graphics for uses that range from military displays to consumer electronics. I see this chip putting more pressure on Intel and AMD, which are both struggling to expand beyond their role as makers of chips for PCs. Who's the winner? Too soon to tell.

The home-entertainment gateway. Who is going to control how entertainment media, from music to movies, gets into the home? This is a big deal for the cable companies and for the phone companies. Cisco Systems (CSCO, news, msgs), a name that most investors don't associate with home entertainment, has made the most interesting moves in the sector recently. The company's acquisition of cable-box maker Scientific-Atlanta (SFA, news, msgs) puts Cisco right in the middle of efforts by the cable and phone companies to roll out video on demand and video over the Internet.

But if you combine the video processing power of Scientific-Atlanta's set-top boxes with the home networking products of the company's Linksys, you start to get a home entertainment business that isn't dependent on any specific pipeline into the home. If you still think that Cisco Systems doesn't have ambitions in this space, I suggest you look at the July purchase of KiSS Technology of Denmark, a maker of DVD players and recorders that can be connected to the Internet. The game certainly isn't over, but Cisco suddenly looks like a major player. (About 23% of company revenues now come from the Advanced Technology division that includes Linksys and Scientific-Atlanta.)

The home-entertainment hub. Lots of folks are going after this one because the potential here is to develop something that would replace or combine the TV, the PC, the family stereo system, etc. with a single device that can store and route media in the home. I'll bet that Cisco has this market in mind. So do Microsoft, Sony and Apple Computer (AAPL, news, msgs), just to name a few. The takeaway lesson of Apple's iPod is that ease of use rules. (Think software and design as key to a successful product.) I think this category is still wide open with the disruptive powers still to be fully unleashed.

Internet telephony over mobile phones. Voice Over Internet Protocol (VOIP) hit the mobile phone industry in late February, when Nokia (NOK, news, msgs) introduced its first mass-market phone capable of sending and receiving calls over the Internet. Think of it: No more per-minute charges or limits on your wireless calls. (That's the model at Skype, the VOIP company acquired by eBay, where users can talk for free as long as they pay a flat monthly fee for a broadband connection to the Internet.) Nokia, which owns 48% of Symbian, the biggest supplier of operating systems to high-end mobile phones, is one company to watch in this space. Symbian's latest software supports VOIP. So does Microsoft's Windows Mobile operating system.

Electronic, networked health-care records. Just because President Bush talks so much about the need to put patient records on a national computer network and actually does so little about it, don't assume this won't happen. They're actually building such a system in the United Kingdom at a cost of $11 billion. The goal of the system, due for completion in a decade, is to enable patients and their doctors to access an electronic health-care record, to access prescription records and digital images such as MRIs, and to make appointments. In the U.S., such a system would cost $100 billion to $200 billion, according to government estimates, but it has the potential to save $700 billion a year. The disruptive potential of such a system is huge. For example, all the data would be available in such a system to compare mortality rates at individual hospitals and for consumers to compare prices for various procedures. While we're all waiting for a national solution, take a look at an interesting project from Johnson Controls (JCI, news, msgs) and Emergin. To produce something that Johnson Controls calls the "future-ready" hospital, the company will add Emergin's software communication solutions to the wireless capabilities in Johnson's building-control systems.

Mapping everywhere. I love to look at the new digital maps offered by Google and Microsoft on my PC. But that's only the first stage of a huge increase in digital navigation. The move is toward adding mapping and route-finding software to smaller and smaller devices, a transition from car-based systems, for example, to those in wireless phones and personal digital assistants. According to research from IDC, by 2008, 383 million wireless handsets will be equipped with GPS capability that will allow the delivery and use of digital mapping. That would be six times higher than in 2004. What is clear is that more devices mean more, and more detailed, maps. And that's good for the few companies that supply digital maps to this market. There are two major players: Tele Atlas (TLATF, news, msgs) and Navteq (NVT, news, msgs).

Batteries. They're a key bottleneck for all kinds of products -- and nowhere more so than in the auto industry, where the sudden popularity of gas/electric hybrids has just highlighted the heavy weight and inefficiency of current battery technology. Hybrid vehicles now rely on nickel-metal-hydride batteries, which are a problem looking for a solution. Whether that solution is a better nickel battery or something new -- such as an improved lithium-ion battery (which now has better energy storage but is a fire hazard in a collision) -- the transition will shake up the ranks of auto suppliers around the globe. One stock to watch on the technology front is Johnson Controls (again -- see No. 5 above), which has recently teamed up with Saft, a company with 10 years’ experience in lithium batteries, to develop a new generation of battery for hybrid vehicles. The results of that research probably won't bear fruit until the end of the decade. In the meantime, Johnson Controls has been making inroads into the global auto battery market, thanks to its acquisition of the battery business of Delphi (DPHIQ, news, msgs).

