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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35363  
Subject: BW: Its Happening Date: 6/5/2005 1:08 PM
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For years, people have been saying that as baby boomers retire and take their funds out of stocks, the solid returns of stocks will stall out.

The June 13 issue of Business Week says its happening. Boomers start turning 59-1/2 on July 1, old enough to cash in their 401Ks without penalties. Most take out significant sums, roll them over to an IRA often at another firm, many shift significant portions of equities to bonds or other fixed incomes.

Hence, total 401K business has already peaked; 401K custodians are losing business.

This should cause a downward estimate for investors. It will be more difficult to earn top returns in stocks. Similarly, prices of fixed income investments will be bid up--lowering long term yields. (Will this cause flattening of the yield curve?)

Boomers are only a phenomenon in the US. Germany and Japan did not experience a post war boom. But the world over, aging population seems to be a factor--presumably a result of smaller family size and wider use of birth control.

Do these demographics mean a global switch to more conservative investments, less risk, lower yield?
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Author: kentm401 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12673 of 35363
Subject: Re: BW: Its Happening Date: 6/5/2005 1:29 PM
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Confirmation of a trend line I "spotted" about 10 years when in the "bidness".........I got out precisely for those reasons, that and the "rapid" conversion of small pension DB's over to DC style plans, that I knew could not continue to yield the same return rates over the demographic "tzsumi" that I saw coming.

The June 13 issue of Business Week says its happening. Boomers start turning 59-1/2 on July 1, old enough to cash in their 401Ks without penalties. Most take out significant sums, roll them over to an IRA often at another firm, many shift significant portions of equities to bonds or other fixed incomes.

Hence, total 401K business has already peaked; 401K custodians are losing business.

This should cause a downward estimate for investors. It will be more difficult to earn top returns in stocks. Similarly, prices of fixed income investments will be bid up--lowering long term yields. (Will this cause flattening of the yield curve?)


Yupper, it's a certainty......."Ponzi schemes and yield curves"......LOL Or, as the Chinese like to say...."May you live in interesting times"......that's a "curse".....in case you wondered.

KBM ("The Other BB - tm")


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Author: wintbill Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12674 of 35363
Subject: Re: BW: Its Happening Date: 6/5/2005 3:41 PM
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I got out precisely for those reasons, that and the "rapid" conversion of small pension DB's over to DC style plans, that I knew could not continue to yield the same return rates over the demographic "tzsumi" that I saw coming.

So 10 years ago employers were transitioning from defined benefit (DB) plans over to defined contribution (DC) plans, like 401(k)s.

Hence, total 401K business has already peaked; 401K custodians are losing business.

And now, business from defined contribution plans is past its prime.

I'm going out on a limb here: do you think the President knows that interests in the defined contribution plan industry stand to lose profits? I'm sure he does. So why not increase business in the defined contribution plan industry, a la "privatizing" Social Security?

After all, privatizing Social Security means that a portion of the required 12.4% of gross income (up to the taxable cap) becomes a "defined contribution," but this time it's defined and required by the government and not by the discretion of the individual employee. I believe this provides plenty of incentive for the industry to encourage the shift to privatization.

Bill

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Author: Quakeboy02 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12675 of 35363
Subject: Re: BW: Its Happening Date: 6/5/2005 7:44 PM
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After all, privatizing Social Security means that a portion of the required 12.4% of gross income (up to the taxable cap) becomes a "defined contribution," but this time it's defined and required by the government and not by the discretion of the individual employee. I believe this provides plenty of incentive for the industry to encourage the shift to privatization.

Ouch. I hadn't considered this line of reasoning. Well done!

Hedge

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Author: kentm401 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12676 of 35363
Subject: Re: BW: Its Happening Date: 6/5/2005 8:18 PM
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In a "manner of speaking"....that's the "plan" to use the word loosely, that's on the table now.....

So why not increase business in the defined contribution plan industry, a la "privatizing" Social Security?

After all, privatizing Social Security means that a portion of the required 12.4% of gross income (up to the taxable cap) becomes a "defined contribution," but this time it's defined and required by the government and not by the discretion of the individual employee. I believe this provides plenty of incentive for the industry to encourage the shift to privatization.


Trust me here....LOL....The financial industry needs NO incentives here to "take your SSI money"....;o)

The idea, as I understand it...is to force everyone into a "semi-private" scheme, with govn'mt selected "funds" on a DC contribution basis.....then @ NRA force them to "buy an annuity" with those funds....that's a DB type "distribution" of benefits but shifted from the govn'mt tax coffers to the insurance industry.......If there is any money left in the fund, after the forced purchase of the annuity.....then that would supplement benefits or be passed on to heirs of the beneficiary.....annuities don't carry a death or joint & survivor benefit generally speaking.......

Sounds good, except when you factor in the issue of "timing" of your DC account payment into an annuity. What happens if your NRA happens to fall in markets down swing, like in 2001 for-instance. Your money will buy much less then you prob. need to cover the full lifetime benefit that you would "receive" under the old plan? And since the Govn'mt has "cut your DB benefit" to account for the lesser contributions through the private accounts, you will likely wind up with a much lesser benefit then you'd receive under the old plan.

That's the "handicap" imv with the "privatization scheme"...it counts on markets forever trending up, and offers no guarantee when the markets....through no fault of your own......come crashing down......especially, in light of the coming "Distribution Phase" of paper assets by the "Boomer Invester Class".....which has been on a tear of "Accumulation" all these years.

And I'm "one of em"....getting ready to retire, and NOT looking forward to "buying an annuity" with a 4% yield....for my lifetime remainder. Noooo, I'd rather stick with the present guaranteed DB benefit, and remove the market cycle from my calculations entirely.....thank you very much. It ain't much, but it's better then nothing, or trying to time my retirement to the markets cycle.

Believe me, when I say this.......and it's not meant to be critical....But anybody that wants to place their faith in the Capital Markets over their next 40 years.....and thinks they can "time the markets" correctly.....just doesn't have a good operating knowledge of the markets.....or history......

BWTFDIK?

KBM ("The Other BB - tm")



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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12677 of 35363
Subject: Re: BW: Its Happening Date: 6/5/2005 11:05 PM
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Let's step back a bit.

Personally, I've worried about the "nuclear winter" hypothesis for stocks when boomers retire since long before I heard of it. My decision to stop dripping money into stocks (index fund) is based on fear, though I've modified my plans so I can keep some money in the stock market for when I plan to be dead.

But the reality is complicated. For one thing, how much of the money in the stock market comes from middle class boomers who have been dripping it in over many years is unclear: probably a significant amount, but not dominant compared to stock holdings of the very wealthy and institutions (not including pension funds). Much will depend on how others react. Then, of course, ultimately returns on stocks come from profits not P/E inflation/pyramid scheme. It may that P/E ratios will come way down, but if companies pay higher dividends over the long haul things may even out. I wouldn't be expecting double digit returns on stocks, but there may not be some permabear frost.

With bonds, I think it is quite different. Early in boomer retirements, there may well be a retreat from stocks to bonds, leading to lower yields, all else being equal. (All else, won't be equal—current yields are being heavily influenced by foreign capital and social security surplus.) But, eventually, boomers will simply be withdrawing money, which, all things being equal, would drive yields up.

As to social security: I think Kent is right in pointing to how insurance companies would benefit if people sought private annuties. But so far the brokerages haven't been all that excited about small time private accounts in stocks and bonds. They would probably be more excited if they thought they would get the high cost accounts many got with 401(k)s, instead of Vanguard-like index funds. But for now, part of the sales pitch is that people would get low cost funds (to counter arguments for why privatizing hasn't worked elsewhere).

For the most part, the attempt to privatize social security is ideologically driven. The laissez faire religious cult refuses to believe that public (or not-for profit) can ever work better than for-profit, despite overwhelming evidence and logic for why sometimes public and not-for-profit win. I do wonder if the attempt to push social security into stocks is also because the privileged ne'er-do-wells who live off their stocks realize they will need more money flowing into stocks when boomers start retiring to get the returns to which they have become accustomed.

Bush, himself, I'm more and more convinced, really doesn't get it. He's one of these people who firmly believes past returns predict the future (he is clueless about how circumstances change and require rethinking), and he is incapable of understanding why those who lack the ultimate safety net of an aristocratic family can't afford to take big risks with money and would prefer the guarantee of an insurance plan to the bigger return from greater risk if things go well. Optimism is a very easy philosophy is you can't lose no matter how much you gamble. "Freedom's just another word for nothing there to lose."

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Author: bighairymike Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12678 of 35363
Subject: Re: BW: Its Happening Date: 6/5/2005 11:23 PM
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....can't afford to take big risks with money and would prefer the guarantee of an insurance plan to the bigger return from greater risk if things go well. - Lokicious

Question - What percent of a future retirees benefits will be in personal account that he can pass on to his heirs vs what percent will remain in the tradional insurance plan?

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Author: terminalwriter Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12680 of 35363
Subject: Re: BW: Its Happening Date: 6/6/2005 9:00 AM
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Yupper, it's a certainty......."Ponzi schemes and yield curves"......LOL Or, as the Chinese like to say...."May you live in interesting times"......that's a "curse".....in case you wondered.

That "curse" was made up here in America at some point.


TW
...http://www.noblenet.org/reference/inter.htm

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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12682 of 35363
Subject: Re: BW: Its Happening Date: 6/6/2005 9:52 AM
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I wouldn't worry too much about baby boomers' reaching retirement age. Those born in 1946 will be 60 next year.

The smart ones will probably not change their portfolios too much just because they reached a magic date. It's a generalization, maybe a stereotype, but baby boomers all figure they'll live to be a hundred. But it's no joke. If advances continue in medicines and treatments, maybe 90 will be much more average than it is today.

The average lifespan, the last I saw, was about 78 for a woman and 73 for a man. But if you're already 65, you'll probably do better than average. Maybe 85 is a realistic number. And maybe 15 years from now, 90-100 won't be anything to write home about.

What does all this mean? It means that people will still have to be long-term investors, AFTER they retire, keeping a growth component (stocks, and maybe REITS) in their investment portfolio, along with income securities (bonds and preferreds).

I just don't see any large liquidation looming on the horizon.

Bill


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Author: kentm401 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12683 of 35363
Subject: Re: BW: Its Happening Date: 6/6/2005 10:40 AM
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You just described my existing ports Bill.....LOL and I've begun that devolution process already....."away from equities into yielding investments mix......

What does all this mean? It means that people will still have to be long-term investors, AFTER they retire, keeping a growth component (stocks, and maybe REITS) in their investment portfolio, along with income securities (bonds and preferreds).

I just don't see any large liquidation looming on the horizon.

Bill


And I don't think I'm "alone" in this changing strategy. I'm 61 and have many business relationships within the financial industry all pointing to the same analysis. This is rocket science, it isn't "political"....at least among my peers. We all view the demograhics of the situation as "unstopable" in nature. You can "manage cash" accordingly, and "allocate" or you can take your chances and "trust in G-d and the markets"......I for one, trust in nothing, and my own markets history over the last 35 years, has taught me to believe only in Demographics.....and markets cycles.

Now if I was 25 again? But I'm not....and I do believe that the "Accumulation cycle" of the last quarter century WILL reverse. How fast, how far, and when.....are the open questions. Much depends on the macro economy, jobs, housing, Trade, the global economy, and how well the FED can manage a "global currency based on a fractional reserve system".

It's ALL in the numbers.....LOL This doesn't make me a Republican, or a pessimist......just cautious, and intensly interested in the business & markets cycles, as I watch them unfold, year to year.

BWDIK?

KBM ("The Other BB - tm)



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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12684 of 35363
Subject: Re: BW: Its Happening Date: 6/6/2005 10:44 AM
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"Question - What percent of a future retirees benefits will be in personal account that he can pass on to his heirs vs what percent will remain in the tradional insurance plan?"

Bush's proposal is hard to pin down on "nuance," but I believe he is talking about 8% of the 12.4% (combined employer/employee contributions) going toward private accounts, though not immediately. Money in private accounts would, then, theoretically be like money in a 401(k) or IRA: free to use as you wish after a certain age with the right to pass it on to your heirs.

Of course, if you chose an annuity, or a joint annuity to protect a spouse, as current social security provides, you probably wouldn't be able to pass on the money to other heirs (annuities that let you do this greatly reduce your annuity).

Bush is so busy lying and propagandizing (and being a blithering idiot), he is unwilling or unable to lay out the real issues for the public.

1) Under the assumption of historically low economic growth projected by the social security administration for the next 75 years, the trust fund built up to cover baby boomer retirees will run out of money around 2041, at which point social security will revert to paying retirees from new inflows, which would cover only 70%-80% of promised entitlements. The CBO projections put the trust fund drop dead date out to around 2052.

2) The short fall, if it happens, can be covered various ways: across the board reductions in benefits (or increase in retirement age), strong reductions for some beneficiaries and not for others (the proposal Bush has embraced), across the board tax increases, raising or eliminating the cap on social security wages (a strong tax increase on those earning more than $90,000), or subsidizing social security through the general fund or through other taxes earmarked for for social security (such as my proposal to treat "investment income" over $100,000 as self employment). Bush and his crowd would never offer this list of options, because voters, given a clear choice, would opt for increasing taxes on the wealthy.

3) Social Security, as it exists today, is a progressive tax/entitlement program. This means that those earning towards the high end of the wage cap will get a lower percentage of their contributions plus growth back on retirement than those on the low end. Theoretically, currently, someone earning around $70,000 or more for 30 years gets less than they would putting the money into a ladder of 3% TIPS then buying a fixed, inflation adjusted, annuity upon retirement. (3% above inflation on government bonds, which you can't actually get right now, is the default assumption; a fixed annuity, a joint annuity with reduced spousal benefits, is what you get with social security.) Under the "progressive indexing" benefits plan embraced by Bush, those earning more than about $40,000 would lose out, with those close to $90,000 in current dollars losing out to a point equivalent of having their social security contributions plus earnings taxed at over 70% to subsidize low wage earners (this is glossed by Bush as reduced entitlements for the affluent). One of the selling points of private accounts, before "saving Social Security" from "bankruptcy," became the mantra for selling private accounts, was that the upper middle class was losing out under the current system, an argument conveniently forgotten in advocating "progressive indexing." I would argue that under the current system, those earning more than $70,000, who are not so wealthy they won't ever need social security, can accept the level of progressiveness on the grounds that they may not really earn at the high end through their careers and might need to partake of the subsidies from high end contributors if life takes a nasty turn. This would be much harder to argue under "progressive indexing."

4) Private accounts would avoid the progressive features of current social security (and the harsher "progressive indexing"). For those on the low end, this would mean they would have to get substantially higher returns than 3% above inflation to make up the difference. Those on the high end would be better off earning less than 3% above inflation under the current system, and as little as 1% above inflation under "progressive indexing."

5) Private accounts would allow people to choose investments that have, historically, provided higher returns than government bonds (stocks, corporate bonds, etc.). It would also, of course, subject people to higher risks. And, the use of historical returns on stocks as a default, at the same time economic growth is being projected at well below historical levels, is smoke and mirrors (P/E ratios on the Total Stock Market would look like Yahoo in 2000).

6) Social Security is an annuity (insurance) system, with survivor benefits and disability features, along with being a retirement annuity (with reduced surviving spouse benefits). You can't pass the money on to heirs (other than spouse). With private accounts, you could choose an annuity, or not. Annuities, even a not-for-profit one like Social Security, are a bad deal, if you don't need the insurance. What an annuity does is pay you more than the earnings on your investment, but less than you would get if you gradually drew down your principal (plus gradually reduced earnings) up to the date the actuarial tables predict you will die (modified for joint annuities). If you don't outlive the actuarials, annuities are a losing proposition. So is any insurance you don't use. From the point of view of the very wealthy, who are essentially self-insured, an annuity like social security is a bad deal. For those who are not wealthy, it is insurance against outliving your savings, with higher, inflation adjusted, income than you would get just from earnings.

7) Social Security is a low cost annuity system. The very lowest private annuities, such as those offerred via Vanguard or TIAA-Cref, have expense ratios of at least 1% more than the same investments in non-annuities. I don't know how that translates to a fixed, inflation adjusted, annuity, but 1% more than what the Social Security Administration uses in expenses would be optimistic. So, this would mean you would have to get a return of more than 1% above the returns Social Security pays for a private annuity to be a better deal.

