How long do "these markets" last?

[DaleB]

My Dad had a thing he told me when I started working "Son, with every paycheck always pay yourself first!" Simple, yet sage.

I got the same advice when we were a young, dirt poor married couple. Unfortunately no one ever really explained what that meant, or why, or anything else, so I was a little slow to figure this stuff out. I don't get judgmental about people being in financial trouble or simply not knowing how to manage their money. Trust me, we've been on both sides of the fence.

 

[Bill]

I got the same advice when we were a young, dirt poor married couple. Unfortunately no one ever really explained what that meant, or why, or anything else, so I was a little slow to figure this stuff out. I don't get judgmental about people being in financial trouble or simply not knowing how to manage their money. Trust me, we've been on both sides of the fence.

I'm not judgmental of my friend, he's a good guy, he just got suckered into thinking he deserves to live a life he can't presently afford. A lot of that falls on marketers, it's easy to fall for their siren song. "You're special, you deserve this..."

 

[David Megginson]

Prices seem very high right now for many popular vintage airplanes. When was the last time prices soared like this and how long did it last?

No one can time a market (used airplanes or the stock market). If it falls 10% next month, that might mean it's going to keep falling, or it might be a blip before it jumps 15% the next month. Just buy what you want when you can afford it, because all reasonably-free markets are a Random Walk (or as close as matters to ordinary people).

And don't borrow to buy the airplane, if you can help it. The money you save from not borrowing is tax free (if you earn an extra $10, you have to hand over $3-5 of it to various levels of government, but if you save an extra $10 by not paying interest on a loan, you get to keep every penny).

 

[Oldmanb777]

It took me several layoffs to realize that "paying yourself first" and living within your means was the only way to live. Spending my working years in the airline business always meant being prepared for the downside. Could be the best of times, bright future, and ten minutes later your getting the ax. Many years ago i started to keep a second job working in my spare time. Not always a work for somebody else job, but something that brought in money. That money always went to investing for our future, not to toys. We lived within our means, stayed out of debt, etc. My wife stayed at home. If she worked it was part time and didn't bring in enough to pay the taxes on it. Since I was gone a lot of the time, she had to be available for the kids. So we lived within that income, and I tried to make up the rest on sideline jobs. Sure, we gave up some things that I would have done different. Everyone can say that. So is the sky falling? i have heard that all my life, and sometimes it came crashing down on us. I do believe we are in for a major correction. With additional redtape and taxes being applied on business in the near future, things must slow down. How much? No way to tell. I do believe in the demographics of supply and demand. The demand of the Milenials,gen x,yz, ers getting into their most productive earnings years, may keep thing going. They just need to learn that you "reap what you sew, and your not ENTITLED to what somebody else sews".

 

[YKA]

I'm not judgmental of my friend, he's a good guy, he just got suckered into thinking he deserves to live a life he can't presently afford. A lot of that falls on marketers, it's easy to fall for their siren song. "You're special, you deserve this..."

Credit is too easy to get. I get mail regularly, saying that I am pre approved for yet another credit card, or my Visa limit has been increased. Walking into stores, it isn't uncommon for someone to approach me wanting to get me a store card. When I bought a pedal bike last year, they almost begged me not to pay for it, but finance the thing, they must get a nice kick back. It was only $1,800 and not some $20,000 bike either. Who would finance an $1,800 bike.

 

[stratobee]

I looked in 2006-7 and then used aircraft actually appreciated, still. It was insane. By the time I bought in 2011, things had changed markedly and stuff was being given away. That depressed market continued until just about 2017 and then shot up again. Today it's insane again, and it makes zero sense when half the population is either unemployed or about to be unemployed. I think beginning of Q3-4 this year things will have started to nosedive. And 2 years from now, you'll be able to buy planes and houses and boats for pennies on the dollar.

 

[Groundpounder]

I looked in 2006-7 and then used aircraft actually appreciated, still. It was insane. By the time I bought in 2011, things had changed markedly and stuff was being given away. That depressed market continued until just about 2017 and then shot up again. Today it's insane again, and it makes zero sense when half the population is either unemployed or about to be unemployed. I think beginning of Q3-4 this year things will have started to nosedive. And 2 years from now, you'll be able to buy planes and houses and boats for pennies on the dollar.

The “half the population is unemployed” thing sure isn’t the case where I live. Unemployment is currently at 4% and employers are having a hard time finding people to work.

