Thrift Savings Plan Type Prvt Org?

[ae...@lafn.org]

I like the Thrift Savings Plan. It's been good to me. I haven't
done any other investing, but I want to start now. I would like to
use a private investment group that works similarly to the Thrift Plan
where you can switch between S&P 500, Bonds and Govmt Securities.
Any suggestions?

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[Micky DuPree]

In article
<jcast144-160...@user-37kb5f9.dialup.mindspring.com>,
jcas...@mindspring.com (John E. Castasus) writes:

: On a related thread, Boomers had a major impact on real estate during
: the 70s and 80s. Can anyone tell me exactly what happened, and is it
: possible that the same thing is happening on Wall Street?

There may be a similar effect, but I can't see it being quite the same
in scope or duration. Don't forget a fundamental difference between
real estate and stocks: both are investment strategies, but housing is a
basic human *need* whereas stocks are not. Even from the market point
of view, there are other places for capital to go if it tires of the
stock exchanges, whereas pitching tents and cardboard boxes is not an
attractive alternative to decent housing.

I can't give you a real-estate expert's historical opinion on the
matter, but I can tell you what it *looked* like was happening from the
point of view of this late-model boomer layman moving through the system
in those days.

The synopsis is that I've never seen either the public or private sector
plan ahead for gross demographic trends that are nevertheless a matter
of open public knowledge and that they have *years* to prepare for. I
was on the trailing end of the baby boom birth curve. Several of the
classes ahead of me "had" to be put on double sessions in high school
because there were too many of them. Excuse me? You couldn't have just
looked at the birth rate statistics and seen them coming? Was that
classified information? By the time my class came through, though,
there were somewhat fewer of us and they had built/acquired extra space
to put us in and hired more staff, so we went back to single sessions.
A few years later, when the Xers would have been starting high school, I
heard that there was some sort of cutback crisis, not enough students
and a surplus of space and personnel. _Quelle surprise_!

Lab rats have better learning curves than that.

From about the late '60s through the early '80s, all those surplus
boomers got out of school, got their first jobs, and started looking
around for permanent housing. They were carrying far less student loan
debt than Xers would later, even adjusted for inflation. Interest on
student debt, consumer debt (including credit cards), and secondary real
estate -- in fact, on *all* debt -- was fully tax-deductible in those
days, and the higher inflation in those days favored *debtors* rather
than creditors. Entry-level jobs with full benefits were still fairly
plentiful and real estate was relatively cheap.

So the boomers bought some. In fact, as the bulge moved through the
snake and demand started to climb, they bought *lots* (pun not
intended). The accepted thing to do among middle-class whites 2-10
years older than I was to buy at least two units, live in one, and rent
the other one out for the income. The more you made this way as a
landlord, the more real estate you'd buy. If you were a hustler, you'd
go after privately foreclosed or publicly seized properties or find some
way to barely qualify for all sorts of private and public loans to
finance your real estate purchases. E.g., one landlord of mine,
couldn't have been much older than I, would move into a property for six
months to qualify for the more generous "owner-occupied" bank mortgages,
and then move out and move on to the next property he wanted to acquire.
If you were a *real* hustler, you'd hold seminars, do infomercials, and
sell audio tapes to other greedy schmucks out there about how they too
could become rich in real estate by using OPM ("Other People's Money").
The seminar attendees were probably joining in too late in the trend to
really cash in, but the rest of the industry could keep this up as long
as the rent was coming in faster than the mortgage payments were going
out. And who could have guessed that property tax caps and rollbacks
would become a popular political issue once the boomers were safely out
of the schools and deeply into property?

Demand did not remain that high forever, of course. A lot of people
bought at the price peak and now cannot sell their houses for what they
paid for them. Those that divested early made out like bandits, but
those who thought that the surge would go on and on often overextended
themselves.

Prices never did go back to a reasonable level, however. Money got a
lot tighter. Savings and loans got their wrists slapped for commercial
extravagance while young adults, the traditional new segment of the
residential market, had the leash attached to their choke collars jerked
tight. They had bleaker job prospects, less real income, more real
debt, and less tax relief on that debt. Real estate profits were
maximized by keeping supply lower than absolute demand and relying on
rent rather than on sales. Those who got out of school in the late
'80s, early '90s had a lot more trouble scraping together the start-up
capital just to buy in, and if they did, they might have trouble getting
their purchase price back when they moved. The meteoric rise of
homelessness in the absence of public relief during this time was
predictable, and yet wasn't predicted.

The fact that all of this started when the boomers entered the market
seemed to take everyone by surprise. The fact that it eventually
leveled off and even sagged a bit once the crest of the boom were in
their thirties also seemed to take everyone by surprise.

I think we'll see a statistical trend amongst Xers from renting to
owning when their parents start to die off in significant numbers,
because inheritance is the only way a lot of them are going to be able
to afford to buy in if their families won't help them out while the
older generations are still alive. Harsh, but there it is. That should
start to take place slowly in a few years and continue very slowly for
another twenty years after. I can just about guarantee a statistical
decrease in homelessness once the boomers start to die off in
significant numbers, starting in about 2011, thus freeing up an absolute
number of housing units. Housing prices will start to fall at this
time, taking a precipitous dive when the bulge approaches average life
expectancy age and investors finally realize they need to ditch real
estate fast, roughly around 2024, and prices will continue to fall for
about 18 years more at that point.

And I completely expect everyone to be taken by surprise by these almost
ineluctable eventualities.

No crystal ball is perfect, and I can see three wild cards that could
make these predictions utterly nonoperative: major scientific
breakthroughs in average life expectancy before the boomers die, major
marketing/engineering breakthroughs in housing, and another major baby
boom or immigration boom. The first is more likely than the second,
IMHO, because there are big-money disincentives to coming up with the
21st century equivalent of Levittown (low-cost mass-market housing
development to fill the huge demand after WWII).

Even without major unforeseeable perturbations to the system, it doesn't
*have* to be like this, though. Neither public nor private policy
dictates that it has to be this difficult for new buyers to get their
first home. There is no earthly reason why the mortgage interest tax
deduction should disproportionately subsidize the luxury end of the
housing market at the expense of the low-income end of the market. It's
not even good for the economy as a whole. However, experience and
history show that maximizing profits at the top but not at the bottom is
a reliable driving indicator of the direction of both public and private
policy.

-Micky

--

Dr. Kendall: "Frankly, I can't even guess at a motive."
Avon: "Try greed. It's usually reliable."

-- _Blake's 7_