Back in July of 2010, I wrote a post entitled, “Am I Living In A Parallel Universe?” discussing the disconnect between the robustness on the ground in San Francisco and the incredibly negative mood by the mass media. Back then, I kept thinking “the economy is back, baby,” but nobody seemed to agree. Even my online friends were making fun of my bullishness. You guys know who you are!
Hopefully you guys not only increased your asset allocation towards equities, you also took advantage of the amazingly bubbliscious bond market and refinanced your debt.
At the end of 2010, Twitter was valued at some $3 billion bucks now its valued closer to $100+ billion in 2021. Prince The same thing has happened for Facebook, now valued at some hundreds of billions of dollars. There is so much liquidity out there it's absolutely ridiculous how much new wealth is being created.
Let's discuss some reasons why people continuously are slow to recognize change. We'll also discuss how you can improve your sense of reality by being more honest with yourself.
In 2021, the economy is back again. It's time for us to revenge spend to our heart's delight and live it up after 12+ months of lockdown!
WHAT'S WRONG WITH PEOPLE
So why didn't my friend also think the economy was back in 2012 and now in 2021?
* We are delusional. Delusion is the root of many problems. You are a C-student but you think you deserve an “A” lifestyle so you spend more than you have and get yourself in trouble. The perfect metaphor is that you believe you can fly, so you jump off a building and die. Back in the summer of 2010, you didn't believe the economy was recovering because your mind selectively chose to highlight all the suffering in the world, even though you yourself were fine! People love to point out that everyone else is suffering but themselves. You know that's just stupid because if you're fine, and you represent everybody else, then of course everyone is fine.
* We are dumb. Let's face it, we all think we are smarter than we really are, but the fact of the matter is, many of us are just dumb. There are actually people out there that think that grades don't matter. Seriously, that's just stupid if you think grades aren't one of many indicators people look at to select the best people possible to partner up with. When traffic is horrendous, you can't get a reservation at your favorite restaurant until 10pm, your friends are all getting jobs, and the stock markets are marching higher due to better earnings and a re-rating, and you still think the economy isn't doing well, then you are dumb.
* It's hard to let go. Change is stressful and we hold on for longer than we should. Money losing stocks are a great example. The stock is down 10%, and we believe it'll recover. The stock is now down 30%, and we continue to hold on until the stock is down 50%. We finally sell, and the stock goes up. We are so stubborn and so slow when it comes to change, that we end up missing out on opportunities. When we feel hurt, we want other people to hurt too, so we can feel better about ourselves. See: Recommend Split Between Active And Passive Investing
* We are as blind as dingbats. There are certain people or organizations out there that are just no-brainers to latch onto. In “Riding Rocketships For Greater Success“, I talk about how everyone should identify who is the rocket ship in their midst and hop aboard. If you are not constantly surveying your community to identify who is the one with great potential, you are just missing out. You need to build those relationships with those rocket ships, leverage off what they are doing, and create your own success as well.
How To Improve Our Foresight
* Be honest with yourself. The first thing to do is to conduct a thorough self-assessment of ones attributes to reduce the amount of disillusionment. I can't surf, which means I will never be a cool surfer dude with nice deltoids and back muscles that can pick up beach babes. Nor can I control myself around cheeseburgers and butter cookies. Which means I will never have washboard abs or be a male model. I have trouble hitting a top spin backhand, which means I will never be a truly elite tennis player. Damn, I'm depressed now! But, that's OK, it's better to be realistic than delusional.
* Recognize that many people are smarter, more attractive, and harder working than you. She will also get the better assignments and get more attention because she's not only speaks three languages fluently, she's just that much hotter than you. He will always have more money than you because he started his business years earlier. Once you recognize that you aren't hot sh*t, you are better able to recognize reality that the economy is back.
* Once you recognize reality, systematically work on improving those things you care about. You can't be everything to everyone, but you can be great at a focused list of things. The goal is to figure out what's important to you and focus like a mad person to get there.
