IT ALL STARTS AT SUNRISE

I've been Watching This Tree. This picture was taken last fall and I am waiting for a repeat performance this year. It's been 15 years and I never cease to be amazed at the beauty that surrounds me here. This is but one example. This picture was taken at sunrise before sunlight floods the back yard. I can't claim to have done many good works in my 72 years on this planet, so I guess all this is truly a gift, for which I have done nothing to deserve. Just don't tell me it is a random occurrence.


Understanding Real Estate. One thing we may not often consider about real estate. Property values are inextricably linked to interest rates. Some of you might think you know the reason for this but maybe there are other reasons that aren't so obvious. When it comes to personal residences almost everyone gets a mortgage to buy the house. Lower interest rates usually mean more people can afford to buy. This increases demand and causes prices to rise. That's simple. But what about the buyer who pays cash and intends to rent the property out for a monthly income? The value of the income stream received is higher in a low interest rate environment. This is part of what's going on right now. Suppose you have $200,000 to invest and you are in need of income to help cover your monthly expenses. If you can rent the property for $12,000 a year after expenses for the next 10 years, you will receive total income accumulation of $120,000. If you buy a 10-year government bond at the current rate of 2.61% you will receive less than half that or a total accumulation of only $52,200. Give the huge difference in return, you might even be willing to pay an extra $20,000 for the real estate.

What if the property produces no rental Income? Do lower interest rates increase the value of real estate that produces no rental income such as raw land. Consider a case of a $100,000 lot that you might want to buy and hold for resale in two years. In the current environment, you can choose to buy a risk free 2 year treasury bond instead but your yield will be only 0.4%. This means that you will lose out on $800 in interest waiting for the market to improve. Perhaps you might be willing to pay an extra %5,000 for that land.

Wait A Minute! Here we have the lowest interest rates of the past 50 years and we all know property values have been going down not up. So how can low interest rates favor higher real estate values. Nothing is simple. I never said that interest rates were the only factors that affect property values. There are other factors at play right now. Probably the biggest factor is the relatively low rates and low qualification standards of the past 10 years. This pushed property values to unrealistic levels as people rushed out to buy properties at values they couldn't afford. Builders rushed to produce more inventory. When it became obvious that home owners couldn't make the payments they promised on contracts they signed, an additional source of inventory became available: foreclosed properties. This made it unprofitable for builders to build new homes and large numbers of construction workers, mortgage originators, and title company employees lost their jobs. Employees in related industries such as lumber, furniture, and concrete also lost jobs. This offset the benefits offered by low interest rates.

Is There An Opportunity Here. I believe there is. If you have a diversified investment portfolio and you can buy a property at a reduced price with a substantial down payment and a low interest mortgage, the rental market is strong and you can receive a decent cash flow while you wait for prices to recover. Now is probably a good time to divert some of your other investments into real estate. This isn't a strategy for a low income employee with twenty grand in the bank and little else but it is a good use of funds for stable investors with an adequate liquidity reserve.

Not a Good Week Health Wise. This morning I tipped the scales at 167, same as last week. I can also see that my blood sugar levels, although acceptable in the morning get much higher during the day and I will not be able to continue at these levels without taking more insulin, a situation I have wanted to avoid. The bottom line is that I made little or no progress. I can not let this discourage me from reaching toward my goal. I will work harder next week. There is a plaque on the wall in Betty's office that says, "Let us run with endurance the race that God has set before us." Hebrew 12:1. I'll remember that as I go through next week.

IT'S SUNDAY AFTERNOON. WHERE ARE YOUR CHILDREN

Beautiful Sunday Afternoon. I love it when the blue sky and clouds reflect into the water. Helps me relax and makes me think about the important things in life. I was going to communicate about the effect the rising stock market is going to have on the economy over the next year but I recently received a message from a friend about a lead she received on the possible whereabouts of her missing daughter. Her daughter didn't disappear in the last few days.....Or even in the last few months. It has been fifteen years since she last saw her. This is just one of the many leads she has followed up during this time. I won't mention her full name yet but she is from Madisonville, Ky and is well known in those parts. While I am willing to help her in just about anyway I can, including writing a story for the world to hear, i am not sure I am the best person for the job. In any event, my heart aches for her as she tells me that she is about to run down this recent lead about a girl in a mental hospital who claims to be the missing daughter. Although it is likely that this lead will be a blind alley like so many others she has followed over the years, her words to me were a simple, "I have to know." More than anything she has said, these simple words let me know a fraction of of the anguish she has felt for so long. Those of you who have children of your own, no matter how old, put your self in her place for a few minutes....If you can stand it. Another simple set of words that ring true are, "No child should ever be just missing." No matter what their condition, they should be found so that the family can welcome them back or give them an honorable goodbye.

