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Old 01-04-2011, 01:58 PM
 
Location: Land of Free Johnson-Weld-2016
6,470 posts, read 16,391,935 times
Reputation: 6520

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What do I know, but I predict:

Consumer Spending Increases or Stays the Same

Based on the Boomers I see (I know a couple of millionaire boomers and a couple of didn't save enough for retirement boomers) it looks like the baby boomers are planning to spend and enjoy their retirement years.

Neither my parents or any of the other "boomer" generation people I know seem to be concentrating as much on their kids inheritance. Is this different from previous generations in the US?

As such, I think they'll keep consuming in their later years. Instead of gas/transportation for work, maybe they'll spend money on education, travel, healthcare (of course), meals, decor, gardening etc. That sounds pretty stimulative to me. In spite of seeing my inheritances(broken home) go down the drain, I'm much happier than I expected to see my parents, aunts and uncles BLISSFULLY retired.

My mom in particular is really ENJOYING herself. After seeing her work so hard for so many years, it's awesome.

It kind of gives me hope for the future. The baby boomers took a lot of drugs LOL, so maybe they haven't completely recovered, but I hope they have an awesome retirement.

Inflation and Stock Prices Increase

As bilingual world-traveler who can't really afford to travel much lately LOL, I still keep up with international news especially in Asia and Africa. It's amazing how many WEALTHY people there are all over the world. They're lots of international rich people, and rich people in the US and apparently they're getting richer.

Soooo, even though the Boomers withdrawing of retirement savings will cause Suucking sound as they spend spend spend, the slack will be taken up by the MANY wealthy foreign and domestic investors looking for a place to park their dough.

Of course this will cause inflation, hurting mainly the working classes. The boomers may be hurt a little too since they'll need to spend more to get the items they want, but hopefully higher stock prices will take the sting out of the increasing costs.

Healthy Social Security

I may be crazy, but if the government makes it easier for more productive immigrants from (how do I say this diplomatically?) "developing(?)" countries to come to the US, their legal contributions will make sure that the social security system (SS) continues to be viable.

If any of the SS money is invested in the stock market, I predict a renewed surge of available funds for the next retiring generation.

One last thing I'd like to add is that the somewhat irresponsible (no offense guys) boomers may cause a resurgence of family closeness. As our parents spend off their savings and healthcare becomes more expensive, more children may end up living with their parents as they near their 70s and 80s. That coupled with the costs of childcare and other inflationary pressures may make it more feasible for extended family members to live in the same house. I'm not sure how much fun that will be for a lot of us, though.
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Old 01-04-2011, 07:40 PM
 
Location: South Jordan, Utah
8,182 posts, read 9,208,437 times
Reputation: 3632
Quote:
Originally Posted by kinkytoes View Post
What do I know, but I predict:

Consumer Spending Increases or Stays the Same

Based on the Boomers I see (I know a couple of millionaire boomers and a couple of didn't save enough for retirement boomers) it looks like the baby boomers are planning to spend and enjoy their retirement years.

Neither my parents or any of the other "boomer" generation people I know seem to be concentrating as much on their kids inheritance. Is this different from previous generations in the US?

As such, I think they'll keep consuming in their later years. Instead of gas/transportation for work, maybe they'll spend money on education, travel, healthcare (of course), meals, decor, gardening etc. That sounds pretty stimulative to me. In spite of seeing my inheritances(broken home) go down the drain, I'm much happier than I expected to see my parents, aunts and uncles BLISSFULLY retired.

My mom in particular is really ENJOYING herself. After seeing her work so hard for so many years, it's awesome.

It kind of gives me hope for the future. The baby boomers took a lot of drugs LOL, so maybe they haven't completely recovered, but I hope they have an awesome retirement.
You can’t just go by anecdotal evidence, the data speaks for itself. Look at the recent Consumer Expenditure Survey http://www.bls.gov/cex/#tables As of the end of 2009 there were 25 million consumers age 45-54, the larger percentage are 49-54. Age 48-49 is the peak cohort for spending by the average person while age 54 is peak for the affluent (the top 5% or so).