[Partial]

So they have a power brick like a laptop?

Yes. It won't be like Xbox 360 sized or anything, it will be like a MacBook sized powerbrick (60 watt version, 3x2x1 dimensions probably)

[Partial]

INTC will again be competitive in the processor marketplace, but has it's brand been irreparably harmed? People used to buy "Intel Inside" without thinking. Since they moved from 1.3 mm to 90 nm with the Prescott introduction, they've been getting their clock cleaned by AMD. The Prescott ran way too hot and enthusiasts couldn't overclock them. Most bought AMD and companies began to notice. Your Best Buy ad now included some AMD systems, and people began to ask questions before they purchased. Some bought AMD, which was more than before. AMD grew their market share, and it's stock has skyrocketed since early last year.

Now Dell who was previously an Intel only shop began offering Opertons to their server customers a while back, and this week they announce that consumers can buy AMD's now too. The people at Intel had to be thinking - Is nothing sacred?

I hear INTC got things worked out with the move to 60nm on the dual cores and they won't perform like easy bake ovens anymore, but I don't know if that will prop the stock back up. The cat is out of the bag, and people know they have a real choice - i.e. the brand has been damaged.

I know where you guys are coming from, as I've been extremely tempted to buy INTC because it looks so danged cheap.

Intel just released the first processor from it's brand new Core 2 architecture (think P4, P3, P2) yesterday. It was Woodcrest, the server processor. All these new chips they're making are built around one central design that is extremely overclockable and electrically efficient.

AMD released their latest offerings about a month ago. They are solid processors no doubt, but still stuck on the 90nm build. Meanwhile, Intel is well underway with a 45nm build which will come out in 2007. They're WAY ahead right now in that department, and what that means is as they get smaller they're going to be much more efficient and a lot less electricity is going to be lost. All around, it's a good thing.

Intel's Woodcreast is beating the pants of AMD's top end Operton. I am talking 30% improvement in performance, which is ridiculous in the world of computing. Spanking it. Intel has officially won over the server market again, especially since they decided to cut costs on all upcoming products to really stick it to AMD.

Conroe, Intel's desktop consumer chip of the Core 2 variety, is even spanking AMD's best server processor (higher powered). The mid-range version of Conroe beat AMD's highest offering available period by 8%. It is expected that the highest version of Conroe will beat it out by 25%.

Merom, the laptop variant of Core 2 is awesome. Right now, the original core duo is doing very well. It is killing the AMD offering since they were very late to introduce a mobile dual-core processor, and its rather unimpressive at that. Core duo is ridiculous, and Intel has guaranteed Merom will be 20% faster. From some of the benchmarks I have read online, people have experienced up to 50% improvement in the flagship version of Merom (core duo 2) versus Yonah (core duo) which is virtually unheard of.

In addition to this, these chips are designed to natively run at an 800 mhz bus, but are being shipped wiith 667 buses. That means it's extremely overclockable. EXTREMELY.

I have read some articles where people have taken Merom and Conroe from 2.4ish ghz to over 4ghz with air cooling alone. That is ridiculous!!

Intel's road map looks a lot better than AMD's also. They swore off their policy of sticking with one architecture (Netburst AKA Pentium 4) for 5 years again, and swore they would evolve with each processor cycle.

The one thing that AMD may have going is the reverse hyper threading that I read about on Digg today. It can get a dual-core processor to act as one really fast processor, rather than be two seperate processors for the sake of multitasking. This is pretty cool, and if it works the performance in games could sky-rocket!! However, Intel also has this technology built into Core 2 duo.

In summary, Intel is going to rock the faces of extremists and consumers everywhere in the next year. In 2007, their advantage should get even bigger, since the jump from 65nm to 45nm should yield much greater performance (especially in notebooks) difference in comparison to jumping from 90nm to 65nm.

Go Intel!

[Partial]

Bretsky, if you find out any really good nanotech companies you think are going to do alright, let me in on your secrets! I should have about 1,000 to invest after this summer!! I'm excited to buy some stocks!