Stories About Missing Children and Young Adults Abound. I guess I haven't paid a lot of attention to them up until now. Let's all take a moment to recollect where our children are. Let's also say a prayer for Sara that she can find an end to her soulful journey of the last fifteen years. I wish I knew what I could do to help her. I will try to keep you informed of any progress in future posts.

I Promised To Keep You Up To Date About My Other Journey. Since my last week's post, I only lost another pound. This is probably more realistic than my previous weekly result of five pounds. Still, 167 lbs is certainly much better than close to 180 a year or so ago. The bad news is that my H A/1c is still 7.7. Much too high and certainly a level that damages my body. They won't test that again until January. It is important that I receive a better result at that time.

THE VALUE OF AN EDUCATION

Memoir From 1960. I'm sitting in a first-class seat on a United DC-7, wearing slacks, my only white shirt, one of my Dad's ties, and a sport coat I got for Christmas when I was in the 8th grade. I am traveling to Wilmington, Delaware to interview for a job at DuPont, the company that promises "Better Things For Better Living....Through Chemistry." I can't believe I'm about to graduate from college with a degree in chemistry and DuPont wants to hire me so bad that they are willing to fly me first class to Delaware for an interview. I'll never forget the flight attendant (they called them stewardesses in those days) who comes up to our seat and asks us what we want to drink. I don't have a clue so I follow the lead of the grey haired man in the next seat and order a scotch and soda. The first taste almost leaves me in need of the "barf bag" in the seat pocket in front of me. Despite the initial shock, I manage to down two drinks and feel like it doesn't matter how long it takes to fly from Denver to Wilmington.



The details of the next day are not important. What is important is at the end of that day when I sit in front of the massive desk of the research director and he offers me a job at a salary that is more than my dad had ever earned. While I am trying to swallow, he tells me that I can expect to double that within five years. Here I am, 22 years old, and that day represents the high point of my career as a research chemist. It was all down hill from there. I did double my salary in five years but I expected that. I found out that what I thought was a huge salary didn't buy nearly what I thought it would and the necessity of going to work on a regular schedule was highly restrictive to my freedom. Even though those were "the good old days," they still didn't meet the expectations of a young man coming out of poverty who had expectations that a college degree was the key to the American dream.



Fast-Forward Fifty Years. I recently heard some statistics that 80% of college seniors expect to move back in with their parents after they graduate. This is up from 67% four years ago. I am not sure I believe that these are exact numbers but my experience tells me that far more young people are entering college these days and graduating into far less opportunity with each passing year. Way too many of my friends and clients still have the responsibility of providing food and shelter for adult offspring. Often, these are not young adults. Some are in their late 40's. You might ask, what is the reason for this? Although I have some ideas, I can't claim to know what the answer is....but I know what it isn't. It isn't depending on the government to solve the problem. Each of us has a unique set of problems that require unique solutions. It is up to us to help our children determine their educational and career path. I have been far more lucky than smart in this area but I know that failure to make the right decisions in this area can make life far more difficult for both parents and kids. The government can't solve all our problems and we need to take responsibility for ourselves. Could part of our recent economic problems lie with those who have come to look towards the government to care for us rather than go out and work to solve our own problems. History has shown us that American ingenuity resulted in products and strategies that have put us ahead of the rest of the world. Many of these solutions didn't come from brilliant ideas but from hard work and grinding out results. The efforts of entrepreneurs like Bill Gates and Steve Jobs have resulted in an improved quality of life and higher productivity for all of us. They had the initiative and drive to accomplish great things and neither had government grants or affirmative action to help them get an education.