 

[SoonerAviator]

The “half the population is unemployed” thing sure isn’t the case where I live. Unemployment is currently at 4% and employers are having a hard time finding people to work.

Yeah I don't know if he was just saying "half the population" as hyperbole or not. I certainly expect there to be a reckoning for the events of 2020, but most of the Southern states have been doing remarkably well in terms of unemployment and manufacturing output. States that rely on tourism and service industries maybe not so much. Im keeping a watchful eye on the markets to see if/when I need to adjust the portfolio into lower risk investments. I do think those boats/rvs will come available in 2-3 years regardless when people find out they only use them twice a year and are laying for maintenance and storage costs in addition to a hefty loan payment.

 

[hindsight2020]

I looked in 2006-7 and then used aircraft actually appreciated, still. It was insane. By the time I bought in 2011, things had changed markedly and stuff was being given away. That depressed market continued until just about 2017 and then shot up again. Today it's insane again, and it makes zero sense when half the population is either unemployed or about to be unemployed. I think beginning of Q3-4 this year things will have started to nosedive. And 2 years from now, you'll be able to buy planes and houses and boats for pennies on the dollar.

Of course. But the positivity fetish crowd will always defend the highs as some sort of constant. The fact you and I bought airplanes on the discount at the lows of these pork cycles may be self-evident to us, but to the color-blind such inflections are invisible. It matters not. The pork cycle continues.

I could make a list of POA users who no longer post here after losing their shirt on short-lived high-tide aircraft ownership transactions they couldn't sustain. But you never hear of it because naturally, nobody sticks around to pour salt on their own wound, nor would I expect them to. This place (and I argue, the industry writ large) is riddled with survivorship bias.

 

[YKA]

Of course. But the positivity fetish crowd will always defend the highs as some sort of constant. The fact you and I bought airplanes on the discount at the lows of these pork cycles may be self-evident to us, but to the color-blind such inflections are invisible. It matters not. The pork cycle continues.

I could make a list of POA users who no longer post here after losing their shirt on short-lived high-tide aircraft ownership transactions they couldn't sustain. But you never hear of it because naturally, nobody sticks around to pour salt on their own wound, nor would I expect them to. This place (and I argue, the industry writ large) is riddled with survivorship bias.

The same thing in business here, 3/4 of trucking companies, and excavation companies shut the doors within 2 years of opening, I am still going after 17 years, which is rare...as a side note, I am so busy now, that I am booked 18 months in advance, and turned down about 90% of the work offered, because of being too busy.

Frequently I buy items, that people just cannot afford to keep. In 2020 I got an almost new boat and motorcycle this way. But my house, car, atv, and even many semi trucks, and heavy equipment were acquired that way. Their loss is my gain, but I don't understand how they couldn't see the writing on the wall. Don't finance toys is the obvious way to go. That $80,000 boat they didn't really need, is an item that they should have saved up for, until they could plunk down cash for it. When I bought it for $50,000 it had 6.1 hours on it, and looked brand new. Or my newest motorcycle, the guy couldn't afford the payments, with 627 kms on it, mint condition, I paid $11,000 compared to his $16,500 4 months earlier. My almost new house in 2016 cost me $950,000 but the original owner spent a whopping $1,607,000. Over extended, couldn't afford to keep it, the Royal bank and I came to an agreement, the bank ate the loss, instead of being stuck with it for a long time, having to upkeep it, pay the taxes, insurance, and more. I did about 98% of the excavation here, and knew the house. So when I heard about it being repossessed, was very interested. Original builder put in the best of the best, but that doesn't translate into an increased price accordingly come time to sell. No toys for me, unless paid in full.

 

[Oldmanb777]

I don't want to hijack this thread, but............ Where to invest when you expect big inflation. I have usually thought real-estate was largely inflation proof, if you could wait out the time. So now that we are retired, and won't have the advantage of making it back, what are good inflation hedges. I no longer want to manage rental property. Numerous reasons for that, starting with govt restrictions, and our age. So where to stash money. I expect inflation to be a big problem for us going forward. I'm already seeing some pretty impressive price increases for goods that I have bought in the past. We are remodeling a property that was a rental. The prices are insane for not only materials, but also for labor. I'm lucky since I am able to do most all the work myself, even if i don't want to. So where to stash our nest egg that won't be destroyed by hyper inflation? We may need it at some point.

 

[MBDiagMan]

I have always believed that borrowing money for toys is a BAD idea. In today’s world, I believe it to be a REALLY BAD idea.

