June 18, 2012

We Lost How Much Net Worth?

This will not be a normal post for me. But, it bubbled up and out onto the page.

Government reports a week or so ago held this startling information: the average American family had lost 40% of its net worth over the past 4 years. We have all been transported back financially to the early 1990's. That is enough to cause anyone some serious stress and make the words satisfying retirement almost like an oxymoron.

The early 1990's: Desert Storm, a decade before 9/11, even longer before Iraq and Afghanistan, several presidents ago.

The early 1990s: my kids were just entering their teens, I was traveling 100,000 miles a year, my mom still had twenty years to live.

The early 1990's: many have pagers, a very few have large and expensive mobile cell phones, laptops are unheard of and tablets wouldn't be invented for almost two decades. The dot.com meltdown is 8 years in the future.

How can it be that all of that time and all our efforts were wiped out in the relative blink of an eye? How can it be that this news story passed with barely a ripple in the press? How can it be that we are calmly accepting the negation of 20 years of work, toil, savings and investing?

How can it be that many of those responsible have become richer and we seem OK with that? How can it be that the mentality that stole 40% from us continues to repeat itself with certain people making huge gambles to pump up their wealth even more (JP Morgan's recent $2 Billion loss come to mind?)?

What I just don't understand is that this report was met with a shrug of the shoulders. Some folks today go ballistic if their Medicare bill goes up $5 a month, gas costs more, or banks tack another $2 a month fee on something that used to be free. But, lose 20 years of work and 40% of net worth and we are focused instead on the Queen of England's 60th Jubilee.

Have we simply given up and assume the deck is so stacked against us we can only grin and bear it? Have we heard so much bad news in the last 4 years that this is just more of the same?

I am more scared of the passive acceptance of this news than I am of the news itself. I continue to lead a satisfying retirement, mainly because what makes me happy and satisfied is mostly under my control. Attitude and adjustments are mine to change.

But, I am not immune to the continued attack on my lifestyle. The problem is, there isn't much I can do about it, particularly when it seems as though so many are simply accepting this turn of events.

Before you add a comment that is political in nature, stop. There is enough blame to go around. The seeds for this disaster started decades ago, was allowed to develop by a blind Congress, bureaucrats and several misinformed or inattentive presidents. This is not a Democratic or Republican issue. Regardless of who occupies the White House and fills the seats in Congress this fall, nothing will change as long as the average person learns he or she has lost two decades of net worth and thinks more about the upcoming NFL season instead.

OK, I needed to vent. I feel better now.

83 comments:

  1. Bob,

    This new reality has crept up. For me, the news item simply put it in writing what I already knew. The value of my house is less than the buying price in 1994. I was no more 'pissed' about it after the news than before. I cannot fix this. I believe tyranny of the urgent plays a huge part in the attitude towards this problem. The problem is important, but not urgent.

    I'm sitting here dreading going to work today because it will be black Monday today. There will be layoffs at the college where I work. If I get laid off, at 57, the problem of my net worth will just be another big problem on top of a bigger, more urgent problem.

    I think we've all come down a notch or two on Maslow's hierarchy of needs. It is the new reality. I do believe this will rebound, but in how many years?

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    1. Oh my, Scott. I hope your black Monday passes without taking you as a victim. Let us know what happens.

      I believe there will be a rebound. But, the larger question is will the decisions and mindset that allowed this to happen change enough to prevent it from happening again? I'm not so sure.

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    2. Thanks Bob - I survived the layoff, I am fortunate. Our department of 18 is now 12. Some very good people were let go. I dare not complain (I am lucky to have a job), but the 12 will be expected to do the work of the 18.

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    3. Good news, Scott, at least for you. You are probably correct: your workload just increased 50%.

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    4. Good to hear you at least survived, Scott. I came back to ask your fate.

      Delete
  2. I do think that there is little comment - although a lot of private outrage and grief - because people feel it is totally out of their control. The effort spent being outraged about things one cannot even influence is a waste from my perspective. I am very concerned about how the financial turmoil in Europe will affect our economy on top of what has already happened.

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    1. Europe is the next house of cards to fall and take the world with it. I gather the initial setup of the EU was not well thought out and didn't establish enough safeguards. They (and the rest of us) are about to pay the price.

      My problem with privately stewing while not publicly commenting when things are obviously wrong seems to give tacit approval and acceptance.

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  3. I pretty much think that we forget how inflation was growing and how inflated the value of housing became. It was a kind of boom time, full of over-expansion that had a new Starbucks on every corner, it seems. Lot's of living big and over-consuming on several maxed-out credit cards. Lots of people looking to make a quick, easy, and big strike by investing in risky-ish stocks. Thus, the bigger the fall for some.

    While much of it was set up cleverly/stupidly by the businessmeisters of Wall Street and Madison Avenue, and abetted by so many of our politicians, we personally got caught up in our own - and/or other's - greed and materialism.

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    1. You have pinpointed a key problem: our own willingness to put ourselves in a deep, deep hole. Zero down mortgages, interest only loans, credit cards used to pay off other credit cards.....no one in their right mind would think this kind of behavior wouldn't lead to major problems down the road.

      That being said, the system was in place to allow people to get into this bind. That should not have been permitted. So we all share some responsibility.

