In the old days it was pretty easy to find good investments that would withstand the test of time. However, in recent years purchasing “blue chip” stocks has become more of a gamble and the real estate market is starting to look more like the “penny stock” market of the 1990’s. These changes in investments started back during the 1980’s when a few really smart guys on Wall Street found out how to manipulate the US investment system using borrowed money to buy old and well managed companies and then break them up into smaller pieces for a quick profit.
Right now from the smallest investor to giant mutual fund companies, everyone is demanding large returns on investment dollars in a very short period of time. This impatient investment style is causing the stock market and real estate investment to take on a new look that could be a disaster for the long term good of most Americans. For the real investor, it is becoming more difficult to find and hold on to great companies and/or real estate because of this “get rich quick” attitude. No where will this new investment environment hurt the US economy more than in the real estate market.
For hundreds of years the biggest financial asset most Americans had was the equity in their home. However, in recent years that equity has been dried up via second and sometimes even third mortgages. With smooth talking pitchmen leading the way, television advertisements encourage the benefits of taking out a second mortgage to pay off credit card debt and to finance exotic vacations around the world. It would not surprise me if millions of Americans have no equity in their homes right now, even after paying decades of mortgage payments on the property.
The United States is a great country and we will survive this temporary fixation on earning double-digit returns on stock market and real estate investments. However, our lesson will not be learned without pain and that is exactly the way it should be. In recent days, news reports have disclosed that some mortgage leaders are in financial trouble because they ignored old rules of leading in the real estate market. These companies will be the first to suffer the pain of an over excited real estate market, but they will not be the last ones to suffer. Millions of Americans will find it impossible to sell their homes, for a profit, in upcoming years and this will lead to some people having to vacate that home through foreclosure.
The US economy has always run through cycles of “boom and bust”, but it seems like these cycles are coming more often now and lasting longer than in the past. I still have fresh memories of the pain suffered by millions of people when the Internet Bubble burst in the late 1990’s and many people who were totally invested in those high flying stocks lost all their money. Now only a decade later, millions of other people are going to lose all their money because they got caught up in the recent real estate frenzy caused by record low interest rates and leaders that would offer mortgages to almost anyone.
Read more about Investments: Stock Market Declines, Follow The Money, Bipolar Stock Market, Boom And Bust
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