Doubling down to bankruptcy

I had to share a quote from Annette Haddad's story in this morning's Los Angeles Times on July home sales and prices in Southern California.

The quote, a paraphrase really, comes from homebuyer Dale Smet of Santa Clarita. Haddad writes: "Smet, who works in marketing for Southern California Gas Co., said he carefully conserved an equity line of credit during the boom years, which he tapped to pay $300,000 cash last month for two foreclosed condos near his house."

She goes on: "After a 15-day escrow, Smet did the necessary cosmetic repairs himself and said he had no trouble finding renters willing to pay about $1,500 a month for each unit. He hopes eventually to take a first mortgage on each with monthly payments that he figures would be less than his rental income."

O.M.F.G.

"[H]e carefully conserved an equity line of credit" (emphasis mine). What the heck does that mean? I think it means that this gambler borrowed 300 large against the value of some other property, then used that loan to buy a couple condos against which he now plans to borrow again.

This reminds me of a blackjack player on a losing streak who keeps doubling down in the hopes of scoring a big win to get back in the black. Casinos luuuuuuve these guys, 'cause they almost always end up broke.

Just like people who borrow against depreciating assets to buy... more depreciating assets.

Robert Niles also can be found at http://www.themeparkinsider.com