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    2. Bob,
      If you watch the movies 'Too Big To Fail' and 'Inside Job' you will understand that it was NOT people's fault for the decline. Please, do not blame people for getting into these binds. Poor people were targeted specifically to be sold a bad bag of goods.

      M

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    3. Sorry Anonymous, but the buyers had to sign the papers that had them buying $800,000 homes with $50,000 incomes. There will always be slick salesmen -- but people have to take responsibility for falling for the pitch. Personal responsibility is all some us have left to guard us in these times and we cannot just say: "it wasn't my fault".

      Delete
  4. "Have we simply given up and assume the deck is so stacked against us we can only grin and bear it? Have we heard so much bad news in the last 4 years that this is just more of the same?"

    Yes. And yes.

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    1. So sad. I feel the sorriest for my grandkids who will be paying for our mistakes for the rest of their lives.

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  5. My concern with blanket statements like "Americans lost 40% of their net worth" is that it continues to feed a victim mentality in this country that is prevalent among so many. Anyone who stayed the course as far as investments, providing they were prudent and balanced in the first place, has recouped all that was lost and then some. But since most Americans net worth is tied up in their homes and not in investments, and many reached for more than they could afford during the glory years, the housing downturn had an outsized effect on the net worth #s.

    The rich are getting richer since they invest, and many take the time to educate themselves in doing so. Granted, there are some who have made gains through fraudulent or shady means, but not the majority. Americans have to educate themselves on how to get ahead and overcome financial disasters. These disasters have happened on a regular basis in this country, some far worse than the recent downturn. People can recover, but they have to take the initiative.

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    1. You make a very important point, Chuck. A "victim mentality" is harmful to recovery. But, does it change the reality of the situation? And, what will prevent a recurrence?

      You have noted the need for education about financial basics. So true. But where does someone get that education? And how do we prevent being taken advantage of?

      Important questions with no easy answers.

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    2. Here's a conclusion I just came to this weekend. Yes, the rich are getting richer because not ALL of their wealth is tied to their homes. That's because they have more cash than the rest of us. The middle class most important investment is their home. Duh,
      So, the middle classes wealth declines, they are forced to take on work at less pay. Who is hiring them? The rich. The same rich who manipulated Wall Street (bankers, mortgage brokers, Wall St execs, green tech companies etc.) and destroyed the middle classes in the first place. Now, the rich are getting even more richer because they hire workers for their businesses and can now pay them less! It's a vicious cycle. The rich are getting richer at the hands of the decline of the lesser classes (middle, lower, etc.)
      Do I make my point? Hubby was telling me this weekend he was so happy to have gotten this job working for a rich, ex-banker turned green tech billionaire mogul BUT hubby was earning thirty dollars less per hour than what he earned a few years ago. DUH? Billionaire had 12 workers maintaining his lawn, six housekeepers maintaining his 4 homes (Park Ave, Southampton, Nantucket etc.), even one employee at each location to walk his 4 dogs.

      Is this what our lives have come to?

      How can we NOT think and feel like victims?

      M.

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    3. Bob/Anonymous, I understand both your points. Regarding education, nothing can substitute for a lot of reading and self-education. I know many have no love for investing; I do but it has taken me some time to get dangerous with it (as dangerous to myself as anyone, probably). Bottom line - lots of hard work, asking questions, making some mistakes, etc.

      I also understand the point around the rich having more resources to get richer. I cannot deny that fact. But there are many rich people who blow through $ and have nothing to show for it after a period of time. Would people have sympathy for them? Not really, nor should they. But to use the example of the super rich, such as billionaires, clouds the picture. There are not a large # of them so they should not be used to vilify a whole class of individuals. Many of the rich that are being railed against by large #s of people made it the old-fashioned way - they earned it. I do not begrudge if they are getting richer through their efforts, as long as it is done honestly. And I do not feel like a victim if they are.

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  6. I concur with Chuck Y on all points. I just finished reading an article about a family teetering on the edge of losing their home after the husband lost his job unexpectedly at age 57. On the surface, it's very sad, but when you read the details, the couple literally raped their home of all of it's equity over the years to purchase things they couldn't have afforded otherwise. This family, now likely one of those included in the 40% loss of net worth statistic, clearly created much of their own financial circumstances.

    I just spent the weekend with several couples in similarly tight financial straits. After listening to their stories, it appears that every one of them made the classic mistake of purchasing too many things on credit, assuming they could just continue to pull equity from their homes to cover their costs every couple of years, and now they are in a bind due to the recent financial events. At what point did our homes become our primary source of income vs. simply being a place to live?

    Yes, my home is down in value, but my investments are not. Our retirement is based on the value of our liquid financial portfolio, not the value of our home, so we are not feeling squeezed. We have no outstanding bills, and keep our fixed run rate very, very low so we can adjust our spending as necessary on the drop of a dime. Life still feels very promising to us as a result.

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    1. I am pleased that this post has generated so many passionate comments thus far. There is no argument that people believed the fantasy that the stock market will always go up, that your home is your best investment, and that if everyone is doing it then I should too.

      The flip side of that is the system that allowed folks to borrow more than they could afford or the ability to get into huge credit card debt. In one sense that was taking advantage of peoples' greed. But, it also happened because of financial ignorance and a fire fed by leaders and those who should have known better.

      There is enough blame to go around.