Related: To Get Rich, Practice Prediction The Future
The Good Times Ahead
You just have to open your eyes to see that things are improving. Credit card use is on fire again. There is massive demand for real estate. Car sales are at a record high. Unemployment rate has dipped to 6% after a tremendous March 2021 jobs report. Interest rates are still near record lows. Consumers are cashed up and spending. Meanwhile, every single bad thing is known, barring another terrorist attack.
With political false promises as a final buttressing point, how can the economy not be back?
Related: A Bull Market To Living Your Best Life Today
RECOMMENDATIONS TO BUILD WEALTH
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After you link all your accounts, use their Retirement Planning calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. Definitely run your numbers to see how you’re doing. I’ve been using Personal Capital since 2012 and have seen my net worth skyrocket during this time thanks to better money management.
Achieve Financial Freedom Through Real Estate
Since the economy is back, inflation is also back. As a result, I think we should all invest in real state. Real estate is my favorite way to achieving financial freedom because it is a tangible asset that is less volatile, provides utility, and generates income. Inflation whittles down the cost of debt and boosts real asset values
Take a look at my two favorite real estate crowdfunding platforms that are free to sign up and explore:
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends.
I've personally invested $810,000 in real estate crowdfunding across 18 projects to take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$300,000.
Updated for 2021+ – Longest bull market ever!
Yes that’s true that the that people are “smarter” with their money now since the housing bubble burst, but is it really smarter or is there simply less consumer confidence. One of the main reason why the great depression was as bad as it was, besides the banks not being insured, was the hysteria that caused a ridiculous trough in consumer confidence.
I agree with you that the economy is on the up-swing. I work with many companies and most that I see today have shifted from survival thinking to growth thinking, and that is good for all of us.
With that said, I think recovery will be slower than with prior recessions. The whole recapitalization process (of everything – banks, companies, real estate, and families) takes time to work through.
I’m not quite as optimistic as you but as someone with several interests in startups including Twitter I hope you are right!
I was on the bandwagon with you last year that the economy was better. Maybe it was just in California, but the freeways have been busy and businesses packed for over a year.
Finally, people are going to have to believe following last week’s employment numbers!
Great analysis: I know a guy with a good job and the Cheesecake Factory has a line.
Please explain how California won’t go bankrupt.
How? You’re going to lend us the money silly and bail us out!
I’m not sure if the economy is alive and kicking but it’s definitely waking up. Once I see 2 consecutive quarters of continued GDP growth, lower unemployment, and improved housing sales watch out. The jobless rate out this morning was a small step forward.
As many have said the media tends to focus on the negative especially when times are good or improving. Many people are starting to question the media’s illusion and spend.
I’d like to think the economy is back. From Christmas until now, all the stores and restaurants I’ve been to have been packed. Either people are getting jobs and spending now, or they are going into more credit card debt. I’d like to think that they are getting jobs, but who knows.
I also think the media either plays the ‘doom & gloom’ card or the ‘irrational exuberance’ card. The economy could be back, but they are stuck preaching the doom & gloom. Next thing you know, you’ll turn on the news and it will be breaking news “the economy is back!!”
Socrates said, “The more you know, the more you realize you know nothing.” Perhaps you are at this stage of enlightenment now Sam. I think you could add that we are often gullible to your list. It seems like we will believe whatever the latest “news” is and the markets react accordingly. Of course all this does is pass on any small profits you’ve managed to make to the hedge fund managers that love this irrational (and exploitable) volatility.
I donno John. I don’t believe people can consistently spend money they don’t have.
I really do think people are bullish about their prospects and income, and are therefore spending.
I’m saying this as a guy who is very disappointed with their 2011 compensation.
Shoot, you caught my spelling error for McDonald’s. Thoughts on the point of the article?
BINGO! It doesn’t matter what you think. What matters is reality. And the reality is, other people are feeling bullish, which is why the economy is bouncing back.
The great thing though is that we have the power to stop being delusional, stop being dumb, and force ourselves to let go. If we don’t, we might go broke!
