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Boyd coddington junkyard dog wheels, car wheels, truck wheels, motor wheels
For most of us, ‘The American Dream’ means a place where your financial status and ability to obtain a mortgage and home-ownership are based upon your salary, assets and credit. This is why it is so strange to look back at the 1950’s and watch the rise in wealth among the middle and upper classes who started out in the 1940’s. What most people see is the rise of the middle class, the shift to a two income family and the explosion of home ownership. The reality is that the 1950’s were the era of the great American middle class.
While it may sound strange to think of cars, trucks, and motorcycles as being part of the ‘Great American Middle Class,’ the reality is that almost every vehicle and machine owned by the average person was purchased on credit. The credit market was the engine that helped drive the economy forward into the 1950’s. In 1950, a family of four needed about $12,000 of family income just to cover the average mortgage payment on a house and car payment. Over time, the amount of income needed to buy a house and car increased, but the amount required to borrow remained the same.
In 1950, the average mortgage payment for a family of four was $575. With two working parents, one for the city and one for the suburbs, it was not uncommon for a family to use all of their disposable income to service the debt incurred for their home and their car. This money was spent on gas, food, clothes, and the other essentials of life.
Over time, the value of the dollar rose, and the value of the household car rose with it. The average vehicle on the road in 1950 was the Ford Model T, a vehicle that could be purchased for about $1300. At the time of this writing, an average new car sells for $26,000 to $38,000. Even with inflation, the median household income has barely budged.
As the consumer price index rose, the amount of debt needed to pay for the average home and car fell as their value rose. That was the way things worked until the mid-1980s.
During that time, the average middle-class family needed about $16,000 of disposable income to support themselves and their car. To maintain that level of consumption, the average middle-class family needed to spend as much of their income paying off debt as they could. At the same time, the cost of fuel rose to match the average household’s inflated mortgage payment.
In other words, in 1985, the average middle-class family was spending about one third of their disposable income on gasoline. If they did not spend enough on other goods and services, they were having to cut back in other areas of their lives. That was the nature of the debt-fueled boom.
The debt boom changed that equation. Inflation made the cost of the average mortgage rise even faster than the price of gas. So, to service that mortgage, middle-class families were able to cut back on other things like eating out, going to the movies, and taking vacations. And the effect was compounded because the housing market was still very healthy.
Middle-class families needed less of their disposable income to pay the mortgage, but what they were spending on their mortgage payment more than paid for it. And as their spending on the mortgage rose, and as the price of fuel rose, the value of their home rose and the value of their vehicle rose. And their debt soared.
The debt boom has continued through 2000, but the situation has changed. The price of fuel has stabilized. That means that middle-class families can spend as much or as little on gasoline as they like. So their disposable income is a lot more predictable. And as their disposable income rises, their tendency to spend less on the non-essential is less powerful.
Because fuel inflation has been contained, the value of the typical middle-class family's vehicle has risen, but not at the same rate as the value of the family's home. So instead of having to cut back on their mortgage or their vehicle, the average family is having to put off some payments or cut back on other expenses. That is, the debt boom has been replaced by a housing correction. And in many cases, the value of their home is beginning to decline.
Middle-class families also had high debt loads during the last recessions in the early 1980s and in the late 1990s. The good news about a housing correction is that, unlike a debt bubble, a housing correction does not produce a recession. In other words, as the price of their home declines, middle-class families may have to give up a little bit of their home equity, but, most likely, not much.
A recession will follow the housing correction only if the economy turns down sharply. If it's a mild correction, you might not even notice it. But if the recession is severe, you might find yourself wondering where your home equity has gone.
##### Chapter 16
## The Big Investment Picture
### In This Chapter
Keeping your eyes on the long term
Protecting your assets from inflation
Maximizing your benefits through insurance
In previous chapters, I describe how the U.S. economy works and the kind of spending that moves the economy forward. Here's how to make your spending decisions in light of the U.S. economy and my goal of protecting your assets through long-term planning.
## Choosing the Right Investments
As we all know, the U.S. economy doesn't grow much on its own. It's fueled by consumer spending and business investment. We can control consumer spending by paying less for housing and more for health care. And we can control business investment by cutting taxes. But we can't control where the money comes from.
The only way we can choose the type of investments we want to make is to take an active role in deciding what types of business are right for us. Because the U.S. economy is a free-enterprise market, people can enter different industries and businesses to the greatest extent possible. As long as people are willing to work and invest, an economy can make almost any type of product and service a reality. The types of investments that create the most jobs are typically those that are in demand.
In other words, the type of investment you make depends on the type of job that best aligns with your needs and interests. If you want to enjoy a good career in teaching, you'll have to invest in the education industry. On the other hand, if you'd prefer to work for a company that makes tools, you'll have to invest in the tool-making industry.
## Examining the Basic Investment Options
Investing in the stock market may seem like a good idea, but it's actually a terrible one. Sure, stocks allow for long-term wealth creation, but over the long haul, stocks are extremely risky. They're often unpredictable and can plummet to zero. They're also incredibly volatile. It's very common for the share price of a company to triple or double in the course of a few days. Stock market investors have less control over their investments, and stock prices often seem to move in an opposite direction from their long-term performance.
By contrast, _real estate_ is a wonderful investment. Unlike stocks, real estate doesn't go anywhere — people actually move into houses and apartments! Even better, real estate doesn't make you jump through hoops. Your principal is always protected, no matter how low the market goes. You can also earn a nice