The 45-54 cohort spent on average of $58,708 in 2009, just above the 35-44 cohort. The leading edge boomers 55-64 spent about 10% less at $52,463 with healthcare being their only increase.

The problem comes as the 35-44 fills in more of the 45-54 cohort, since there are over 3 million fewer of them and the 25-34 group is 5 million less than the 45-54 cohort. The problem is the 35-44 cohort is more saddled with debt, less inclined to go into new debt to consume and heavily upside down in their housing. They can’t spend 120% of their income as the boomers did.

Even if boomer spending decreases by only 10%, that is a huge drop in the economy that will cause all other cohorts to drop in spending also. We are at the end of a 40 year run and it won’t be pretty.

Inflation is not the worry, deflation is the future.
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Old 01-05-2011, 06:42 AM
 
1,736 posts, read 4,742,958 times
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Quote:
Originally Posted by mysticaltyger View Post
$336,501 after 30 years
$542,944 after 35 years
$817,288 after 40 years
You left out the 50% cut every 8 years or so due to bubble crashes. That’s the problem quoting fantasy figures. They’re meaningless.
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Old 01-05-2011, 10:00 AM
 
8,263 posts, read 12,193,585 times
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Quote:
Originally Posted by RedNC View Post
You left out the 50% cut every 8 years or so due to bubble crashes.
Actually no, he didn't.

He took an assumed 7.5% return that he calculated from returns on a balanced index fund over the past 18 years. That would includes the crash of 2001 and the crash of 2009.
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Old 01-05-2011, 01:41 PM
 
Location: South Jordan, Utah
8,182 posts, read 9,208,437 times
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Quote:
Originally Posted by RedNC View Post
You left out the 50% cut every 8 years or so due to bubble crashes. That’s the problem quoting fantasy figures. They’re meaningless.
Quote:
Originally Posted by slackjaw View Post
Actually no, he didn't.

He took an assumed 7.5% return that he calculated from returns on a balanced index fund over the past 18 years. That would includes the crash of 2001 and the crash of 2009.
Crashes hurt when they happen if someone is taking or near taking income, this is the flaw of averages. I have seen investment simulation where someone earns a high average reuren (7-10%) and still run out of money with a 4% withdrawl rate.
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Retiring baby boomers and effect on economy?-averages.bmp  
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Old 01-05-2011, 03:08 PM
 
8,263 posts, read 12,193,585 times
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You're mixing apples and oranges. That post we were discussing was about accumulation of assets, not withdrawing as income and the additional risk that puts on principle.
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Old 01-05-2011, 03:29 PM
 
Location: Land of Free Johnson-Weld-2016
6,470 posts, read 16,391,935 times
Reputation: 6520
Quote:
Originally Posted by hilgi View Post
You can’t just go by anecdotal evidence, the data speaks for itself. Look at the recent Consumer Expenditure Survey http://www.bls.gov/cex/#tables As of the end of 2009 there were 25 million consumers age 45-54, the larger percentage are 49-54. Age 48-49 is the peak cohort for spending by the average person while age 54 is peak for the affluent (the top 5% or so).

The 45-54 cohort spent on average of $58,708 in 2009, just above the 35-44 cohort. The leading edge boomers 55-64 spent about 10% less at $52,463 with healthcare being their only increase.

The problem comes as the 35-44 fills in more of the 45-54 cohort, since there are over 3 million fewer of them and the 25-34 group is 5 million less than the 45-54 cohort. The problem is the 35-44 cohort is more saddled with debt, less inclined to go into new debt to consume and heavily upside down in their housing. They can’t spend 120% of their income as the boomers did.

Even if boomer spending decreases by only 10%, that is a huge drop in the economy that will cause all other cohorts to drop in spending also. We are at the end of a 40 year run and it won’t be pretty.

Inflation is not the worry, deflation is the future.
You may be correct, but with all of those numbers how come economists always seem to get it wrong? Anecdotal evidence helped me to predict the Dot-com crash, the housing crash etc way before the "experts."

I also predicted the loss of the mortgage tax credit on my myspace blog many years ago. LOL I don't have any evidence of that, either, but you can choose to not believe me.

