Financial Education

DawgsCanDance said:

HFNY said:

Do they teach shop in high school anymore anywhere? Become an electrician or plumber and start you own company after 5-10 years working for someone else. Probably could stop being in the field (if you want) at 45-50.

As for real assets, so much is about interest rates. Nothing will put downward pressure on stocks, bond holdings, and real estate like the 10 year yield continuing to climb. The Fed could be in a very tricky place come May.

Agree... great tradespeople are always in short supply.... and running your own plumbing /electrical / skilled trade business currently is a way to earn 200+ a year if you are a dedicated and ethical tradesman that everyone can count on to be on time, ethical and a beacon on perfect work. If you are the best at what you do, and there is a balance or small shortage in favor of suppliers, you will find very little competition and be well paid.

Regarding the real estate ride, i agree, the ride down from 14% [in 1980, like everyone else that was scrambling to get in to move up to that statement 2nd purchase house in their life at that time, I was writing 14% interest only real estate contracts with a 5 year balloon payment in order to buy] has been spectacular because there is an inverse relationship of affordability tied to real estate that makes it seem like real estate ALWAYS goes up no matter what.

The problem as @HFNY and many others have stated, is that what we have seen is a steadily decreasing 10 and 30 year treasury bond rate [which has steadily improved affordability in terms of inflated dollars] that is the proxy for being able to pass through and lay off risk via mortgage backed bonds ever since the peak in 1980.

The fact that the inverse relationship between the rising prices due to increased buying power per dollar is an automatic phenomenon has created the inherently false impression that real estate is always a safe haven for assets that you need to continue to grow to protect capital and maintain liquidity. For the last 40 years Western culture has grown up with the fact that this is a law of physics, and in more modern times have believed through observation that the real estate they own is an ATM that allows them to refinance and pull out equity capital as needed in order to shoulder tougher times.

This available liquidity has been an often underappreciated key driving force behind our increasing personal and collective Gross Domestic Product. Simply put, we take it for granted that it will always be that way. This is the greater fool theory at work in its full expression.

Once the period specific shortfall in demand for limited supply becomes satisfied, when the progressive effect of the pending reversal of affordability is combined with the automatically created trough of new household formation rate which has been created by the demographic decline in the people having fewer kids that began 30-40 years ago, the obvious outcome will be a sideways to downward slanting trend of sustainably lower longer term pricing.

Even though the outcome is staring people in the face, it will take people an extended period of time to believe it simply because the opposite has always been so.




The effect will become a progressively more obvious fiscal GDP crisis of importance because of the seemingly alien effects of decreased liquidity which ripples through the economy, and the resulting lower tax revenue over time.