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homestead - Re: [Homestead] Cash production, was The Piggy Bank is empty

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  • From: Gene GeRue <genegerue AT ruralize.com>
  • To: homestead AT lists.ibiblio.org
  • Subject: Re: [Homestead] Cash production, was The Piggy Bank is empty
  • Date: Tue, 28 Sep 2004 08:45:03 -0700


If I might restate your question: What could you invest in today while you can still earn surplus cash (today while the blossom still clings to the vine) that later when you can't earn any cash will provide you with a *reliable* source to meet your even very modest cash needs? My thought on the question is that there might not be anything that will do that.

Well restated. Here's the thing. I am not so much talking about myself. My retirement plan includes five sources, spreading the risk. But on this list we wrestle with how people can most successfully live the homestead life, and unless we accept that the end years will be spent in some dreary, state-supported care facility---can you imagine a more horrific end for our free, independent sorts?--then it is useful to develop a good plan.

Yes, of course nothing is certain, except death. Yes, of course change is inevitable. But also of course, homesteaders are more self-reliant than the masses. And I am becoming of a mind to challenge naysayers who say what can't be done, by demanding that they give a superior replacement to that which they deride.

The often heard pronouncement that "God only made so much land" so real estate is as close to a sure investment as you can get - is an equally
cryptic saw and the gods surely have something nasty up their sleeves for
that as well.

Not the ethereal gods, but the politicians, who, along with doctors and preachers, often preen themselves as gods. I expect that taxes and zoning and building requirements will become ever more onerous. If they don't, great, but I plan for it. And in my book I advise finding a place of traditional distrust of government with its attendant low taxes, and getting out far enough where the bureaucrats are more likely to leave you in peace.

The point I'd make is the relative value of housing
has varied very greatly in human history.

Housing is taking a higher percentage of income because of the factors of fixed supply and increasing demand. Unless population plummets, land will continue to rise in price. History indicates population will increase. If sociopolitical policy is successful in holding or decreasing population, the rise of land value will not stop, but become more modest. I see land increasing in value even if population becomes static. Note the popularity of second homes, the second typically away from cities. The only way I see land values falling is if there is a sustained economic decline.

Now days residential real estate has two components in its 'value', the real
or pragmatic component and speculative component. This has always been true to some extent, but now the speculative component seems to be inflated beyond all reason. That speculative component is just like playing the stock market, that is, it is gambling.

Absolutely, and those who do it full time have become highly knowledgeable and the common man has become much more knowledgeable regarding real estate. Far fewer steals and fast profits made in the better areas anymore.

I had a front-row seat to the real estate speculation phenomenon, in California in the 1970s. As population increased rapidly, houses rose in price faster than ever before. Investors, always looking for opportunity, seized upon real estate as a starving cat seizes a rabbit and with not much more subtlety. As California goes, so goes the nation. The braggarts wrote books and lectured and the masses swooned over becoming millionaires "with no money down." And so it has been for thirty years. Which is why successful real estate investment today demands greater sophistication.

My parents are in Florida just a little north of the place hit by two
hurricanes this season. Right now undamaged real estate in Florida is
worth a fortune because . . . .

I have never recommended Florida and doubt that I ever will. The list of negatives is long. If your parents need warmth, suggest they investigate Arizona soon.

It's all a matter of odds and taking one's best shot at stacking the deck in
one's favor. But the way I see it, it is better to rely on the perennial
ability to do something like add value to, say, a piece of wood than it is
to cast your bread upon the waters and hope to find it after many days.

I hope you are always able to do so.

Now go back up to the top, to your first sentence. The question that you well restated includes: "when you can't earn any cash."

I'm still waiting for the alternative to investing in the stock market and/or real estate. Neither is perfect. But what is better?









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