Tuesday, October 07, 2008

Where To From Here?

Right now we are beginning to see the effects of the economy grinding to a halt. It is controlled by the financial interaction of the markets. The real estate industry is unemployed as are the homebuilder and it is spreading throughout the country.

Don’t for a minute think that government can fix this mess. It doesn’t work that way. Picture your wife paying the monthly bills year in and year out. That’s our government in action. Now when the husband tells the wife he has lost the house, don’t expect her to come up with some plan to save the family home. That’s just not the role of government.

There is no problem starting over if you are young, but that may not be the case for a lot of us. Today the government said that retirement funds have lost over two trillion dollars already. The stock market is getting a little bit green behind the gills. I hear pundits say “Don’t panic and sell and get out of the market you’ll lose money when it goes up.” It makes me think; maybe these guys were selling real estate two years ago. Greed will get you every time ("Stay in there, you’re going to get rich").

What happens from here? Things are going to get a lot worse. If you have expensive toys, unload them now, prices are going to drop fast on items like big boats ("yachts" if you paid more than a $1,000 a foot). Try to keep living in the home you occupy even if you are upside down, the banks will probably welcome you as a renter while they go through the foreclosure process (that could be two years of low rent). The schools offer free lunch programs for your kids.

Sadly you can’t believe anything that the government tells you. We know that we are about to lose a lot of our saving. So if we diversify into different things, we have a chance of limiting our losses. The trouble is, we have an awful lot of people with nothing to lose already (they’re already broke). That is the scary thing that we are facing.

Where to from here? Congress will finally "grow up" and rewrite Social Security and Health Care benefits. It ain't going to be more, but less. The silver foxes will get a free walker and a life time bus pass. Life is funny, it seems like just yesterday that I could hardly wait until I turned 18 to buy beer. Now I can cry in it with sincerity.

Copyright 2008 All rights reserved


Anonymous said...


Thanks for your website and the clarity in which you predicted and continue to describe the pain unfolding. From your website and others like it, I took the necessary steps a couple of years ago to protect myself financially for the tough years ahead of us.

I watched the second debate between McCain and Obama tonight and unfortunately, neither one have an answer to your $700bn question either (Where to From Here?).

I have heard that history does not necessarily repeat itself, but merely rhymes with it. Those who have studied the past will survive the tough times ahead. Those who have ignore the warning signs will be severely schooled in capitalism.

If you have children, understand that you will have no control over what happens in the next 10 years to you personally... but that it will be your responsibility to educate them to the point that they may save themselves and future generations.

HOPE will get you only so far. CASH-IN-HAND will be what gets you the rest of the way!


Anonymous said...

I've got a solution. Liquidate everything: stocks, bonds, house, 2nd cars, toys, etc.
Use the cash to buy one or two multi-family rental properties and set them up with good property managers. Buy them free and clear or at very small leverage (so you can lower rents as needed without worry of not being able to carry the NOI). Move to Mexico, Costa Rica, etc. and live on your USD like a king.

Anonymous said...

I am a first time poster on this site. I look forward to new posts and appreciate the plain spoken explanations of what is going on right now in economy. I live in Canada and people here are unbelievable smug about situation saying that it won't happen here. It shows the complete disconnect most have with what is going on. Keep up the good work.



Jim in San Marcos said...

Hi Tom

I'm glad us bloggers could be of some help.

I can't stand to watch the political debates. Everything is so simple, the other guy is lying.It pretty much boils down to a popularity contest. I do think that in the Congressional races, people will be voting their wallet this election.

As for educating our kids about this mess, I have a quote hanging on my monitor that I picked up from somewhere, "The easiest way to teach your children about money, is for you not to have any."

Your remark "CASH-IN-HAND" makes me wonder if credit cards could dissapear. The next few years could prove very entertaining.

Glad you like the blog. Thank you for your comments

Jim in San Marcos said...

Hi Anon 3:31

Which house of Congress are you going to run for? You might just get elected;>)

Jim in San Marcos said...


Canada is a little slow to the party. The housing boom ended a little late there. I remember reading about housing in Vancouver being hot 6 months ago, it really mystified me at the time.

Plus Canadian money is now on par with our currency (we tend to use and awful lot of green ink and paper here).

You might get more than a cold winter this year.

Thank you for your comments and the ata boy.

Anonymous said...

It looks like the depression has actually begun.

Take out your chart. Mark the date when the Great Depression started. Watch the patterns. The Great Depression started with a huge plunge and set off a series of other events along the way. The stock market did not bottom out on day 1. I think that people are searching for the big bang and the big bang was a series of several smaller bangs beginning last Friday.

Friday, Monday, Tuesday, Wednesday - from 10,800 to 9,300. It's already started. Of course, if the general public is still "looking for a recession" that began at least 10 months ago, the landing is going to be the hardest they have ever faced.

Anonymous said...


Fortunately for me I live on other coast on Nova Scotia and economy here has been flat since about 1920with a few exceptional years along way. I do think that this should protect us somewhat and most people here actually own there houses. The biggest bust, as I see it, will happen in Alberta. The place is going thru boom caused by oil production. This is the reason for the strength of our dollar. Lately however, our currency is dropping back a bit. This should give us pause in Canada to stare into abyss along with everyone else.