Speaking Of Solutions. I promised to keep you informed of my progress towards controlling diabetes. My theory is that dietary control and weight management will provide the solutions I seek. In that regard, my weight has dropped from 173+ to 168 in the course of a week. Periodic blood sugar checks indicate that I am doing about as well without three insulin injections a day as I did when I was taking these shots. At this point I am still taking 50 units of time release injections at night. So far, the biggest problem with blood sugar control has been hypoglycemic (low blood sugar) episodes at night. The journey has only begun. I'll let you know of my progress, if any, next week.

I AM NOT A DIABETIC.

Don't Call Me A Diabetic. I have diabetes but I never did like calling people names just because they have a disease or disorder. When you call me a diabetic, you are adding a label that makes it my identity. In 1995, I was told I was about to develop diabetes. I weighed about the same then as I do now and I ate whatever I pleased. They told me that I either had to change my lifestyle or I would be subject to all the complications that develop with diabetes. These include, blindness, loss of limbs, heart disease, stroke, and overall reduced life span. As a result I went on a drastic diet, reducing the amounts simple sugars, animal fats, and overall caloric intake I consumed.



Great Results....For Awhile. I lost almost 20 lbs, brought my blood sugar to normal levels, and eliminated the blood pressure medication that I had taken for 10 years. I considered this quite an accomplishment but I bragged too soon. My weight gradually increased and I had to resume the blood pressure medication. They put me on oral diabetes medication. Although I would have preferred not to have taken this medication, I guess I considered this a small price to pay to live the way my friends and family lived.



Things Got Worse. Within five years, the oral medication was no longer sufficient to maintain my blood sugar at normal levels. Although I resisted, they warned me that I was facing the danger of some severe complications if I didn't do what was required to bring my blood glucose levels down. To make matters worse, they warned that once I begun to experience these problems it would be too late to reverse them. This reminded me of what happened to my grandfather who spent his last 5 years with no legs. He also suffered a stroke and no longer recognized any family members. They gave me a free supply of time release insulin and some needles and told me to try nightly injections for a month. The results were excellent and, although I had really wanted to avoid the needles, I decided the shots didn't hurt too much and a single injection at bed time was not too high a price to pay to avoid ending up like my grandfather.



Fast Forward Five Years. The nightly injection of time-release insulin is no longer sufficient to keep glucose levels within the desired range. They decided that the best way to remedy the situation was for me to test my blood sugar at each meal and inject myself with a fast-acting insulin before eating. I gave up and decided to try it. Again, it was not painful but it severely cramped my style. I did what they said........sorta. On my last visit, after being on this regimen for 6 months they asked me to wear this device that would give them a continuous reading of my blood glucose levels. Then they could tell me more precisely when to make these injections and in what quantity. It was at that point that I decided to try something on my own.

Here Are Some Steps I Plan To Take. 1. Strict low carbohydrate diet with an emphasis on protein. 2. More diligent exercise levels. 3. Eliminate fast-acting insulin injections. 4. Lose at least 15 lbs. Why am I telling you this? Because I plan to write about my progress once a week and going on record with my plans should provide some extra motivation to stick with it. Another, more important, reason is that I think improved awareness of diabetes risk factors might benefit my readers. Diabetes is approaching record levels in this country. Granted, better detection and monitoring is responsible for part of this; however, obesity and inactivity are other major factors. Type two diabetes levels are endangering our children as they are developing this at far earlier ages than in the past.

Weight Loss Is a Major Issue For Now. My friends tell me I don't need to lose weight. When I went on a major weight loss program 20 years ago, my friends told me I looked like "a refugee from the Bataan death march." That being said, I know losing some weight would be beneficial. As of today, I weigh 173.5 lbs. I will write again next Sunday and report my progress. Another major factor is called hemoglobin A1c, which is a measure of average blood glucose levels over a 3 month period. As of my last visit to the clinic this level was 7.7. Over 8 is considered dangerous and the real goal is 6.5 or less. A new result will be available after October 21 and I will report that then. In the meantime, I will work on my weight and report on the results. This should take less space than this post and I will resume writing about our financial choices in this most difficult of economic environments.