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Re: Excellent Retirement Crisis Analysis
Old 09-15-2004, 12:08 AM   #61
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Re: Excellent Retirement Crisis Analysis

Alec posted this paper by Bernstein in another thread:

http://www.efficientfrontier.com/ef/702/2percent.htm

In it, Bernstein argues that stocks grow at the rate of GDP growth - the dilution rate, which he pegs at about 2%. Historic GDP growth has been around 3.6% in real terms, so you can infer that stocks will grow at approximately 1.6% real going forward.

Now, combine that analysis with this one from the CBO:

http://www.cbo.gov/showdoc.cfm?index=3581&sequence=0

In which they show real GDP growth slowing to about 2% due to fewer workers as boomers retire.

So, the implication of these two are that we should expect *zero* stock market growth starting around 2015! Sorry, gen-X.
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Re: Excellent Retirement Crisis Analysis
Old 09-15-2004, 04:00 AM   #62
 
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Re: Excellent Retirement Crisis Analysis

TH, of course I am "argumentative". Cut-Throat too.
However, we serve a useful function, I with my witty
anecdotes and comic relief from endless prattle about
SWR, DJIA, COLAs, DRIPs, SS, CCs, etc. Not to mention my
hyperbolic pontificating (whew!). Cut-Throat is useful
for posting photos of big fish

John Galt
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Re: Excellent Retirement Crisis Analysis
Old 09-15-2004, 08:48 AM   #63
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Re: Excellent Retirement Crisis Analysis

Quote:
TH, of course I am "argumentative". Cut-Throat too.
However, we serve a useful function, I with my witty
anecdotes and comic relief from endless prattle about
SWR, DJIA, COLAs, DRIPs, SS, CCs, etc. Not to mention my
hyperbolic pontificating (whew!). Cut-Throat is useful
for posting photos of big fish

John Galt

You are NOT argumentative. And you dont. And he isnt. And I'm not either!!!

Nyah nyah nyah! :P

Sorry, its been one of those days...
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Re: Excellent Retirement Crisis Analysis
Old 09-15-2004, 09:05 AM   #64
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Re: Excellent Retirement Crisis Analysis

Quote:
So, the implication of these two are that we should expect *zero* stock market growth starting around 2015! * *Sorry, gen-X. *
Harry Dent has the US markets tanking around 2008-10 due to demographics and suggests that we'll see deflation. So, buy bonds.
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Re: Excellent Retirement Crisis Analysis
Old 09-15-2004, 10:09 AM   #65
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Re: Excellent Retirement Crisis Analysis

The most mathematically sound thing to do with respect to risk is to always diversify with a stock weighting in the 30-70% neighborhood. *Two reasons:

1. *Once you go above 70%, you're really not buying that much more return, but your risk rises disproportioniately. *The opposite's true when you go below 30% stock (risk doesnt go down that much, but your return takes a nasty drop).

2. *If you religiously maintain a finite stock/bond ratio in the 30-70% neighborhood, as stock and bond prices rise/fall, you'll, by default, have to buy low and sell high to maintain the ratios.

Spock would diversify. *Anywhere near 0% or 100% stock is illogical.

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Re: Excellent Retirement Crisis Analysis
Old 09-15-2004, 10:17 AM   #66
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Re: Excellent Retirement Crisis Analysis

I haven't read any of Dent's books. *What's his argument for deflation?

I would expect production to go down with fewer workers, salaries to go up as companies compete for fewer workers, and for consumption to stay strong as retired boomers spend down their hoards. * *This would point strongly to inflation rather than deflation.

Not to mention the inflationary effects of our ever-increasing treasury debt, which will only increase faster as the tax-payer base goes down and social security payouts go up.
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Re: Excellent Retirement Crisis Analysis
Old 09-15-2004, 10:24 AM   #67
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Re: Excellent Retirement Crisis Analysis

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Spock would diversify. *Anywhere near 0% or 100% stock is illogical.
Spock doesn't worry about stocks. He's got a kick-ass government pension.
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Re: Excellent Retirement Crisis Analysis
Old 09-15-2004, 11:17 AM   #68
 
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Re: Excellent Retirement Crisis Analysis

Hi everyone,
You guys have been very busy on this thread!
Wabmaster: Thanks for that dismal outlook. What's an Xer to do. Other than stocks what other ways are there to accumulate the kind of capitol you need to ER in 15-20 years, ( me being 30-something now) Any suggestions.

