1. Policymakers learned from the delayed response in the great recession (08-12)
2. Trillion dollar stimulus is no longer taboo (better too much than too little)
3. The ENTIRE interest rate curve can be controlled (not just short term rates) at least for the time being
4. There is a global backdrop of negative rates (this is actually because govt bonds were bid up too high in Europe) which keeps rates in the US lower than otherwise
5. The supply constraints on housing in markets like SD during the great recession were never lifted and there is a supply gap which has been growing for over a decade
6. Policymakers have failed to incentivize older households to downsize
7. Trump tax changes did not cripple Blue states housing markets
8. US is still a center right capitalist/rule of law country and never will be even remotely close to socialism in the classic sense (a few things here in there may trickle in)
9. There are only a few hundred world class companies with global reach: Apple/Google/Amazon/McDonalds (rising Tesla)
10. China’s internet and manufacturing prowess cannot be ignored (we are still in the game but need to pay attention)
11. Public health will see significant investment going forward (thank God for a functional pharmaceutical industry)
12. There are huge education gaps in the US
13. SD is a world class place to live and will continue to attract high brain power jobs/activity
So in a nutshell, yes prices are high but there are forces at work which only a few can fathom and are bigger than any of our own unique perspectives.
Going into 2020, I had six properties (SFHs), added one this year and another pending. Net gain on the two new ones is roughly 200K of unforeseen gains.
Stock portfolio which was down 400K in March is up 300K YTD.
Needless to say, there is much that needs to be fixed and we can’t tolerate incompetent govt from the right or left. But economically, we have seen a form of the Greenspan put on steroids during Covid. May we never need it again.
Can we ever get back to normal where interest rates are fully market driven, maybe in some years. But in the meantime, it reminds me of a conversation I had with a relative of mine who used to work at Treasury, in summary, the government wants the population to have confidence, with rising home values, so they borrow and spend (ideally even taking out equity to boost the economy).
Yes, there is a risk of a crash as at anytime but don’t look back too much (at past crisis), I think it is prudent to borrow as long as properties cash flow or come close. Keep most money in stocks. Plan on working longer even if you don’t need to. Enjoy life and give to those less fortunate. But keep in mind, your fathers recession/depression is likley not in cards anytime soon.
There may be negative consequences, but I don’t see us going full former USSR anytime soon (and I lived 15 year in 5 former soviet republics). So be vigilant, exchange investment ideas, don’t be afraid to put more skin in the game. And be damn grateful that things worked out as well as they did in-spite of everything.
And if you’re in a position to, get takeout as much as you can, tip generously, and try to be a friend. I do appreciate this forum.