      Delete
  7. I have to agree with Chuck and Steve. I'm not a financial whiz, but I always felt something was wrong when our house value went from $55,000 to $250,000 in 30 years. It just wasn't right. We were living too high. So, it's not a shock to me or many others that the home values fell. We probably don't protest too much because we still have it relatively good. I'm kind of tired of whining about "poor us"...we're still darn lucky to live where we do. On the other hand I don't want to be used and abused by government and big business either. Bob, you're right...it won't matter who is in office, the real economic power lies elsewhere. I don't know what to do except control my own choices, and spending so as not to help the rich get richer. And lastly, to control my own expectations for the future.

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    1. "I don't know what to do except control my own choices, and spending so as not to help the rich get richer. And lastly, to control my own expectations for the future."

      That is probably the best approach for those of us who still in decent shape. Thanks, Jane.

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    2. I have been house hunting in the DC area. No wonder congress doesn't understand. Their "touchstones" are their aides. The housing bubble has not popped in that area. Houses purxhaed in 2002 for 128,000 are on the market for 350,000. Until everyone has experienced the boat - it will limp along.

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    3. It is interesting you note that, Janette. I was reading a report over the weekend that made the same point: Washington is a boom town and those who live there have no idea what it is like in the rest of the country. Lobbyists, consultants, and all the businesses that live off the government are fat and happy and isolated from reality.

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  8. We bought our house in 2002 and by 2006 it had increased in value by 30%. Malcolm kept referring to those years as the bubble that was about to blow. Even so, people kept buying and paying the higher prices, banks kept lending with little or no money down. Everyone was living the American dream - whether they could afford it or not. So, when the bubble blew, how much of that "net worth" was really net worth? The losses are real and the pain is real, but the "worth" was never there to begin with.

    Malcolm and I did a lot of things right during those years and I am grateful that although our portfolio is not worth what it might have been with better interest rates, we did not suffer huge losses.

    I read the same article as Tamara and although I have compassion for the situation that the couple now faces I don't feel that it is my responsibility to help with their bailout. To continue borrowing against the equity in your home to support your lifestyle instead of altering said lifestyle is always inadvisable.

    It is good to vent. But, I also think we have to be realistic about the way things are. Most days I am somewhere between having my head in the sand and becoming a raving lunatic.

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    1. At one point we were told our house value had increased by 150%. I looked at the home and started laughing. There was no way this structure is worth that kind of money. So, when its "value" dropped by 100% of that inflated figure, it was still 50% higher than we paid for it.

      Like you I have days when I get really P.O.'d at the people who should have prevented this mess and didn't. Then, I feel poor decisions and greed can't be prevented and are personal responsibilities.

      There has been a huge cost to people, families, and our country's health. It hurts to see that.

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  9. Bob,
    When I used to write about how my wealth was eroding, through no fault of my own, how each and every day I felt a bit poorer, I could do/earn less and less, and watched my portfolio go down, most of my readers used to send me nasty comments, tell me I was probably off my daily meds and just scoffed. No, it was NOT my imagination. The decline was real. We are like that frog in the boiling kettle of water. At first the warm water feels like a tepid bath and then by the time we realize we are boiling, it's too late.
    My net worth went from $1.25millto $700K. Know what kind of comments I get now: "I should be happy with the $700K. Who do I think I am?"
    Horrific comments & people. DH and I worked for what we got.

    Anyway, my recommendation to people is to go rent and watch two movies, over and over again till you know it by heart. The movies are 'Too Big To Fail' and "Inside Job". In that order. You will learn how a bunch of men destroyed this country and how our government bailed them out and then did nothing to rectify the damage. You will understand how Obama got elected but he has done NOTHING to resolve these problems in the future. Let me repeat, Obama has done nothing to help out 'We The People'. And the more I hear how he is attending another celebrity fund raiser, I'll scream!
    You will also learn how England refused to 'import our economic cancer' and lucky for them! Their economy is doing just fine and Queen Elizabeth well deserves her big 60th anniversary celebration!

    Our media is in the pocket of Obama, wants him to be re-elected regardless of how 'We The People' have been screwed. So, do NOT expect any press form the media reminding all of us of what we have lost and how much of a decline we Americans are feeling. There will be no ripple in the press.

    Now, 'We The People' must suffer for our own actions. After all, we elected an inexperienced politician to the highest office in America to handle the greatest financial decline in history. Has anything changed? Dimon from J P Morgan still swindled over $2billion dollars of his depositors money. Nothing has changed. We are all just 3 and 1/2 years older and broker.

    If there is anyone to 'blame' it should be ourselves. Now, we are stuck in the mire and the best thing to do is to suck it up and accept our fate. Personally, I'm just going to wait it out. I have hope in November things will change.

    Even though we live 100% debt free, there will be no upgrades in our life. No more restaurants, vacations, or anything that involves spending money other than maintaining daily living. We can't buy a new flat screen TV, no iPads, smart phones, N O T H I N G, except exactly what we have now. I no longer can shop retail. I go to Goodwill, thrift shops, discount centers. No more quality foods. I buy in bulk. Our lives are survival now.

    Watch the movies. We're like 'nothings', unimportant......'they' used the money saved by millions of hard-working Americans and played games with it, knowing that the US government would use our tax money and bail 'them' out.

    Morrison

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    1. Based on my request to keep politics out of the comments, you have bent the "rules" more than a little. But, rather than delete this I will let it stand as an example of the level of anger that is felt by many. Since the post asked where the passion is on this issue, I would be somewhat hypocritical to dismiss it.

