JoeTaxpayer

Seems like yesterday, but it was 516 years ago…..

Enjoy the holiday.
Joe

In the classic Christmas song Winter Wonderland there is a line, “it will nearly be like a picture print by Currier and Ives.” Well, the times we are in now, are in fact, just that. Just perhaps not the scene that song was alluding to.

This print is from 1875. Will we ever learn?
Joe

The Palin’s income for 2007 was revealed to us as being $166,080. During the Vice-Presidential debate this past week, she referred to her and her husband as being ‘middle class’. “$166K middle class”, I asked myself, about to embark on how disconnected all politicians appear to be. Then I asked myself the next logical question, “Where does middle class end and upper class begin?” An entry in Wikipedia offers us that “The American upper class is estimated to constitute less than 1% of the population, while the remaining 99% of the population is ‘Steerage/Under class.’ ” To join the top 1% of households from an income perspective would take about $350K/yr. So by this definition, the Palins are indeed middle class. She does get credit for knowing the precise number of houses she owns.

Joe

If you have not yet done so, please read part 1, part 2, part 3, and part 4 of this series first, then read on.

As I discussed a couple weeks back, we are to believe that the use of a HELOC (Home Equity Line of Credit) can somehow help accelerate the paydown of our mortgage.

MMA ‘magic’ comes from turning one’s idle cash at zero interest in their checking account to yield the same as their mortgage, right? And the HELOC shuffle is merely to make up the difference from ‘average balance’ to maximum balance in the checking account.

From there, the math is simple.
Following the standard 6% example, with a 10.4 year payback, the $3500 cost for the program is $37.77/mo or $453/yr. Since that fee becomes part of the debt, there’s no disputing this, right? This is only $4713 for the whole time, not like I’m backending to pay the fee in the last months, in which case I’d claim $6415, or I could use the same math the agents do to show how $250 shoes really cost $1500, and show that the $3500 fee really costs $20,157. (But I’d never suggest that.)

Now, let’s ask, what is the maximum money that can be extracted using this plan? Simple, right? $5000 is the monthly cash flow. If I concede that the sophisticated algorithms and precise monthly timing can simply make the $5000 earn 6%, well, that’s $300/yr, no? And isn’t that the [absurd] maximum that can ever happen? $5000 goes to the mortgage on day one. All bills are due on day 31, but by the time the checks clear, the HELOC has accrued no interest, and that $5000 has effectively earned 6% through the year.

So to summarize;
The logical, mathematical limit of HELOC gain is $300/yr.
The cost of MMA is $453/yr.

quod erat demonstrandum

(Note: the above post was the concept that grew into my guest post on Tracy Coenen’s site, the Fraud Files blog, if you wish, you can read the longer, more detailed, article there)

Next week – some more MMA hyperbole and obfuscation, not to mention the smoke or the mirrors.

Joe