I actually think we are headed for another financial crisis and recession. Where I live and from what I see, many people haven’t learned their lesson. They are blind like dingbats. They are still spending more than they have and aren’t worrying about it. I guess the first round didn’t hit them hard enough?!
Really?? Perhaps they saved and invested very well and that’s why they are spending more money! They are bullish about their career!
I do believe people have much more money than we know.
I agree completely with Miss T.
This is a momentary blip as the systemic issues that plague the world, and the US, have not been resolved.
The Fed, along with the current administration, will certainly not let anything bad happen before the election so they will keep the ship afloat as long as possible. We STILL have not crashed like we needed to after 2008.
Samurai – Never use SF/Bay Area as your frame of reference for the economy. Ever. Just like the NYC real estate market is in NO way representative of the real estate market as a whole.
And what area do you hail from? Do 700 million people in the world not use Facebook?
How can I talk about another area, when I just live in this area?
If my area is booming, why wouldn’t everybody in the world want to move here and boom as well? Planes, trains, automobiles get people here quick!
I think positive change is coming for many. Here is Central Florida, the job market is easing up a bit and that is always a good sign. Will wages improve? Probably not in my particular career choice. That market is flooded by graduates from the influx of for profit schools in this area. But, the employers know the reputations of these schools and that will help them decide on a candidate.
Great to here about C. Florida, b/c I know Florida, like California was hit hard by the housing downturn.
It’s interesting to see the USA doing so well while things are slowing down in Europe so much. From the 2008 downturn I had thought we were all connected so why the decoupling now?
Mike
We coupled in 2010, and now I think we’re really sick of Europe and are emerging, doing our own thing.
Sam,
As always, I appreciate your candor, intelligence, insightfulness, and optimism. I think you are better situated than most, both financially and intellectually, so it contributes to your optimism, but I do also think you work hard, which also contributes to your success.
I was recently forwarded a newsletter that I felt was insightfully written and factually accurate that I would value your opinion on. I agree with the perspective presented on the merits (which is quite dire on its outlook), but felt that if you could remain optimistic in spite of it, that your optimism would be persuasive. I am not sure if I am allowed to reference another newsletter in your blog, so let me know if it is not permitted. Here is the link for the article:
https://www.stansberryresearch.com/pub/reports/201112PSI_issue.html
Your thoughts and opinion would be deeply appreciated.
I couldn’t get through it. The newsletter was way too long.
Yes, government is corrupt. So, I am constantly perplexed why people want to vote for raising taxes and voting for bigger government.
I just found something disheartening. I played tennis with a 31-32 year old guy who is interviewing at Google, and he said they are offering him only around $125,000 base, plus bonuses…. might come out to $200,000… but this is a far crew from the 28 yo $450,000 applicant I had for my rental.
He said his friend makes $150-$200K at Google as well. Good, but not ridiculous. Thoughts?
My tennis buddy is a software engineer.
Do you want the typical option package compensation structure is and how much? Can one get rich this way?
Didn’t catch what the rental apps title was. Perhaps he was including all his accumulated stock. Now I wonder and am really thankful I rejected his application!
Blame the media – pessimism sells better, especially when there is a minority group of (sometimes) comparatively better off people to put the knife into – and the politicians who encouraged entitlement mentality to become so ingrained in our society – it’s much easier to moan and complain and demand that someone else pay (more) than to get off your butt and make it work for yourself.
Sometimes I think the US should amend the constitution to guarantee freedom from the press rather than freedom of the press.
If the economy was as bad as some people claim, you’d be having hunger riots on the streets instead of seeing crowds pushing and shoving to buy the latest Apply gizmo.
“Sometimes I think the US should amend the constitution to guarantee freedom from the press rather than freedom of the press.” Got to agree. The mass media annoys me. It’s like they CAN’T think for themselves!
This is one of the main reasons why I write/blog. To speak the truth and challenge the mass media!
I think the biggest contributor to bearishness is LOCAL NEWS.