      I disagree with some of your conclusions and where all the blame lies. But, I'd glad you did leave your thoughts. After all, the name Morrison and strong opinions are pretty synonymous!

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    2. This is a topic, Bob, that I feel so strongly about. Probably because I'm just a 'litle guy' and things make an impact in my life much more quickly than others.

      I can not blame someone who earned $100,000 a year, and bought himself a $500K home with granite countertops (and the whole 9 yards) drove a BMW and used credit for travel and entertainment for the country's decline. Realistically, he/she could afford it and was living a justified life and lifestyle. At the time.

      Now, if this person loses his/her job or has to accept a lower salary, they suffer from a domino effect. He or she may not be able to make the lifestyle adjustments nor pay off their debt. So, this is hindsight. If you have a great college degree, have a career and were earning what that position paid, you couldn't expect this person to go and buy a $50K house and drive a 9 year old car. Doesn't make sense. Should we then say to ourselves that NOTHING goes up or stays the same? Not only will home values and portfolios decline, but most can expect to lose their jobs or earn less in their lifetime? So, all of us should live a $50K (or lower) lifestyle regardless of our education, experience, career strategies? Back in 2000 and 2001, people made decisions on their current status.
      Back in 2001 when I decided to go 100% debt free, have no mortgage, no credit cards, no car loans, equity loans etc. etc. every single friend of mine laughed at me and said some cruel, nasty comments. Why suffer, they used to mock. Live a little, they sneared. Go out! Enjoy!
      What made me do something against all logical sense? It was because I didn't like the way banks, mortgage brokers, credit card companies or Wall Street was treating me. It was a 6th sense.
      This 6th sense is the only thing that sustained my husband and myself. Compared to our friends and family we are doing quite well.
      But it doesn't make me feel any better.
      M.
      I'd love to keep politics out of our problems, but unfortunately politics does play a role in everyone's current situation. I thank you from the bottom of my heart for publishing my comments. I'm used to people mocking me because I just see things so differently. It's that 6th sense, I suppose.

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    3. I'll continue to violate the admonition to keep politics out by saying that I have NO faith that either the R or D's will make any genuine effort to correct the abuses of the banks and WS. The money that runs both sides' campaigns dictates what we get; not what is good for the American people. I'm cynical to the point I've given up hope.

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    4. Wow, Morrison. I think you owe Bob an apology for highjacking this post. It's fine to express your opinion in one lengthy response but this is too much. Perhaps you need to restart your own blog instead.

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    5. Jane,

      When Morrison had her own blog she "took no prisoners" so I know what to expect when I see a comment from her. But, I will agree that adding half a dozen or so to this one post is a bit excessive.

      I'm a big boy and knew this post would generate as much heat as light. Thanks for your concern. I'm off to delete one of her ruder comments and hope she has made her point clear.

      I am sure she isn't alone in her anger so it is probably good overall to let her have her say (to a point).

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    6. Some people are victims by nature. I will not be a victim. I'll take responsibility for my decisions, good and bad, and learn from them. I won't be bitter, I'll be wiser. And I will adapt. Sure I would have had a lot more money in retirement if everything continued to go up, but that didn't happen. This isn't Obama's doing. It wasn't even 43's doing. People got greedy. Europe began to fail. Not enough regulation. Too much regulation.

      Maybe I'll have to work a little during retirement. OK. I'm going to find something I like. I've already got a couple of ideas. Looking forward to it.

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    7. I like your attitude, Jim. I have found in 11 years of retirement that how I think about a "problem" has a tremendous effect on how it actually affects me.

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  10. Even though my fiancial situation is very strained, it was through choices I made. In general I agree with Tamara and steve. For a long time in this country people have had unrealistic expectations-it's that old you can do anything you want, have everything you want, be anything you want. Well, yes, but not at the same time. The other big problem is that unlke our parents, our house is not our savings.

    I do think that there is a huge gap in this country between the rich and the poor, and the middle class is stuck in the middle. But frankly, its the poorer people I worry about...the ones who never made enough to invest because they were living on minimum wage. Those folks I get angry about on a regular basis.

    Realize that my perspective is from living in europe for many years but......homownership is or those who can pay for at least half of their homes up front....there is absolutely nothing wrong with renting for many years and many people do it. Most places dont take credit cards cause many people don't have them. Taxes are high but no one lives on the street. All of this and the absolute best lifestyle I ever had was in Europe and that would still be true today even in the current crisis (the only primary mistake the EU made in my opinon was not have a "national bank"-thank you alexander hamilton, aristocrat though you were. Theyre going through the same thing the us did in the early years).

    Unlike M, there are many people who'se lives can still be enriched living on less. are there some in survival mode? of course? But for many of them and us, a few simple choices, then and now make the difference. As someone who is in the middle of those choices, I appreciate the difficulties.


    Finally in terms of anger, whether its me spending my life insurance and now having to live on a pension and SS, or someone losing forty percent of their net worth, I am reminded of my late husband's mantra during recovery-YOu know, the old saying about letting go of the things we have no control of and worrying about those things we can control.

