Families need to
invest in assets that increase in value over time and spend less on other
things. Investing in a single family home and paying it off in 15 years is the
best investment a family can make. When the mortgage is paid, families finally
have low cost housing and can use their money to improve and maintain their
homes. The other good investment includes a 401k Plan that is invested in
stocks.
Investments in stocks
was limited to a smaller number of investors from the 1900s to the 1980s.
The DOW average range
between 1900 and 1919 was 49.11 to 99.05. In 1920, more middle class families
bought stocks and the DOW average range between 1920 and 1930 was 71.95 to
307.01. In the 1930s, the DOW range was 41.23
to 244.20. In the 1940s, the DOW stabilized with a range between 112.77 and
200.52.
During the 1950s, the
US economy surged because the US infrastructure had escaped the damage of wars
and the DOW range had lifted to 239.92 to 679.36 In the 1960s, US prosperity
continued to expand with the DOW range between 615.89 and 969.26.
Inflation had ravaged
the US dollar from 1913 to 1969. The cost of a loaf of bread rose from 2 cents
a loaf to 50 cents a loaf. New Car
Prices went from $500 to $3000. Housing Prices
rose from $5000 to $30,000. But Wages had increased to match these living cost
increases. Inflation in the 1960s averaged 7% per year.
US inflation continued
from 1970 to 2018. The cost of a loaf of bread is now $2 - $4. New Car Prices
are in the $13,000 to $30,000 range. Housing Prices are in the $200,000 to
$300,000 range. A good household income
in 1970 was $20,000 per year, now it’s $100,000 per year.
The 1970s was a
transition to higher inflation. The DOW range was 632.04 to 1031.68 in the
1970s.
401k Plans were
introduced in 1978 to make investments in stocks easier for middle class wage
earners. The 401k plans allowed all wage earners the opportunity to add savings
to their retirement and this resulted in a massive expansion of the DOW range.
The Dow Jones Average
on 12/31/79 was 838.74. On 12/31/80 it was 963.99. By 12/31/83 it was 1,258.64.
By 12/30/88 it was
2,168.57.
The DOW under Reagan
had increased by 250% from 1979 to 1988. Reagan had cut taxes and regulations
and caused an economic resurgence in the US led by the US electronics
industries. Reagan ended the Cold War and the US was set to concentrate on the
economy.
In the 1990s, the
economy continued to expand. By 12/31/99, the DOW was 11,497.12.
In the 2000s, US jobs
were off-shored and US household incomes were lower due to the loss of middle
class jobs.
The DOW averages from
1990 to 2018 show the results of the 401k Plans with millions of additional
investors in the stock market. The stock market took a 700 point hit in 2000
and a 2000 point hit with the recession in 2002 and a 4500 point hit with the
Mortgage Meltdown in 2008.
The DOW closed at
2,633.66 on 12/31/90
The DOW closed at
3,168.33 on 12/31/91
The DOW closed at
3,301.11 on 12/31/92
The DOW closed at
3,754.09 on 12/31/93
The DOW closed at
3,834.44 on 12/30/94
The DOW closed at
5,117.12 on 12/31/95
The DOW closed at
6,448.27 on 12/31/96
The DOW closed at
7,908.25 on 12/31/97
The DOW closed at
9,181.43 on 12/31/98
The DOW closed at
11,497.12 on 12/31/99
The DOW closed at
10,787.99 on 12/29/00
The DOW closed at
10,021.57 on 12/31/01
The DOW closed at
8341.63 on 12/31/02
The DOW closed at
10,453.92 on 12/31/03
The DOW closed at
10,783.01 on 12/31/04
The DOW closed at
10,717.50 on 12/30/05
The DOW closed at
12,463.15 on 12/31/06
The DOW closed at
13,264.82 on 12/31/07
The DOW closed at
8,776.39 on 12/31/08
The DOW closed at
10,428.05 on 12/31/09
The DOW closed at
11,577.31 on 12/31/10
The DOW closed at
12,217.56 on 12/30/11
The DOW closed at
13,104.14 on 12/31/12
The DOW closed at
16,576.66 on 12/31/13
The DOW closed at
17,823.07 on 12/31/14
The DOW closed at
17,425.03 on 12/31/15
The DOW closed at
19,762.60 on 12/30/16.
The DOW closed at
24,719.22 on 12/29/17
The DOW closed at
25,313.14 on 8/10/18.
US fixed rate
investments were decent from the 1950s through the 1960s, but interest rates were
generally low in the 4% range. The
government spending triggered by the Vietnam War and Lyndon Johnson’s Poverty
Program resulted in massive federal debt that turned into inflation in the
1970s through 1990s that was generally high in the 7% to 13% range. Borrowing
costs soared, but fixed rate investments in mortgage lending also soared to the
10% range.
Norb Leahy, Dunwoody
GA Tea Party Leader
No comments:
Post a Comment