By Michael Del Prete |AZREIA
When the New York Stock Exchange opened for trading on January 2, 1970, the Dow Jones Industrial Average was at 809 points. Consumer confidence was high, the economy was strong.
But that didn’t last long.
Over the next 10 years, the U.S. economy would suffer its most painful episode since the Great Depression.
The 1970s were hit with two economic recessions — a period of high unemployment, high inflation, higher taxes, higher debt levels, and an overall slump in growth. Inflation peaked above 10%, unemployment was around 8%. While ‘Underemployment’ was nearly 20%, i.e. people who wanted a full-time job but were only able to find part-time work.
As of May 2020, the U.S. Underemployment rate was 22.8%. The traditional financial investments and the stock market produced bleak returns.
Remember — the Dow Jones Industrial Average opened in 1970 at 809 points. At the close of the decade in December 1979, the Dow was worth just 839 points — almost no gain. When adjusted for inflation, stock market investors LOST about 49% during the 1970s. It was a brutal time to be an investor in mainstream assets. However, people who invested in REAL assets did quite well.
You won’t be surprised to learn that gold generated great returns. A lot of investors dismiss gold as jewelry. In 1971, gold traded at US$35. By the end of that decade, gold touched US$850. That’s a 2,300 percent gain in the 1970s. Meanwhile, for stock investors, the ‘70s were pretty much a lost decade. Residential real estate, however, was a mixed bag.
In some parts of the US, residential real estate as an asset class performed very well in the 1970s. California real estate, for example, tripled in value during the decade as the state’s population exploded. But in other parts of the country, residential real estate was a dull investment as local governments imposed rent control, limiting how much a landlord could charge. Reduced rents meant depressed property prices, so residential real estate was a very uneven asset class. However, the 1970s still ended with double-digit returns.
The point is that real assets generally produce strong returns during the worst economic times. Now, it would be ridiculous to say that 2022 will be exactly like the 1970s. However, I do believe the further back you understand history the further you can see into the future and it would be to your advantage to study similar eras that resemble today.
If you were in the real estate business during the last recession like myself, at some point I’m positive you said something along the lines of, “I wish I had bought more properties.” I feel your pain, but in our defense, we just didn’t know what we didn’t know.
Looking back to 2009, I referred to the recession as a crash. Now, with my continued education and experience, I realized America was on SALE.
In these unusual times, there is no room for the lack of education and relationship building. It’s more important than ever to understand how to solve problems. You can easily do this by filling your investor toolbox with creative ways to purchase and finance real estate.
In the best of times and even in the worst of times, AZREIA is committed to standing by our members to continue to help each and every one of you find the success you’re looking for. We will help you fill your investor toolbox so you’re prepared for anything. This could be helping you connect with other investors that can partner with you, provide properties for you, or mentor you. It could be through continuous education, whether our market update or new skills taught by a national speaker, that can keep you updated to make the wisest decisions with your investing. Perhaps it’s through significant discounts with our various business partners that can help you save money when you need to. Our government affairs efforts and membership discounts are just a few more ways we are here for our members when they need us most. It is our mission to support you, we will be here for you when you need us and when you don’t.
See you at the next meeting,
Michael Del Prete