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    1. The poor have felt absolutely nothing from the 40% net worth decline. Their lives are still the same. They're still poor. But only in America can a poor person rise to the top. So, that's a moot point.
      As for Europe, again, we Americans really don't know the truth. The media is NOT telling us. But right now in Greece, because they had the govt pay for everything (medical, early retirement and a plethora of benefits, all of which were unsustainable) 1 in 10 eat in soup kitchens, services are turned off, no credit to anyone, you must pay in cash which Greeks have very little of, the hospitals do not have the money to treat people, anyone still on govt assistance may be able to buy something, etc. etc. etc.
      It is obvious to me that the European way doesn't work. And what are our current politicians aiming for? The European way. Duh. We Americans are not sitting ducks. We can take control. It's called 'voting'. I am sick and tired of blaming the American people for the problems. We did not create this mess. There was nothing wrong with borrowing equity to use as we wanted. We didn't create the housing decline.
      It's like there's this company that wants to make money selling crutches. So, they set up an info booth and when people come to them for directions, the company sends them on this journey they know will cause them to fall and break their legs. Thus, the need for crutches.
      We're blaming the people for falling?
      No, it's the company that purposely gave unknowing people wrong information and directions.
      STOP BLAMING PEOPLE FOR THE ECONOMIC MESS. We didn't create it. We were just living our lives and stupidly following the 'experts' advice.
      Hindsight is 20/20.
      M

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    2. And one last thing. Then I won't write anymore. Barb you told me not to complain about my loss of never being able to go to a NYC Broadway show ever again because I simply could no longer afford it. That there was plenty of talent available locally and equally as good. So, I've been going to local shows, concerts, free entertainment venues.

      Well, yesterday my sister took me to see 'Once' winner of 8 Tony awards, on NYC's Broadway row. And I'm sorry, Barb, but NO! There is NO substitute for NYC Broadway shows. NO substitute for Times Square. NO substitute for the look, feel, smell of The Great White Way in the greatest city in the world, Manhattan.

      I want my life back.

      M

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    3. I don't agree with the overall premise cited here. This implies that the "people' were just sheep following along with no common sense or knowledge. As several comments have noted, a house doesn't gain %150 in equity in a few years in the real world, only when there is a disconnect between economic fact and fantasy.

      If someone takes out a mortgage that they know they can't really afford who is more in the wrong, the lender or the person accepting a bad deal? I contend it is both. If a family racks up $15,000 in credit card debt they are financially out of control, but the companies that issued the cards are guilty of greed and stupidity.

      The system that allowed then to get that way is flawed. No rational lender would send multiple credit card applications to college students or folks already on the edge of disaster. No ethical mortgage broker would approve a home loan on hyper-inflated values and an insufficient income to service that loan.

      Hindsight is 20/20, but so is history. We are doomed to keep repeating it if we don't learn the lessons it teaches.

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    4. M, maybe the truth is that you really never could afford that first Broadway show in the first place, it was simply all part of the illusion of the late 90's/early 2000's. Meaning you are lamenting the loss of something you never really could afford, as opposed to being thankful you ever even got to experience it at all.

      There are many things we did in the past that we likely won't elect to do again because they simply no longer make financial sense. Rather than being filled with resentment at what I perceive as a loss, I'm full of gratitude that I ever even got there at all.

      Something to think about perhaps.

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    5. Bob, you have to watch the movies. Wall Street took our regular mortgages and re-categorized them into credit default swaps, derivatives, etc. etc. and knowingly sold the junk around the world. Look at the country, Iceland. Wall Street has destroyed actual countries.

      Think for a minute: you now know that home equity or home values are not supposed to constantly rise yet, you (and others) invest your money into Wall Street thinking you are going to increase your net worth and those values will still continue to climb. Why do you think home values and Wall St investments (Fidelity, Vanguard yada, yada, yada) are two different entities? Why do people think that the stock market always comes back yet housing values shouldn't. Doesn't make logical sense.

      Why do people invest their money into stocks, bonds and mutual funds while knowing that those investments generate cash for such companies as J.P. Morgan, Merrill Lynch, Bear Stearns who in turn make risky purchases? Why do people think they can only earn interest and increase their wealth by investing in Wall Street? Why not the security of FDIC banks that are prohibited by law to use their depositors money to make risky investments? Duh? Wouldn't it be better to deposit your hard earned cash into local banks, who in turn may loan this money to local companies, who in turn will help out and benefit your local municipality?

      Want true hope and change? Don't invest in Wall Street. Without your money, they can't do a thing. Do we realize our true power? Without our money to gamble with, we can get more accomplished than any politician, lobbyist or government. Think about it.
      M

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    6. M. - I'm not sure why you feel the need to respond so rudely when you post, but I do feel for you - it's not a fun way to go through life.

      Clearly Broadway ticket prices have risen dramatically over the years, well outpacing inflation. At some point the increase became more than you could afford. Such is life. How nice that you could enjoy it as long as you did.

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    7. I have deleted Morrison's last comment. She has made her points strongly and completely in her previous comments. I don't ever want this blog to degenerate into personal attacks or hurtful comments. That's not my purpose and you readers deserve a more mature discourse.

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    8. Bob, I didn't think what I said was out of line. But, if you think otherwise, then I respect your decision. I apologize if I stepped out of line.
      But I think you answered your own question:
      "How can it be that we are calmly accepting the negation of 20 years of work, toil, savings and investing?"

      Because we get deleted. No one wants to know.

      Again, a big apology if I have done anything inappropriately. I shall bother not anymore.
      M.

