Welcome to StkyTreat

[jiesen]

Ok for over a month one every one was afraid and hoping the feds would not raised rates but we all knew that they would. So the market took a nose drive. This I understand.

When a rate increase was announced as expected, the market took off like bat out of hell. I don’t understand? Are they looking at the future of a no rate increase?

Can someone help me out in a nut shell explain in 9th grade English? Thanks

Ok, well it looks like you got a lot of people pointing you in the right direction, but still nobody willing to tackle your whole post point by point yet, so I'll give it my best shot... but you are asking some very good, and tough questions, so I'm relying on the rest of you out there to stop and correct me when I start spewing the bs.

First of all, yes the market is looking forward, as it always does. News tends to be priced in, and when a particular news item's been expected for awhile, there's about as good a chance that the price of the security/bond/commodity in question will move in the opposite direction you'd have thought it would in response to the news being announced as it would in the "correct" direction.

Interest rates, though fixed at certain points, are really just a guide. Bonds trade by the laws of supply and demand, just like anything else that can be traded on an open exchange. And the current rate is a reflection of that equilibrium of trade of whatever bond is in question. And the rates can and will move in anticipation of future market forces, like the fed hiking, stopping, or in-out flows of money.

Ok Ok before the increased to day of a quarter point, the interest rate was 5%. I saw bank advisements of home loans at 6.29 to 7%. I called a few banks and no one wanted to explain to me because I sound young many service people told me. Those stupid people thought I was pranking calls or maybe they didn’t know themselves.

Rates for different types of loans are different based on a number of factors, including risk. The bank will not loan money to you at the same rate it borrows (usually) because it's taking on the risk that you won't pay it back, and needs the spread as profit to keep it in business. The riskier the loan is, the higher the rate is likely to be. Pretty logical there.

So I walked the credit union by my house and I had a nice lady who spent her lunch time trying to explain to me. I understand the process of getting a home or car loan. But she didn’t explain why the rates are higher then what the fed sets it at.

I guess she has a hard time figuring out where her paycheck comes from, eh?

Since I’m on the subject of home loan, how come a person buying a house if they do not have 20% for a down payment must have a second for PMI or PIM (I forget)?

When you get a loan, it should be for less than the bank could sell your collateral in case you default. Otherwise the bank would be taking the risk of losing some principal. That's not a wise move for the bank. Ususally to account for the possibility that real estate prices may fall, or your house could actually be worth a bit less than you thought it was, they insist you have at least 20% equity in the home (meaning you can only borrow 80%). If you want to borrow more than that, it's fine, as long as you pay for the risk, and the bank doesn't. They make you do this by forcing you to buy PMI, (Private Mortgage Insurance), which will pay the bank that difference in principal if you default and they are unable to get the 100% of their principal back on the foreclosure. Usually, when people go in on a loan with PMI, they believe that they'll be able to quit paying it in a few years, either by paying down that 20% of principal quickly, or getting another appraisal after property values have gone up. Betting on the direction of a market with money you don't have, though, usually turns out to be a bad idea.

Why is the second loan much higher than the first loan and the amount are smaller?

Again, the risk is low that a bank will lose out on a loan that's only 80% of the value of a home, since prices tend not to drop 20% very often. The second loan, though, is likely to use up much of that 20% buffer and greatly increase the risk to the bank. Ergo, higher rates.

So after a person gets the two loans after a year or how long it takes combine those two loans into one at a lower rate?

Depends on how well he keeps up his credit rating, and how quickly his equity grows. And it depends on the market in home loans. Sometimes it's easy to find people willing to make a better loan (when rates are low) and sometimes it's really tough (when rates are high). Every time the Fed increases rates, people/banks hold on tighter to their cash to get that higher risk-free return, and money gets tougher to borrow.

Is this the best time to buy a house? I notice the new homes in my area have lower their prices. I think that since the price of a home is low (fixed) but interest rate is high it’s a better deal then buying a house at a higher price with low interest rates. My thinking is that if you buy a house when the price is low and can’t be changed but the interest rate can always go lower at some point. But with a price is higher is fixed and you can’t change it.

The best time to buy a house is
1) when you can afford it AND
2) when you need it

I know you don't need a house yet, so don't worry about the real estate market. But it's never too early to start saving up for a downpayment on one. And yes, the prices and interest rates fluctuate inversely, somewhat dampening the effects of each other on the homebuyer's total cash outlay.

If the interest is was 5% then how come home loans, car loans, especially credit card rates are higher up to 22%?

Credit cards are unsecured, so if you don't pay it, there's really nothing the bank can do to get the money from you other than put you on a do-not-lend list. Generally, these are the riskiest loans out there that the banks will make, and so charge the highest rates. Car loans are almost as bad, since on a repo they only can get back maybe half of what they lent, if they're lucky.