Those brilliant MBA types who run out the numbers to prove that borrowing at a low rate for the toy is offset by the high rate they make somewhere else can indeed show pleasing numbers. That works as long as elsewhere in their budget there is reserve liquid cash to cover it in the event of an emergency financial event. Otherwise they are just over extended like so many others.

 

[MBDiagMan]

I don't want to hijack this thread, but............ Where to invest when you expect big inflation. I have usually thought real-estate was largely inflation proof, if you could wait out the time. So now that we are retired, and won't have the advantage of making it back, what are good inflation hedges. I no longer want to manage rental property. Numerous reasons for that, starting with govt restrictions, and our age. So where to stash money. I expect inflation to be a big problem for us going forward. I'm already seeing some pretty impressive price increases for goods that I have bought in the past. We are remodeling a property that was a rental. The prices are insane for not only materials, but also for labor. I'm lucky since I am able to do most all the work myself, even if i don't want to. So where to stash our nest egg that won't be destroyed by hyper inflation? We may need it at some point.

This is a really good question. I too would like to know a good strategy. With the government printing a few trillion in Covid relief money, inflation is imminent. I am retired with a very good revenue stream for the moment, however, inflation has the strong potential to eat it up.

 

[Half Fast]

This is a really good question. I too would like to know a good strategy. With the government printing a few trillion in Covid relief money, inflation is imminent. I am retired with a very good revenue stream for the moment, however, inflation has the strong potential to eat it up.

You need investments that will ride up with inflation.

Consider:
Commodities such as oil.
TIPS.
Stock in companies that produce consumer goods.
Beer and liquor producers.
https://www.investopedia.com/articles/investing/080813/how-profit-inflation.asp

Pharmaceuticals might be good.

 

[Half Fast]

A friend of mine chided me all last summer at the lake. He had bought a new much bigger boat and kept teasing me about my old small paid for boat. Sad thing is, his new boat, his new cars, everything was financed, and this past fall he lost his job. They have virtually no cash, and they're hurting and selling things off to make the mortgage payment.

So have you made him a low-ball cash offer on his boat?

 

[Oldmanb777]

I think oil may be very short lived for investment purposes. I expect large taxes and restrictions/redtape on fossil fuels coming soon. That will eat up any upside. TIPS may be good, but only time before the govt defaults under the weight of debts. Not sure what happens to TIPS then. Beer and liquor producers could be very good. That market is full of somewhat new entrants, so finding the survivors.
At this time in my life, I need something that isn't too risky, and at the same time inflation resistant. Am I asking for something that doesn't exist?

 

[SoonerAviator]

I think oil may be very short lived for investment purposes. I expect large taxes and restrictions/redtape on fossil fuels coming soon. That will eat up any upside. TIPS may be good, but only time before the govt defaults under the weight of debts. Not sure what happens to TIPS then. Beer and liquor producers could be very good. That market is full of somewhat new entrants, so finding the survivors.
At this time in my life, I need something that isn't too risky, and at the same time inflation resistant. Am I asking for something that doesn't exist?

While the green energy zealots will talk about eliminating O&G, the nation doesn't have the infrastructure to do that, even within the next decade. 30-50 years is a different story, but still unlikely to shift a ton without nationwide power grid infrastructure and outright banning of ICE vehicles/toys. Oil has been parked extremely low fir the past two years. Ideally, oil should be in the $70/bbl range, and it's currently in the mid-$50 range.

The other side of the equation is that many of the big energy producers have been investing in green tech themselves as a hedge (think cigarette companies investing in marijuana and vaping). Even if Oil takes a hit, the big players have been divesting their portfolios to stem most of that impact. Also, some of the biggest growth segments are overseas, so while there may be some push to get out of the US onshore market, the middle east, Africa, and South Anerican markets are heading up. I wouldn't hesitate to use O&G as a price inflation hedge in the near term.

 

[Ed Haywood]

At this time in my life, I need something that isn't too risky, and at the same time inflation resistant. Am I asking for something that doesn't exist?

Index funds. Get the growth of the market as a whole, while avoiding sector-specific and stock-specific risks.

 

[PaulS]

Bitcoin

 

[kayoh190]

As I get older, I'm starting to lean towards the opposite sentiment (regarding debt) from this thread. I've been financially conservative since my teenage years, but I have a few friends that take a give-a-crap attitude towards their finances, and it's not from stupidity or from a lack of financial education - it’s just a YOLO way of living.