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    9. Wow, I didnt mean to turn on a hornests nest especially sinced Ive blogged aobut my own issue today as well and linked both to this blog and another. That said, without picking on Morrison per se-If you cannot come to terms with the live you need now, how can you ever enjoy life again. I personally am not just willing to keep on going, Its simply not enough. And I would remind her that millions of people never get to a broadway show (because of affordability, geography or anything else) and live full, cultured lives.

      and with that bob, I leave it to you for now.

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    10. Anonymous

      Actually Morrison I am fine with all but your last comment addressing Tamara. You will notice I did leave your other 5 or 6 comments unedited and untouched.

      Your style grates on some people but I'm used to it and don't mind you stirring the pot a bit. But there is a limit to the number of comments from any one person and when things degenerate I have to turn down the heat a bit.

      Don't worry about me...I like that you say what you think.

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    11. We can't expect to get all our knowledge watching movies and complaining about the JP Morgan's "swindling shareholders" (that isn't close to what happened, btw). As you said Bob, we make our choices, we question the "too goods to be true", we do our homework and we take responsibility for our actions.

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    12. btw, I have lived in Europe and many parts of Europe are WONDERFUL, MAGICAL PLACES TO LIVE. Europe is not Greece. Europe is rural France, villagers helping each other, working the land. It is London, people working and living in a city a millenium in age. It's Stockholm, a city of 1,000 islands, beautiful and vibrant. I could go on and on. The point, try to have joy in life, see the good side and go there.

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    13. My wife and I love England, Scotland, Ireland, and Italy. The countries are beautiful. Unfortunately average person is suffering just as much as some of our citizens due to poor policies and decisions.

      I love the cafe lifestyle of Europe and will continue to visit when I can.

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    14. Back up a few comments from Barb,

      I just read your post on roughly the same subject today. Your openness on what got you where you are today is refreshing. You admit to errors and mistakes but no real regrets for the choices you made. And, importantly you are moving on without anger because it solves nothing. Thank you for the important reminder.

      Readers: Barb's post is well worth reading: http://www.frugaltexasgal.com/2012/06/living-in-now-or-dealing-with-life-as.html

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    15. I would remind Morrison and othes that Greece is NOT Europe. Germany's economy grew a strong .5 percentt in the first quarter of this year. They have the fifth largest GDP (us has the second and the EU the first). Much of europe, especially northern and western Europe have very strong economies and extremely good quality of life. Germany's quality of life is similar to (in some areas better than ours). Look it at the perspective of the United States if you will. We have states such as Michigan that are on the edge and states that thrive.

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  11. I will add nothing to your thoughtful comments and interesting perspective from living in Europe. Very well said, Barb.

    By the way, just for the record, my retirement remains very satisfying and has benefited from having to tighten down our lifestyle. The things that are really important have risen to the surface.

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  12. I'm not qualified to analyze how "this" happened, but my take is this. We've oversold the ideal that home ownership is something we're all entitled to as Americans (no matter our income or wealth). Congress had a big hand in easing mortgage requirements, encouraging Fannie Mae etc to open the spigot and not be so tight. Any of us who bought houses decades ago remember the rigorous scrutiny we were subject to; waiting 6 weeks for the "loan committee" at the bank or S&L to approve us (and I always put 20% down). If we'd stuck to that this would not have happened. It generated the huge inflation of values as the money flowed in, without controls. Over the years, once inflation tamed, I abandoned the "buy all the house you can, it's a good investment" in early nineties, and when moved to present location paid cash for a modest but nice home. Our area did not bubble up, house probably 50% more than in 1996 when bought. I've NEVER looked at our house as an investment or source of equity for .... anything. It's a house to live in and we'll always need one. Well, for quite a while anyway.

    That's my philosophy, courtesy of a being raised by a father who saw the depression. The only thing he ever borrowed money for was a home. Same with me. While we were living way "below our means" others were living much "apparently" better lives from a material standpoint. Never missed it. The gyrations of the markets have been gut wrenching, but we've stuck with it and it's been rewarding.

    My thoughts when I saw the piece on the 40% loss was "wow!" but my assumption was it was largely false value of the real estate bubble. That, and I'm sure there was plenty of 401k sacrificed in the downdraft of 2008-9 as people pulled out. So we thankfully escaped the decimation so commonplace. That's not to say I don't regret that so many fell into what was such a tempting trap.

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    1. Well stated, Allan.

      Yes, a lot of the 40% drop was from the hyper-inflated housing prices. But, as you note, peoples' 401K accounts and other investments took major hits too.

      There is enough blame to go around. The question is, what have we learned?

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  13. Wow, I don't know how to react to all of this. My simple life goes on the same way- basically simple pleasures with enough for a broadway show and trip when I want. My investments are fine-no 40% drop. I have always lived debt free. If I didn't have cash, I saved until I did.

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    1. Hats off to your approach to a satisfying retirement, Donna. Your decisions has been similar to mine and I'm doing fine.

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  14. Quite the hornets nest you stirred up Bob! All I have to add is that I feel fortunate we didn't have a lot invested in the market. We own 2 homes and both have dropped in value a bit, but we bought at a low point so it's probably a wash.

    I think we lost our way when everyone just accepted the supreme court's decision to consider corporations 'people'. We're watching that play out in such an ugly way right now and I'm hoping it's a wake up call to everyone to get more involved in what happens in Washington.
    b

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    1. Every once in awhile I want to make sure everyone is awake! I really hope that folks will read the article and consider all the comments to see if there is anything to be learned from all this.