I hope I was able to explain a few things to you that you didn't already know. I think it's great you're learning about these things so early. It takes most people learning these lessons the hard and costly way.

Now go and read all those books everyone else was talking about.

[New-born baby]

They do laundry, too.

Hey, Sticky, this page may have the answers you're looking for. This is a great site for information on all kinds of stuff. And it's presented in a fairly easy-to-understand format. Check it out.

Rob,
That's not all banks do for money. They also do laundry. But I didn't see on your link how banks
launder money. .

Sticky, did you buy that book I recommended to you a couple of months ago? It answers all your questions and more. Try reading it before you drive yourself crazy.

[Rob]

Hey, Sticky, this page may have the answers you're looking for. This is a great site for information on all kinds of stuff. And it's presented in a fairly easy-to-understand format. Check it out.

[Lyehopper]

Sticky.... You might just make it dude!....jejeje

[JohnHenry]

FED questions

Ok for over a month one every one was afraid and hoping the feds would not raised rates but we all knew that they would. So the market took a nose drive. This I understand.

When a rate increase was announced as expected, the market took off like bat out of hell. I don’t understand? Are they looking at the future of a no rate increase?

Ok Ok before the increased to day of a quarter point, the interest rate was 5%. I saw bank advisements of home loans at 6.29 to 7%. I called a few banks and no one wanted to explain to me because I sound young many service people told me. Those stupid people thought I was pranking calls or maybe they didn’t know themselves.

So I walked the credit union by my house and I had a nice lady who spent her lunch time trying to explain to me. I understand the process of getting a home or car loan. But she didn’t explain why the rates are higher then what the fed sets it at.

Since I’m on the subject of home loan, how come a person buying a house if they do not have 20% for a down payment must have a second for PMI or PIM (I forget)?

Why is the second loan much higher than the first loan and the amount are smaller?

So after a person gets the two loans after a year or how long it takes combine those two loans into one at a lower rate?

Is this the best time to buy a house? I notice the new homes in my area have lower their prices. I think that since the price of a home is low (fixed) but interest rate is high it’s a better deal then buying a house at a higher price with low interest rates. My thinking is that if you buy a house when the price is low and can’t be changed but the interest rate can always go lower at some point. But with a price is higher is fixed and you can’t change it.

If the interest is was 5% then how come home loans, car loans, especially credit card rates are higher up to 22%?

Can someone help me out in a nut shell explain in 9th grade English? Thanks

[Rob]

Is it a good sign when the price of a stock jumps up one point or more on low volume (below its avg. vol.)?

Not necessarily, but neither is it necessarily bad.

The same when the stock price declines one point or more on low volume (below its avg. vol.)? Thanks

Same thing.

Obviously every long on a particular stock would like to see price appreciations accompanied by huge volume. What may foreshadown a short-term sell-off is when you see big gains in price per share on very low volume. Each stock may establish a recognizable pattern of behavior over time, and you sort of get to know intuitively what to expect after you've watched that pattern repeat many times over a few years. Ask Lyehopper; I know that's one of the things he firmly believes in.

[JohnHenry]

Price Jump/Decline with low Vol

Hi

Is it a good sign when the price of a stock jumps up one point or more on low volume (below its avg. vol.)?

The same when the stock price declines one point or more on low volume (below its avg. vol.)? Thanks

[jiesen]

Hi Jiesen

I saw you in the BRKA room talking about Roth IRA. I can’t open a Roth or an IRA until I am a legal age to work. I think that age is 15.5 with a work permit or 16 without a work permit. I found that I could invest as little as $25 to TIAA CREF funds. I don’t know it they are good until I do more research but I think it doesn’t matter because time is my friend with the Roth. Do you have suggestions? Thanks

Well, a Roth IRA is an excellent way to avoid being taxed out of your investment gains, in the long run. I highly recommend opening one, as soon as you're able to. If that means waiting a year or two, so be it. It also means you'll need to get a job, if just part time. The great thing about the Roth is the government can't touch your investment gains, since the money you put in has already been taxed when you earned it. So if you are able to grow your $4000 to $400,000 over 40 years, it's all yours.

Now, just because it's a great way to save doesn't mean you have to run out and open one right away. I don't recommend you selling your investments you have now just so you can put the money in a Roth, it really should be money you earn yourself. So get a job first, and if that means taking some shop classes to get some job skills, or if it means getting your EE degree first, do whatever you need to, and make sure you can earn enough to be able to put away a few thousand every year into your Roth. A small but disciplined savings plan will make a HUGE difference in the long run, especially over the timeframe you've got ahead of you.

