New Era of Investing.

I think we have had a major shift in philosophy regarding long term investing. It may be rare but what has always been considered the American way and the way of capitalism, long term buy and hold of any asset is now considered a questionable strategy. There can certainly be an argument made that continuing to pay on your mortgage that may have 30% negative equity may not be the smartest decision financially. Each person has to make this judgment for themselves and their current situation. There are people who bought homes before the massive appreciation that are underwater even if they have not refinanced or taken a second mortgage. Deciding on walking away could be the difference between sending kids to college or having money to care for elderly parents. Everyone should realize that blanket statements about the irresponsibility of homeowners are way off base. The true irresponsibility happens when the chairman of the FDIC comes on the news saying that people should all keep paying their underwater mortgages while the banks are leaching the taxpayer to death. The massive depreciation of all assets has changed the game. It has not leveled the playing field. It has made it even more difficult for the little guy to build wealth. Real estate was really one of the few investments that allowed the average American to get ahead. For years the rhetoric was that nothing had a better return than stocks. This was never true based on cash on cash returns or overall return. There was never any method of investing in stocks or otherwise where the non wealthy could take advantage of leverage. A 10% investment on a cash flowing rental could easily be turned into an infinite level of return in a few years. The recouping of the down payment could normally be done in 3-5 years or sooner if the property was improved. Even a 20% down payment could be recovered in short time frame. It worked for anyone who tried it. People were also not dependent on brokers or investment bankers for advice or access to the markets. There are still people who own cash flowing real estate and have not been wiped out by this meltdown. If purchases were made based on cash flow, most landlords could weather a down turn if they could keep vacancy rates down. Contrast this with a 401 k plan that will now need 150-200% returns to see a substantial recovery and you can see that long term hold of stocks is really more for the brokers and Wall Street players. They make more money by sitting on your funds then you do. They are paid not on gains but on how much money they hold that allows for fees to be charged and collected.