Investors have a history of herding their money on to
“greener pastures”. This results in a roller-coaster ride that creates wide
swings in investment values. When interest rates were high due to inflation in
the 1970s, investors bought fixed interest investments to get earnings over 7%.
Mortgage interest topped out at 13% in the 1980s and began
to drop through the 1990s. Stocks languished through the 1960s and 1970s, but
In the 1980s, stocks began to move up and fixed rates began to drop. Stocks
out-performed fixed rate investments in the 1990s, but middle-class jobs were
moved overseas and household incomes began to drop. Mortgage interest rates
declined in the 1990s to 10% and then 7% and moved lower in the 2000s and 2010s
to the 3-4% levels we had in the 1950s and early 1960s. Money printing for
“quantitative easing” in the years between 2008 and 2012 provided free cash for
the banks to lend to “day traders” to keep the stock market propped up.
Inflation over the past 60 years we’ve seen prices of homes
increase from $30,000 to $300,000. Home prices in 1900 were closer to
$5000. Automobiles in the 1960s sold in
the $2000 to $3000 range and now new cars cost from $20,000 to $50,000. A good
family income in the 1960s was $10,000 a year and now it’s $100,000 a year. The
cost of a loaf of bread in 1900 was 2 cents and now bread is $3 a loaf.
Inflation in the US declined along with the drop in household incomes. Interest
rates have flat-lined at 3% for a decade and won’t move until consumers and
governments can afford for it to move up. Household debt is at $17 trillion and
needs to be reduced. Homeowners who can convert to a 15 year mortgage loan
should do this now.
Every move in our economy offers “false flags”. Companies
in the Apartment business suggested that home values would decline, but they
didn’t. Companies that sell Gold and Silver continue to advertise it despite
the fact that their prices are stuck in a flat-line and the Fed is clawing back
their 450% increase in the money supply.
Our largest Corporations are planning big cost reductions
to stay alive. They also need to attend to consumer discontent. Consumers don’t
like companies usurping voters to lobby for laws that benefit the companies at
the expense of the voters or imposing their political views. Many of the
companies that were big in the 1960s have been absorbed into conglomerates and
some have gone out of business.
A home is an investment that appreciates in value over
time. We were married at age 21 in 1964. We bought a 4 bedroom ranch with a
basement on a 1 acre lot in a subdivision in St. Charles County Mo in 1966; we
were 23 years old. It was a 6 year old home next door to my brother and was
heading for foreclosure. I paid the seller’s $700 in back taxes and assumed his
4% loan balance of $16,000. We lived
there for 9 years, fixed it up and sold it for $36,000. We moved to Kansas in 1975 and we bought a 4
year old two story, 4 bedroom home in a subdivision in Salina Ks for $55,000.
We sold it for $85,000 in 1983. We moved to Atlanta GA in 1983 and bought a
large two story 6 bedroom home in Dunwoody for $133,000. The mortgage interest
was 13%. We refinanced that loan to 10% and again at 7% with a 15 year
mortgage. We paid it off in 2003 and remain there today. That home is now, in 2017
worth about $600,000. Home ownership requires maintenance, so you need to
preserve buckets of money to replace roofs, sewer lines, driveways, HVAC units
and other mechanicals. If you buy right and sell right, you will recoup your
entire cost of home ownership including interest costs.
I kept my TIAA $5800 balance in fixed income in 1975 and by
2015, in 40 years that $5800 had grown to $90,000. I signed up for a 401K in
the 1980s and transferred the 401K to a SEP in 1993 in the Vanguard 500 Index
that produced about $200,000. I worked as a Personnel Director and Consultant
and my wife worked as a Dental Hygienist from 1986 to 2017. We took Social
Security in 2009, but continued to work part-time until 2017. I started to wind
down my private consulting practice after the 2008 Meltdown. My wife went from
4 days a week to 2 days and 1 day and then to be an “on-call” fill-in Hygienist
for two dental offices. We are now age
74 and have more time to spend time with our 6 kids, 13 grandkids and 2 great
grandkids, friends and each other. We did our world traveling throughout our
marriage.
We have time to reflect and be grateful. We came from great
families and had great educations. We enjoyed the jobs we had in high school. I
started my own Rock Band in 1957. I was 14 and played 3 nights a week through
high school. Then I joined a Blues Band and played 6 nights a week through
college. I graduated and went to work in 1965, but continued my music career. I
joined a Jazz Trio and played weekends until 1975. We had careers we loved during a very
prosperous time.
Norb
Leahy, Dunwoody GA Tea Party Leader
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