[pittstang5]

Bretsky and maybe the others in here - I hope this isn't a repeat, but I just noticed this thread and didn't feel like reading through 6 pages.

I have one little blemish on my credit report - a late payment to an electrical company while I was in college. What can I do to get it off my credit report or do I have to wait the 7 or however many years it takes to go away. Which leads me to another question, will it go away in 7 years?

So far it really hasn't affected anything. I was able to get a mortgage and car loan. However, my wife is on the mortgage as well and she has excellent credit. But I hate seeing that one little negative.

[Fosco33]

Bretsky, if you find out any really good nanotech companies you think are going to do alright, let me in on your secrets! I should have about 1,000 to invest after this summer!! I'm excited to buy some stocks!

I worked loosely with a startup nanotech company called Imago Scientific during my senior year at Madtown.. They were started by some former UW Madison profs and built a 3-D atom probe microscope. The potential upside is huge - at last check they weren't public (in rounds of financing). The basic idea is this microscope can be used in material application in many industries. Initially, they focused on semiconductor chips (silicon and other elements interact to create processing power - requires about 1000 steps and all trial and error). It could remove an atom and identify what element it was - greatly reducing time to market, efficiency of processors and overall cost. My best guess - they'd sell this to an Intel or AMD. Check 'em out if you're interested.

http://www.imago.com/imago/

[Bretsky]

Bretsky and maybe the others in here - I hope this isn't a repeat, but I just noticed this thread and didn't feel like reading through 6 pages.

I have one little blemish on my credit report - a late payment to an electrical company while I was in college. What can I do to get it off my credit report or do I have to wait the 7 or however many years it takes to go away. Which leads me to another question, will it go away in 7 years?

So far it really hasn't affected anything. I was able to get a mortgage and car loan. However, my wife is on the mortgage as well and she has excellent credit. But I hate seeing that one little negative.

Sorry Pitt, have bad news here. There is no way to get the negative trade removed from credit. After 7 years it should fall by the wayside. Just remember it becomes less and less of a factor for every month that goes by and you make all your payments on time. And nothing helps a credit score more than mortgage payments on time.......in same tone......nothing will kill a credit score more than being last on a mortgage payment. So shake it off, buy a bunch of houses, and get rich.


Cheers,
B

[Bretsky]

Bretsky, if you find out any really good nanotech companies you think are going to do alright, let me in on your secrets! I should have about 1,000 to invest after this summer!! I'm excited to buy some stocks!

I worked loosely with a startup nanotech company called Imago Scientific during my senior year at Madtown.. They were started by some former UW Madison profs and built a 3-D atom probe microscope. The potential upside is huge - at last check they weren't public (in rounds of financing). The basic idea is this microscope can be used in material application in many industries. Initially, they focused on semiconductor chips (silicon and other elements interact to create processing power - requires about 1000 steps and all trial and error). It could remove an atom and identify what element it was - greatly reducing time to market, efficiency of processors and overall cost. My best guess - they'd sell this to an Intel or AMD. Check 'em out if you're interested.

http://www.imago.com/imago/

Went to bed with a headache last night trying to understand this technology.

But Partial really has me thinking about Intel.

Cheers,
B

[MJZiggy]

Didn't they just start putting Intel chips in Macs?

[retailguy]

Bretsky and maybe the others in here - I hope this isn't a repeat, but I just noticed this thread and didn't feel like reading through 6 pages.

I have one little blemish on my credit report - a late payment to an electrical company while I was in college. What can I do to get it off my credit report or do I have to wait the 7 or however many years it takes to go away. Which leads me to another question, will it go away in 7 years?

So far it really hasn't affected anything. I was able to get a mortgage and car loan. However, my wife is on the mortgage as well and she has excellent credit. But I hate seeing that one little negative.

Sorry Pitt, have bad news here. There is no way to get the negative trade removed from credit. After 7 years it should fall by the wayside. Just remember it becomes less and less of a factor for every month that goes by and you make all your payments on time. And nothing helps a credit score more than mortgage payments on time.......in same tone......nothing will kill a credit score more than being last on a mortgage payment. So shake it off, buy a bunch of houses, and get rich.


Cheers,
B

Well, I just got back from vacation and read this thing. Whoooo. Gosh where to start? I thought about just letting it go and pretending that I didn't see it, but....