8) Bottom line: under the current progressive system, which could be maintained by eliminating the wage cap, by bringing in new money, such as by taxing the investment income of the wealthy or earmarking renewed estate taxes on wealthy families, or by across the board benefit reductions (or retirement age increase), anyone earning less than about $70,000 in current dollars for a career would have to get returns on private accounts of a minimum of 1% better, after retirement, than the 3% above inflation government bond default to do better with private accounts, assuming you need the insurance/annuity. Actually, it is more than 1%, once you factor in the disability/survivor (life) insurance. At the low end, it would have to be much more than 1% better, because these earners are subsidized in the current system by the high end earners. During the accumulation phase, presuming it was really possible to buy low expense ratio options, you'd only have to earn slightly more than the default if you are toward the upper end. In any case, except for those at the upper end who are subsidizing the progressive system, it would be necessary to have an asset allocation in a private account with a fair proportion in stocks and get near historical returns: for those on the low end, who can least afford the risk of stocks, the asset allocation into stocks would have to be very high to make up for the loss of subsidies from the progressive system. However, if "progressive indexing" is adopted as the solution for the projected short fall, if private accounts were available, anyone making more than about $50,000 would be better off with private accounts/private annuity, even if they only got the 3% above inflation default.

9) I don't know if Bush is bright enough to get this—I'm sure some of his advisors are—but "progressive indexing" as a solution to the short-fall is a way of driving the middle class toward preferring private accounts. Of course, if this happened, Social Security would be dead, because there would be no money from the upper end to subsidize the lower end, in which case if anyone at the bottom still wanted to opt for traditional Social Security it would have to be subsidized from general fund dollars, turning it into a pure welfare system where it would have to compete with other government programs (which is a better use of government money, keeping the very old from destitution or providing a boost to children of the poor? for example). To pay current entitlements during the transition to private accounts, the government would have to borrow massively, which, unless all the private account money went to buy government bonds, which would make the whole exercise pointless, would require high returns on stocks. This would essentially mean buying on margin. Basically, what we are looking at, under any variation of the Bush proposals, is: ultimately eliminating the progressive aspects of social security and turning it into a welfare program for the poor elderly and an enforced IRA program for everyoe else; a progressive system in which progressivity ends with the middle class, who would be forced to subsidize poor retirees at a huge tax; or, a completely privatized system which would be more expensive and would only work on the whole (i.e., higher total returns after expenses) if stocks return at least 5% above inflation for the next 75 years, at a time growth is being projected at less than 2% (more than 5% if people followed a reduced asset allocation plan similar to Vanguard's Target funds).

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Author: terminalwriter Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12685 of 35363
Subject: Re: BW: Its Happening Date: 6/6/2005 11:58 AM
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Now if I was 25 again? But I'm not....and I do believe that the "Accumulation cycle" of the last quarter century WILL reverse. How fast, how far, and when.....are the open questions. Much depends on the macro economy, jobs, housing, Trade, the global economy, and how well the FED can manage a "global currency based on a fractional reserve system".

Just out of curiosity, I'm always interested in listening to the available opinions out there, to see what people think of, that I didn't. And since I am 25, what would you do if you were 25 again?


TW

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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12686 of 35363
Subject: Re: BW: Its Happening Date: 6/6/2005 12:06 PM
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(TW:)Just out of curiosity, I'm always interested in listening to the available opinions out there, to see what people think of, that I didn't. And since I am 25, what would you do if you were 25 again?
___________________________
Right about now, I sort of wish I'd started saving in my IRA sooner. And yet I also know why I didn't. Namely, I had other priorities. Saving for my first house down payment. After, that I paid down my mortgage, and it's now paid off. I don't really regret those things either. I took money out of the market to do that before the slide started in 2000.

My biggest regret was probably being complacent and staying in one job too long.

Bill


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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12687 of 35363
Subject: Re: BW: Its Happening Date: 6/6/2005 1:27 PM
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"Just out of curiosity, I'm always interested in listening to the available opinions out there, to see what people think of, that I didn't. And since I am 25, what would you do if you were 25 again?"

I think most of us would still suggest that you save your money and invest beginning at as early an age as you can manage.

But the basic problem seems to be that each generation tends to copy en mass what it thinks worked for the previous generation. But when everyone tries to do that, something seems to shift and the "magic formula" does not work out.

Hence, it may not be correct to assume that index fund investing leads to a comfortable retirement. Keep your eyes open. Be willing to try new things. Maybe real estate investing or some diversified strategy will prove to be best.

No one knows for sure. But clearly those who write financial advice do not have crystal balls. They lead the sheep down certain chutes. The question is whether or not the pot of gold is at the end or not.

At the moment all methods of funding future retirement seem to be under a strain to find payoffs for everyone. None of them alone is a sure thing. Future generations will likely cobble together their retirement funding from a complex combination of sources. This will not be easy for the average American, but for the likes of those who tend to participate in Fooldom, its a likely solution.








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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12688 of 35363
Subject: Re: BW: Its Happening Date: 6/6/2005 4:46 PM
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"Just out of curiosity, I'm always interested in listening to the available opinions out there, to see what people think of, that I didn't. And since I am 25, what would you do if you were 25 again?"

I think, inadvertently, we did the right thing: lived way below our means and socked away as much as we could. This wasn't a financial strategy, just life choices.

I think your generation (and those of us boomers who are waiting late to get started) are likely not to be able to rely on investment returns to do your savings for you. I could be wrong—my predictions always are—but the expectations for returns above inflation you see in most retirement planners, whatever combination of stocks/bonds/real estate you choose, have always looked high to me, and if the Social Security administration is even close to correct on its growth projections, with an older population and an older economy, returns will be well below the lowered expectations of current planners, which are down a bit from a few years ago. And, the Social Security administration's low growth projections don't consider the impact of less available energy resources and environmental degradation issues (such as needs to cut back far further than Kyoto, since nothing is being done now). Maybe there will be a way out of the energy/environment problems—some recent positive news on fusion and fuel cells—but I wouldn't plan my finances based on naive optimism on those fronts.


I don't see higher risk investment strategies (i.e., moving money about a lot) as ever being anything except zero sum options with higher expenses: index funds will still always be average, with those trying to beat the average on the average losing by the added expenses. And, I don't see real estate as a panacea, just something appropriate as part of a balanced portfolio. I'd actually be more worried about real estate prices dropping with boomer retirements than stocks, since there will be a lot of empty-nesters looking to downsize homes or move into easier to maintain situations, and eventually (in about 20-25 years) all those second, vacation, homes that are a big part of the current real estate market, will have to be unloaded to a smaller younger population.

So, basically, I'd be doing a standard, age appropriate, asset allocation (more or less 100 minus your age in stocks, perhaps less after real estate, and a good dose of international, including emerging markets, which I won't touch at my age). The key, though, would be lowering expectations on returns, which would demand saving/investing more. I'd say, try to save as much as you spend (after paycheck) for about 25 years, if you plan to retire at 65, saving as much as you can prior to age 40, though that is usually harder. If you have a lot of parenting expenses and mortgage payments, it may be necessary to back-load the savings period, with as much as twice your expenses for the last 10 years of earning, or something like that.

We chose not to have kids and we don't have the slightest interest in conspicuous or gratuitous consumption. With two professionals and all the tax deferred retirement options available that is allowing us to put away more than double our expenses for a considerable time (even though we will have to pay taxes on much of it, presumably at a lower rate). Most of our friends, with kids and higher consumption preferences, are in deep trouble, at least if the stock market doesn't do the work for them. I frankly have no idea how someone in the middle middle class with kids and no traditional pension (that didn't go belly up) can possibly save enough to live indefinitely in old age, even with Social Security, to maintain a middle middle class lifestyle after retirement.

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Author: kentm401 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12689 of 35363
Subject: Re: BW: Its Happening Date: 6/6/2005 6:38 PM
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I'll "second" Lok here on this....It's a conumdrum......of the first rank, and to be blunt about it....I see no way possible for the "financially under-educated" middle class to come out of this "intact"......And by middle class, I'm defining those @ or < $100000 gross income......Secondarily, those in the defined income cohorts of $25000 or <......have no chance at all.

I frankly have no idea how someone in the middle middle class with kids and no traditional pension (that didn't go belly up) can possibly save enough to live indefinitely in old age, even with Social Security, to maintain a middle middle class lifestyle after retirement.


Course, then you have my cohort....with above average incomes.....AND absolutely NO desire to "retire", ever......I'm a poster child for SSI "Means Testing".....which of course turns the present system on it's ear.....and into a welfare system for those that truly "need it"....

KBM (61 and counting to 62 when I'll begin to draw on all'ya'all....;o)

Side bar: For as long as ya'all will let me that is.....;o)



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Author: kentm401 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12690 of 35363
Subject: Re: BW: Its Happening Date: 6/6/2005 7:03 PM
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First of all....congratulations.....on being astute enough to at least read what the "older" generations are thinking.....LOL.....You don't have to agree, with any of it,......but at least understand.....that ALL of us are "talking our book"....so to speak.

Just out of curiosity, I'm always interested in listening to the available opinions out there, to see what people think of, that I didn't. And since I am 25, what would you do if you were 25 again?


And secondly....your question is "well placed"......cause all of us have the desire for a few "do overs" in life. My own "do overs"? Well allow me to prefece with a couple of personal data points.
@25
1. I'd graduate from UofM & CMU with a Masters, & a BA in finance & accounting.
2. I'd just gotten married......the first time....;o)
3. Completed my "Reserve" Service at 24 and was grateful that my AD callup never showed up....
4. Just entered the "family business"...and watched my Dad struggle with "family retirement issues" in 1969.

Sooooo, with that out of the way.......@25.....would I have done anything differently?

Prob. not.....<VBEG>.....except one thing......I didn't become politically active, till my mid-30's. That was a mistake I think.....because the intersection of politics and business was and is.....so "important".....that I don't see now......how I could have ever seperated the two in my mind way back then....and I was a anti-War Vet back in the day....and did attend the Demo Convention in 1968, and the attendent "riots" in Grant Park that August.....;o) But by 1969, I was over it, or thought so then.......Didn't merge politics and business, till 1976, when I decided to help run John Anderson's campaigns in MI in both 76 and 80......<VBEG>

So "conservative Republican", I'm not.......but a "Conservative Deficit Hawk, Liberal Democrat, I am....;o) But with a good grasp I think(?) on the macro economy, on business cycles, and on politics. That said, it wasn't my education that trained me.....LOL.....Rather it was watching my Dad deal with this crap.....and my own experiences with my Dad there to cushion the lessons, both "failures" and successes......that trained me. I "Bless my Dad" even 10 years after his death....;o)

To parse it another way, "Pay attention" to others....or just "pay".....LOL

Don't know if that helps, or if answered your question, but others have done that "well", imv.......The above is merely my own personal contribution.

KBM ("The Other BB - tm")




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Author: mjcalab Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12692 of 35363
Subject: Re: BW: Its Happening Date: 6/7/2005 2:38 AM
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Just out of curiosity, I'm always interested in listening to the available opinions out there, to see what people think of, that I didn't. And since I am 25, what would you do if you were 25 again?

The best financial advice I ever received was from one of my finance professors, it went something like this: Your first and most important investment should be in your education. It will increase your annual earnings and quality of life. You will never find a better investment opportunity for the risk adjusted return will be much higher then any other form of investment. Focus first on earning and savings don't count on investing to build wealth unless it's your occupation.

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12693 of 35363
Subject: Re: BW: Its Happening Date: 6/7/2005 4:30 PM
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I was just looking at Vanguard's web site to see if I could see what default assumptions they are currently using for stock/bond returns (which I couldn't find), but I think they have a new version of their retirement planner. I didn't feel like filling out the forms and playing with the pencils (Kent will get the reference), but probably will at some point. Others might want to get a jump.

Anyway, the key point, in answer to the what I would do if I were young again (financially speaking) is save more and not rely on historical returns. I was just reading how one reason traditional pension plans are in such trouble (besides cooking the books) is that they assumed unrealistically high returns, the same kind of returns we see in most retirement planners, which of course is also why insurance rates have skyrocketed and both pension plans and insurers are play the hedge fund game, as they discover there really isn't enough money to cover paper gains is everyone cashes in at the same time.

Just one set of numbers (assume constant dolalrs, i.e., zero inflation, to make arithmetic easier).

Assume after-paycheck expenses of $40,000 per year:

If you put away $10,000 per year for 30 years in a 401(k), which would require a gross income of around $60,000-$65,000, including taxes, etc, and employer match:

At 6% real return, you would have about $900,000;
At 4%: about $600,000
At 3%: about $500,000.

In the first case, to maintain $40,000 in expenses, plus taxes, you'd need an initial withdrawal rate of around 5%. If you also had social security and had paid off your home, you could probably make it through with about a 4% after retirement return (which would be consistent with a mixed portfolio getting historic returns), unless you lived well past 90. You could probably also modify lifestyle a bit and keep working for a while.

What happens if you don't get the 6% return, or the 4% after retirement? You're looking at poverty somewhere in your eighties or substantially cutting back on your lifestyle right on retirement.

What this article is suggesting, as are Kent and myself, among others, is we think historical levels of returns on investments are not likely over the next 40-50 years, which is what matters to those of you now in your 20s. We may be wrong, but our reasons are pretty good (without falling into Chicken-Little doom and gloom), and the assumption of low growth coming from the Social Security folks, although clearly being used as a scare tactic to destroy Social Security as we know it, do fit the low returns perspective.

So, the key to survival will become saving more, much more. I think budgeting/life choice advice will be much more important than investment advice.

Of course, there will probably be so many other changes in the world, any advice given today will be as useless as Polonious'.

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Author: kentm401 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12694 of 35363
Subject: Re: BW: Its Happening Date: 6/7/2005 4:39 PM
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Couldn't have said this any better.....oh, wait....I think I did....LOL

At 3%(Compounded): about $500,000.

Skippy:

What this article is suggesting, as are Kent and myself, among others, is we think historical levels of returns on investments are not likely over the next 40-50 years, which is what matters to those of you now in your 20s. We may be wrong, but our reasons are pretty good (without falling into Chicken-Little doom and gloom), and the assumption of low growth coming from the Social Security folks, although clearly being used as a scare tactic to destroy Social Security as we know it, do fit the low returns perspective.


KBM ("One&Done" or "two&through" - camp)
Sidebar: The "days of easy money" are just about over methinks. Only the magic of "compounding yields will work in the future decades to come.


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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12695 of 35363
Subject: Re: BW: Its Happening Date: 6/7/2005 9:28 PM
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I'd forget the crap about dividends being a waste of corporate earning, and that the dividends could be better used to generate capital gains (too many companies have wasted a good share of their earnings on red herring ventures and terrible M&A). My trouble with being in growth stocks when I was young was that I couldn't hang in there when the going got tough so I wasted a lot of assets. It took me 40 years of investing to realize that I HAD to have dividends so I was getting something. With one exception for a number of years (playing BAC in a cyclical fashion and buy when it got below $17/sh and sell when it got about $21/sh), I couldn't make market timing work. Incidentally, one time BAC dropped to $17-1/4 and I waited to buy in again, but it took off and never looked back. I finally bought back in at $70/sh (from which it has split a couple of times).

brucedoe

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Author: PolymerMom Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12696 of 35363
Subject: Re: BW: Its Happening Date: 6/7/2005 11:35 PM
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If I were 25 again<sigh - sort of>...

After I graduated from college and got a job (for all of $6800/yr) I signed up for the retirement savings plan. (This was a state University and was independent of the SSI system.) I worked there for 8 years and took the money out when I married and moved to help put MDh through grad school. The money went for a down payment on a house. My work payed the mortgage payments.

We sold the house and moved back to the midwest. The proceeds bought a much bigger house than was available on our income in the Boston area. As soon as Savings Investment Plans/401ks became available, we maxed out our pre-tax contributions to reduce taxes, plus gain whatever match the employers made. We've both been doing that for 25+ years.

What I'd do differently was learn all I could about asset allocation.

I was really ignorant until the job market threw the fear of a very early retirement into me. I didn't actively manage my 401k until the last 10 years, and learned along the way. Luckily, I picked the best of the funds available - the Dodge & Cox Balanced fund (DODBX).

Now I've diversified, pushed into it by having DODBX pulled out from the plan. (Never count on fund offerings to remain constant. One company had Vanguard Index funds for a couple of years, and then changed to mediocre funds<grrr>.)

My current company provides a self-directed 401k account, which allows investing in ~1200 funds, some of which are much better than the base offerings. (Don't know how long that will last since the company whas been acquired.)

The financial planning seminar they gave when the 401k was created was meaningless to someone in their early 30's. All it did was ask you to target how much you need to retire. What you really need to do is save as much as possible and allocate the money to a mix of domestic and foreign asset funds. Rebalance every year - not when the market scares you - and you should do well.

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Author: mjcalab Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12697 of 35363
Subject: Re: BW: Its Happening Date: 6/7/2005 11:55 PM
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What this article is suggesting, as are Kent and myself, among others, is we think historical levels of returns on investments are not likely over the next 40-50 years, which is what matters to those of you now in your 20s.

