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Chapter Nine
While Heilbroner’s book gives you insight into where we have come from
economically, the other authors give their views on where we are headed.
Their contrasting viewpoints have been important. They allowed me to
see what my eyes could not. By reading books like these, I have been
able to gain insights into the ups and downs, the cycles and trends, of
the economy. A common theme in all of these books is that one of the
biggest changes of all is right around the corner.
How to Play the Bank
After the 1986 Tax Reform Act became law, there were opportunities
everywhere. Real estate, stocks, and businesses were available for low
prices. While it was devastating for many people on the left side, it was
wonderful for me because I could utilize my skills as a B and I to take
advantage of the opportunities around me. Instead of being greedy and
chasing everything that looked like a good deal, I decided to focus on
real estate. Why real estate? For these five simple reasons:
1. Pricing
Real estate prices were so low that mortgage payments were
far lower than the fair-market rent for most properties. These
properties made great economic sense, which meant there
was little risk. It was like going to a sale at a retail store when
everything was 50 percent off.
2. Financing
The banks would give me a loan on real estate, but not on
stocks. Since I wanted to buy as much as I could while the
market was depressed, I bought real estate so that what cash
I had could be combined with financing through banks.
For example, let’s say I had $10,000 in savings to invest. If
I bought stocks, I could only buy $10,000 worth of stocks.
I could have bought on margin and put up only part of the
total cost and the broker company would have loaned me
the remainder, but I wasn’t financially strong enough to
risk a downturn in the market.
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