Saturday, September 20, 2008

Fun looking back on finances

Its always interesting to look at the financial prognostications of yesteryear in light of the present.

Take Start Late Finish Rich for example. Itsa a good book and I'm reading it now. Written in 2004 it was a darn good book for the time, full of good advice in lots of ways some of which still hold true, such as not being wasteful in your spending, money management, general targets in terms of how much to save, the importance of tax sheltered retirement accounts, but wow, some of the info:

Such as: the investment return projections are based on 10% annual returns from the stock market - good luck with that. We haven't seen that kind of return in a long time. He also fails to point out that when you have a 50% loss in the market for example, you need a 100% growth to just get back to where you started from.

The real estate advice was great pre-crash but he sure didn't anticipate this mess. His book is full of 0 down mortgages, buying houses for flippage etc. Ie buy it and watch the ridiculous amount of appreciation make you wealthy. The problem is that kind appreciation was anomalous - great if you were doing it then and got out, but otherwise once the music stops you're in trouble. Combine this with banks and mortgagees all doing the same approach on this belief of unsustainable returns as normal, couple it with a little regulatory capture from Freddie Mac and Fannie May and you get the mess we're in now.

Its a good read but the current state of the market and real estate fracas just made large chunks of the book historical curiosities.

1 comment:

Murphy's Law said...

What did I tell you a few years ago?

Put your money in old ARMY TRUCKS. (Preferably ones with functional brakes.) You get a nice return on those provided you get rid of them before the first snowfall, and all you need worry about is having someplace to park them.

And FWIW, I have a line on a few more of them coming fresh out of DRMO if you're interested.