I agree with everything you say but why do you use the 40-50 years? It doesn't appear to be supported by the historical facts. ( http://www.nber.org/cycles.html ) I doubt the economic cycles are dead. Shouldn't young people have multiple opportunities to buy low and sell high, in their life times, just as we had? These are wonderful opportunities if one can stay fixed on the concept of rate of return and avoid being influenced by the madness of the crowed.

.

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12698 of 35363
Subject: Re: BW: Its Happening Date: 6/8/2005 9:58 AM
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"Couldn't have said this any better.....oh, wait....I think I did....LOL—Kent"

Kent, I humbly beg to agree. (Before correcting it, I just typed "humply"—must have some Freudian significance.)

"I agree with everything you say but why do you use the 40-50 years? It doesn't appear to be supported by the historical facts. ( http://www.nber.org/cycles.html ) I doubt the economic cycles are dead. Shouldn't young people have multiple opportunities to buy low and sell high, in their life times, just as we had? These are wonderful opportunities if one can stay fixed on the concept of rate of return and avoid being influenced by the madness of the crowed."

MJ,

We aren't suggesting economic cycles are dead, but we are talking about lower returns/economic growth, at least in the US, perhaps internationally, for a long time, within which there would probably be cyclical ups and downs. I would still seek a sensible asset allocation plan to optimize what returns are available (such a plan may well take on more of an international flavor, as countries such as China, India, and Brazil become bigger players in the world economy, perhaps then being less high risk for investment).

As Kent says, it's all demographics. "Old Europe" would have slow economic growth even if it did loosen some of its limiting work rules, etc. simply because the non-immigrant population is shrinking. Japan, which restricts immigration, is also shrinking and aging. The US, which is more open to immigration, might be able to shift the aging demographics better, but even though boomers will probably not be able to afford to retire at as young ages as their parents, for most people over 70 or 75, full time work is not realistic, and boomers, given current life expectancies of those alive at age 50, will be a dominant fact of life until past 2040 (If I remember correctly, the baby boom is defined as lasting through 1964).

However, I think it's more than just demographics. I don't believe that "growth" is the key to quality of life, but it is a big part of return on investment, which is why those pushing tax cuts for the rich insist on faking data about global warming and won't fathom conservation as a solution to energy use. The expansions in world economies since the industrial revolution started have all been based on increased per capita use of energy and harvesting of resources. That's going to end, either because there is a willingness to focus on efficiency, or because of crisis.

I think I've mentioned before one of my favorite movies, Alec Guiness in the Man in the White Suit. It's a wonderful enactment of the basic fact about capitalist economics: capitalism works on ever expanding needs, much of which is, in fact, waste. I've had the hardest time trying to explain to my father-in-law that digital cameras do not generate sales, at least not to the same extent, on all the stuff that brought the main profits to photo companies (film, developing)—he wants to know where the profits are going to come from, and the answer is: nowhere. I don't think the quality with digital cameras is yet up to mid-level film cameras, but that will probably come. Even now, though, I can take many more pictures for a fraction the cost, and if I'm not in a rush to share them (via wireless), there's little profit for anyone.

Greater efficiency, greater productivity, are deflationary: you get more bang for the buck, which means fewer jobs and lower profits. What keeps the system expanding, despite greater productivity, is people wanting more and more stuff. I think, in the information age with dwindling raw materials, greater efficiency and productivity will become a priority, but won't be accompanied by finding all kinds of new stuff people have to have (and won't be able to afford). That means growth will be much less per capita, at least among the "have" nations. In most ways, working from home is a lot more efficient (though we will discover that most of the time spent in meetings is a complete waste, so we can get rid of a substantial portion of the work force whose jobs involve making themselves appear useful). But if people stay home, they won't need to spend money on commuting (multiple cars, gas), eating out, etc. Of course, on-line shopping and banking will mean significant reductions in retail jobs. And so on.

Another issue worth examining is where historical returns on stocks and bonds come from. I have long questioned the notion that when you push more and more money into the stock market, as the tax incentives increase and there are vehicles, such as 401(k)s encouraging wider participation, you can expect the same returns. This would assume that companies can increase their profits indefinitely at the same rate people are buying stocks, even though buying stocks is not investing, whatever the gloss in terminology—little, if any, of the money ends up providing working capital to companies that might enable them to increase profits.

Historically, a much higher percentage of stock returns, as Bruce reminds us, came from dividends, and the decrease in dividends is not just because more earnings are being retained as working capital. If you look at the historical returns on stocks, you see in earlier times, when participation was largely limited to the wealthy and big endowments and other institutions, returns were primarily from a share of the profits. As wider participation increased, the continuation of paper returns at a high rate became more a matter of P/E inflation. That can't continue, and won't as boomers withdraw money (even if there isn't a nuclear winter).

The only arguments I've heard for why these factors won't yield lower economic growth and return on investment are: historical returns are predictive whatever the changing circumstances (no one actually says this, but that's the reasoning) and that increased productivity inevitably leads to expansion into new arenas (none of which the believers in this are willing to guess and the historical claims of this happening are problematic, especially if there are no new sources of energy and no new frontiers for immigrants displaced by downsizing).

Maybe the 21st century will continue to provide historical returns on investment, despite my concerns. But if I were just beginning to save for retirement in another 30-40 years, I'd be making learning how to live frugally the starting point. As I look at most of the college kids around me, even ones struggling to pay for tuition and housing, I don't see many signs of breaking away from a sense of easy money (eating out is the norm, coffee shops are still proliferating, designer clothes are everywhere, blonde bombshells in white jeeps don't yet seem ready to exchange for a "Gremiln": classic Doonesbury, "Wouldn't a Gremlin has been more sensible").



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Author: kentm401 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12699 of 35363
Subject: Re: BW: Its Happening Date: 6/8/2005 10:09 AM
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In the interest of continuing education......this cross post nicked from cf on another board......and a definition of a term I rather casually toss around alot....;o) Ponzi Scheme

KBM
------------------------------------------------------------------------
Author: kentm401 Number: of 111586
Subject: "History" for a "new time" Date: 6/8/05 9:01 AM
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Or Not?

Nicked, but U might be interested a little bit more on the subject of much conversation.......

KBM (W/thx to cf for the piece)

Politics & Current Events / Mish's Political Quagmire
URL: http://boards.fool.com/Message.asp?mid=22590492
Subject: Ponzi Date: 6/7/05 9:45 PM
Author: cobrafang Number: 24960 of 24974

--------------------------------------------------------------------------------

http://www.news-journalonline.com/03ColEssays.htm

Everyone's heard of the scam, but since we're all living it on a scale worthy of a Christo exhibit, it's worth a refresher. Charles Ponzi was an Italian immigrant of small stature and oversize ambition who wanted to be rich, sought after and talked about. He briefly became extremely rich, the police sought him out, and he's been talked about ever since. But he didn't merely achieve his goals. He codified the REM cycle of the American Dream: The glory of getting rich quickly and with as little work as possible outweighs all consequences no matter how reckless.

The way Ponzi did it is a beauty of short-attention guile. He created a front with the upright name of Boston Exchange Company. He invited people to invest and promised them better than 50 percent return within 90 days. The promise wasn't without a financial foundation. Ponzi planned to buy foreign postal coupons at cut rates and redeem them at face value for cash in the United States. It was 1920, exchange rates hadn't caught up with the devalued currencies of countries wrecked by World War I. He would just take advantage of the disparity, legally. Today they call it currency trading.

Except that Ponzi never bought a single postal coupon. Cash from investors rolled in so fast and in such huge amounts that he saw no reason to. He became a millionaire in a matter of months. His and his investors' wealth was made entirely of borrowed money and the expectation that an ever-larger number of fools would keep financing the debt ad infinitum. When reporters and banks finally did look into his numbers, the game was up. Most of his 27,000 investors were ruined. Ponzi spent a few years in prison and finished his days broke and poor in Brazil, but not before a stint as a swindling real estate broker in Florida, without which no scheming life is truly complete.

------------------------------------------------------------------------


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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12702 of 35363
Subject: Re: BW: Its Happening Date: 6/8/2005 1:29 PM
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Kent,

I don't know whether paper (or projected) returns on investment really constitute a true Pnzo scheme (or pyramid scheme, also a loose usage), but the value of anything that is contingent on being to sell it is limited by supply and demand: in other words, if when you need to sell there are more sellers than buyers, your assets won't be worth what they would be worth if there are more buyers than sellers. Basing wealth projections on the presumption there will always be more buyers than sellers (or, at least, that this as a general trend is only subject to temporary downturns in economic cycles) is essentially accepting a kind of Ponzi scheme logic.

Social Security was a viable Ponzi scheme. As long as the working population kept growing fast enough to sustain a growing retiree population, inflow from wage taxes could cover outflows. The build up of the Trust Fund by massive overpayment for about 25 years was a recognition that the demographic reality meant the Ponzi scheme was no longer going to be sustainable.

Except for the permanbears who hawk an exaggerated "nuclear winter" version for the stock market, there really has been much too little discussion among legitimate economists and policy makers of the broader impact of an aging demographic on supply and demand for wealth accumulation assets. My view, though everything nowadays is grossly distorted through momentum trading, is that there won't necessarily be net losses, but that the possibility for net gains will be much less than when the working population (including through the entry of women into the workforce) was proportionally much higher.

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Author: kentm401 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12703 of 35363
Subject: Re: BW: Its Happening Date: 6/8/2005 1:46 PM
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Correctamundo....

Social Security was a viable Ponzi scheme. As long as the working population kept growing fast enough to sustain a growing retiree population, inflow from wage taxes could cover outflows. The build up of the Trust Fund by massive overpayment for about 25 years was a recognition that the demographic reality meant the Ponzi scheme was no longer going to be sustainable.


The Greenspan Commission in 1984 "said this much". What they didn't count on, was an explosive series of budget deficits in the years since, and the sunset of "budget PayGo" provisions that were in place by 1988 and expired last year IIRC? The original "overfunding from SSI taxes" from 84 onward was intended to "pay down the debt" then about 2.5 Trillion.......not to stuff the pockets of the K-Street bankers lawyers lobists and CongressCritters.

And the "point is" that transfering the future economic wealth of a generation, from the guaranteed payer of benefits (the US Treasury) over to the cyclic markets driven private economy.....just makes absolutely "no sense" to me.

This issue of "transition" from a DB structured SSI system to a DC structured system, without a govn'mt guaranteed benefits floor, turning SSI into a "welfare program"......will prove to be the death nell of both pensions and retirements for at least 50% of the "future retired populac", not to mention the destruction of a "Social Compact" between generations that kept the peace for the last 70 years.

Oh well....

Life's a Beach & then you die.....;o)

KBM (Showing an 8.2% yield on aggregate funds Y/Y)







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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12707 of 35363
Subject: Re: BW: Its Happening Date: 6/8/2005 5:38 PM
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I've been thinking about my in-laws as a classic example of how the WWII generation really has been able to retire well, thanks to the "three legged stool" model (at least those for whom one leg of the stool includes supplemental health insturance to pay for drugs)—actually, in their case, social security is fairly minimal.

My father-in-law was a mid-level civil servant for a little under 30 years, who retired at 59 under a buy-out. My mother-in-law was a housewife, except for a few stints as a part timer. They put their only child through 8 years of first rate college/professional school (just tuition, after college). They have always lived frugally (we think to the point of being debilitating), but the fact is, with a middle-middle class salary and normal living expenses, the stock market did make a huge difference between accumulating enough to get by as an addition to the pension and really having nothing to worry about (with the liklihood of leaving some legacy, if we can persuade them to put the trust fund money into something more cautious, albeit by time my wife would see the money it will probably be after we've reached out own goals, hence largely irrelevant, since we treat it as non-existent).

I think people like this have created a myth that the middle class can fairly easily put away enough for a safe retirement by saving a modest portion of salary and investing wisely for a long time. It worked for people like my in-laws. But it worked thanks to an inflation adjusted pension and a long, strong bull stock market, albeit with a few cyclical burps. Pensions are disappearing (government is one of the few remaining strongholds, and don't expect that to last). Saving even to the extent my in-laws did (and they had only one child and lived too frugally), combined with Social Security paying around 50% inflation adjusted wages simply would not have been enough without the bull market to sustain more than 30 years of retirement (my guess is more than 40 for my mother-in-law, who was about 53 when her husband retired, who could well live another 10 years or more).

I would agree we are heading for a time, unless the "Social Contract" is dramatically reinstituted, when the most of the elderly in this country, like pensioners in Russia after the collapse of Communism, are going to live near or below the poverty line, just as before Social Security was created. The best chance the middle class will have, even what is officially the lower upper middle class ($60,000-$100,000 in today's dollars), will be to keep parenting to a minimum and to be vigilant in keeping expenses in check, so as to put away substantially higher proportions of income than most people think is sufficient (often on advice from financial planners, human or forms, that use historical returns as the default).

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Author: mjcalab Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12708 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 2:03 AM
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I would agree we are heading for a time, unless the "Social Contract" is dramatically reinstituted, when the most of the elderly in this country, like pensioners in Russia after the collapse of Communism, are going to live near or below the poverty line, just as before Social Security was created. The best chance the middle class will have, even what is officially the lower upper middle class ($60,000-$100,000 in today's dollars), will be to keep parenting to a minimum and to be vigilant in keeping expenses in check, so as to put away substantially higher proportions of income than most people think is sufficient (often on advice from financial planners, human or forms, that use historical returns as the default).

For a different point of view,right or wrong...look at the brighter side. Think about it, in your previous posts you have projected what is known today into the future drawing a very dark picture. Yet we all know from previous experience we are always wrong. In fact something like the opposite usually occurs which should be very encouraging. Any way I hope you didn't post these thoughts with the idea that the young should use them in making their financial decisions. To do so would be a mistake for that would not be investing, it would be gambling on one of millions different possible futures. But your right it is best to over save, but be alert to what form those saving take. I think asset allocation is something one should never consider. One should not risk savings in hope of a price increase for this is gambling and the odds are usually against you. It is best to invest your money where you get a real return without or with little risk. Price increase will occur from these forms of investment automatically depending on the economic cycle. Be patient, opportunity always come. Every generation has had them but they have always come in a different form.

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12709 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 3:45 AM
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Yet we all know from previous experience we are always wrong.

Every prediction I made about the Iraq War came true.

Unfortunately.

Except for the one where I thought Saddam really had some weapons somewhere & would use them on our troops.

Fortunately!

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12710 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 9:46 AM
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"Any way I hope you didn't post these thoughts with the idea that the young should use them in making their financial decisions. To do so would be a mistake for that would not be investing, it would be gambling on one of millions different possible futures."

MJ,

I think you are misreading what I said. I would agree that my conclusion that most retirees in the future will live near poverty is pessimistic, but it is a realistic conclusion if it turns out that returns on investment are substantially lower in the future than in the past (at least if the expectation continues that personal savings are to be the core of retirement planning). Someone, like my father-in-law, saving 10% of their income for most of their working life can build up a tidy nest egg if they get historical returns on stocks and bonds, using something like the "your age in bonds" allocation formula, probably enough of a nest egg, if they continue to get historical returns after retirement, to live comfortably indefinitely, presuming they also get historical levels of Social Security. Cut historical returns in half and that's going to require saving a lot higher percentage of income, which is increasingly difficult for the middle middle class.

Following my suggestion that saving more and expecting lower returns is the opposite of gambling: it's being deliberately conservative. Expecting high returns because that happened in the past in the face of demographics and dwindling resources, to which the only response of the optimists is, "don't worry, something will save us, it always does," none of the optimists being scientists and other experts with actual knowledge of the problems that need solving, just economic theologians, is what I consider "gambling."

"I think asset allocation is something one should never consider. One should not risk savings in hope of a price increase for this is gambling and the odds are usually against you. It is best to invest your money where you get a real return without or with little risk."

Huh? Are you suggesting only putting money into savings accounts and other principal preserving assets? I would still advocate young people follow some kind of standard asset allocation plan (stocks, bonds, real estate, international), presumably updated for changing times. My view is that if economic growth is less in the future (which doesn't necessarily mean a lower standard of living, if standard of living is measured as quality of life not how much stuff people buy), then returns on investment will be less, overall. A sensible asset allocation plan should still be the best way to optimize what real return is available.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12714 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 1:35 PM
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"I think people like this have created a myth that the middle class can fairly easily put away enough for a safe retirement by saving a modest portion of salary and investing wisely for a long time. It worked for people like my in-laws. But it worked thanks to an inflation adjusted pension and a long, strong bull stock market, albeit with a few cyclical burps."

The mood of the estimates posted on the Foolish boards certainly is more pessimistic now than it was 5 years ago.