As my buddy says, “It’s better to have Ferrari’d and lost than to never have Ferrari’d at all.”

It’s not like these guys are risking going to jail or ending out on the street. If disaster strikes and they suddenly can’t pay for it, they either sell it, or worse case they lose it and play it safe for awhile until their credit recovers.

I’m not wired to play that game, but I know plenty that are, and they’re doing so while fully aware of the potential downfalls. The system is set up such that they feel the risk is worth the reward, and as I get older I’m less and less sure that my way of living life is necessarily superior to theirs.

 

[Matthew Rogers]

This is a really good question. I too would like to know a good strategy. With the government printing a few trillion in Covid relief money, inflation is imminent. I am retired with a very good revenue stream for the moment, however, inflation has the strong potential to eat it up.

The Fed injected trillions into the economy in 2008 and there was no (meaningfully high) inflation. Why would it be any different this time? A large part of inflation is driven, not by the government or the fed policies, but by individual expectations and demand. When everyone expects a good to cost more in the future, there is pressure to buy the good sooner, increasing demand and therefore prices.
After 2008, nobody was in a rush to buy more things or expect higher prices, so the trillions of dollars of Fed cash, had little effect on inflation.
So this time around, the government can again inject cash, and if the majority goes to lower income people who are spending it on basic necessities (rent, food, electricity, gas, toilet paper, etc.) there will be little risk of inflation.

But that also explains why GA aircraft go through inflationary phases. People expect the prices to be higher in the future and therefore buy sooner and pay higher prices. When prices are expected to fall in the future due to some unrelated event in the economy, buying slows and the prices fall, even though the overall supply and demand is relatively constant.

 

[hindsight2020]

This is a really good question. I too would like to know a good strategy. With the government printing a few trillion in Covid relief money, inflation is imminent.

*Laughs in MMT*

I bet you think sovereign currency-issuing governments need a household budget too...

 

[OneCharlieTango]

I have doubts about MMT, but I hope it's true for the time being.

 

[Ed Haywood]

As I get older, I'm starting to lean towards the opposite sentiment (regarding debt) from this thread. I've been financially conservative since my teenage years, but I have a few friends that take a give-a-crap attitude towards their finances, and it's not from stupidity or from a lack of financial education - it’s just a YOLO way of living.

I'm the opposite. All that money I saved when I was younger is now working for me in the market. When your investments start earning more than your day job, it opens your eyes to the power of compound interest over time.

During the real estate market spike in 2006, the guy across the street from me took out a $150K home equity loan. His house went up in value from 200K to 400K, so why not, right? YOLO! He spent 50K on a swimming pool, 50K on a car, and blew 50K on whatever. Then the bottom dropped out of the market and he was under water. He stopped making payments, lost his home, and wound up living in a ****ty apartment complex. I'm still here, he's long gone.

 

[Gino Shtirlits]

I have met two guys who tried to sell Cessna 150. But both has FAA registration issued for somebody else. The guys explained to me that the new registrations are in a process. I have found the situations suspicious because I was not sure the guys are eligible to sell the planes. Actually how could I make sure if a seller is authorized to sell a plane?

 

[Morgan3820]

I'm the opposite. All that money I saved when I was younger is now working for me in the market. When your investments start earning more than your day job, it opens your eyes to the power of compound interest over time.

During the real estate market spike in 2006, the guy across the street from me took out a $150K home equity loan. His house went up in value from 200K to 400K, so why not, right? YOLO! He spent 50K on a swimming pool, 50K on a car, and blew 50K on whatever. Then the bottom dropped out of the market and he was under water. He stopped making payments, lost his home, and wound up living in a ****ty apartment complex. I'm still here, he's long gone.

Maybe the middle ground is own nothing on the house but finance the toys. If things go south give the toys back to the finance company. Keep the house.

 

[kayoh190]

Maybe the middle ground is own nothing on the house but finance the toys. If things go south give the toys back to the finance company. Keep the house.

There you go! Heh.

I dunno, maybe these thoughts are just the beginning of a midlife crisis. I blame it all on that punk kid @Mtns2Skies and his 180.

 

[YKA]

As I get older, I'm starting to lean towards the opposite sentiment (regarding debt) from this thread. I've been financially conservative since my teenage years, but I have a few friends that take a give-a-crap attitude towards their finances, and it's not from stupidity or from a lack of financial education - it’s just a YOLO way of living.

