ADU/Renovation HELOCS to 125% LTV; Why Iran War Didn’t CRASH STOCKS & Re-Create The 1970s (Worst Decade Ever)

I. We have a Home Equity Line of Credit (HELOC) for ADU/In-Law construction that can also be used for general renovations.

What makes it unique is that credit limits go up to 125% of the property’s value – or as much as 95% of the property’s value after the renovation/construction (95% ARV or After Repair Value).

Caveats: Not available in TX (TX never gets to have fun); Primary and 2nd homes only; Need legit plans and specs; HELOC draws go directly to the contractor (so borrowers can’t borrow the full 125% and “put it all on red” – something I saw repeatedly in the dotcom era).

II. You Kids Today Have No Idea HOW AWFUL The 1970s Were! Why The Iran War Did Not Foster a Repeat.

I never pass up a chance to make fun of the 1970s, the decade of bell-bottoms, feathered hair, platform shoes (for men), mood rings, pet rocks, shag haircuts, lava lamps, waterbeds, short shorts (for men), disco, and polyester leisure suits.

It was bad. (Except the music was kind of awesome).

But – what made it even worse were the horrible economic and geopolitical disasters.

1. The stock market was DOWN over the decade!!! The Dow Jones went from 800 in 1970 to 839 in 1979, but when you adjust for inflation, it actually fell substantially. Stock investors actually LOST about 45% over the decade, adjusted for inflation.
2. Nixon took us off the gold standard, ushering in 55 years of inflation.
3. We had TWO oil price spikes! The first one QUADRUPLED oil prices. It would be like oil going from $90 per barrel to $360 today (and yeah, the world could not survive that).
4. We had rampant political violence! This was a huge problem that is largely overlooked today. There were 2,500 domestic terrorist bombings in 1971 and 1972 alone – and they continued well into the decade, as underground radical groups like the Weather Underground seemed to be everywhere.
5. We lost the Vietnam War. The communist north took over the entire country in 1975, rendering the 58,000 men we lost a complete and humiliating waste.
6. Nixon faced Watergate and resigned. This was the start of America’s steadily increasing distrust of institutions.
7. Inflation and interest rates hit double digits. This was something we had never seen in peacetime, and it ravaged the economy.
8. We endured three recessions – but two had no real recoveries. We instead drifted into “stagflation” – slow growth and inflation.
9. We lost the Panama Canal – an extremely important chokepoint built at the cost of billions (in today’s dollars) and 5,600 American lives.
10. Iran took 52 Americans hostage – and there was little we could do about it because we were so weakened.
11. I dropped a touchdown pass. Yes, I still feel the pain, as I was wide open.

It was nothing but malaise – triggered largely by oil price spikes and inflation.

III. So, why didn’t the Iran War foster a repeat?

Peter St. Onge posted this excellent video today: Why are Stocks Ignoring Iran? (2 minutes at 2x).

At the start of the war, MANY prominent analysts were predicting $150 to $240 oil prices – something that would have crushed the world economy and the stock market.

But oil did not spike because America was producing way more than analysts realized, because Asian demand was much lower than analysts realized, and because China had stockpiled far more than analysts realized (per Doomberg, not St. Onge).

Stocks did not crash because (1) we are in a Fed-driven economy (investors still expect the Fed to boost assets when a downturn comes via the “Fed Put” that I discussed yesterday); and (2) today’s stock market is driven by AI and tech.

In the 1970s, the stock market was driven by companies that made things that were dependent on oil.

Tech companies only worry about oil prices insofar as they might impact the cost of filling up all the Lambos in the parking lot. But as electric cars get cooler and faster, that concern will soon be a non-issue.

I am kind of sad that the Iran War did not spark a repeat of the 1970s, because horrific decades also seem to foster awesome music!

But for all that malaise, Ziggy might not have played guitar, Stevie Wonder might not have been superstitious, Queen might have missed their night at the opera, the Eagles probably would not have been trapped in a nasty hotel, and Lynyrd Skynyrd likely would not have returned to sweet home Alabama.