There’s a difference between reading about the national housing crisis in the newspaper and actually seeing one of your neighbors lose their home. That’s just what occurred two doors down from us.
My neighbor, a hardworking guy with a nice family did what he thought was the right thing at the time. After all it was 2004 and with local real estate prices spiraling upward, it seemed to him that it was now or never to own a piece of California real estate. He plunked down most of his savings for the down payment and fatefully was directed to an “option ARM mortgage” (which as early as 2006, were referred to in Business Week as a “nightmare mortgage“). In addition, he didn’t quite have enough for the down payment and borrowed the remaining amount from a family member.
Voters in the state of California spoke loudly and angrily last Tuesday. After years of convoluted budget fixes, exotic borrowing schemes and skirting tough issues, Californians just said “no” to another series of band-aid fiscal ballot measures that just seemed like more of the same. Voter frustration has risen to such new levels that now there is even a movement to completely rewrite the State’s constitution to prevent the politicians from operating like credit drunk consumers.
“No Gold In State” was the title of this week’s article about California in The Economist magazine. The article chronicled, “At one point during his desperate campaign for six ballot measures meant to reduce California’s gaping budget deficit, Arnold Schwarzenegger, the governor, pleaded with voters not to make California ‘the poster child for dysfunction.’ But on May 19th they did exactly that.”
A few weeks ago I referenced the “Miracle on the Hudson” and how Captain “Sulley” Sullenberger’s Flight 1549 heroics can guide us during financial emergencies. You may recall that Sullenberger safely landed a commercial airliner on the Hudson River after hitting a flock of geese and losing both engines. I was intrigued by his success enough to study a few of the attributes that led to this amazing outcome.
All of us have baggage, some good and some not. Sulley packed incredibly good baggage for Flight 1549. In his bags were years of serious and specific training. While he had no idea of how the events would unfold, the resources he packed proved perfectly suited for the situation. When the engines blew out two minutes into the flight, Sulley drew upon among other things:
I’ve talked to some pretty nervous investors recently…even with this latest uptick they’re not sure if they can ever trust the stock market again. With their fears being totally understandable, I decided to research an historical worst case scenario to help them evaluate the length of time they needed to be in the market to be reasonably assured that they wouldn’t lose money.
This was accomplished by portraying someone who had decided to invest in the stock market just before the onset of the The Great Depression. If we could ascertain how long it took this unfortunate soul to get their money back including the worst market years ever experienced, then it may be helpful to of us who are nervous to get back in the game.
I’ve heard it said that you can tell a lot about a person by what they do with their wallet. In our life, I would say that’s pretty accurate. A few years ago if someone went through our checkbook and debit card receipts, there is would be a pretty consistent pattern tracking what we value most highly. Repetitive expenditures after essentials are traveling to hang out with our adult “kids”, charitable stuff and keeping my wife’s horticultural degree in bloom by regular visits to the local nursery.