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No. of Recommendations: 1
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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