Reality Check Q&A #4

Gary North

Sept. 22, 2009

REAL ESTATE

My retired father-in-law plans to purchase a second house in an Akron, Ohio suburb and rent to me/my wife. Should he wait?

I think Akron will continue to suffer from falling real estate prices. Akron is in the rust belt, and the rust belt is not going to recover in his lifetime.

But prices are so low there that it is possible to get positive cash flow. If he buys a home in a neighborhood that your wife likes, he probably won't lose much money.

If you can do the leg work on the best deals, then he should buy. Use the techniques that John Schaub recommends. www.JohnSchaub.com

Your goal is to find a desperate seller in a neighborhood that is owner©occupied. If there are three four "For Sale" signs on the block, that's a bad sign. If there are two or more "For Rent" signs, that's a very bad sign.

If you intend to stay there, he is getting his daughter to be available if he gets sick or in some way incapacitated. Ads long as you are content with this, tell him that you will stay as a renter until he dies.

You might get him to sign an option to sell the place for what he pays for it (plus 5%) for the next five years. If he pays cash, and he is willing to sell it to you on a 30-year loan at (say) 5.3%, that is a good deal for you.

INVESTING

Your age: 72 & healthy.
Your location: Mohawk Valley, upstate NY
Your occupation: retired, former computer consultant
Your retirement date: 2001
Your #1 goal in life: I don't have one anymore! (Seriously, I know this is bad.)
Deadline date: Oct 1, 2009
Question:
I have a $100,000+ Certificate of Deposit maturing Oct 1, 2009, what specifically should I do with this cash?
I worry about the collapse of the US Dollar.

If you are 72 and healthy, your first step is to get back in the work force. That will let you continue to invest. Anything that does not bore you is good. Just don't draw down your savings.

If you can get a job doing anything related to your long-term lifetime goal, that's best.

As for $100,000, that depends on your total net worth. If this money is crucial for your retirement, you must find a job. That amount of money is not enough to provide a comfortable lifestyle if you get sick. It will go like a torrent.

If I were you, I would look for a house to buy that will provide income. If you can locate a deep-discount house and pay cash, or close to it, the money will do more for your income than what a CD will pay. If the dollar falls in value, the house should appreciate.

What will finally trigger any economic collapse and how rapidly do you think that things could deteriorate?
What can we watch as our "canary in the coal mine" to indicate an impending collapse?

Nice try! But only one question per subscriber!

INVESTING

Age 63 (both)
Chadds Ford, PA
Retired since January 1996
# 1 Goal Protect our $750,000 life savings (Half Roth, Half IRA) mostly equities
$40,000 Pension husband only (no survivor option)
$31,000 Joint Social Security excellent health and longevity prospects
$400,000 Level term life insurance on Husband only (expires at age 71)
Primary residence value $500,000 mortgage $240,000
Shore Rental Condo value $280,000 no mortgage My wife, always risk averse, wants all of our savings in an absolutely safe place. She thinks only Bank insured accounts.

You are in equities. Your wife's opinion has not affected you in the past, or else you would have sold your equities in 2000 and not bought any more. You have been in a dead market for a decade. She never complained.

So, she is right and you are wrong. Compared to equities, an FDIC-insured account is wise.

You are 63 years old and you owe over $250,000 on a house. What would it cost to rent a similar property? If you say, "My wife likes the house," then she is not risk-averse at all. She is a big spender who likes being in debt for something you two cannot afford.

She still thinks the dollar is safe. You do, too.

If you sold your shares, put half the money in foreign Asian currencies with Everbank and 50% in dollars waiting to get into commodities and Asian shares during the next recession, she would be safer than to be in dollars.

She is a standard wife. She trusts the government, she wants way more house than you can afford, and she is terrified of your inability to protect her after you're gone.

You trust the stick market, you live in more house that you can afford, and you own a condo instead of gold coins.

You both need to re©think just about everything.

INVESTING

What is the best place or places to protect our life savings?

Your own side business that you can keep working in until you die.

INVESTING

Over the next 15-20 years, what will act more like "money", a.k.a: the most marketable, exchanged-for-no-discount commodity: oil, silver, gold or something else?

Gold.

CAREER

Economics question:
Regardless of the endpoint (e.g., stagflation, deflation with fascistic advancement), what are the immediate, critical moves for both liquid and illiquid (e.g., 401, IRA) assets?

You get only one question. I find this one less interesting than this one.

Career decision questions:
Your age: 40
Your location: Pittsburgh, PA but willing/desiring to relocate to a more rural area
Your occupation: Health Services Researcher (Masters in Economics and Policy Analysis)
Your retirement date: Honestly, never is both acceptable and likely
Your #1 goal in life: Live in a rural area and work in a vocation that is fulfilling
Deadline date: 12 to 60 months
What should I do to achieve this goal? I am considering paramedic and MS-Physician Assistant with a focus on primary care.

Your goals seem reasonable. Your occupation is the limiting factor.

You must begin spending at least 5 hours a week on this question: "Who in a rural area would want to hire someone with my skills" Will this outfit survive the coming crisis?"

You need advice from several people in the profession in a rural area what you must be to be a desirable employee. Then concentrate on developing these skills.

I think you should make the career move where you are. Get qualified locally. Get a good reputation. This will lower the rural outfit's the risk of hiring you. Find out if you really want to do this the rest of your life.