Lots of good advice in this thread, some not so good and some just plain wrong.

B, what you wrote above is accurate, PROVIDED he made the payment late. If that is the case, he MIGHT be SOL. First off, I'm puzzled by the "electric company" on a credit report. I've been buyin' electricity for about 28 years, and have NEVER seen the electric company on my credit report or any of my clients, UNLESS it went to collection. That's more than a late payment.

So, Pitt, assuming that you really didn't pay on time, as it looks that way, you may be SOL. There is, however, no harm in disputing it with the credit bureau. They've got 30 days to verify it with the creditor who placed it. If the creditor does not/ or cannot verify it, it gets removed. Most verify these days, however some do not. Also, items of <$50 should not appear on the credit report. Electricity could fall into this category.

It is important to note that to dispute anything you must do it off of a current credit report (within last 30 to 60 days for the most part), and second, it is recommended that you only dispute ONE ITEM at a time. Disputing multiple items makes it look like you don't have a valid complaint, and the credit bureau can legally ignore your request.

[retailguy]

Bretsky, if you find out any really good nanotech companies you think are going to do alright, let me in on your secrets! I should have about 1,000 to invest after this summer!! I'm excited to buy some stocks!

Why does everybody want the "latest greatest, can't miss opportunity"? Partial, I just finished reading a book that would probably bore most of the people in here to death in the first 5 pages, but it applies to your situation.

Without boring you with details, it discusses "visionary companies". It was published in the late 90's so the info is a bit dated, however, the authors can support that their 18 "visionary companies" all in existence since before 1950 have an earnings track record that would amaze most.

You can pick an "unknown" company and "strike it rich" or you can pick a solid blue chip company, buy it and HOLD FOREVER and you will almost invariably do very well and better than the speculative stuff. The key is TIME.

You minimize risk by buying established (boring) companies in industries you understand and buying and buying and buying, EVERY MONTH. Buy when the price goes up, buy when the price goes down, and barring anything illegal, immoral, or just plain stupid, NEVER sell it.

[Bretsky]

Bretsky and maybe the others in here - I hope this isn't a repeat, but I just noticed this thread and didn't feel like reading through 6 pages.

I have one little blemish on my credit report - a late payment to an electrical company while I was in college. What can I do to get it off my credit report or do I have to wait the 7 or however many years it takes to go away. Which leads me to another question, will it go away in 7 years?

So far it really hasn't affected anything. I was able to get a mortgage and car loan. However, my wife is on the mortgage as well and she has excellent credit. But I hate seeing that one little negative.

Sorry Pitt, have bad news here. There is no way to get the negative trade removed from credit. After 7 years it should fall by the wayside. Just remember it becomes less and less of a factor for every month that goes by and you make all your payments on time. And nothing helps a credit score more than mortgage payments on time.......in same tone......nothing will kill a credit score more than being last on a mortgage payment. So shake it off, buy a bunch of houses, and get rich.


Cheers,
B

Well, I just got back from vacation and read this thing. Whoooo. Gosh where to start? I thought about just letting it go and pretending that I didn't see it, but....

Lots of good advice in this thread, some not so good and some just plain wrong.

B, what you wrote above is accurate, PROVIDED he made the payment late. If that is the case, he MIGHT be SOL. First off, I'm puzzled by the "electric company" on a credit report. I've been buyin' electricity for about 28 years, and have NEVER seen the electric company on my credit report or any of my clients, UNLESS it went to collection. That's more than a late payment.

So, Pitt, assuming that you really didn't pay on time, as it looks that way, you may be SOL. There is, however, no harm in disputing it with the credit bureau. They've got 30 days to verify it with the creditor who placed it. If the creditor does not/ or cannot verify it, it gets removed. Most verify these days, however some do not. Also, items of <$50 should not appear on the credit report. Electricity could fall into this category.

It is important to note that to dispute anything you must do it off of a current credit report (within last 30 to 60 days for the most part), and second, it is recommended that you only dispute ONE ITEM at a time. Disputing multiple items makes it look like you don't have a valid complaint, and the credit bureau can legally ignore your request.

Retailguy,

I didn't read your whole post and will go back, but when I read about the electric company I wanted to note that WI Electric absolutely DOES report on time and late payments to the credit bureas. I see them on there everyday of the week.