As my buddy says, “It’s better to have Ferrari’d and lost than to never have Ferrari’d at all.”

It’s not like these guys are risking going to jail or ending out on the street. If disaster strikes and they suddenly can’t pay for it, they either sell it, or worse case they lose it and play it safe for awhile until their credit recovers.

I’m not wired to play that game, but I know plenty that are, and they’re doing so while fully aware of the potential downfalls. The system is set up such that they feel the risk is worth the reward, and as I get older I’m less and less sure that my way of living life is necessarily superior to theirs.

Lots are becoming homeless, and the bank will come after people for the short fall between selling price, and amount owed. In the past decade, I've talked to several people who lost it all. One woman had to move her husband and children back into her parents basement, that would be my worst nightmare. My GF is a nurse, it is staggering how many Doctors and nurses have to claim bankruptcy. My credit rating is 825, and it disappoints me that it isn't 850.

 

[kayoh190]

Lots are becoming homeless, and the bank will come after people for the short fall between selling price, and amount owed. In the past decade, I've talked to several people who lost it all. One woman had to move her husband and children back into her parents basement, that would be my worst nightmare. My GF is a nurse, it is staggering how many Doctors are nurses have to claim bankruptcy. My credit rating is 825, and it disappoints me that it isn't 850.

Huh. That all sucks, but I can’t think of a single person that I’ve known over the course of my life that’s been left homeless or even more than merely inconvenienced by taking on more than they can chew. Worst case they sold the stuff they accumulated and started fresh. Every one of them would do it again if given the chance. YOLO and all...

Again, I’m not saying that makes any of it a good idea, but I don’t think any of those guys are looking back on their lives with regret over their credit score.

 

[Half Fast]

Maybe the middle ground is own nothing on the house but finance the toys. If things go south give the toys back to the finance company. Keep the house.

Somewhere in my senior years I'll probably just buy whatever toys I want on credit cards, make the minimum payments, and die owing a chunk of money to Visa.

 

[YKA]

Somewhere in my senior years I'll probably just buy whatever toys I want on credit cards, make the minimum payments, and die owing a chunk of money to Visa.

And a reverse mortgage on the house to

 

[Bill]

Nah, I like my little 21’ bow rider. Six cylinder engine, easy on gas, bulletproof alpha drive. Simple systems, easy to maintain.

 

[Groundpounder]

If you can finance for less than 6%, it makes no sense to pay cash. Just make sure you have a fully stocked FU fund, and you're maxing out your retirement funds.

 

[YKA]

6% interest is really high right now. But interest on savings is almost nothing to.

 

[wheaties]

6% interest is really high right now. But interest on savings is almost nothing to.

...and that's why assets that can be financed are going up in price. Hell,
tththethertthere's a kid that just financed an $18k plane. Just stupid.

 

[David Megginson]

If you can finance for less than 6%, it makes no sense to pay cash. Just make sure you have a fully stocked FU fund, and you're maxing out your retirement funds.

That's leveraging. When it works, it's nice, but when it fails, it fails big.

 

[Groundpounder]

That's leveraging. When it works, it's nice, but when it fails, it fails big.

Yep, just can't be dumb about it.

 

[Morgan3820]

Somewhere in my senior years I'll probably just buy whatever toys I want on credit cards, make the minimum payments, and die owing a chunk of money to Visa.

I have heard that, or something near to it called 'Yuppie Suicide'. Kind of analogous to the guy that starts smoking at age 70, what is the worse that can happen?

 

[Racerx]

...and that's why assets that can be financed are going up in price. Hell,
tththethertthere's a kid that just financed an $18k plane. Just stupid.

Seriously?! Was just saying i needed to have a finance class at work after 2 employees admitted to cashing out their 401k's from previous places of employment. Both are under 35. Two other employees just put solar panels on their house. Oh yeah? Whatd it cost? Nothing?! Did you read the fine print? It's a 20 year lease and the lease can increase 2.9% every year.... But saving 700 in the first year sounds so enticing.

If you HAVE to finance your hobby, you need a cheaper hobby.

 

[WDD]

as I get older I’m less and less sure that my way of living life is necessarily superior to theirs.

Older I get the more I’m grateful I lived within my means and invested. Approaching retirement I can now afford this flying thing, kids through college with no debt, weddings for kids no debt, and wife and I doing lots of things we couldn’t before. We have no debt - we have no fear that our lives have to be put on hold. If I loose my job nothing bad happens