REIT

Real Estate + The Financial Crisis Ten Years Later

Saving for retirement while also trying to save for a house downpayment. That’s the dilemma facing Erin from Salt Lake City as we kicked off the latest radio show. Is there a happy medium? Or should she focus all her efforts on getting that downpayment in place?

Next up was Joe from Chicago with another real estate question. This one involves finding a way to keep an piece of existing property in the family.

Where has the time gone? It was ten years ago this month that the U.S. financial system was brought to its knees.

To help us retrace the events of that period, we’re joined today by Gretchen Morgenson, investigative reporter at the Wall Street Journal.

As the financial crisis was unfolding, Morgenson was working for the New York Times, and subsequently co-authored Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon.

There’s no one more qualified to walk us down memory lane and remind us of just how bad things actually were. In case you’ve forgotten, consider this timeline:

  • 9/15/2008: Lehman Brothers files for Chapter 11 bankruptcy protection. On the same day, Bank of America announced its intent to purchase Merrill Lynch for $50 billion.

  • 9/16/2008: The Federal Reserve Board authorized the Federal Reserve Bank of New York to lend up to $85 billion to AIG under Section 13(3) of the Federal Reserve Act.

  • 9/16/2008: The net asset value of shares in the Reserve Primary Money Fund fell below $1 per share, primarily due to losses on Lehman Brothers commercial paper and medium-term notes. When the Reserve fund “broke the buck,” it caused panic among investors who considered money market accounts nearly the equivalent of bank savings accounts.

  • 9/19/2008: To guard against a run on money market funds, the Treasury Department announced that it would insure up to $50 billion in money-market fund investments at companies that paid a fee to participate in the program. The year long initiative guaranteed that the funds' values would not fall below the $1 a share.

  • 9/20/2008: The Treasury Department submitted draft legislation to Congress for authority to purchase troubled assets (the first version of TARP).

  • 9/21/2008: The Federal Reserve Board approved applications of investment banking companies Goldman Sachs and Morgan Stanley to become bank holding companies.

All this in just one week!! An incredible moment in the history of this country, and it was only ten years ago.

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The Price is Wrong

The Price is Wrong

If you feel like things are more expensive, you are right. Despite a slightly weaker than expected inflation report in April, this year, prices have accelerated faster than Fed officials anticipated just a few months ago. Last week we learned that headline inflation increased to a 14-month high of 2.5 percent from a year ago in April, due in large part to rising gas prices. Excluding food and energy the core rate increased by 2.1 percent.

Inflation-Proof Your Life

Inflation-Proof Your Life

Worries about rising inflation have spooked stock and bond investors. As a reminder, inflation occurs when the prices of goods and services rise and as a result, every dollar you spend in the economy purchases less. The annual rate of inflation over from 1917 until 2017 has averaged just over 3 percent annually. That might not sound like much, but consider this: today you need $7,272.09 in cash to buy what $1,000 could buy in 50 years ago.