I have a friend.
His name is Jake.
Jake and I discuss a multitude of things, he tuned me into a lot of worldview and objective rationale issues I struggled with. Jake shoots straight, his depth of knowledge on political and financial issues in our world is vast. I'm not trying to boost his ego, because occasionally he sounds batshit insane. Here's the real issue.
He usually isn't wrong when the dust settles.*
sometimes though he's out of pocket. He apologizes, we move on.
We haven't discussed much lately as I've been working nights, but he has been lining my Discord inbox with a bunch of posting about HELOC, or Home Equality Lines of Credit. I am a knowledgeable individual, not a smart man. So I will try to break it down for you as simply as possible.
People purchased houses at excellent prices and using sound practices, these houses SKYFUCKINGROCKETED in value. Banks, being in ever more need of money to further the endeavor of making the rich white dinosaurs in a closed room more wealthy had a brilliant play.
Let's get these dumb fucks sitting on untapped gold mines to use HELOC and create "generational wealth" by property acquisition.
Step 1. Give notice of HELOC potential to Property Owner with unrealistic equity in a batshit insane market
Step 2. They bite, and get it
Step 3. Shop and find property, use HELOC finances to purchase downpayment on home
Step 4. Rent this property and use the income to pay the HELOC back...
THIS IS THE LAST RATIONAL STEP IN THIS PROCESS. THIS WAS A SOUND DECISION ON PAPER... (Barring interest rate adjustments, which is when it gets stupid scary.)
Step 5. Now you have 2 properties, HELOC is getting paid, sick.
Step 6. Some crooked fucking realtor convinces you to HELOC the new property and first property for a THIRD PROPERTY.
Step 7. Income is coming in, paying them HELOCS. The Feelgoods maximum speed.
This is when we enter into present day. The Fed is not fond of Inflation at this rate and tweaks interest rates, and your HELOCS are adjustable rate. that 3.25% is now 3.5% and it looks like rises are coming. Guess what? AT ANY TIME THE BANK CAN SAY THEY ARE UNCOMFORTABLE WITH THE LIQUIDITY AND DEMAND THE ASSET FORFEIT TO COVER THE EQUITY. HOUSES PRICES TUMBLE. YOU OVER LEVERAGED SO FUCKING BADLY, IT IS GAME THE FUCK OVER.
Welcome to The Big Short Round 2: No one wins.
This post is is short. My advice to you is pad those savings accounts, don't buy property, get your assets in liquid cash, prepare for a shitstorm. I may be wrong. I sure as shit don't think I am.
Thank you, this is my TED Talk.
The only way to fix it is to flush it all away Any fucking time, any fucking day Learn to swim, I'll see you down in Arizona bay
Fret for your figure and Fret for your latte and Fret for your lawsuit and Fret for your hairpiece and Fret for your Prozac and Fret for your pilot and Fret for your contract and Fret for your car
It's a Bullshit three-ring Circus sideshow of Freaks
You're gonna carry that weight.