B

[retailguy]

Bretsky, you asked for my advice, and I'll give it. FOR FREE. Just for members of this forum. My "consulting rate" is $80 per hour for financial planning, but considering you are all "Packer fans"...

Somewhere, I've got an analysis of home buying that I'll refine and share with you. I promise you, you won't like it.... but it doesn't make it less true.

It was a presentation that I did for a rotary group about 5 years ago and I titled it "The fallacy of the 30 year mortgage with ZERO down".

It usually raises the "fur" off the neck of every mortgage broker I've ever met. It should, because it attacks the very bread and butter of your livelihood.

Essentially, I do not believe that a "homeowner" who purchases a home on a 30 year mortgage with zero down and faithfully pays the payment for the entire 30 years has made an "investment". He's merely rented from his bank instead of a landlord, his bank made a profit, and he's lucky if he broke even in real dollars. Undoubtedly, he could have invested the difference between the mortgage payment, taxes and upkeep versus what he could have paid in "rent" in a good mutual fund and blown the doors off his return on the "house" he invested in.

Please understand that I recognize there are many reasons to purchase a home that have ZERO to do with money. The "money" reasons chanted by most are usually unsupported bullshit, however. (IMO) - That's for you, RED.

I'll enjoy this debate with you, my friend.

[retailguy]

Retailguy,

I didn't read your whole post and will go back, but when I read about the electric company I wanted to note that WI Electric absolutely DOES report on time and late payments to the credit bureas. I see them on there everyday of the week.

B

Well if that is the case, Pitt is SOL. I haven't lived in WI in 18 years so my "knowledge" of WI is a bit dated.

[Bretsky]

Bretsky and maybe the others in here - I hope this isn't a repeat, but I just noticed this thread and didn't feel like reading through 6 pages.

I have one little blemish on my credit report - a late payment to an electrical company while I was in college. What can I do to get it off my credit report or do I have to wait the 7 or however many years it takes to go away. Which leads me to another question, will it go away in 7 years?

So far it really hasn't affected anything. I was able to get a mortgage and car loan. However, my wife is on the mortgage as well and she has excellent credit. But I hate seeing that one little negative.

Sorry Pitt, have bad news here. There is no way to get the negative trade removed from credit. After 7 years it should fall by the wayside. Just remember it becomes less and less of a factor for every month that goes by and you make all your payments on time. And nothing helps a credit score more than mortgage payments on time.......in same tone......nothing will kill a credit score more than being last on a mortgage payment. So shake it off, buy a bunch of houses, and get rich.


Cheers,
B

Well, I just got back from vacation and read this thing. Whoooo. Gosh where to start? I thought about just letting it go and pretending that I didn't see it, but....

Lots of good advice in this thread, some not so good and some just plain wrong.

B, what you wrote above is accurate, PROVIDED he made the payment late. If that is the case, he MIGHT be SOL. First off, I'm puzzled by the "electric company" on a credit report. I've been buyin' electricity for about 28 years, and have NEVER seen the electric company on my credit report or any of my clients, UNLESS it went to collection. That's more than a late payment.

So, Pitt, assuming that you really didn't pay on time, as it looks that way, you may be SOL. There is, however, no harm in disputing it with the credit bureau. They've got 30 days to verify it with the creditor who placed it. If the creditor does not/ or cannot verify it, it gets removed. Most verify these days, however some do not. Also, items of <$50 should not appear on the credit report. Electricity could fall into this category.

It is important to note that to dispute anything you must do it off of a current credit report (within last 30 to 60 days for the most part), and second, it is recommended that you only dispute ONE ITEM at a time. Disputing multiple items makes it look like you don't have a valid complaint, and the credit bureau can legally ignore your request.

Guess I should note regarding Pitt's scenario that it was my assumption that the late charge on the credit report from college was accurate. You can always dispute these things if they are not. Better to do it with a written note than a phone call, and while we like to believe the credit bureau's follow through with things as well as they can that is not reality so if you are truly concerned you will want to verify they did their job a few months later by looking at a current credit report again.

[Bretsky]

Bretsky, you asked for my advice, and I'll give it. FOR FREE. Just for members of this forum. My "consulting rate" is $80 per hour for financial planning, but considering you are all "Packer fans"...

Somewhere, I've got an analysis of home buying that I'll refine and share with you. I promise you, you won't like it.... but it doesn't make it less true.

It was a presentation that I did for a rotary group about 5 years ago and I titled it "The fallacy of the 30 year mortgage with ZERO down".