But I wonder how many of us has any hope of predicting 20 years out? Look at 1970. Serious concerns about inflation. 20% interest rates. The saving and loan melt down looming.

Who would have predicted the fall of the Soviet Union? Or the Falklands war and Margaret Thatcher's successes in Britain? Or the boom in stocks that followed? Paul Volker and new Fed policies that have proved far more successful?

On and on.

You cannot predict the future. But by keeping living expenses in check and maxing your savings/investment effort you have a decent shot at it. And maybe once again--even for the 30 year old--a time will arise when stocks do very well.

Be prepared. Make hay when the sun shines.

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Author: MargaritasAtFive Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12715 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 1:56 PM
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This is a subject I have recently been thinking about a lot, but have come up short on a good answer. My husband and I are 36, expecting our second child in a matter of weeks.

My best thought has been to try to acquire rental properties here in San Diego, as a safeguard against the guaranteed-to-decline equity market (as far as I can see). Beyond that, what can you really do? You have to keep putting $$ in the 401K and Roth-IRAs, which means equities. I guess you can diversify into emerging markets, which I've done also. Europe is no better off than we are in the demographic-department.

So, your best recommendation is just keep doing it, and accept lower returns, and put away more in response? I hate that answer!! :) Can't you recommend something more concrete, bonds, CDs, SOMETHING?? Any ways to put the 401K to better use, since we just keep putting gobs in there?

Maybe I should get some weathy parents.

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Author: 3acorns Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12716 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 2:18 PM
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I would be more active to get taxes instituted on those evil rich people that do so much damage to the economy. To think of it, all those new industrialists like Bill Gates, Steve Jobs, Andy Grove etc, that do nothing more than sit around and think up ways that increase productivity of America and in the process make that evil cabal even more money. The nerve of those folks.! Just think, if we could tax them for their evilness of wanting to get those obscene profits for what they create, we could send a good message to all of those that create things and induce them to create more and more so we could tax them more and more, and thus we could achieve our pipe-dream of getitng all the benefit of not only the creations of their minds, but also get more money for ourselves - more free money for all of us that don't have the guts and intellect to make it on our own but instead think that "feeling" substitutes for rational thought, and think that it is good to go stealing from my brother becasue I have decided he has too much. I mean, I am lazy, and it is not my fault, and I think that those that do work should pay into some fund or something to pay for my house, and my food, and my medical bills. and my vacation ......, After all, I know how to spend THEIR money better that they do.

Ohh by the way, I am writing this on a device that was not invented in China of the Soviet Union... Nations where the tax-the-rich philosophy has ended up elimination the rich - but hey those rich people (meaning anyone that has more money than me) are EVIL.... Right???




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Author: JourneymanFool Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12717 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 2:42 PM
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>> The only arguments I've heard for why these factors won't yield lower economic growth and return on investment are: historical returns are predictive whatever the changing circumstances (no one actually says this, but that's the reasoning) and that increased productivity inevitably leads to expansion into new arenas (none of which the believers in this are willing to guess and the historical claims of this happening are problematic, especially if there are no new sources of energy and no new frontiers for immigrants displaced by downsizing).<<

One persuasive argument I've heard regarding why demand for equities won't fall off a cliff as the Boomers retire is the demand for equities from the rapidly growing middle class in many developing markets, particularly China and India. Although the per capita income is still quite low in both countries compared to that of the U.S. and Europe, if one takes into account the sheer size of the populations, along with their rapid and seeming inexorable growth and (at least in India) the percentage of the population below 30, it doesn't seem unreasonable to believe that any slackening in demand will reverse itself in the medium term as long as we keep moving towards free global capital and labor markets.

If you couple the "emerging markets" argument with that of the idea mentioned in the string above that shifts from equities to fixed income/cash generally occur over a longer time frame, the retirement of all the boomers may not have quite the negative market impact folks expect in the coming decades.

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Author: kentm401 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12718 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 3:01 PM
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2 "points", not to "start any arguments here".....note: This ISN'T the Board for those...LOL

Boomers retire is the demand for equities from the rapidly growing middle class in many developing markets, particularly China and India. Although the per capita income is still quite low in both countries compared to that of the U.S. and Europe.

Assumes that one or both "developing economies" can both sustain their own growth rates and will be "willing" to move consumption into savings and investment. IMV, unlikely.

If one takes into account the sheer size of the populations, along with their rapid and seeming inexorable growth and (at least in India) the percentage of the population below 30, it doesn't seem unreasonable to believe that any slackening in demand will reverse itself in the medium term as long as we keep moving towards free global capital and labor markets.


The above assumes there will be a "continuing willingness" of foreign capital to move offshore, and into the USA. Further there must be "Free" and markets driven exchange rates established. We don't have that now, and likely will never have that in place. As our economy continues to slow, perhaps even "contract", ala Japan in the last 10 years, I do not envision that the "Free Trade" compact aka WTO, will continue. In fact, the reverse, as nations around the globe begin to "see protectionist measures" as homegrown political neccessity. Further, I'd NOT count on the Chinese (same for India I might add) doing anything monetarily that does not benefit THEM exclusively and directly, at OUR expense.

This is economic WARFARE, imv....and the opening salvo's have already been fired, in case you missed the sounds of gunfire in the distance?

KBM (Pessimist (on global salvation) R Us)



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Author: leosshoes Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12719 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 3:40 PM
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one of the main problems we're dealing with here is the loss of a sense of community in this country. there used to be an ethic of taking care of the old as well as children. this concept seems to have lost it's value to too many people. we've become a lot more self-absorbed, money-conscious and money-driven. the people who do make the decisions that affect our country and our willingness to share and be a part of a community have applied the screws and more and more people have opted for the "every man for himself" ethos.

the disparity between the have's and the have not's has increased dramatically in the past thirty years. with some exceptions the have's have turned a blind eye to the less fortunate. our leaders (and i won't name names) either seem indifferent to the problems of the less fortunate or worse, offer preposterous bromides and little else. social security and medical care are the obvious hot potatoes. actually though, these two issues are just symptoms of the elephant in the living room: our loss of community and consideration for the defenseless and those less fortunate than ourselves



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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12720 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 3:52 PM
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Democrats try to say "Look, we like people, in fact we'll tax everyone so the people get helped, and everyone does a good deed painlessly without thinking about it"

Republicans try to say "Taxing everyone is evil, some people might not want to help people, good deeds should come of your own free will not from government imposition, so we'll just eliminate the program and if those old people starve it's their own fault, they chose to!"

Neither of them really cares.

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Author: Haise Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12721 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 4:03 PM
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the disparity between the have's and the have not's has increased dramatically in the past thirty years.

I've never met a "have not" in America, but most Americans think they are part of this group. Not being able to get into an Ivy League school, afford a new car, or even an iPod, does not qualify one as being a "have not," as some people seem to think. Perhaps the only true "have nots" are the homeless who suffer from pscyhological conditions which need medical treatment. Since they aren't able to think rationally much of the time, if at all, it's difficult for them to receive help from shelters or other programs. However, a single mother with four kids living in a Section 8 housing complex and working at McDonald's is doing better than billions of others in the world.

I would prefer Americans being grouped into the have's and have-a-lot's. Not that we shouldn't help those struggling to get out of poverty here, but by and large nearly everyone in the industrialized world is far better off than their ancestors who lived during the Industrial Age had it.

But I'll step off that soapbox :) Getting back to the original question, I kinda hope equities do get cheaper. Good bargains are still difficult to find. However, isn't the effect on equity and bond prices going to be limited somewhat? I'm sure a significant percentage of the outstanding shares of GE, Coca-Cola, and other blue chips are indirectly held in 401(k) accounts through equity mutual funds, but they aren't going to fire sale their holdings at any price. Besides, after rolling over their 401(k)'s into IRA accounts, most Boomers will probably repurchase the same funds, after adjusting for appropriate diversification.

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12722 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 4:23 PM
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I've never met a "have not" in America,

Read the book "Nickel and Dimed: On Not Getting By In America". Yes it has a bias but it will bring you a little closer to the lower class. E.g. paying $60 a night for a tiny room in a fleabag motel since you can't save up enough cash for the security deposit on a 2-bedroom $300/mo apartment.

The "have lesses" stay out of sight; they're too busy trying to survive. Yes, their stomachs are full and they have a roof over their heads, but they are always one step away from ruin.

Not that we shouldn't help those struggling to get out of poverty here

Current ruling theory (widely believed, if not often discussed) is that a certain percent of people *must* be kept in poverty, or they would demand better treatment, which would lead to inflation. When people's wages are low, they are willing to accept very poor treatment. The economy has to be built on the backs of someone.

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Author: reidmp Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12723 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 4:57 PM
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My best thought has been to try to acquire rental properties here in San Diego, as a safeguard against the guaranteed-to-decline equity market (as far as I can see). Beyond that, what can you really do? ... Can't you recommend something more concrete, bonds, CDs, SOMETHING?? Any ways to put the 401K to better use, since we just keep putting gobs in there?


One of the difficult things about investing is that sometimes there isn't an easy answer, like "now is the right time to invest in the .... category" (replacing "..." with stocks, bonds, etc.).

Interest rates are going up.

- increased rates push stocks down (because increased borrowing costs reduces profits, business investment, consumer purchases)

- increased rates push down the value of any currently-held bonds

- increased rates push property values down (because increased mortgage costs reduce the pool of people who can afford the mortgage on a house, so property prices have to fall to keep the total monthly mortgage cost in line with what people can pay).

None of these things happen overnight, and these things are somewhat separate from the baby-boom liquidation issue that started this thread, but when you add energy cost issues to interest rate issues, you see broad trends that don't look nice. The baby-boomer effect isn't going to help, if it is real.

Does that mean you can't invest? No. It does mean that investing on auto-pilot is probably not going to perform as well as it used to. Hunting around for true opportunities will become increasingly necessary. For real estate that could mean buying foreclosed fixer-uppers to convert into rentals; for stocks that may mean hunting around for long-term value opportunities, for bonds it means only getting them when yields make them a good long-term hold. Don't forget there is also another investment opportunity, one people often forget about - you can set up your own small business. If you pick the right business, do it at the right time, and work hard, who knows what kinds of return (and non-monetary satisfaction) you'll get from it?

The thing about investment that can be most depressing is when it doesn't meet our expectations. We all wish it was fast, easy, and had good returns. If we change our expectations, it may not be so depressing. Obviously we still want the returns. Becoming flexible about "fast" and "easy" may become necessary survival skills.




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Author: AStrayElmGod Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12724 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 5:00 PM
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<snip>
I've never met a "have not" in America,
<snip>

Come on over here, I can show you people living in the bottom of the river. And not all of them are psychos, either.

"Here" = Ventura, CA.

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Author: det110 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12725 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 5:34 PM
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You are making a gigantic, and unwarranted, logical leap in your article by concluding, among other things, that the mere fact of 3 million BB's reaching age 59 1/2 will lead to lower returns in the stock market.
Even though they will avoid the 10% early withdrawal penalty, most BB's would be foolish, in the worst sense, to take out large sums from their 401 k and incur the INCOME TAX consequences. Now, they have a significantly diminished retirement portfolio, that is supposed to last FOR THE REST of their LIVES,i.e., about 40 years life expectancy, without the tax deferral benefits of their former 401k, free to invest it at 4% in 10-year Treasuries! Come on, now. How foolish do you think mature people are going to be?
Sincerely,
det110

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Author: brassbear Old School Fool Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12726 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 5:50 PM
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I certainly agree with the comments about the loss of community and the self-obsessed focus on getting mine (i.e., "your end of the boat is sinking!"). I also agree with many of the comments on the importance of investing some money in parts of the third world which are showing rapid economic growth. Thomas Friedman's new book, "The earth is flat" is well worth reading on this topic. It would seem that China, India and other asian countries well may surpass us economicallly within a generation. If so, it is difficult to see anything positive about our economic future on a macro scale which means we face a reduced standard of living for ourselves and our children. However, I do not forsee a huge, iminent liquidation of equities in favor of bonds, and insurance products, etc. The savings rate for the baby boom generation is so low that many of us will not be able to retire at 65 because our own investments are not sufficient to live on even with Social Security. Even now, one can see quite a few older persons working at fast food joints, driving taxis and bagging groceries. Presumably, these individuals have retired from previous employment but find it necessary to supplement retirement income. I agree with those who say that most of these working elderly will probably stop working due to diminished health by age 75 even if they live another 10 or 15 years. Given the relatively low yield from fixed income currently, it seems to me that a significant portion of equity investments will shift to dividend paying stocks like those recommended in MF's Income Investor newsletter. Many of these stock picks pay 3.5% and higher. Companies with large free cash flows, a healthy dividend and a long history of increasing the dividend should become ever more attractive to us baby boomers, causing the price of these stocks to rise based upon growing investor demand. One still must contend with market risk. But there is market risk, too, in fixed income investments purchased as UITs or mutual funds. Plus, the need for growth in income makes solid dividend paying companies potentially worth the risk, depending upon one's risk tolerance and age.

Investing in emerging markets also will be important. Finding a reasonably safe way to do this, taking into account paucity of company information, less transparent accounting and markets and currency risksmakes this a daunting task. I don't think I can ignore the emerging market investment option altogether because of a need for diversification and the positive economic trends in the Far East as compared to our own.

I also think buying land or investment grade property on water remains a compelling place for a portion of one's assets if one has the money to do so. My wife and I own a house on Lake Hickory outside of Charlotte, NC which we purchased at a very low price as compared to what the same amount of money could buy within easy driving distance of Minneapolis-St. Paul, Minnesota, where we currently live. Because NC is expected to be the fourth fastest growing state and there is a finite limit to the amount of water-front land, this should be both a good investment and fine retirement home. We probably are teetering on the edge of a bursting real estate bubble, particularly for property on both coasts in major metropolitan areas. This does not mean that all real estate investment is subject to a ruinous collapse in value in the near term.

One commenter mentioned that standard of living does not equate to quality of life. I could not agree more. Studies on "happiness" discussed in The New York Times within the last year noted that money does not yield happiness once one is out of poverty. Many of us, including myself, may face the need for a more frugal life style in the next decades but that does not mean loss of happiness. It does mean we must turn from accumulation of stuff towards nurturing family and community relationships and contributing, personally, not just monetarily, to benefit others, not just ourselves. I have been retired on disability for four years and I am just now, at age 54, learning this life lesson. I wish I had learned it earlier.

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12727 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 5:57 PM
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"So, your best recommendation is just keep doing it, and accept lower returns, and put away more in response? I hate that answer!! :) Can't you recommend something more concrete, bonds, CDs, SOMETHING?? Any ways to put the 401K to better use, since we just keep putting gobs in there?"

I really do think more of the same, modifying asset allocation categories according to common sense as times change, is all we can do. The only way to get higher returns than the markets as a whole allow is to take on the risk of trying to one of the ones who wins (usually not the little guy). This means risking losing a lot, because the mantra that more risk necessarily means higher returns is a crock.

I don't know for sure that the next 40 years will provide lower aggregate returns than the last 100. As I've said before, and Paul and others are reminding us, the "nuclear winter" hypothesis for the collapse of stocks and bonds when boomers retire and have to live off assets greatly exaggerates the extent to which the markets are dominated by middle class boomers saving for retirement. But it is a pretty big demographic to have to replace, so the conservative stance is to assume the Social Security administration isn't just blowing smoke in predicting low growth with the aging population, and like it or not, low growth means lower returns. And, the Social Security administration is not factoring in the energy/environmental constraints that cannot be wished away, when all of the pie in the sky alternatives that get bandied about by the "optimists" have been dismissed (including alternative energy sources favored by environmentalists) as grossly insufficient to replace oil and gas.

All this says to me is, if I were in my 20s or 30s, I would try very hard to save more, even if it meant living less high on the hog than I might like, on the conservative assumption that returns will not be at historical levels.

Hey, if it turns out the stock market provides historical returns above inflation for the next 20 years, I'll be able to live high on the hog the rest of my life. (But starting to live high on the hog at 75 ain't as much fun as at 25.)


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Author: mjcalab Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12728 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 6:02 PM
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Huh? Are you suggesting only putting money into savings accounts and other principal preserving assets? I would still advocate young people follow some kind of standard asset allocation plan (stocks, bonds, real estate, international), presumably updated for changing times. My view is that if economic growth is less in the future (which doesn't necessarily mean a lower standard of living, if standard of living is measured as quality of life not how much stuff people buy), then returns on investment will be less, overall. A sensible asset allocation plan should still be the best way to optimize what real return is available.

