energy followup.....

This weekend we have Cassie's last summer swim meet on Saturday and Sunday mornings, and then on Sunday night Morgan and I will be baptised down in La Jolla in the Pacific Ocean. We are really looking forward to it. Not sure, as it might be Cassie, but will try to have some pictures.

Yesterday's post about energy seemed to get many reads, and a few responses. One from Chris was questioning my thinking that $5 gas was a good thing in spurning on "green" alternatives. While there are many suffering because of the high fuel prices which in turn makes everything else more expensive, my comments were not to mean I'm glad they are suffering. My point is that we as a society seem to only really innovate when something else effects our wallets, and I mean that in the bad way (higher costs) and the "good" way (someone can make a buck). My hope is that gas prices drop below $3 a gallon, and in turn, other costs follow the downward trend. I don't think that is going to happen, but it is my hope. A bigger concern though arises from that scenario, and that is we cut back on our thoughts towards alternatives because $3 a gallon does not seem like a big deal. I don't want people to be choosing between gas and food, and I pray that people don't have to make that choice, but it is these tough times in America that usually bring about bigger and better changes. I hope as a nation we follow suit and repeat our record of making things better at the end of the tunnel.

He also mentioned his IRA and the housing market. While I did not mention anything about finances, he did, so I feel that I should/can follow up on his comments.

An IRA not doing well is something I hear from many of my clients. I get the "it's gone down, so I'm not investing anymore" excuse, quite a bit. My answer is "fine, it's your money and decision", but I always ask when did it go down, and has it gone down to where you have less than what you have invested. Nine out of ten times the answer is usually that it went down in the past couple of months, and virtually never have they lost their initial investment if they have been investing for more than 3 or 5 years. We are an American Idol, I want it now, society, and are investment strategies are falling into that trap. I am not sure where it was written that eight to ten percent growth each year was the norm, but people sure feel that way.

Take a large timeline snapshot of investments, and you will see a pretty steady average growth rate when looking at 20 or so years of numbers. Patience is needed with any and all investments. The economy always has its ups and downs, with history showing that there is more overall "up" than "down".

Now some might be "hissing" at me and asking what to I know. Is my family suffering? No, fortunately, my family has been blessed, and although we have tried to destroy ourselves financially (some would say), we have been patient, and not "knee jerk" in our ways. Will we be rich come retirement age? Probably not, but we will be OK, and to me that works just fine.

As for the last point about the housing market. I'm not even sure where to start. There is a ton of blame to go all around, but the first thing I will say is that I do not want to hear anyone cry out that they were forced into a home and mortgage anymore.

People were greedy, and it starts with home buyers thinking homes were going to keeping rising in value at ridiculous rates which made them go look for a home. Then when they did find one, it was usually more than they could afford, but then in came banks and mortgage brokers telling them that they would get them a loan that would "fit" them. Simple division, would have shown them that a $360,000 house with no money down and with no interest is still $1000 a month for 30 years. If that was OK, then add interest to the equation. Start with that teaser 2% interest and the payment is $1330 a month (before insurance and r/e taxes), but then even if the rate doubled to 4%, which is still low, it raises the monthly payment over $300. People were not thinking ahead, and if they were, it was that the $360,000 home would be worth $500,000 in five years. That's great, but unless you were selling or getting a raise, you were still not going to be able to afford the initial payments no matter how high the house value rose.

I am not discounting the fact that there were many crooks out there selling mortgage packages that were wrong, and selling them to people who were marginal loan applicants at best, but again, some simple math and taking a step back could have prevented many of these ills. If these brokers or banks falsified papers, or did other fraudulent acts, I believe they should be prosecuted and punished to the fullest extend.

Sorry, but again, there is no law stating an annual rate of return on real estate. Again, just look over an extended period of time, and you will see that real estate is a sound investment. Yes, prices are falling, but maybe they were too high when they reached their last peak. I know many used this "paper equity" as a piggy bank to take out loans for other items, and now they are upside down, but patience, and it will all come around. Again, this might be a "good" thing it making people think about saving and not overextending themselves the next time we are riding on the high side of the wave.

I don't want to get too much into this, as I try to keep these posts from making you fall asleep. Also, I want to please remind you that I do want all comments, good and bad, agree and disagree, and to not let this post discourage any comments or questions. It gets me thinking, and I appreciate a good "think".

I have been dealing with finances and hearing and seeing peoples money situations and investments for the past 20+ years. All, I'm saying is that these are tough times, and we will get through them. I know this all seems dire, but I think part of that is 24/7 news and stories about it. Actually these times are probably not the worse in the last 40 years. Go back to someone who was an adult in the early 1970's, and they will have stories of double digit unemployment, inflation, and mortgage rates. Plus, let's not forget the lines at the pumps for "every other day" gas fill ups, which brings us back to gasoline, which brings us full circle to the start of yesterday's rant.

- Your Olympic mention for today. You are watching?
- Hard times for Mrs. Fields. Maybe it's those $5 cookies.
- OK, why can't this Friend keep a man?

Until the next time.....
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