It usually raises the "fur" off the neck of every mortgage broker I've ever met. It should, because it attacks the very bread and butter of your livelihood.

Essentially, I do not believe that a "homeowner" who purchases a home on a 30 year mortgage with zero down and faithfully pays the payment for the entire 30 years has made an "investment". He's merely rented from his bank instead of a landlord, his bank made a profit, and he's lucky if he broke even in real dollars. Undoubtedly, he could have invested the difference between the mortgage payment, taxes and upkeep versus what he could have paid in "rent" in a good mutual fund and blown the doors off his return on the "house" he invested in.

Please understand that I recognize there are many reasons to purchase a home that have ZERO to do with money. The "money" reasons chanted by most are usually unsupported bullshit, however. (IMO) - That's for you, RED.

I'll enjoy this debate with you, my friend.

I can buy your PREMISE Retailguy, and you are right in that we can debate this forever. But your premise is loaded full of assumptions that simply do not occur. First, I want to point out that I don't pound the pavement for no money down programs. I work for a bank and am not a broker who whacks people with unnecessary closing fees or jacks the rate up to pad my own wallet. That being said, I do have several no money programs that I use when the need calls for it, and for good credit people I try to find a way for them not to pay PMI, which greatly drives up the cost of the mortgage.

Also, I know very few who has plan to faithfully make the payment for 30 years. The reality is if you buy a home for 250G anybody who lets the course ride will probably pay around 600G over the next thirty years. That's a rarity in our world anymore. The average person stays in the same mortgage for 3.5 years in Wisconsin, and moves every 6-7 years. And equity is built.

Secondly, your assumption is that the renter will do will do exactly what he should do with the money savings. And that simply is not reality. I consider myself very fiscally responsible; good credit....savings history....etc. But when my wife and I both worked and rented for the first couple years we pissed away money left and right. Because we could and we had no worries or real responsibilities.

Sure we could have been saving a ton of money in the world of idealists; but reality is we were living the high life and getting NOWHERE until we bought this little FSBO ranch for 96G, paid the mortgage down over 40% (refinancing to a lower rate and 15Yr in between) , and selling it for 120G six years later. That allowed us the downpayment to buy a much much bigger house with 20% down that we've now been in for three more years, and we've built up a lot more equity in this house .....while putting money away in stocks/mutuals and 401K and reaping the tax benefits as well as the equity position/ pride of homeownership as well.

Maybe your premise would apply to .5% of the population, but I think the growth in equity through home ownership can be realistically achieved by any Joe or Jane.

[retailguy]

Bretsky,

A few things. First, in no way was I implying that you'd do anything "unethical" or "seek" to sell something that someone didn't want. I have many friends who are mortgage brokers, some disagree with me on this, some understand my point. I don't see them as unscrupulous sales people, and they know that. I hope you do as well.

Second, when I'm talking about equity, I'm not talking about "equity" in tax return dollars, nor am I talking about a "standard" equity calculation. I'm talking "real" dollars. Over the term of the loan, you put X dollars into the house, and sell for Xplus dollars. Real dollars does minimize equity, and the "tax savings" for most people, especially those with children, is ridiculous.

Finally, you can't "force" people to save money. But, in my example, as unrealistic as you think it may be, that individual pays approximately 127% of the purchase price of the home in interest costs over the loan (6.5%) That same loan over 15 years pays 57% in interest costs. That is a HUGE difference for a couple hundred dollars per month. The difference directly affects the homeowners "equity" and could very well mean the difference between a "good" investment and a "terrible" investment.

Your PMI point is well taken, that is a LARGE part of the equation. For my information, what is the cost of PMI on zero down 150000 loan annually these days?

I understand about "equity" and don't disagree with that, however, I think I would calculate that equity quite differently than most.

Oh, and I do support buying homes. I recommend it to clients whenever I'm asked. I NEVER recommend a 30 year mortgage, for the very reasons you state in the above posts about whether or not people will actually save. If you give people the choice of variable mortgage payments, most choose the LEAST amount. That typically equates in my mind to "negative" savings.

[retailguy]

Sure we could have been saving a ton of money in the world of idealists; but reality is we were living the high life and getting NOWHERE until we bought this little FSBO ranch for 96G, paid the mortgage down over 40% (refinancing to a lower rate and 15Yr in between) , and selling it for 120G six years later. That allowed us the downpayment to buy a much much bigger house with 20% down that we've now been in for three more years, and we've built up a lot more equity in this house .....while putting money away in stocks/mutuals and 401K and reaping the tax benefits as well as the equity position/ pride of homeownership as well.