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    2. Barbara, I , too, think that decision will have more overall influence on our children's future than the loss in housing prices. That decision os overlooked- and yet permits our basic right to vote come into question.

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    3. Worst decision I can name.

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  15. A lot of the decline in net value came from housing.

    And while many were willing to pay inflated prices, many were willing to sell. Those who sold did damn well. You don't hear about them because I think they choose to keep quiet.

    Even with the price of houses down 20%-70%, I still think they're overpriced. Especially in SoCal.

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    1. My parents were one of the beneficiaries of an inflated market in the Boston area in the late 80s. They managed to sell a small home for enough to buy a bigger home for cash in a retirement community in Arizona and move close to Betty and me.

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  16. So, what do we do? I have been aware of the apathy of the citizenry for quite some time. I have asked myself what difference I can make. So many things are so right with our country.....with that said, there are so many freedoms that are rapidly slipping away while we let them. I contact my congressperson from time to time. I vote. Now, here is the question....how do each of the "I's" of our citizenry get to the point that as a combined group we really can make a difference. I think we tend to feel helpless. When I listen to the news I am aghast at what has became norm that 20 years ago would have alarmed many of us and had us ready to change things. So, how do we fix it? I am not proposing protests, militia, or anything of that nature. But, what can the common person actually do to exact change and retain our rights?

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    1. That is the $64,000 question, Linda. If more of us would simply pay more attention to the world outside of our small little daily sphere I think things would change. But, it seems as though too many people are content to remain oblivious and then be surprised when the real world comes knocking at their door.

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  17. Nobody objects and screams for reforms when their houses are appreciating leaps and bounds or during the run where stocks were up 20% a year for many years. I know so many people who just had to get "in" to both riding the trend. Now we're on the backside of that and there is outrage. It's overwhelmingly about personal responsibility; our country is so great nobody is forced to do anything!

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  18. I saw the article and felt that it should have been reworded to suggest that inflation is starting to increase. For someone who is still working fulltime, I can tell that my spending has gone up quite a bit for the basics. Before I posted this, I read some of the comments, because I didn't want to come across as cavalier. Actually, I'm not so sure net worth(+/-) is the issue here. I think unless you personally feel you've lost ground, the headline won't interest you.

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  19. Oh my, what have I stumbled into?! You really did hit a nerve with this post. I appreciate your balanced and fair view as far as the blame game goes, especially with politics. That serves nothing and no one. I don't have any great wisdom or insight or expertise. I suspect that there is something more at play here than economics and financial policy. And more at play than government regulation or deregulation. What keeps coming to mind is the verse about our treasure being where our heart is. I think that is true not just at the individual level but also at the national and global level, in the private and the public sectors.

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  20. I hoped this post would generate some good back and forth, but this has been a rather busy day. It is the first time I've had to turn on comment moderation so I have a chance to make sure someone hasn't gone off the deep end!

    A few folks have noted the role of personal responsibility and that is probably at the core of the entire issue. It is also how we will get ourselves upright. Extreme partisan politics doesn't have the ability to fix much of anything at the moment.

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  21. Buy a house in the early '90's for 120,000. Move forward in the job ladder, but need more money to keep up with the perceived Jones family. The 2000's arrive and The house is now worth 400,000. The perceived net worth is high- but it is not through hard work or savings. Begin to borrow against this "increase in wealth". Net worth is still 150,000 more then it was in 2005 because of the hyper inflation. Same thing happened to many small business as well. One of your posters was one of them.
    Bubble bursts. Out of work, one still can get unemployment- for several years. Instead of retraining, hold breath and pray that it comes back. When it doesn't and you realize that your net worth is mostly gone...complain, say you were robbed.
    Bad luck, good luck. If you were one of the actual few who were young enough to purchase your first house during the bubble rise- you have the right to complain. Most of us knew it was too good to be true. Don't blame the banks for pushing credit cards and mortgages. The reality is don't do the crime if you don't want to serve the time.
    Do I want the political climate to change- yes. Do I think each and every one of us is responsible for what it is right now- yes. It is a democracy. VOTE - the question is what way do you want the country to go? And how can we get it there?

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    1. I benefited from unreal housing inflation once and have been stuck in its downdraft once. Of the 9 houses i have owned I never put down less than 20% and bought my last house for cash. I have been lucky in that regard.

      I do feel sorry for those who are upside down through no fault of their own. They played by the rules and were caught up in the mess caused by those who didn't. They are some of the true victims in all this.

      BTW, today is the first day this blog has passed the 1,000 a day view threshold. There is something to be said for controversy!

