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Old 08-23-2011, 01:53 PM
 
Location: San Diego California
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Demographic Trends Show Another Lost Decade Ahead | Michael Shedlock | FINANCIAL SENSE

This article makes the case that P/E ratios are heading lower going forward. Do you think the author makes a reasonable case?
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Old 08-24-2011, 05:23 PM
 
Location: Conejo Valley, CA
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Michael Shedlock never makes a reasonable case, he is a clown. But the research he is citing is interesting, I have long thought that oldsters are not going to get away trying to "jump ship" before it sinks.

At some one boomers are going to regret not making better investments in younger generations, for example, when they have to sell their stocks, homes, etc or at fire sell prices to fund their pathetic retirements!
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Old 08-25-2011, 12:10 AM
 
2,515 posts, read 1,819,085 times
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Quote:
Originally Posted by jimhcom View Post
Demographic Trends Show Another Lost Decade Ahead | Michael Shedlock | FINANCIAL SENSE

This article makes the case that P/E ratios are heading lower going forward. Do you think the author makes a reasonable case?
The falling price of houses is going to be putting a downward pressure on the economy for a very long time to come. 10 years or more of falling stock and house prices is what I see happening. More to the point I see the Fed printing money to keep the Dow above 12K but the value is going to be going away. Dow 500 (Not Dow 5,000) in 1999 dollars is not out of this world as a possibility. Am I a doom and gloom-er? I don't like to think so I'm just a realist.
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Old 08-25-2011, 11:21 AM
 
Location: San Diego California
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I believe that selective dividend stock selection at sub 10x levels will be a reasonable goal sometime after next 2 years.
While I would not expect to see a lot of growth in stock prices going forward after that period, I believe there will be plenty of opportunity to pick up strong companies paying very reasonable dividends.
The key will be having a strong cash position, which will allow you to cherry pick the bargains when the inevitable crashes occur.
I believe anyone who ignores the demographic models, are doing so at their own peril.
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Old 08-25-2011, 01:40 PM
 
Location: Ohio
22,798 posts, read 15,935,395 times
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Quote:
Originally Posted by jimhcom View Post
This article makes the case that P/E ratios are heading lower going forward. Do you think the author makes a reasonable case?
Yes, this is part of the reason I keep telling you your economy is going nowhere for the next decade.

This is also one of the dangers of allowing wealth to be concentrated into the hands of only a small percentage of the population. 80% of the wealth in the US is in the hands of those 55 and older, ie in the hands of the Boomers. I'm not suggesting in any way that wealth should be redistributed, I'm just saying that for any number of reasons wealth can become concentrated to the detriment of all.

The subsequent generations are not going to be nearly as successful as the Boomers were. That should be obvious by the simple fact that the people in those generations are not going to make the wages/salaries that the Boomers were accustomed to making. In addition to the high wages/salaries that Boomers took advantage of, Boomers had the additional benefit of an economic climate that allowed both spouses to work and earn if they desired (and again at premium wages/salaries), and that created a situation where 67% of households had 2 wage-earners. Those days are gone. By the end of the decade, I'm sure many households will still have 2 wage-earners, but the difference is that only 13% will have 2 full-time incomes. For the other households it will be a full-time wage-earner and part-time wage earner (if they are so lucky).

Given that 70+% of households are living paycheck-to-paycheck there isn't much money available to invest, and the only reason you have investment now is because 401(k) plans are mandated. What percent of employees in a 401(k) plan would bow out if allowed?

So you have 80% of the wealth in the hands of those 55 and older, and that is mainly in the form of investments, and those investments are going to be liquidated in short order over the next two decades.

Who will step in to fill the void left by the Boomers? Very few, because very few are in a position to do so.

It's kind of difficult to buy $500 in stocks every month if you paying on $80,000 worth of student loans, right?

How much student loan debt did Boomers have? How much credit card debt did Boomers have when they were graduated or got married and started families? None. 21 year olds weren't allowed to have credit cards prior to the 1980s. Sure, they probably had a gas card from Union 76 or SOHIO or Texaco, and probably a charge card from Sears or JC Penny, but no VISA or Mastercards.

How many Boomers put 0% down on a home to buy? None. It wasn't allowed until recently.

So you have 3 generations, Generation X (the Me Generation), Generation Y (the Me, Myself and I Generation) and Generation Z (Generation Diaspora) who are buried in student loan debt, mired in credit card debt, who do stupid things like buy a home with 0% down and throw away several hundred thousand dollars in interest payments that could be used to invest, and who generally make incredibly bad financial decisions overall and they will be earning practically nothing in comparison to the Boomers with respect to wages, and people actually think they will be investing at the same levels as the Boomers?

Okay.
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Old 08-25-2011, 04:04 PM
 
2,515 posts, read 1,819,085 times
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Quote:
Originally Posted by Mircea View Post
Who will step in to fill the void left by the Boomers? Very few, because very few are in a position to do so.
That is in large part why I’m for a 4X on the minimum wage. Upping wages without having the principle on debt indexed for inflation will tend to give people the extra money to invest.
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Old 08-25-2011, 04:12 PM
 
8,317 posts, read 27,059,582 times
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Quote:
Originally Posted by Mircea View Post
Yes, this is part of the reason I keep telling you your economy is going nowhere for the next decade.

This is also one of the dangers of allowing wealth to be concentrated into the hands of only a small percentage of the population. 80% of the wealth in the US is in the hands of those 55 and older, ie in the hands of the Boomers. I'm not suggesting in any way that wealth should be redistributed, I'm just saying that for any number of reasons wealth can become concentrated to the detriment of all.