It’s gotten to the point where people feel vindicated for their own financial missteps if they see that “things are still terrible.” Those who missed out on the 100% rally because they didn’t let go of their fears in time, want another correction in the markets.
I think trade volumes and the US market are going to start picking up as more and more people gradually accept that the Fed has told us YOU WILL lose money if you just sit on cash over the next 2 years and companies are telling us that economic headwinds are subsiding.
Agreed Nathan.
It will be interesting to see the herd asset allocate out of money markets into real estate and stocks. I can’t wait actually, as that will be good for the job market and consumer confidence.
Sam,
People were pessimistic back in summer of 2010 because people are sheep. We are all brainwashed by the media and, unfortunately, was majority of people think that world is ending just because pundits keep repeating same ole crap over and over in media. That’s why I don’t have cable anymore. :)
Excellent. I hate watching CNBC and all that… it annoys me.
I find it hard to believe the economy is suffering right now. When I go to the mall on a Saturday night and I see 60 people waiting in line for Cheesecake factory, I know this must be false. If the economy was truly in dire straits like the media often reports, there wouldn’t be a 30 minute wait for overpriced crap. People wouldn’t be throwing around money like there’s no tomorrow every time I go to Vegas. The economy is just fine, it’s just not very newsworthy to report this.
Lol, Cheesecake Factory is ALWAYS PACKED! That is the biggest money making restaurant on earth! Key LIme pie cheescake is the bomb!
I am one of those eternal optimists who doesn’t care about what “the economy” is doing. I understand and recognize that certain factors and numbers used to measure the economy were down, but like you pointed out, my perception was skewed because I wasn’t affected. I also group myself in the “personal responsibility” crowd. I am responsible for my economy and you are responsible for yours. The economy as a whole has very little effect on personal economics, unless you let it.
Well said Matt. In the downturn a friend of mine increased his revenues by 25% in a market that should’ve been getting hammered (house painting). People are out there succeeding in every industry.
Good attitude Matt. I got punched in the gut recently in terms of some income, and plan to create and make my own destiny!
The market is on fire. I’m afraid to put new money in. Will it pull back a bit so I can add investment or should I just go ahead and buy? Who knows. I have a pretty good feeling about the economy so I probably will just keep dollar cost averaging in.
There is never a better time to invest than right now. Do so with a plan and you will benefit. I bought STX for the dividend but got some kick-a capital gains instead. It rocked the house, today.
I’m afraid too, and I’m taking some profits to wait for a better re-entry.
I think lots of people are slow to recognize and grasp changing times because they harbor the Who Moved My Cheese? mentality. They’re more worried about bitch’ about the cheese being gone than they are about going out and finding a new/better/funner/wilder way to live.
I agree with what you wrote, but have to add that “Who Moved My Cheese” has to be one of the worst books ever written.
I tried to read that book….. too deepfor me, and didn’t get a lasting impression. That said, I understand what you are saying!
I’m all about finding a funner way to live in 2012!
There is a syndrome for this phenoeinon! If the economy is not helping you with raises and bonuses, it sucks. There is a saying that if my neighbor loses theri job, it is a recession. If I lose my job, it is a depression. Itis all about the individual! We are self centered in this respect. That is why it takes a lot to increase positive consumer sentiment and just alittle to decrease it.
My year end bonus was horrible, yet I’m still bullish about the economy b/c I see it all around the improvement!
I think it will be a better year and that the economy is doing better – the problem I always see is the politicians *causing* economic problems like they did a few months ago – creating the problem with our credit rating. They do it for their own personal and political gains, and the media follows that. If we ignored politicians and ignored the media, I think that people would see that things are definitely improving.
Agree. Politicians are KILLING us! I wish they would just all get out of the way.
I also believe that 2012 will be a much better year. I think economy is definitely doing better. I don’t know if we go back to pre-2009 level. Not in 2012. Not in the real estate market. But we are on the right path. Maybe I am just too optimistic. But I do have a good feeling about it (I am not delusional lol).
I think US real estate is one of the absolute best places to put money now with 7-8% rental yields and 2.5-3.5% money.