I liked the statistics you quoted, but I am still going to keep a more positive outlook based on what I'm seeing personally. The things I see around have proven to be more telling that the official numbers at times. Perhaps it's because I live in an "affluent" state, but I also see a recovery in the economy and an increase in business spending.

There's also what I consider to be a continued increase in overseas consumption (China, Japan, Africa/Middle East).

Unless our trade and immigration policies become extremely restrictive, I imagine rising prices all over the world will = inflation at home. The prices for food and building supplies have Already increased, and I think the increases will keep coming as more people start to want wooden tables, cars etc. all over the world.

Nevertheless, thanks for disagreeing with me in such a mature and informative manner.
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Old 01-05-2011, 06:15 PM
 
Location: South Jordan, Utah
8,182 posts, read 9,208,437 times
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Quote:
Originally Posted by slackjaw View Post
You're mixing apples and oranges. That post we were discussing was about accumulation of assets, not withdrawing as income and the additional risk that puts on principle.
Accumulation eventually ends and whether it stops in 2007 or early 2009 makes a huge difference.Ridding the wave up to the day you retire is not smart.
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Old 01-05-2011, 06:42 PM
 
Location: South Jordan, Utah
8,182 posts, read 9,208,437 times
Reputation: 3632
Quote:
Originally Posted by kinkytoes View Post
You may be correct, but with all of those numbers how come economists always seem to get it wrong? Anecdotal evidence helped me to predict the Dot-com crash, the housing crash etc way before the "experts."

I also predicted the loss of the mortgage tax credit on my myspace blog many years ago. LOL I don't have any evidence of that, either, but you can choose to not believe me.

I liked the statistics you quoted, but I am still going to keep a more positive outlook based on what I'm seeing personally. The things I see around have proven to be more telling that the official numbers at times. Perhaps it's because I live in an "affluent" state, but I also see a recovery in the economy and an increase in business spending.

There's also what I consider to be a continued increase in overseas consumption (China, Japan, Africa/Middle East).

Unless our trade and immigration policies become extremely restrictive, I imagine rising prices all over the world will = inflation at home. The prices for food and building supplies have Already increased, and I think the increases will keep coming as more people start to want wooden tables, cars etc. all over the world.

Nevertheless, thanks for disagreeing with me in such a mature and informative manner.
Economists use models and rarely do they include things like demographics, they think it is all money supply and interest rates. They assume all consumers are the same, they don't differentiate between a single 25 year old and married 48 year old with 3 teen kids, and to them they all spend the same way all the time. Read the Myth of the Rational Market and the Black Swan to see why economists are where they are now.

Demographics also predicted the market peak, I did a report for clients in 2005 saying that 2006 is the peak and we have 10 years of down. This is because the average person buys their move-up home at age 43 and we had more and more 43 years olds every year through 2006. Now we are seeing a massive drop of people turning 43 through 2017.

In 2008 a USC report showed how when people hit their mid 60's they turn into net sellers of housing. We are seeing an increase in net sellers and a reduction in net buyers, not a good combo. http://www.informaworld.com/smpp/content~content=a789053981~db=all~order=pubdate

As I said affluent people peak in spending at 54 so you will still see that cohort spend, the problem is there are not enough of them.

I am positive long term especially in emerging markets but they will suffer short term as we suffer. Just as Japan did during even as their exports skyrocketed, their boomer peak was 1990 BTW. Deflating bubbles are painful.

I understand the inflation worry but the cost of infrastructure build out is inflationary when we have a young population, not one with a shrinking need for current infrastructure. For other nations they are laying cheap fiber, not expensive copper and the infrastructure is in place to produce newly inexpensive goods, plus the next “cheap labor” will be Africa, so we don’t have a shortage of cheap labor. We will see inflation, just after the bubble has deflated, they always do.

Civil discussions are fun, that is how we all learn.
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Old 01-06-2011, 06:43 AM
 
8,263 posts, read 12,193,585 times
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Quote:
Originally Posted by hilgi View Post
Accumulation eventually ends and whether it stops in 2007 or early 2009 makes a huge difference.Ridding the wave up to the day you retire is not smart.
I agree completely, but again this doesn't refute MT's post about possibilities of accumulation of assets of time despite market crashes.
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