As for the math question, go ahead and shoot. I'll give it a try, as I used to be a pretty decent math nerd myself back in the day, and I'm sure if I screw it up, there are plenty of other nerds lurking here who'd be more than happy to point out my errors. Just don't ask me anything about gauge theory or diffeomorphisms.

[Lyehopper]

(Are there any math people in here?) To ask question on the subject? Thanks

I'm more a "metal shop dude" Sticky.... Ya wanna talk about single-point cutting of double-reverse Acme threads in stainless steel on a manual engine lathe using an offhand ground highspeed steel cutting tool? I can do that.... But I'm no advanced math guy (wish In were).... Hey, maybe IIC, Jiesen or Rockin'Rob can talk math with you.

btw.... Do they offer "Machine Shop" as a vocational curriculum at your high school?.... I was on the advisory board (Corp Advisor) at our local Votech school. The goal of the Corp advisors was to communicate to the school what industry needed from new students as they were brought through the program. My biggest complaint was the quality of students taking Machine Shop. When I was in school (North Carolina 78-81) there seemed to be a decent bunch of (generally smart) guys signing up for the vocational classes. But in this particular school they could only get the misfits and basic idiots into these programs. I wanted to recruit good solid math students from the 8th and 9th grade levels and talk to them about taking Machine Shop. Of course the guidance counselors never would do that, they'd rather encourage a solid student to become an unemploy'd marine biologist and make $18k for the rest of their life.lol....

Here's an idea for you Sticky. Do some research on the dying art of "Tool and Die Making". I would guess that the average age of skilled Tool Makers is about 55+ years old right now. There's big money in the trade both as an employee and as a business owner.... And.... An experienced (hands on) CNC machinist that also has a Mechanical Engineering degree?... Is VERY VERY rare dude!.... btw, I started working in a machine shop when I was just 15 in 1978.... Just a thought.

[JohnHenry]

Roth IRA

Hi Jiesen

I saw you in the BRKA room talking about Roth IRA. I can’t open a Roth or an IRA until I am a legal age to work. I think that age is 15.5 with a work permit or 16 without a work permit. I found that I could invest as little as $25 to TIAA CREF funds. I don’t know it they are good until I do more research but I think it doesn’t matter because time is my friend with the Roth. Do you have suggestions? Thanks

[JohnHenry]

Are there any Math people in here?

To ask question on the subject? Thanks

[JohnHenry]

Pascal’s Triangle

In algebra the instructor(s) teach us how to expand (x+y)^4.


(x+y)^4

=(x+y)^2 * (x+y)^2

=x^4 + 4x^3y + 6x^2y2 + 4xy^3 + y^4.

This is a longer way and I understand it’s for the thinking process but why not also show Pascal’s Triangle?

SEE JPG...how do I attach a jpg into the body?


With (x+y)^n, n equal the row (row n)

(x+y)^4, just look at row 4 and pug in X starting from n and decreasing to zero.
Y starting from zero increasing to n, to get the answers (see below) I think this is easiest.

1x^4y^0 + 4x^3y^1 + 6x^2y^2 + 4x^1y^3 + 1x^0y^4…same answer as above.

This also works for probability of finding four fair toss coins, what’s the probability of three heads?

Use the triangle and look at row 4, add up 1+4+6+6+1 to get 16.
Replacing x for heads (H) and y for tails (T)..getting

1 4 6 6 1
4H 3H 2H 1H 0H
The probability of three heads is 4/16 = ¼. Sorry if my explaining is not clear.
I need to learn how to put my thought on paper.

Thanks for your feedback.

For example, I owe ABC Company, the IPO price is $10 with one million outstanding shares. sold. The company or I get $10 million dollar once the shares are sold to re-invest?

Once that IPO has sold the company doesn’t not get any more incoming revenues from selling the shares, the shares are traded between the traders once they are sold?

If the asking price is $1 and sell price is $0.95, where did the nickel go and who gets to keep it?

I have XYZ shares and want to sell all of them, do I have to have wait for a buyer to buy them from me or I place a sell order and my broke takes care of them for me?

Thanks for your inputs.

The answer to all these questions and many more can be found in, "The Wall Street Journal Guide to Understanding Money and Investments," by Kenneth Morris. It's available at Amazon.

[JohnHenry]

IPO Question

For example, I owe ABC Company, the IPO price is $10 with one million outstanding shares. sold. The company or I get $10 million dollar once the shares are sold to re-invest?

Once that IPO has sold the company doesn’t not get any more incoming revenues from selling the shares, the shares are traded between the traders once they are sold?

If the asking price is $1 and sell price is $0.95, where did the nickel go and who gets to keep it?

I have XYZ shares and want to sell all of them, do I have to have wait for a buyer to buy them from me or I place a sell order and my broke takes care of them for me?

Thanks for your inputs.