Lokicious

Please don't misunderstand me, you make this board and we all enjoy reading your posts. I do admire your writing ability, but my life experiences leads me, at times, to see things differently then you do. You talk about the historic average return, this is just a reference point, for it is not our reality, our investment lives are too short. What we experience is some small parts of that historic average that turns out to be a violent roller coaster ride with the potential to wipe out our savings. Huh?..yes you guest it exactly, at this time it is hard enough to limit ones losses, I follow the first rule in investing, don't loose money. Presently our government is stealing our savings and encouraging us to take risks that only benefit the financial industry. It is times like this to stand aside. Using asset allocation to spread our savings over high-risk low return investments only benefits the financial industry at our expense. I have no way of knowing what the future holds and my only guide post is rate of return related to risk. I view the deflation of all assets as good times ahead for rates of returns will improve. It will create investment opportunities. I like the globalization that is going on for it raises the standard of living of all people. If things work out in this world as it did in our country the increasing demand for everything will benefit everyone. But it is this same globalization that makes markets and the future so unpredictable.

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Author: Quakeboy02 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12729 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 6:03 PM
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BB's reaching age 59 1/2 <big content snip irrelevant for my contribution> FOR THE REST of their LIVES,i.e., about 40 years life expectancy,

(Before you read this, be aware that I am going through some personal turmoil and am watching two loved ones waste away.)

I am quite concerned about all the rosy scenarios that continue to be painted about aging. While it's possible that you might live to be 99 1/2, I'm not certain you would get much personal benefit out of it. Over my life, I have only known one centenarian who could be said to have most of his faculties left, and he wasn't in any real shape to do anything other than walk around his property once a day and then go back inside. There was no longer any chance of his benefitting on any real personal level from anything he might have saved. His last vacation had been taken, and his last adventure was long completed. I will note, that he did continue to have independence at this point, which is very important as you get older.

But, the truth for most of us is that we will either get dementia or cancer or another "elderly" disease and waste away. If you have saved all your life for that, then your heirs will watch the money get put back into the system maintaining you long after you have any real appreciation of what is happening. Perhaps my outlook is being jaded by watching my mother waste away with cancer and increasing dementia, or my wife's great aunt slide into oblivion at a rest home at about the same pace (or perhaps more quickly) as her funds are depleted. But, I am very skeptical of the increasing call for marshalling funds for a life expectancy of 100 years.

I could be overly cynical, but I would still place the "enjoyable" life expectancy for most of us to be at around the mid-70s. If your genes provide for enjoyment of your life into your 80s or beyond, then I am very happy for you, and more than a little jealous. But, I suspect that you won't have many of your peers left to enjoy it with, which is sad.

The government continues to equate longevity with the ability to work longer. I see nothing but bad news for us in this equation. Sure, the machines and modern care practices can keep us "alive" into our 80s and beyond, but our bodies will still, in the main, start running down in our early 70s.

If your family history gives you hope that you will live a productive life into your late 90s, then, by all means, plan for it both socially and economically. But, as you reach your 60th birthday, do try to make a realistic projection of what your future holds. Will it be 40 years of paying strangers to care for you, or should you enjoy what you have for the next 15 years and let the rest shake out as it will?

Hedge

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Author: A6ETrammn Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12730 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 6:51 PM
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Guess I'm not sure about all of the panic with the "demise" of the stock market due to the aging of the baby boomers (of which I am one).

I have been looking at statistics that show almost the same amount of births in the U.S. between 1960 and 1974 as 1980 to 1994. I'm not sure how everyone else brought up their kids, but I encouraged mine to seek returns in the market consistent with their own willingness to accept risk.

W. has pretty much divided the country into the us and thems, where if you have family money you'll be fine. Without it, you better learn how to swim (invest/save). DC plans, and IRA's are the only way my kids will be able to retire with some cash without living hand to mouth. I don't see the big rush to cash out since there will be money flowing back in.

JMHO.

Craig

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Author: kishjb01 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12731 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 8:48 PM
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If you follow Dent Theory you are advised to pull out of stocks (market timing) and put assets into cash/bonds to preserve capital before the “Big Shakeout” when the market is expected to crash back to a Dow level of around 7,500. However, a number of “market timers” boasted how they yanked all their money out of stocks before the 1987 crash and many did not get back into the market until it has passed its previous highs. Market timing may get satisfaction from having sold before market declines …but by not knowing when to re-enter the market, they realize inferior returns to those investors who never try to time the market.

I am a die-hard, “buy and hold” investor, but after reading Dents book I am conflicted on “IF” this is still being a good strategy in the long run. Diversification depending on your goals is key, but it appears some market timing strategy may be prudent …. if Dent is right.

To summarize Dent predictions, he is saying the following in his latest book “The Next Bubble Boom”:

· Stronger bull market than the 1990's to year 2009 – 2010
· The tech wreck we saw in 2001-2003 was necessary to major advances in progress
· 40,000 Dow by end of this decade (by 2009-2010)
· There will be another tech bubble by 2010
· The roaring 20's bull market was the least anticipated in history due to devastating tech bubble and crash that preceded it
· Between 2005-2015 investors will receive higher rates of compounded returns than the 1990's bull market. Keep in mind; both Buffett and Templeton do not see this. They see 6.5 to 7% average annual growth rates in stocks over the next decade, so opinions vastly differ on this outlook.
· Every decade sees recessions, consolidations and stock declines into the first few years and then most gains are made in the second ½ of the decade.
· Dents predictions are based on a “age wave” theory that follows the spending wave of Baby Boomers. Analogy is the Python swallowing the pig. The spending patterns of Baby Boomers is one of the main reasons for 1990's bull market
· Strong rally by mid 2005 due to resurgence in capital spending by business (Note: cash in corporate reserves as of 11/04 was at all time high)
· The Dow will hit new highs by Q2 2005 which will bust the “bubble has burst and the bull market is over,” thought pattern.
· Tech companies will lead growth and earnings in 2005 and on like they did in 1995 – 1999 time frame
· Inflation will go up in 2006 and we will see the Fed start to tighten up more. But, the market will ignore this because earnings will be soaring due to high productivity rates.
· Between April and August 2006 we will see a test of the 2000 Naz high of 5050.
· 2006 will look like 1998; a pullback, then another rally in 2007 in best year of the four year Presidential Cycle. This correction will be a huge “buy” signal.
· The last part of the cycle accelerate again in 2007 – continuing to rally to the end of 2009 – 2010 and a Republican will win the White House in November 2008.
· The Federal Budget Deficit will disappear around 2010
· The Dow will hit12, 000 by end of 2005, maybe higher.
· The Dow will hit 20,000 late 2007, then 35,000 by June 2009 and finally reach 38,000-40,000 by 2009-2010.
· Now for the bad news: The bubble will burst in 2009 – 2010 with a subsequent crash
· There will be recession similar to the Great Depression of the early 30's. The Dow will be at 7500 around 2022 and the Naz at 1100 with a new long term bull starting in 2023
· Starting in 2010 we will see housing prices start to decline in high-end urban and suburban and resort areas.
· We will see more terrorist activity in the 2009 - 2010 just when we think we have won the war on terror.
· After 2010 we will experience a thirteen (13) year bear market, until the Echo Boomer age wave kicks in with increased spending

After some research, I have concluded Dent is an “age wave” theory guy, based on his predictions of what is going to hit asset markets over the next 10 years. His claim is that a demographic phenomenon called the “age wave” will eventually crest and drown stockholders as surely as it sent stock prices soaring in the last decade.

The story goes like this: The Baby Boomer generation born between 1946 and 1964 (those in the current age group between 59 and 41) is rapidly accumulating assets in anticipation of their retirements. Dent and other “age wavers” predict this accumulation process will accelerate in the last half of this decade 2005 – 21010 and the Dow will hit in the 35,000 to 40,000. Dent says, the reason most people don't think this will happen is because we think “linear” and not “cyclical”.

The Baby Boomers highest savings years occur when they are in their forties and fifties with the mortgage paid off (or nearly so) and children well on their way to finishing college. Many are hoping to prepare for retirement by accelerating the tax-exempt contribution (401K, Ira, Keogh) plans.

So far, the market has been good to Boomer over last 10-12 years. Stock and bond returns in the 1980's and 1990's have been far above the norm and have left many with substantial assets despite the 2000-2001 bear market. With their retirement nest eggs in place, may are projecting a life of leisure. The only problem is that when it comes times for them to cash in their assets, they cannot eat their stocks and bond certificates. Assets can only be turned into purchasing power if there are buyers willing to give up their consumption so that sellers can enjoy theirs.

In the past, the young generations when reaching middle age, usually has sufficient purchasing power to buy to buy its parent's assets. This time however the situation is different. There are not enough generation X-ers' (generation born in the 60's and 70's) with sufficient wealth to absorb the Boomers substantial portfolios of stocks and bonds at current prices.

Who are buyers of the trillions that fund private savings? The big problem indicates that the main threat to Boomers is not weather the trust fund contains government or private assets but that there is not enough buying power to absorb the sales on any assets. The massive distribution of stocks bonds portends soaring interest rates and falling security prices.

Dent predicts a crash similar to 1929 around the 2009-2010 time frames after the Dow hits 35-40,000 followed by a long and deep depression with deflation, unemployment rates of 10 to 15% and declining real estate values increasing in personal bankruptcies and the election of and FDR type president.

Dent advocates moving assets into long-term bonds, cash, CDs and Asian stocks by late 2009. But, what if three different scenarios develop?

First, what if the Boomers have not saved enough and have to keep working or want to keep working? Won't that funnel more assets into investments as they try to save more at the last minute? How will that impact Dent's predictions?

Second, we can rely on more rapid economic growth. One can compensate for the dearth of numbers of generation x-ers who follow the Boomers by making all Generation X-ers's better off so that they care able to buy the abundant assets of the Boomers. It may be surprising, but according to the very figures published by the SSTF (Social Security Trust Fund), if productivity would rise from the paltry 1.5% rate assumed by the trustees to 3.5%, the trust fund would be fully funded for the next 75 years. There are no comparable figures on how increased growth would influence private pension funds, but it is certain that absorption of the Boomers assets would be far greater if productivity growth rates were higher. The only problem with this line of logic is that gambling on productivity growth rates to solve the long-run age wave problem is clearly risky. Although most economists have raised their long-term productivity projections to 2.5%, few believe that productivity growth can be boosted to 3.5 % over long periods of time.

Third, it is unlikely that US growth rates alone can solve the looming crises. A solution most likely will involve the global economy. We know the “age wave” is a phenomenon of the DEVELOPED world. The DEVELOP-ING world such as India, Indonesia, Africa and Latin America has experienced ever-increasing population growth. Over the next half century workers aged 20 to 60 will decline from 60 percent of the population to 54% of the population in the DEVELOPED world, whereas in faster-growing DEVELOP-ING countries, the percentage of such workers is predicted to rise from 51% to 58%. The DEVELOP-ING world can emerge as one answer to the age mismatch of the industrialized economies. If their progress continues they will sell goods to the Boomers and thereby acquire the buying power to purchase their assets. In the 1990's the developed world is many times richer that the DEVELOP-ING word and is providing it with capital to develop its industries and infrastructures. As the economies of the developing world grow, their people will increase their standards of living and levels f savings. If this occurs, the developing nations will pay off their debts acquire ownership of their own capital and eventually buy a significant stake in the assets of the DEVELOPED world (US, Europe, Japan and emerging China). This scenario doesn't depend on DEVELOPING nations becoming as rich as DEVELOPED countries, but it is critically dependant on the continued integration of world economies. Protectionism, import restrictions or other impediments to the free flow of goods and services and capital around countries would sharply curtail the ability of the word economy to undertake these massive asset transfers. A permanent slow-down in growth of the DEVELOP-ING economies will have a sharply negative implication for all world markets.

Dent says that you cannot predict the market in the short term but the market does show some patterns over the long run based on consumer spending patterns. Does this man have credibility and should we take him seriously? I wonder what Greenspan would have to say.

Cheers …


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Author: yahooross Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12732 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 9:34 PM
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Hi kishjb01:

Thanks for the summary. It's nice to have a good idea of what the book is all about.

It's also nice to know what's going to happen in the next few years ;)

Ross

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Author: PolymerMom Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12733 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 10:23 PM
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First, what if the Boomers have not saved enough and have to keep working or want to keep working? Won't that funnel more assets into investments as they try to save more at the last minute? How will that impact Dent's predictions?

I think that's exactly the case. I keep seeing articles about low savings rates and average savings for various age groups that indicate people aren't as prepared as the folks on TMF boards are. They latest of these is a study by Fidelity.

Boston-based Fidelity recommends replacing 85% or more of so-called preretirement income. But the index revealed that just 15% of typical American households are on track to achieve that goal.

This probably means that there will be a sell-off in the first 5-10 years as people try to eek out a living in retirement, supplemented by part-time or full-time jobs. But it won't be a massive sell-off.

Pre-retiree households typically have saved $60,000 and contribute $229 each month.

Eleven percent of working pre-retiree adults have yet to start saving.


"Pre-retiree" is defined as those 55 and older.

http://www.marketwatch.com/news/print_story.asp?print=1&guid={EE1A4C6B-03C5-43AB-A83A-40BE8F716889}&siteid=mktw


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Author: lesolini Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12734 of 35363
Subject: Re: BW: Its Happening Date: 6/9/2005 10:46 PM
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I'M 67 AND AN EX-BROKER, AMONG MANY OTHER THINGS.
Obviously, starting early is always the way, but you have to remain flexible. I have sold my house and rental house and I am investing in house lots as well as the stock market. That may not be appropriate in your area. I expected growth in the price of good building lots in mine and it is happening.
Also, the Wall Street machine is not going out of business. The majority of investors will continue to rely on them so that will create opportunities for the rest of us. At my age, I don't put money in the market that I will need any time soon. I suggest hidden gems if you are interested in doing due diligence and monitoring your portfolio indefinitely.
If I had it to do over, I agree with Bill. Do what you love. The money may or may not come, but you will have fun instead of just working, as most of us did.
As I said, be flexible. I may sell off my lots next year, build houses on them or just hold them longer.

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Author: CoffeeInBed101 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12735 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 12:00 AM
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The best financial advice I ever received was from one of my finance professors, it went something like this: Your first and most important investment should be in your education.

===============================================

Of course it was. His business is to sell you an education. He doesn't get paid without someone to educate. ;-)

CiB

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Author: mjcalab Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12736 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 12:33 AM
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Of course it was. His business is to sell you an education. He doesn't get paid without someone to educate. ;-)

CiB


He made his living advising banks and financial institutions and he wasn't talking about just a university education. But no matter lets say you are right, and also those were the days when an education didn't cost much and it paid off with lots of good high paying job opportunities. I gather that's not the situation today, so do you think it is bad advice today? If you do what alternative do you suggest?


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Author: MBABSIT Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12737 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 12:36 AM
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Thing is, y'all think that all boomers have 401(k)s. NOT!

Only a small minority of boomers have 401(k)s, those who work for large companies and who weren't laid off due to downsizing or offshoring. Trust me, those who wound up in the latter situations cashed theirs in long ago when their unemployment ran out and they had to seek a McJob. The vast majority of boomers work at businesses where there are no stock options because the company is so small that it's a closed corporation, or the fact that the manager is also the owner.

Come on out, Chicken Little, the sky ain't fallen'.

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12738 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 9:22 AM
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"Thing is, y'all think that all boomers have 401(k)s. NOT!

Only a small minority of boomers have 401(k)s, those who work for large companies and who weren't laid off due to downsizing or offshoring. Trust me, those who wound up in the latter situations cashed theirs in long ago when their unemployment ran out and they had to seek a McJob. The vast majority of boomers work at businesses where there are no stock options because the company is so small that it's a closed corporation, or the fact that the manager is also the owner.

Come on out, Chicken Little, the sky ain't fallen'."

Try actually reading what people say.

The "nuclear winter" hypothesis for stocks after boomers retire, which is often combined with the "Dow to 3000" or "4000" before boomers retire, are based on technical analysis in which boomers continue to put money into 401(ks) and the like at increasing rates, but generally in line with the drip into funds through the 80s and 90s—the assumption is not that all boomers invest in stocks. Then, when boomers retire, they would withdraw the money, leading the markets to decline, either suddenly or slowly, for the same technical reasons.

It's an interesting theory, but I doubt it holds up. What does hold is the demographic fact that baby boomers are a disproportionate part of the population and have an enormous affect on the economy. When boomers stop working, either voluntarily or because they can't do so physically anymore, and when they start living off savings/investments/real estate/ Social Security, this will have a significant impact on investments and savings/bonds/interest rates. It could lead to a stock market crash that only very slowly recovers, especially if other money flees; it could lead to a gradual decline; or it could simply mean that there is enough money coming out from investments to dampen returns while boomers in retirement are an important factor. There are various mitigating circumstances that might make the impact less. On the other hand, there are other circumstances, such as increased competition around the world for dwindling resources, that could exacerbate the situation. We do know that aging populations tend to dampen economic growth, which is why the Social Security Administration is predicting slow growth. I know John Snow, our beloved Treasury Secretary, when confronted with the assumption that the stock market was supposed to provide historical returns in private accounts at the same time the assumption of low growth put traditional Social Security into crisis tried to find excuses. It's all wishful thinking and stock pumping to me.

