Current Events

Yesterday, I read an article about a man who lost a fortune. He had inherited somewhere in the range of $11 to $14 million from the sale of a company his father started. In a little over a decade, all of that money was gone. This person is now, in his words, broke, and he's starting all over again at age 59 teaching at a local college.

The interesting thing in the article, is that he blames him bankers and investment advisers who told him to invest in stocks and real estate.

Now, the stock portion, I can understand. I personally don't own any stock in anything. (Except my own real estate company) However, to hear him complain about investing in real estate caught me off guard. ...Until I read the article, and saw how he "invested" in real estate. Then I understood.

This individual purchased personal residences that needed work. Fixer upper's you might say. He put almost $5m into one of them. Everything was very lavish and well appointed. That was one property. There was another, for $650k, and again, there was a bunch of money poured into that one as well.

When the economy collapsed, it's obvious what would happen to him. There is no way he could continue to pay for these monsters, and no way to sell them for enough to cover his basis.

So was investing in real estate the problem? No. It runs much deeper than that. I feel that it is a cultural problem, and and emotional problem that we as Americans are being forced to deal with. This man talked about wanting to keep up not with the Jonses, but with his other family members who had bigger shares of the company.

So the problem this man had is not that he invested in real estate. It is HOW he did it, and what his mind-set was. For one thing, he wasn't investing. He was just living lavishly. That's not investing. If you are investing, you are looking at returns, income, expenses, and treating it like a business. This man didn't do it this way.

So blaming real estate investing is just a cop out. He made bad choices, and to his credit, he recognizes this. Nobody could have predicted the collapse of our economy the way it happened. That is a serious stroke of bad luck.

But just as this man's perspective, expectations, and attitudes about money have been changed by these traumatic events, we each need to change our perspective about what we need to be happy, successful, and take a real serious look about why we invest and how we invest.