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  22. I guess it just pays to be poor or poor in the eyes of some…we bought our home 30 years ago, a fixer upper…which we have all along the way, our house is home, raised five children, 12 grand children now return regular and play in the old playhouse and fort and trees…..our income, never hit 50 grand not even once, hit 40 grand about 8 years out of the 40 working, hit 30 most of the time, couple years never hit 5 grand….we never went without, we had food fit for a king…raised much ourselves including beef, eggs and milk….all five children are out in the world making more than I ever did…we on the other hand are taking a retirement from two places (after long term unemployment) that equals almost to the dollar what I made-no will not hit 50 but mighty close to 40…our house with we paid 20 grand for, was at one time worth 100,000 now back down to 70, we do still owe 29 g on a pice of vacant land…house free and clear…money in cd’s (enough) new part time job 20 hours a week at hardware….just living happy ever after…. And feeling mighty rich…good health-wonderful children-lots of books to read and doing just about what I want to…(ronaldj)

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    1. That is the story of responsibility, thanks. Not much of that in today's world. People freely chose to buy an inflated asset (a house) or borrow heavily against it and treat it like a piggy bank rather than a home. Now prices return to the real world and that is positioned as "played by the rules" and got burned because of someone else - hogwash! this isn't net worth lost but a return to reality. Much like any asset, if one wanted to realize that net worth they should have sold to a bigger fool than themselves because that's the only way to make money on something way over priced.

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  23. All so sad but true Bob. The thing that gets me is that none of those higher ups that contributed to if not totallt caused the financial meltdown are being prosecuted. They made a killing at the expense of so many hard working non one percenters by cheating and stealing. With no culpability it is just going to happen again. As Baretta always said if you can't do the time don't do the crime. But if you don't have to do the time you will just look for the next way to do the crime. Be careful everyone out there.

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    1. Except for an occasional "clawback" of already obscene compensations, there seems to be very little cost to those at least partially responsible. But, those are also the largest contributors to both political parties so.........

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  24. Bob how can I say how much I love your style? A perfect balance of banter to be mind stimulating and allow intelligent disagreeing...REFRESHING! and God I love the take no prisoners Morrison-I have missed her 2 blogs and will forever! hint hint.I really appreciate the fact that you could sit back and observe, lending balance when necessary and editing as it would serve.We got all the content, facts and fire aka passion without any bruises, after all we are all adults and can play in the sand box and still get things done.So Thank You ! intelligent conversation with adults listening to each other is well not as abundant as I would like.Let's keep it up so we have great stuff to read.

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    1. Thanks very much! I won't take on a subject like this very often because that isn't the overall goal of this blog. But, occasionally stirring the pot is kind of fun.

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  25. Hi Bob, I just nominated you for the versatile blogger award. Although I haven't commented before, I have been enjoying the discussions that take place on your blog.
    Shelley

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  26. Oh, I felt the pain of others today as I read your blog, Bob. I think the subject, though, is right down the alley of what a satisfying retirement is and therefore appropriate for your blog (if I may say so....not my call). I think you were brave to do it.

    I'm Irish and so of course I feel it can get worse, yet. If not, we'll sing that old Peggy Lee song of years ago: "If that's all there is my friends, then let's keep dancing."

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    1. Brave, or unaware of what it would provoke! I've enjoyed the varied responses and the passion involved. But, for the next few posts I'll take on less intense subjects!

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  27. Wow, this was some really great reading! It was so refreshing to agree and disagree with such well thought out postings.

    My thoughts are with the idea that if it sounds too good to be true then it probably isn't, and this has served me well. I was never house poor, didn't consider home equity "real money" and retired debt free with savings. I'm still working on what a satisfying retirement is but I have the luxury time to do what I want (which includes two days of work to pay for my Mom's care) and of not having to worry from month to month whether I will eat every day.

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    1. I think most of us would agree you have described a satisfying retirement. The important point is each of us has our own definition of what makes a happy retirement...there is no one model we must follow.

      And, absolutely true..if something seems too good to be true, then it isn't. People's ability to ignore that truism allows scammers to make a very nice living.

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  28. I agree with the more moderate posters on this blog Bob. While I agree that banks and other too big to fail instititutions played a large role in what's occurring today, we ourselves are responsible for the lives we chose to live.

    If you earn 50K a year, how can you possibly afforde a 500k McMansion? Many people chose to sign the deed and are now paying the piper.

    I do disagree with Morrison in that life can continue to be enjoyable despite reduced circumstances. Barb is right about the many free community events, which are not Broadway, but enjoyable of themselves. Like Tamara said, it's great she was able to experience it for so long and now...it's time to adjust to a different reality. Different, not worse. The world does not owe us world class entertainment, fine dining or trips abroad.

    We purchased our home in Miami in 1999 for 142k, a few years later, it skyrocketed to 450K, the banks were constantly calling to encourage us to refi with cash out and my husband and I thought they were crazy. We will be mortgage free in less than 9 yrs.
    All told, there are choices to be made and we can be victims and bemoan our list fortunes or pick ourselves up and carry on. Even so, we are much, much richer than 90% of the worlds population. And I am grateful every day for a roof over our heads and food in our bellies

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    1. The "I want my old life back" plea just isn't helpful. As you and others note, the world is not fair and owes us nothing. Adjust to the new reality and life continues to please.

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  29. We will be ok going forward but I am truly concerned for my kids' futures. I just don't see them having any of the opportunities that we had - no matter how hard they work. The business world is so shaky. I feel so responsible for preserving what we have so that my kids will have something to give them security after we are gone - a means to put their kids through college and have some financial cushion in their old age. I feel like my husband and I worked a lifetime to secure the stability of 2 generations

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    1. You make an important point. It may be that the "promise" of continual growth and an always better future may be something people only read about in future textbooks.

      Are we responsible for our kids' financial well being? That's a question almost worth a separate post.

      Thanks for adding to this discussion. BTW, I looked at your blog: nice renovations!

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