Maybe your premise would apply to .5% of the population, but I think the growth in equity through home ownership can be realistically achieved by any Joe or Jane.

B,

Paying a mortgage down 40% in six years is NOT something that any Joe or Jane would do. That takes "commitment" that most Jane's and Joe's don't have. Your "circumstances" are just a "unlikely" as mine. And, yes, you do build equity that way. How much equity would you have built, if you "just made the payment over those six years? See my point now?

I'll think of an example using the timeframe and dollar amounts you've stated. I'll give what I believe most would use as "profit" then tell you what I see the "profit" as. Maybe you'll see that my purpose was not to "attack" you or home buying, but to say primarily that most homebuyers believe the "bullshit" they are told from all angles. Most of it is just not true.

[Bretsky]

Sure we could have been saving a ton of money in the world of idealists; but reality is we were living the high life and getting NOWHERE until we bought this little FSBO ranch for 96G, paid the mortgage down over 40% (refinancing to a lower rate and 15Yr in between) , and selling it for 120G six years later. That allowed us the downpayment to buy a much much bigger house with 20% down that we've now been in for three more years, and we've built up a lot more equity in this house .....while putting money away in stocks/mutuals and 401K and reaping the tax benefits as well as the equity position/ pride of homeownership as well.

Maybe your premise would apply to .5% of the population, but I think the growth in equity through home ownership can be realistically achieved by any Joe or Jane.

B,

Paying a mortgage down 40% in six years is NOT something that any Joe or Jane would do. That takes "commitment" that most Jane's and Joe's don't have. Your "circumstances" are just a "unlikely" as mine. And, yes, you do build equity that way. How much equity would you have built, if you "just made the payment over those six years? See my point now?

I'll think of an example using the timeframe and dollar amounts you've stated. I'll give what I believe most would use as "profit" then tell you what I see the "profit" as. Maybe you'll see that my purpose was not to "attack" you or home buying, but to say primarily that most homebuyers believe the "bullshit" they are told from all angles. Most of it is just not true.

I didn't take it as an attack so my apologies if I came on too strong. And I do see your point of view; in general my feeling is that most people are not discliplined enough to execute nearly what you would suggest they do. Not sure I would be and I'm more disciplined than most.

On the other hand, most clients do just make the minimal payment rather than refinancing to cut down the term and paying extra on that each month. After thinking about it the term I began with a 15Yr Fixed, and refinanced to 10Yr's at a lower rate, and it took me 7 years to pay that down......but my wife and I had good jobs that allowed us to poor extra money into the mortgage. It was actually a bit painful to sell that house and buy the big boy that we have now with the term spread out to 30 again when we only had about 8 years left on the other.

With a no money down 150G loan, the PMI would be around $89, and that's assuming best case. PMI is scaled on tiers now for different risk levels so for a clean credit buyer it could be as low as $89 and as high as a couple hundred dollars for a rough deal through a mortgage broker.

Truth be told, experiences in my area have led me to believe there are many more shady mortgage brokers than good ones. I've been doing this for 4+ years and I've only come across two that I feel comfortable sending buyers to (if they can't get approved at a bank) in my area.

Gotta hit the hay, but I'm sure we'll debate a bit more.

BTW, got any hot stock picks ? I'm into the 401K and ROTH, but I have a small portion of money on the side that I almost consider my fun money.....hence I try to swing for the fence on those.


Cheers,
B

[GrnBay007]

Essentially, I do not believe that a "homeowner" who purchases a home on a 30 year mortgage with zero down and faithfully pays the payment for the entire 30 years has made an "investment". He's merely rented from his bank instead of a landlord, his bank made a profit, and he's lucky if he broke even in real dollars. Undoubtedly, he could have invested the difference between the mortgage payment, taxes and upkeep versus what he could have paid in "rent" in a good mutual fund and blown the doors off his return on the "house" he invested in.

So how much extra should be put on a mortgage payment each month? I know you will say ...as much as you can, but are there some general "rule of thumb" figures? I'm in my first year in my house. I pay extra every month....about enough to amount to a little over an extra payment a year. Is that amount going to make any great difference in the end?


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