The subsequent generations are not going to be nearly as successful as the Boomers were. That should be obvious by the simple fact that the people in those generations are not going to make the wages/salaries that the Boomers were accustomed to making. In addition to the high wages/salaries that Boomers took advantage of, Boomers had the additional benefit of an economic climate that allowed both spouses to work and earn if they desired (and again at premium wages/salaries), and that created a situation where 67% of households had 2 wage-earners. Those days are gone. By the end of the decade, I'm sure many households will still have 2 wage-earners, but the difference is that only 13% will have 2 full-time incomes. For the other households it will be a full-time wage-earner and part-time wage earner (if they are so lucky).

Given that 70+% of households are living paycheck-to-paycheck there isn't much money available to invest, and the only reason you have investment now is because 401(k) plans are mandated. What percent of employees in a 401(k) plan would bow out if allowed?

So you have 80% of the wealth in the hands of those 55 and older, and that is mainly in the form of investments, and those investments are going to be liquidated in short order over the next two decades.

Who will step in to fill the void left by the Boomers? Very few, because very few are in a position to do so.

It's kind of difficult to buy $500 in stocks every month if you paying on $80,000 worth of student loans, right?

How much student loan debt did Boomers have? How much credit card debt did Boomers have when they were graduated or got married and started families? None. 21 year olds weren't allowed to have credit cards prior to the 1980s. Sure, they probably had a gas card from Union 76 or SOHIO or Texaco, and probably a charge card from Sears or JC Penny, but no VISA or Mastercards.

How many Boomers put 0% down on a home to buy? None. It wasn't allowed until recently.

So you have 3 generations, Generation X (the Me Generation), Generation Y (the Me, Myself and I Generation) and Generation Z (Generation Diaspora) who are buried in student loan debt, mired in credit card debt, who do stupid things like buy a home with 0% down and throw away several hundred thousand dollars in interest payments that could be used to invest, and who generally make incredibly bad financial decisions overall and they will be earning practically nothing in comparison to the Boomers with respect to wages, and people actually think they will be investing at the same levels as the Boomers?

Okay.
I wish I could rep you on this because it is exactly right on point. Throw in what is happening with domestic resource scarcity and uncontrolled immigration and you have an economic "perfect storm" that is going to slap the living delights of most of the US population. As was the case in the Great Depression, some will fare better than others, but nearly everyone is going to share in some quite significant level of economic pain. The real question is whether the social fabric of the US can withstand the stress under which it is going to be placed. That is worrisome.
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Old 08-25-2011, 08:37 PM
 
Location: Ohio
22,798 posts, read 15,935,395 times
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Quote:
Originally Posted by jazzlover View Post
I wish I could rep you on this because it is exactly right on point. Throw in what is happening with domestic resource scarcity and uncontrolled immigration and you have an economic "perfect storm" that is going to slap the living delights of most of the US population. As was the case in the Great Depression, some will fare better than others, but nearly everyone is going to share in some quite significant level of economic pain. The real question is whether the social fabric of the US can withstand the stress under which it is going to be placed. That is worrisome.
Yes, and they've spent themselves into a trap so that it will be difficult, if not impossible for the federal government to provide any help to keep the social fabric from ripping.

Quote:
Originally Posted by newonecoming2 View Post
That is in large part why I’m for a 4X on the minimum wage.
Yes, we're aware of your idiotic ideas, and also aware of the fact that you're clueless and don't understand that you would unleash instant Wage Inflation. You seem to think that someone earning $30/hour and paying $2,000/month rent for a one-bedroom apartment is better off than than someone earning $7.50/hour and paying $400/month rent.

Do the math.
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Old 08-25-2011, 08:58 PM
 
2,515 posts, read 1,819,085 times
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Quote:
Originally Posted by Mircea View Post

Yes, we're aware of your idiotic ideas, and also aware of the fact that you're clueless and don't understand that you would unleash instant Wage Inflation. You seem to think that someone earning $30/hour and paying $2,000/month rent for a one-bedroom apartment is better off than than someone earning $7.50/hour and paying $400/month rent.

Do the math.
Here is the math I’m doing. http://www.bearishnews.com/wp-conten...l-debt-gdp.jpg Cut the total debt down from 350% of GDP to 175% of GDP and we would all be better off.

Yes I do think that even with the higher rents than what you have now you would be better off because it would be cheaper to own than to rent and that would get the prices of houses going up sustainable. Because going from $400 a month to $ 2000 a month in rent will get you money spent now. And that will bring with it full employment.

Wage inflation is what I want. Take a good hard look at the alternatives. Deflation for the next two decades or so as Japan has done? Default on our national debt? That is hyper inflation. Have the banking system collapse and with it the flow of oil shutting down. That is the flow of food into cities as well. That gets you a 90% population die off. I am really not afraid of a bit of inflation.

You are idiotic if you think that there is a better alternative than causing real inflation now.

I understand what wage inflation will do to the economy do you understand what not having it will do to the economy?
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Old 08-26-2011, 05:46 PM
 
8,317 posts, read 27,059,582 times
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Here's the dirty fact: Inflation subsidizes and encourages irresponsible borrowers and non-productive people; and punishes financially responsible people who save, do not over-consume, and are productive members of the economy. That is why high inflation inevitably will destroy a productive economy. Unfortunately, inflation is most likely what we are going to get, because it is the only way that government can effectively expropriate the wealth of the middle and upper classes without raising taxes outright. A nasty deflationary depression is actually what the US desperately needs--sufficient to correct the real estate market to affordable levels and wring the speculative excesses out of the economy. Make no mistake, whether by inflation or deflation, the material standard of living for most Americans is going to be lowered significantly, and permanently. That's already baked into the cake--the only question is who will be slapped around more--the speculators and financially irresponsible or the prudent and financially conservative. Deflation will benefit the latter, inflation the former.
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