I walked past Third/Fifth Bank, yesterday, and love the sign in the window: "We work hard so you don't have to." The American dream is often more associated with getting rich easily than with being rewarded for hard work, ingenuity, and seeking and seizing opportunties—my favorite photograph remains the image of the long line of ill-prepared prospectors climbing Chilkoot Pass in the dead of winter during the Alaska Goldrush.

Yesterday, Alan Greenspan was bemoaning the low savings rate in this country. He doesn't believe in Rumplestiltskin, either. Real conservatives add up numbers, look at facts, and plan based on assumptions and contingencies at the cautious end of the spectrum. That's not the same thing as planning based on doomsday/Chicken-Little thinking (like you often hear from Goldbugs).

What the numbers say, approximately, is this: if stocks and bonds provide historical returns, people can put away 10% of their gross paycheck (pre-tax) in a tax deferred account, such as a 401(k), for 30-35 years into a standard asset allocation vehicle, such as a Vanguard Target Fund (for age 65), and accumulate about 20 times their inflation adjusted average pay. If Social Security replaces 40% of average pay (for somewhere in the middle upper middle class), the combination of savings plus Social Security should be enough to maintain lifestyle indefinitely.

But, if stocks and bonds provide half of historical returns, it would be necessary to put away about 25% of gross paycheck to reach the 20x figure, and if Social Security provides less than 40%, it would be necessary to accumulate more than 20x to be be relatively safe from running out of money if you live past average life expectancy. (I haven't crunched the numbers to get it exact, but these are in the right ballpark.) Doomsday thinking suggests you would actually lose money going for a traditional asset allocation plan. Conservative thinking suggests planning based on the assumption that the aging demographic and lack of realistic alternatives for energy will lead to slower than historical growth, hence a need to spend less and save more.

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Author: Rizzo21 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12739 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 10:59 AM
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If your family history gives you hope that you will live a productive life into your late 90s, then, by all means, plan for it both socially and economically. But, as you reach your 60th birthday, do try to make a realistic projection of what your future holds. Will it be 40 years of paying strangers to care for you, or should you enjoy what you have for the next 15 years and let the rest shake out as it will?

Hedge


I hear you on this as well as a comment in an earlier post that suggested “living it up” at 75 is a whole lot different than living it up at 25. My mother struggled with dementia for about three years until she died last year at 78 (my father died at age 70). Now my mother-in-law has come down with aggressive cancer at age 73. It sure changes your perspective about having enough to live on until 90 years old. I base my retirement models on living to 82 hopefully with some semi-healthy years in there to “live it up”.


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Author: MBABSIT Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12740 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 11:07 AM
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If true what Greenspan said about low savings, it's because America has gone from a nation of savers to a nation of spendthrifts. I am still not worried about any Doomsday scenario regarding 401(k)s and the stock market, because boomers can't save anyway. They were all too busy buying trophy houses and costly toys, instead of socking it away for the inevitable rainy day. Boomers just love to brag about how much this or that cost, rubbing people's noses in their "success." I seem to being poked fun at when I purchased second-hand cars, adopted Heinz 57's instead of pedigrees, did not live in a fancy neighborhood, wore clothes that were patched and repatched or were shiny in the seat, and so on. I did the "pay yourself first" thing with a vengence, because I knew that toys eventually wear out and have to be replaced with new, and that last year's hot fashion could be purchased for a buck at a thrift store today.

Result? The majority of boomers have no savings, and whatever investment portfolios they have are pitifully small. Some boomers are trying to make up for lost ground in real estate, but what they make is pitifully small compared to those who saved their money. Yesterday's "bum" who chose to save his or her money is today's savior of the nation. They are the ones who really invest, who trade at sums equal to a boomer's best yearly salary.

I wouldn't worry at all about the boomers "portfolios." They saved nothing because they are nothing.

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Author: SisypheanFool Big red star, 1000 posts Old School Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12741 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 11:23 AM
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Then, when boomers retire, they would withdraw the money, leading the markets to decline, either suddenly or slowly, for the same technical reasons.

Most of the nuke winter painters seem to present this as a sudden event. Like everyone is going to instantly pull out all their funds and get crucified by the taxes they'd have to pay? I can see shifting towards more bonds/fixed income in their ports, but not a wholesale mass exodus.

Even the talking heads are presenting the need for retirees to keep in equities to provide growth to fund their latter retirement years.

Heck, this Sisyphean doesn't even have that dire of a projection.


If Social Security replaces 40% of average pay (for somewhere in the middle upper middle class), the combination of savings plus Social Security should be enough to maintain lifestyle indefinitely.

Hypotheticals based on SS for retirement living baffle me.

When I was in HS (almost 30 years ago), it was getting pounded into our heads to not depend on SS being there when we retired. Those of us in the trailing end of the BB stood a chance of getting some, but not likely all of the payout. Those after the BB's might see SSA existing only as an anti-poverty benefit of at all.

Sure, Greenie & Co did some rework to improve the trust's stability since then. But it's not as if things have improved to where one should incorporate SS benefits as part of the foundation of their retirement funds.

I've built my retirement funds w/o dependence on receiving SS payouts. If I get it, it's a windfall. Even with the doom and gloom projections flying around, I stand a better than fair chance to get a payout, but I still won't include this in my planning. So why is anyone younger than I basing their retirement on having SS?

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Author: SisypheanFool Big red star, 1000 posts Old School Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12742 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 11:34 AM
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So "conservative Republican", I'm not.......but a "Conservative Deficit Hawk, Liberal Democrat, I am....;o)


Can I steal this Kent? This describes me so much better than calling myself a moderate. The best I've been able to do is "Capitalist with Compassion."

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Author: kentm401 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12743 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 12:55 PM
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Steal away Sis.......I'll go you one better?

KBM (Jeffersonian Conservative; Republican Liberal Democrat) (JCRLD - think i've succeeded in offending everyone?)

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Author: rrjjgg Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12744 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 1:13 PM
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Wradical wrote

'The average lifespan, the last I saw, was about 78 for a woman and 73 for a man. But if you're already 65, you'll probably do better than average. Maybe 85 is a realistic number. And maybe 15 years from now, 90-100 won't be anything to write home about.'


The June 6, 2005 Forbes magazine has some articles about retirement. One gives the following figures: A 65 year old man in good health has a 50% chance of living to 85 and a 25% chance of living to 92. The corresponding figures for women are 88 and 94. For a couple, both 65 and healthy, there's a 25% chance at least one will live to 97 or beyond.

Maybe we should tell our kids to plan on working as long as they can.
If they don't grow up hoping to retire to nightly moonlight strolls on the beach, perhaps they won't miss them.

I have, as probably most of you have, met a number of active folks over 90. The most interesting experience happened when I was a teenager going to work out in a gym about 45 years ago. It was a very hot summer day and I saw an old white haired man sitting on the sidewalk slowly breaking up some damaged concrete walkway with a small sledge hammer just below the gym. I asked people in the gym about him and they told me Bob lived in the back of the drugstore below the gym in return for handyman/janitor services and how old Bob was. I thought they were pulling my leg, but they said to talk to him. I found Bob sitting at the soda counter in the store and in talking with him he told me he'd been a blacksmith for 20 years, a this for 20 years, a that for 20 years and on and on, so I asked him how old he was. He said he was 103 years old and I clearly didn't believe him.
Who would break concrete at that age? So he took me to his little room in the back.
He had framed an official document from the President celebrating his 100th birthday. (This was the first I'd heard of this nice Presidential practice, but I think it still continues.) So, maybe there's hope for some of us wimps, too. Just gotta keep breaking the concrete!

rrjjgg

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12745 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 3:11 PM
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Sis,

I have Social Security penciled in as zero, too, but that's partly to push toward having enough to get by without it, in our case, I believe, a realistic goal (though currently being impeded by low interest rates relative to actual inflation rate). But, if assuming zero Social Secuirty leads people into taking risks that are more likely to fail than Social Security, they should assume some Social Security. If the General Fund pays back what it owes the Social Security Trust Fund, Social Security is supposed to be able to pay full benefits until 2041, according to the pessimistic scenario of the SSA, and then pay out about 70% of current entitlements. The CBO projections are more optimistic, and I suspect more realistic, because many boomers will be forced to continue working after 66 or 67, at least part time. How the actual projected shortfall is dealt with will make a big difference: "progressive indexing" would mean that the middle would get much less and the upper middle very little, since they would be subsidizing the elderly poor (with no help from the very wealthy). But until such legislation becomes law, I wouldn't go making decisions based on big cuts to Social Security, and even the radical surgery being proposed is not supposed to affect boomers very much, just more down the line. (I'm more worried abou the General Fund meeting its obligations to the SS Trust Fund than SS insolvency or even cuts.)

Anyway, I wasn't suggesting that 40% income replacement from SS was something future reitrees should assume. I was trying to point out that what was available to the current generation of retirees in the way of SS and investment returns, if projected into the future, would mean younger people could put away 10% and probably do fine. If either SS or average investment returns are substantially lower, it will be necessary to save much more than 10% to reach a similar level of retirement security. You don't have to buy into the "nuclear winter" hypothesis or the "no Social Security" scare to prepare for something less from either investment or SS or both.

As to political identification: I describe myself as a radical pragmatist, which puts me at odds with just about any politician of any stripe, since politics is about making false promises. I believe in hard work, analytical skills, facts, ingenuity, and seeking and seizing opportunities on a level playing field. I know the difference between rewarding achievement and pretending that anyone who gets rewarded must have achieved something to deserve it. I know corruption when I see it, and cronyism and privilege. I believe societies and economies work best when anyone who wants to work hard and seize opportunities has opportunities to seize and that those who want to screw off should fail, even if to the manor born. I believe that compensation needs to be fair and proportionate to encourage hard work and achievement, which is different from trying to pay those who work hard as little as possible or letting executives write their own paychecks. I believe capitalism (not to be confused with Capitalism) succeeds when there is a balance between supply and demand, which means rewarding investors sufficiently to get investment but paying labor enough to buy what gets produced (Henry Ford's "pay workers enough to afford a Model-T" shift in boss philosophy). I know the difference between investing, i.e., providing working capital to companies that enables them to improve and expand as businesses, and buying stocks on the secondary market. I know that innovation is not driven by Capital: innovation requires capital to do the research and development that leads to innovation and then requires more capital to bring innovation to the market; but those who provide capital are rarely the ones who do the innovating. I know that real innovators are rarely motivated primarily by greed: wanting to make a lot of money from innovating may be one goal, but the Fords and Edisons and Carnegies and their recent counterparts at Microsoft and Qualcomm and Google and Intel and so on are all at least as motivated by intellectual curiosity and the desire to create something of real value that advances society as they are by making big bucks: the people who worship greed are generally not innovators, just folks like Donald Trump. I believe that people who want to play the angles and get rich quick by hook or by crook so they can live high on the hog without working have nothing to do with functioning capitalism. When those who have fortunes who has never achieved anything for themselves cloak themselves in the mantle of those who have, I know they are either fooling themselves or just scamming. On the other hand, I believe that throwing money at "have nots" has nothing to do with providing opportunities so the best and the brightest can reach their level of potential. I think organized labor is essential to working people getting their fair share, but have little patience with unions when they protect the lazy and incompetent and foster featherbedding (I also recognize featherbedding in the exectuive suite). In other words, I believe in hard work, achievement, fairness, and equal opportunity, and I disdain privilege and a sense of entitlement because of past wrongs on your ancestors or past achievements (or thieveries) of your ancestors. I would say these are values that don't associate me with any political party. They make me an American, at least what used to be an American.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12746 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 3:24 PM
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<Interest rates are going up.

- increased rates push stocks down (because increased borrowing costs reduces profits, business investment, consumer purchases)

- increased rates push down the value of any currently-held bonds

- increased rates push property values down (because increased mortgage costs reduce the pool of people who can afford the mortgage on a house, so property prices have to fall to keep the total monthly mortgage cost in line with what people can pay).>

The Fed is pushing up short term interest rates and people expect long term rates to rise because of large Federal deficits, etc. But so far the long term rates have not gone up much (nor have mortgage interest rates gone up much). As a result of this phenomenon, the yield curve is flattening. The Fed is trying to understand this anomaly, but Alan Greenspan just said he had not heard a reasonable explanation.

You would think that something is gonna give in this system one of these days. The question is what?



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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12747 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 3:29 PM
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"Come on over here, I can show you people living in the bottom of the river. And not all of them are psychos, either."

We all know the look of starvation especially from the TV images from Sudan. Sunken cheeks. Bulging eyes. Enlarged bellies.

Do the poor of Ventura, CA look poorly fed?

I notice the panhandlers of NYC tend to be well fed. Some are even chunky, a bit over weight. I notice the food stamp moms in my area are usually pretty hefty. They are not skinny for sure.

Do you think people are starving in America?

CDC figures show about 3000 deaths from starvation (on their death certificates) in the US per year. Most are elderly females. What does that mean?

Food is cheap and abundant in the US. Even the poor are well fed.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12748 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 3:41 PM
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"You are making a gigantic, and unwarranted, logical leap in your article by concluding, among other things, that the mere fact of 3 million BB's reaching age 59 1/2 will lead to lower returns in the stock market."--det110

The facts remain, 1) that some have predicted a decline from baby boomers retiring, 2) that total money in 401K plans has peaked and is falling, and 3) that many rollover their 401Ks to an IRA at the first opportunity and that they change investments in the process.

Certainly we know there are companies out there who see retirees as major prospects for financial services, and who encourage them to roll over their 401Ks as part of the process (as they sell them financial services).

I agree, this process may not make sense. I would hope it is not large enough to make a difference in stock prices or in bond yields, but it might. That is the question.

Remember the average American with a 401K plan at retirement does not know what to do. Only the tip of iceberg finds its way to Motley Fool. The rest probably seek out professional assistance and pay for it. Do they get good advice? Or do they pay substantial sums for mediocre advice and to be sold costly load funds or annuities?

These are sheep to be sheared. Wall Street is good at it too.


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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12749 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 4:01 PM
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<So "conservative Republican", I'm not.......but a "Conservative Deficit Hawk, Liberal Democrat, I am....;o)


Can I steal this Kent? This describes me so much better than calling myself a moderate. The best I've been able to do is "Capitalist with Compassion." >--SisypheanFool

What ever happened to Teddy Roosevelt's Bull Moose Party? I thought he called himself a progressive. Anti big business. Anti trust. Populist. Pure Food and Drug Act. Willing to regulate. But still not given to big spending (well Panama Canal excepted) or high taxes. Fiscal moderate, but can do attitude.

We need more like him. For a while there Elliot Spitzer looked like another Teddy. He is following a similar path.

Let the good guys run for office. They may not win, but perhaps the other politicians will at last get the message and know what the people want. And what is really possible outside the beltway.


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Author: CoffeeInBed101 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12750 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 4:13 PM
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I gather that's not the situation today, so do you think it is bad advice today? If you do what alternative do you suggest?

=========================================

My comment was tongue in cheek. I actually agree with your professor.

CiB

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12751 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 6:08 PM
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2 parts to being well fed:

1. Calories (from carbs, fat, protein, whatever)
2. Nutrients (vitamins, minerals, essential amino acids, etc.)

We all know the look of starvation especially from the TV images from Sudan. Sunken cheeks. Bulging eyes. Enlarged bellies.
The folks in Sudan (many refugees are actually in Chad), Niger, Uganda, Congo, Ethiopia, etc. have neither #1 nor #2. But this is mostly due to government policies preventing distribution of food, not poverty.

Do the poor of Ventura, CA look poorly fed?
The folks in your town who are poor but not showing the symptoms of starvation do have the calories (calories are cheap and easily available in the US thanks to factory farming) but may or may not have the nutrients. Food stamps tend to only let you purchase high-calorie, low-nutrient foods. You have to eat a lot in order to get enough nutrients.

And there are folks in your town who are poor but you don't see them.

I notice the panhandlers of NYC tend to be well fed.
Many panhandlers in NYC get over $80,000 a year, tax free -- they are not poor. And again, calories are cheap.

Do you think people are starving in America?

Not starving from lack of calories. But many people in America are sick because they are getting inadequate nutrients -- they are eating high-calorie but low-quality foods. Not getting adequate nutrition means you're more susceptible to all kinds of diseases.

Food is cheap and abundant in the US.

I'll agree, with one caveat:
Low-quality food is cheap and abundant in the US (at least it tastes good thanks to the chemicals they put in it). High-quality food is rather expensive.

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Author: kentm401 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12752 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 7:10 PM
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Lok...that "rant"....gets reposted in your personal best column......Thx for reminding me why I'm a Jeffersonian Conservative Liberal Republican Democrat....LOL

KBM

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Author: shiftsuper Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12753 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 7:38 PM
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I wonder what the effect of aditional 40 million workers over the next 50 years would be? That's a lot os S.S. payers. And their children would also be workers some day.
Isn't 40 million the number of abortions over the last 30 years?
What does everyone think?
Shift

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Author: Windchasers Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12754 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 8:18 PM
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Low-quality food is cheap and abundant in the US (at least it tastes good thanks to the chemicals they put in it). High-quality food is rather expensive.

I disagree. It is often processed foods (crackers, cookies, some cereals, pepperoni, fish sticks, etc.) that are more expensive. Wholesome foods are relatively cheap - you may just have to cook them yourselves. Eggs, ground beef, frozen vegetables, fruit, beans and rice - all cheap and healthy.

~w

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Author: PolymerMom Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12755 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 9:49 PM
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Most are elderly females. What does that mean?

They could be like MIL, who has Alzheimer's and has forgotten how to cook. She did a pretty good job of starving herself until we realized what was happening.


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Author: PolymerMom Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12756 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 9:55 PM
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I think that's a spurious anti-abortion argument.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12757 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 10:27 PM
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<Food is cheap and abundant in the US.

I'll agree, with one caveat:
Low-quality food is cheap and abundant in the US (at least it tastes good thanks to the chemicals they put in it). High-quality food is rather expensive.> jrr7

Commodity foods in the US are inexpensive. They have traditionally been flavored by conconcoctions like fats that we now consider unhealthy. Chemicals can be used as preservatives or to replace flavors in convenience foods. But natural food commodities are healthy, tasty and nutritious when prepared properly.

The high cost of foods thought to be of high quality are in many cases more due to marketing and perceptions that real differences.

You can make your food dollar go farther by buying the lowest cost foods available in your area. That makes for buying things in season when they are overly abundant. It also favors a rather boring diet. But foods of adequate quality are usually available at reasonable prices. Its the specialty foods, prepared foods, convenience foods, and processed foods that often offer you $0.30 worth of commodity foods packaged neatly and priced for whatever they think they can get.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12758 of 35363
Subject: Re: BW: Its Happening Date: 6/10/2005 10:31 PM
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<Most are elderly females. What does that mean?

They could be like MIL, who has Alzheimer's and has forgotten how to cook. She did a pretty good job of starving herself until we realized what was happening.>--PolumerMom

Yes, it seems that at least sometimes the frail little old lady is malnourished. And those without family sometimes go unnoticed until its too late.

Elderly men may have the same problems, but they often have a longer living spouse to look after them.



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Author: mjcalab Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12759 of 35363
Subject: Re: BW: Its Happening Date: 6/11/2005 4:41 AM
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wonder what the effect of aditional 40 million workers over the next 50 years would be? That's a lot os S.S. payers. And their children would also be workers some day.
Isn't 40 million the number of abortions over the last 30 years?
What does everyone think?
Shift


I think we shouldn't go around telling people how to live their lives.

Of greater importance: When it comes to projections based on demographics I think they could be wrong, it depends on how we handle immigration. Los Angeles has a large number of young illegal immigrants who have a large number of young children. We are told our school system is being strained because of these children. These children are the future. If we help them get a good education it will be of great benefit to our society and the economy of southern California. Immigration made this country what it is and will continue to be, unless we do stupid things.


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Author: rustybell Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12760 of 35363
Subject: Re: BW: Its Happening Date: 6/11/2005 9:20 AM
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fiscal conservative + social liberal = libertarian

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Author: MBABSIT Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12761 of 35363
Subject: Re: BW: Its Happening Date: 6/11/2005 10:09 AM
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How did we go from the impossible scenario of boomers breaking the stock market to starvation?

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12762 of 35363
Subject: Re: BW: Its Happening Date: 6/11/2005 11:56 AM
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"You can make your food dollar go farther by buying the lowest cost foods available in your area. That makes for buying things in season when they are overly abundant. It also favors a rather boring diet. But foods of adequate quality are usually available at reasonable prices. Its the specialty foods, prepared foods, convenience foods, and processed foods that often offer you $0.30 worth of commodity foods packaged neatly and priced for whatever they think they can get."

Here's a nice example of my pragmatist's pox on both your houses frustration.

First, hunger/malnutrition in America cannot be compared with the underdevleoped world, in general, let alone places undergoing famine, usually do to war (Sudan) or governmental tyranny or obstinence (North Korea, Zimbabwe). As noted, starvation or near-starvation among the elderly or neglected children is not because resources are unavailable: it is due to a failure to access the resources (dementia, parents on drugs, etc.).

However, there is some real hunger and poor nutrition, that has a definite affect on learning and physical development among the young and probably is a factor in this country's abysmal infant mortality rate.

Much could be improved by getting better nutriton from the welfare buck. This would involve education, help with budgeting, and greatly retricting what foods can be purchased with government money (as is done with the WIC program). But the combined forces of the "don't tell poor people what to do" camp (more or less on the left) and the "profits are us" food and supermarket industry won't let this happen. So, it is really left to poor people, with little knowledge of how to budget or get the right nutrition, and who seem to be particularly influenced by advertising, to figure out how to do it themselves. Personally, I think if the taxpayer is paying and the intent is to prevent hunger and malnutrition, we have a right to demand efficiency and, frankly, not only do I have no problem telling the food industry no, I have no problem dictating to the people taking handouts.




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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12763 of 35363
Subject: Re: BW: Its Happening Date: 6/11/2005 1:08 PM
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I would say that another factor in starvation in the US where food is abundant is pride. There may be those out there who are too proud to admit they need help and who are unwilling to accept what they see as charity.

We certainly do have some social programs that could be improved. But I do think the data suggest that people in the US are generally well fed--even if they are poor. Some do slip through the cracks.

I think in urban areas nutrition problems are addressed at least during the school year with free lunch and breakfast programs. I'm not sure if the rural poor get the same programs though. Are they as well served?

And what about the kid whose parents don't get him to school? Home schooled, drugs, alcohol, mental illness, poverty. They are all out there to be dealt with.

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Author: ghgale Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12764 of 35363
Subject: Re: BW: Its Happening Date: 6/12/2005 5:12 AM
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No one can fight trends, especially in demographics. Good observation.

So, where now to park ones money?

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12765 of 35363
Subject: Re: BW: Its Happening Date: 6/12/2005 10:10 AM
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"No one can fight trends, especially in demographics. Good observation.

So, where now to park ones money?"

Most of this discussion (other than tangents) has been in response to a request for suggestions for those in their 20s on implications of boomer retirement demographics on investments (stocks and bonds: this is, after all, a discussion forum primarily about bonds and fixed-income). Advice for those already retired or facing retirement in the next 10-20 years might be quite different (or not).

Of course, it also depends on how we read the impact of boomer retirements. Do we take seriously the "nuclear winter" bleak forecast? Do we take a more moderate view of, yes there will be a significant impact but not necessarily devastating? Or, do we take the "what, me worry?" view that the demographic trend won't matter a whole lot?

It is an inescapable fact that when boomers, a "bubble" demographic, retire, instead of being net savers and investors, they will be net withdrawers. The speed with which withdrawals take place, the way in which they take place (e.g., quick flight from stocks to bonds followed by slow withdrawal from bonds), and whether there will be enough new capital flowing into the markets to mitigate the impact of boomer withdrawals is where the question marks lie, and it is the question marks that determine the best decisions.

Concerning the bond market, even if boomers move stocks to bonds, over the long haul they will have to cash in on bonds. At the same time, the Social Security Trust Fund, a major puchaser of government debt, will be paying back the money it borrowed (unless, of course, it defaults). The sobering implication of this, even ignoring possibilities of flight of foreign capital from stocks and bonds, is that the presumption that a nice balanced fund or personalized balance of stocks and bonds is a way of playing it safe falls apart: stock and bond prices could both go negative at the same time.

Assets not subject to market risk are a way of playing it safe: CDs, buy and hold with bonds (including TIPS). The problem, of course, is that these savings vehicles typically return less than stocks (or long term bonds that are too long for buy and hold, hence better accessed through funds).

My view is that there certainly will be a considerable impact from boomer retirement, but it will probably not be as extreme as the "nuclear winter" hypothesis suggests. There will likely be slower economic growth, typical of aging demographics, and lower returns above inflation, but not negative returns, at least over the long term for 20 or 30 somethings. This is where my basic advice is: be prepared to save a lot more than the retirement planners say you need to. That white jeep you are driving because you want people to think you sexy enough to go hot rodding in the wilderness when you are terrified of a well maintained dirt road might not be worth it. (I'm still revelling on seeing a hot young blonde in a virginal white jeep watching the gas meter a couple of weeks ago: a white jeep ought to be an oxymoron. I also get tired of SUVs, on some of my standard access roads to hiking trails in national and state parks and forests, slowing down my little Civic: and, believe me, I go at a safe speed for a low clearance, 2-wheel drive.)

But I digress. For the young, I still see no choice but a well diversified portfolio, though with low interest rates, I prefer CDs to bonds and bond funds, if that choice is available: 5-year CDs are paying a lot better than 10-year Treasuries and the dividends of anything but long term bond funds (excluding junk bonds, which are a different can of worms).

For those of us closer to retirement (I'm at around 10 years out), I think a lot more cash (CDs) or TIPS (except, not a today's yields) than the usual advice is the defensive posture, with heavy saving to make up the difference from lower expected returns. Enough stocks as a hedge against inflation for later in retirement, but not so much you can't survive a big crash if it happens. The problem for most boomers, though, is they haven't saved enough and won't be able to save enough to get by with the returns provided by CDs or TIPS: they will need historical returns on stocks (or better). And, I don't think they will see that.

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Author: zenbro Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12767 of 35363
Subject: Re: BW: Its Happening Date: 6/12/2005 11:28 AM
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"Just out of curiosity, I'm always interested in listening to the available opinions out there, to see what people think of, that I didn't. And since I am 25, what would you do if you were 25 again?"

Hi TerminalWriter,
I'm a 46 year old male from Michigan, and I went thru the tough recession of the late 70's and early 80's. And one of the best lessons I learned was that I was resilient, and tougher and smarter than I gave myself credit for. So, if I was 25 again, I would do my utmost to maintain an optimistic attitude toward life.
Yes, you do need to live below your means, and you do need to invest in the stock market, despite all of the dire predictions of how the market will crash when the boomers retire. The retired boomers will not be pulling all of their money out of the market, so I don't think the market will crash. But you might want to think about investing in dividend paying stocks, or the DVY index fund. The retired boomers will need to get a cash flow from their investments, and CD's and money-market funds are probably not going to cut it. You also want to think about investing in the world stock markets, not just the USA market. There is a good chance that that is where the growth will come from. An excellent book on this subject is "the Future for Investors" by
Jeremy Seigel. Best of luck to you.


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Author: PolymerMom Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12768 of 35363
Subject: Re: BW: Its Happening Date: 6/12/2005 12:54 PM
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Don't limit your investments to the US market. This allows for investing in markets that don't have a population top-heavy with retirees.

In a book I've been reading, Brinson recommends a 50-50 split between domestic and foreign investments.

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Author: czbill Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12773 of 35363
Subject: Re: BW: Its Happening Date: 6/13/2005 11:37 AM
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<<<What ever happened to Teddy Roosevelt's Bull Moose Party? I thought he called himself a progressive. Anti big business. Anti trust. Populist. Pure Food and Drug Act. Willing to regulate. But still not given to big spending (well Panama Canal excepted) or high taxes. Fiscal moderate, but can do attitude.

We need more like him. For a while there Elliot Spitzer looked like another Teddy. He is following a similar path.>>>>

Hey, I used to work for MCI/WorldCom, so I agree with some of your points. But don't compare Spitzer to TR....the two are not even close.
(btw, I grew up near the Panama Canal)
cheers,
--czbill


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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12781 of 35363
Subject: Re: BW: Its Happening Date: 6/13/2005 4:58 PM
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Supermarkets selling low-cost, quality foods do not exist in poor communities. The only options available are convenience stores selling poor-quality or high-cost foods.

Also, someone working three jobs to make ends meet will not have enough time to properly prepare the commodity foods. They'll only have time for preprocessed or convenience foods.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12785 of 35363
Subject: Re: BW: Its Happening Date: 6/13/2005 10:38 PM
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"But don't compare Spitzer to TR....the two are not even close.
(btw, I grew up near the Panama Canal)
cheers,"
--czbill

OK, I'll bite. TR was Dutch patrician, and like many of the WASPs of his era, chose a career of public service when he did not have to.

Eliot Spitzer is none of those things. But both Spitzer and TR seem to be using a populist, anti-big business strategy to gain the public exposure needed to run for public office.

I don't see TR's strategy fitting very well in the Bush administration. But similarly they say he was moved into the Vice Presidency to get him out of Albany, where as governor he was causing trouble for big business. VP was a terminal office at the time. Of course, they had not counted on McKinley being assassinated.



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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12786 of 35363
Subject: Re: BW: Its Happening Date: 6/13/2005 10:40 PM
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"Supermarkets selling low-cost, quality foods do not exist in poor communities. The only options available are convenience stores selling poor-quality or high-cost foods."

I'll agree that keeping supermarkets alive in poorer areas is a problem. But I would think that materials like rice, beans, and potatos are inexpensive everywhere. They are also not difficult to prepare. The trick is to make them tastey.


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Author: epgumpel Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12791 of 35363
Subject: Re: BW: Its Happening Date: 6/14/2005 11:06 AM
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You guys are scaring me, with your doom and gloom prognostications. But couldn't a solution to the Social Security mess and the Baby Boomer stock money withdrawal be to let in as many new educated immigrants to the USA as possible? That would increase the pool of young workers and as the immigrants prosper, they would also presumably want to start investing in the stock market, thus shoring up stock prices and returns. That would make housing scarcer, too, so prices there would not cave either. I think this sounds logical, but I'm no expert. Am I being too simplistic here? I have only just started investing, as my husband used to do all of it for us.

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12793 of 35363
Subject: Re: BW: Its Happening Date: 6/14/2005 12:12 PM
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"You guys are scaring me, with your doom and gloom prognostications. But couldn't a solution to the Social Security mess and the Baby Boomer stock money withdrawal be to let in as many new educated immigrants to the USA as possible? That would increase the pool of young workers and as the immigrants prosper, they would also presumably want to start investing in the stock market, thus shoring up stock prices and returns. That would make housing scarcer, too, so prices there would not cave either. I think this sounds logical, but I'm no expert. Am I being too simplistic here? I have only just started investing, as my husband used to do all of it for us."

An increase in working age population, either immigration or people working longer, would help offset the impact of an aging population. It's one of the reasons I don't look at concern over boomer retirement demographics as doom and gloom. But I do think it will be difficult to offset the demographics entirely, which is why I think it is safest to assume lower than historical returns on assets, which means saving more to cover the difference, which means more work and less spending.

There are some people for whom more work and less spending probably still won't be enough to maintain a modest middle class lifestyle before and after retirement. There is also a group of mostly young folks who have an entitlement attitude (we see it at the University as, "I deserve a good grade even though I chattered through class, did a lazy job on my assignments, and didm't learn a damned thing) who feel entitled to getting at least historic returns on the market, since their ambition is not to have to work hard for 40 years and live modestly. I think this is mostly from whom we hear slow growth/demographic impact/running out of fuel (literally) dismissed as a matter of faith: the Gods of the free market dictate we can live high off the hog forever, so anything that suggests otherwise is sacrilege.



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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12795 of 35363
Subject: Re: BW: Its Happening Date: 6/14/2005 1:02 PM
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That's find if you don't mind driving down everyone's wages. Consumer staples would do very well, consumer cyclicals would have extremely hard times, big-ticket items would be very hard to buy.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12797 of 35363
Subject: Re: BW: Its Happening Date: 6/14/2005 1:12 PM
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"But couldn't a solution to the Social Security mess and the Baby Boomer stock money withdrawal be to let in as many new educated immigrants to the USA as possible?"--epgumpel

Yes, economic growth in the US economy and immigration certainly can help us in the future--especially with funding Social Security requirement for an aging population.

The bottom line of course really is how many jobs will there be in the US? If the number grows and they are good jobs, we will surely have immigrants and even the poor from rural and inner city areas who will want to work those jobs.

But what if the US becomes no longer competitive in the global economy? Only service jobs. Only delivery jobs. Income from pensions from failed companies or govt--we will be in trouble. That seems to be happening in Europe and Japan right now. Slow growth. Unrealistic expectations from the good times. And a public (and unions) unwilling to adapt to the new realities.

The end can take a long time. It may not be total collapse, but it won't be good times. It will instead be endless discussions of declining benefits and rising costs to pay for them. We seem to have arrived there already.

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Author: PaintSpeck Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12799 of 35363
Subject: Re: BW: Its Happening Date: 6/14/2005 5:23 PM
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But couldn't a solution to the Social Security mess and the Baby Boomer stock money withdrawal be to let in as many new educated immigrants to the USA as possible?"--epgumpel

We've already "been there done that" back in the 90's when we needed software and electrical engineers. Based on what I've been reading lately, many jobs requiring a good education are now in India & China, and that trend is growing.

I think the current need is for nurses and other health service professionals and clerks - apparently can't get enough folks here in the states (low wages bad hours maybe?). My sister, a manager in a hospital medical records dept., blames it on poor college curriculums; colleges don't ask what kind of training the hospitals need, so the hospitals and health service companies are having to go outside the US to get qualified people. What a shame.

I think there are still quite a few unemployed college grads in the US of A today.


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Author: TheNajdorfDefens Big funky green star, 20000 posts Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12800 of 35363
Subject: Re: BW: Its Happening Date: 6/14/2005 7:03 PM
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The June 13 issue of Business Week says its happening. Boomers start turning 59-1/2 on July 1, old enough to cash in their 401Ks without penalties. Most take out significant sums, roll them over to an IRA often at another firm, many shift significant portions of equities to bonds or other fixed incomes.

Since when have 'most' people been cashing in their 401k's? Since June 13th? I thought this couldn't happen until July 1?

The above makes no sense. Inertia will rule the day of financial decisions, as it normally does. At 59.5 people are going to one day shift their asset allocation from the day before? Really?

Naj

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12802 of 35363
Subject: Re: BW: Its Happening Date: 6/14/2005 9:50 PM
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"I think there are still quite a few unemployed college grads in the US of A today."

Its too bad more students planning to attend college fail to do a better job of checking out job prospects before they settle on a career. If they did, more might choose training for careers in health care; fewer would get degrees in things like liberal arts, that don't prepare you for a career.

Nurse burn out seems to be a major factor in the nursing shortage. Many find the career stressful and tend to leave the profession after some years.

But hospitals are also making life more difficult by spreading the registered nurses thinner and thinner giving them more responsibilities and less trained help. Hence, they can be all alone with major responsibility backed up only by helpers with minimal training. If some one calls in sick, they can be called in to cover for them. Meanwhile temps man other areas, who may not know much about the hospital routine. Stress levels rise with the chaos.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12803 of 35363
Subject: Re: BW: Its Happening Date: 6/14/2005 9:56 PM
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"The above makes no sense. Inertia will rule the day of financial decisions, as it normally does. At 59.5 people are going to one day shift their asset allocation from the day before? Really?"--Naj

The article makes clear that in retirement many people do roll their 401Ks over to an IRA often at a different custodian, and in the process change their investment choices--often to more conservative investments, out of equities and into at least more bonds.

The article reports that total funds in 401K plans have already peaked and is starting to decline.

The comments about baby boomers is an extrapolation, but it is true that increasing numbers will soon become eligible to cash in their 401Ks without penalties.

And few can deny the number of firms out there constantly churning for IRA rollover business--suggesting that finanical advisers see retiring boomers as a major prospect for purchasing expensive new financial services.

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Author: PaintSpeck Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12804 of 35363
Subject: Re: BW: Its Happening Date: 6/14/2005 10:28 PM
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Hi pauleckler,

Yes I agree with your comments. I have another sister who is a nurse. I think she hates it (loves the patients, hates the 'boss'). The hours really are bad, they are very much overworked and understaffed, so no wonder we need to go outside the US to recruit. I think it has to do with the cost of healthcare. As with most businesses, the first place to cut cost is by hiring fewer workers and laying off the ones you have.

Health care is one of the most inefficient industries left on the planet! Ok, well at least in the US.

karen

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Author: kentm401 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12805 of 35363
Subject: Re: BW: Its Happening Date: 6/15/2005 8:13 AM
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I'd have to agree with Paul in this......

The bottom line of course really is how many jobs will there be in the US? If the number grows and they are good jobs, we will surely have immigrants and even the poor from rural and inner city areas who will want to work those jobs.

But what if the US becomes no longer competitive in the global economy?


And believe "We" are in the early stages of it now, as the economy shifts from a "producer of "things" to one of a consumer of other peoples "things." While others may see the shift to a "Service economy" as a "good thing"....I do not. Never in history, has an economic power succeeded in surviving in a "competitive world", by sending it's "natural resources" and it's "goods production capacity" across borders to others, in return for nothing more then "knowledge and fiat paper currency.

I can not believe, I've no historical evidence, that the USA can change this historical record, by importation of "workers". Once an economy or nation, sends it's production capacity "offshore"......it's the "end game" of the life cycle of nations, imv. Read "Guns Germs & Steel" by Jared Diamond for a good primer on this subject.

IMV, the USA is at or near the "top" of it's life cycle of Nations (Superpower)....the only trend line that can be predicted "now" is the downward one. And conversely, the China cycle, appears to be on upward slope of that cycle.

Nations rise and fall. But one thing is clear, no Nation State, can retain it's own unique and individual "powers" on the largess of other Nations. Never has happened, never will.....it's not a near term prediction, just a certainty, over the course of decades.

KBM ("Capitalists will sell us the rope, by which we hang them" - Lenin)





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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12807 of 35363
Subject: Re: BW: Its Happening Date: 6/15/2005 8:43 AM
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"Its too bad more students planning to attend college fail to do a better job of checking out job prospects before they settle on a career. If they did, more might choose training for careers in health care; fewer would get degrees in things like liberal arts, that don't prepare you for a career.

Nurse burn out seems to be a major factor in the nursing shortage. Many find the career stressful and tend to leave the profession after some years."

What is most important is a well-rounded education and learning how to think. Which specific professions are needed tend to change. A lot of times Liberal Arts majors are better prepared with thinking, writing, and communications skills than a lot of the proliferation of current majors. (Add to this stronger math and some required finance courses.) For example, if I were a personnel manager for a big corporation, I'd be hiring anthropology majors not undergraduate business majors, because understanding the rest of the world is key.

Obviously, there are some fields, such as nursing, where there are still undergraduate majors, but still a good grounding in the first two years of college is essential. Nursing, and to a lesser extent teaching, is suffering from the opportunity for women to choose other professions, without men then going into traditionally women's fields. Add to this that nursing and teaching are grossly underpaid for the skill and work load required (does anyone really think that day trading for a hedge fund requires more skill or knowledge than trying to teach 30 squirrely 6-year olds to read, or contributes anywhere nearly as much to society or our long term economy?).

The funny thing about "market forces" in the labor market is, they don't really work. I wonder how much CEOs would get paid if, instead of having compensation fixed by hired guns who tell them how wonderful they are and boards of directors who are mostly their pals, they actually had to compete for their jobs?


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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12808 of 35363
Subject: Re: BW: Its Happening Date: 6/15/2005 9:12 AM
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"And believe "We" are in the early stages of it now, as the economy shifts from a "producer of "things" to one of a consumer of other peoples "things." While others may see the shift to a "Service economy" as a "good thing"....I do not. Never in history, has an economic power succeeded in surviving in a "competitive world", by sending it's "natural resources" and it's "goods production capacity" across borders to others, in return for nothing more then "knowledge and fiat paper currency.

I can not believe, I've no historical evidence, that the USA can change this historical record, by importation of "workers". Once an economy or nation, sends it's production capacity "offshore"......it's the "end game" of the life cycle of nations, imv. Read "Guns Germs & Steel" by Jared Diamond for a good primer on this subject.

IMV, the USA is at or near the "top" of it's life cycle of Nations (Superpower)....the only trend line that can be predicted "now" is the downward one. And conversely, the China cycle, appears to be on upward slope of that cycle.

Nations rise and fall. But one thing is clear, no Nation State, can retain it's own unique and individual "powers" on the largess of other Nations. Never has happened, never will.....it's not a near term prediction, just a certainty, over the course of decades.

KBM ("Capitalists will sell us the rope, by which we hang them" - Lenin)"

I am yet to be even slightly convinced that there is such a thing as a wealthy "service economy." It may be very lucrative for some folks who control the bulk of the capital, but not for the "wealth of nations."

Plus, there are other concerns. A faith based society (and I'm not just talking about the power of religious fundamentalists, but also faith in Capitalism, as opposed to understanding how capitalism works, and faith in American superiority) is not going to solve problems: what has made this country wealthy has been problem solving. Concentrating wealth and power in the hands of an inherited aristocracy also, inevitably, leads to economic ruin. Most of the innovation and energy that has created this nation's wealth has come from immigrants and the upwardly mobile. Nowadays, where invention requires detailed knowledge of science and engineering, that means making sure that the best and the brightest can get an education: I just had a conversation with one of the young guys, working his butt off and meticulous in his work, painting my house who wants to go to college but can't afford it. I often meet people like this. At that same time, there are lots and lots of college students from privileged backgrounds who are just there to party and feel entitled to get through without working or learning (like Bush). They are also motivated in job direction by greed: they want to make as much money as possible with as little effort as possible. An economy that promotes gamblers (even in the disguise of "risk taker"—real risk taking comes from strong knowledge and good planning) instead of inventors and entrepeneurs is in deep trouble. We need people trying to be the next Edison or Carnegie, not the next Wall Street trickster.

And, let's not forget just how poorly educated our country is at math and science (and analytical skills and basic finance). Teaching to the test, which is how schools improve accountability, goes completely in the opposite direction of the "higher order thinking skills" (knowing how to acquire new knowledge, putting that knowledge to use in new contexts, problem solving) that are necessary once one stops being only accountable to do well on standardized tests.

And, what about ethics (most college students cheat on a regular basis, as do a large number of executives) and work ethic. I know older generations have always complained about the young, but at this point I am no longer willing to use that as an excuse for rampant consumerism and the desire to get something for nothing (which is why the notion that the stock market might not do your saving for you is such an anathema for some).

I'm not ready to write off the US as an enduring economic and political power. But we aren't going to stay that way by producing Britanny wannabes while the Chinese and Indians, with all their problems, are pushing knowledge.







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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12809 of 35363
Subject: Re: BW: Its Happening Date: 6/15/2005 9:18 AM
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At that same time, there are lots and lots of college students from privileged backgrounds who are just there to party and feel entitled to get through without working or learning (like Bush).

and Kerry (both Skull & Bones members)

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Author: bighairymike Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12810 of 35363
Subject: Re: BW: Its Happening Date: 6/15/2005 10:25 AM
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....(like Bush)

I was ready to give you a rec until I encountered this. Liberals, even when they have a good point, just can't contain their Bush hating (actually frustration with being out of power for the first time in umpty ump years)..

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12811 of 35363
Subject: Re: BW: Its Happening Date: 6/15/2005 11:00 AM
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"Liberals, even when they have a good point, just can't contain their Bush hating (actually frustration with being out of power for the first time in umpty ump years)."

I am not a liberal. I am a conservative, using the actual definition of the word. Bush and most of his supporters are reckless ideologues who are not in the slightest bit conservative by the actual defintion of the word.

I have no trouble with real conservative Republicans, who believe in making the numbers add up and being sure you have a plan for how to achieve an objective that is worth achieving before venturing forth. I have trouble with people who substitute privilege for competence and a desire to be "bold" for common sense.

I have no interest in seeing well-intentioned "liberals," who can't add up numbers and who substitute their own wishful thinking for effectiveness, in power. I am interested in seeing problem solvers in power, but I fear that won't happen.

And, yes, Kerry wasn't much different when he was in College, though he grew up before age 40.

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Author: PaintSpeck Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12813 of 35363
Subject: Re: BW: Its Happening Date: 6/15/2005 12:44 PM
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At that same time, there are lots and lots of college students from privileged backgrounds who are just there to party and feel entitled to get through without working or learning (like Bush).

They are paying for this privilege with their own money are they not?
At least their partying is not paid for by taxpayer funded college aid/loans as with some of the other partiers ...







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Author: SisypheanFool Big red star, 1000 posts Old School Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12814 of 35363
Subject: Re: BW: Its Happening Date: 6/15/2005 1:12 PM
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What is most important is a well-rounded education and learning how to think.

...and research to expand one's knowledge base.

I'm educated as a microbiologist, yet had a career as a commercial construction manager. I've had many a person comment that I wasted my college years since I'm not in that industry. But I'll support Loki's contention, that the learning process is what kept this far from being wasted time.
I'm no academic rock star, but in the course of 3 years I went from laborer to superintendent to estimator to project manager. I credit the learning/thinking process that I got from college that enabled me to move up the ladder.
The classes that I'd credit having a direct applicable benefit were Chem, Calc, Physics, Sociology and Econ - the GE stuff. Supporting Loki's other point of "well-rounded education."

I'll also support Paul's premise that undergrads fail to research their chosen field of study for what's on the other side. I believe that the lower division studies should force the student to do some sort of internship in their major.
I worked in a hospital to pay my way through school. From working in that environment, I learned that the medical research I was interested in was tedious, bordering on monotonous, work. This got me shifted towards pursuing pathology. I then took advantage of being in a teaching hospital to get to know and let myself be known to the MD's that were part of the teaching arm. I also got a reality check of how crazed the life of an intern/resident/fellow is.

What got me flipped into an entirely different industry was one summer when the advent of HMO's and PPO's made a stark impact on the med students. The practices that supported the residencies and fellowships were dropping their support en masse. So it was clear that the opportunities on the other side of med school were going to be dramatically limited.
I was at an age where I could try something different and if it failed, circle back and finish off the track I initiated. I made the leap and have no regrets.

Oh well, I have no idea how this all relates to the original topic, but it just struck me that my life exemplified what Paul and Loki were stating.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12816 of 35363
Subject: Re: BW: Its Happening Date: 6/15/2005 1:54 PM
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"A lot of times Liberal Arts majors are better prepared with thinking, writing, and communications skills than a lot of the proliferation of current majors."--Loki

I do believe this is the arguement for schooling students in the classics. Its ancient and must have been around for centuries.

Sure those with deep pockets and trust funds to live on can indeed do quite well studing whatever they want. Why not the classics.

But for those who expect to earn a living in a professional field, I should think some focused training is a better idea. Especially in the modern world. Picking the right field is the hard part.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12817 of 35363
Subject: Re: BW: Its Happening Date: 6/15/2005 2:06 PM
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"Concentrating wealth and power in the hands of an inherited aristocracy also, inevitably, leads to economic ruin. Most of the innovation and energy that has created this nation's wealth has come from immigrants and the upwardly mobile."--Loki

Still capital formation does create jobs. The ability to do that is very powerful. It has kept Europe in power even though its economies have been weak for centuries.

Sprinkling the wealth of the aristocracy over the poor destroys the ability to raise capital with minimal benefit to the poor. There has to be some middle ground.

Selecting the most capable of the poor--math, hard work, arts, science, skills, knowledge--and giving them the opportunity to move into the middle class has always been a central part of modern capitalism. I think that is how most of our immigrant ancestors got us here. And I see healthy indications that ability is still alive and well in the US. People worry about it, but it is still there.

"I'm not ready to write off the US as an enduring economic and political power. But we aren't going to stay that way by producing Britanny wannabes while the Chinese and Indians, with all their problems, are pushing knowledge."

I agree. Its great that the long standing emphasis on education is paying off at last for the Chinese and Indians. Its too bad our own youth seem reluctant to study anything they see as "difficult." Hence, we must rely on immigrants to do most of the "hard work"--even if its intellectual. That predicts a very sad future for the US, I'm afraid.





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Author: PaintSpeck Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12819 of 35363
Subject: Re: BW: Its Happening Date: 6/15/2005 2:15 PM
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Its too bad our own youth seem reluctant to study anything they see as "difficult."

This is a result of our lousy education system and poor parenting skills. We adults have let our children down; I don't think we should blame our youth. Why should they strive for anything when most adults feel as though they are owed something?

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12820 of 35363
Subject: Re: BW: Its Happening Date: 6/15/2005 2:19 PM
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The problem with confiscating the wealth of the aristocracy and sprinkling it over the poor is that since there are so many poor people, no individual poor person or family ends up with enough capital to do anything worthwhile, and plus they want to improve their situation now.

Keeping wealth concentrated in the hands of the aristocracy means that the aristocrats tend to allocate their wealth to conserve their own status and wealth, at the expense of society as a whole.

Capitalism, plus a severe inheritance tax, seems like a decent compromise. The current inheritance tax is ineffective because there are so many loopholes (trusts, annual gift exemptions, etc.).

Of course it would be better not to confiscate the wealth of the aristos if they are investing it in something that benefits society as a whole.

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