Mikey,
My point was mainly that I learned from my father's lesson that I do not want to work until I drop and not have time to enjoy other things in life. He does not enjoy working, he works long hours. He had opportunities to invest in real esate/ stock market but never made a move. Although I have much, much less capitol to invest than my father did at the same age, I plan to take advantage of some opportunities and hopefully time will be on my dide.
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Re: Excellent Retirement Crisis Analysis
Old 09-15-2004, 11:37 AM   #69
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Re: Excellent Retirement Crisis Analysis

Quote:
Thanks for that dismal outlook. *What's an Xer to do.
Hey, I'm just reporting the numbers. I didn't create this mess.

If I were gen-X, I might consider the following:

1) The short-term outlook for stocks doesn't seem so bad. You might do OK while the boomers are still drawing salaries, inflation is low, and interest rates are low.

2) Save like crazy. That's what worked for most ERs, not outrageous investment returns.

3) Crank up your salary. You have *much* more control over your salary level than you do your investment returns. Ask for a raise today. Start climbing the ladder. Emulate your leaders (basically, act cocky, make quick decisions even if wrong, bury your mistakes, and flaunt your successes).

4) Get a government job with a kick-ass pension.

5) Start a business, and sell it when valuations are crazy.

6) Use the magic of leverage. Write a book, or a song, or a movie script. Patent an invention. Launch a website. Focus on spending your time in ways which can pay you back manifold.

Good luck!
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Re: Excellent Retirement Crisis Analysis
Old 09-15-2004, 05:03 PM   #70
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Re: Excellent Retirement Crisis Analysis

[quote]Hi everyone,
*You guys have been very busy on this thread!
Wabmaster: Thanks for that dismal outlook. *What's an Xer to do. *Other than stocks what other ways are there to accumulate the kind of capitol you need to ER in 15-20 years, ( me being 30-something now) Any suggestion

lili:
As Wab mentioned, there are many ways to accumulate capital other than the stock market. (Personally, if I were in my 30's that would be one of the last places I'd look.
If you have a burning desire to retire early, you'll figure out a way. If not, find a career that you really enjoy, and as the Tomcat says, put a little in the kitty every paycheck.
This board is most helpful for passive investors, but you, if you are in need of capital accumulation need to be action oriented at this stage of your life.
In other words, get off the keyboard, get out there amongst-um, and compete the way immigrants do.
Good luck, Jarhead









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Re: Excellent Retirement Crisis Analysis
Old 09-15-2004, 05:48 PM   #71
 
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Re: Excellent Retirement Crisis Analysis

What's an Xer to do? Real estate man, real estate.

John Galt
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Re: Excellent Retirement Crisis Analysis
Old 09-15-2004, 05:58 PM   #72
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Re: Excellent Retirement Crisis Analysis

Quote:
What's an Xer to do? *Real estate man, real estate.
Overpriced due to the boomers.

On the Dent and deflation I'll have to check up my copy of his book once I get home tonight as I don't remember all the reasoning.
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Re: Excellent Retirement Crisis Analysis
Old 09-15-2004, 06:10 PM   #73
 
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Re: Excellent Retirement Crisis Analysis

Thanks for the great advice!
Wabmester: plan on doing #4 and #5 (work for govn't while starting a business.
Ex-jarhead: You are right too much typing not enough action. I will be attending a seminar on Sat. featuring the author of the Millionaire Next Door that should be filled with great ideas and motivation. I will continue to browse the boards as this is the best resource I have seen on the Web.
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Re: Excellent Retirement Crisis Analysis
Old 09-15-2004, 06:18 PM   #74
 
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Re: Excellent Retirement Crisis Analysis

Re. "overpriced", wrong! wrong! wrong!
There are ALWAYS opportunities in real estate.
I see them every day, Is it work? You bet.
Do you need some smarts? Absolutely! But, even at my age (or maybe especially at my age due to decades
of experience) I could start now and make millions.
And, you don't need any money; just brains and
willpower.

John Galt
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Re: Excellent Retirement Crisis Analysis
Old 09-15-2004, 06:24 PM   #75
 
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Re: Excellent Retirement Crisis Analysis

Funny you should mention that John as I am in the suburbs of the Baltimore area. The area has been depressed and crime ridden in past years( still is in quite a few areas in the city). Others have increased greatly in value. Investment opportunities are out there for areas that are up and coming.
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Watch out for that TMND seminar...
Old 09-15-2004, 07:42 PM   #76
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Watch out for that TMND seminar...

Tom Stanley hasn't done very many of them and I'd be surprised if he's at yours.

Danko, OTOH, has been mercilessly flogging his TMND horse through the lecture circuit for years. Stanley has clearly despaired of his collaboration and has gone on to write two more books without Danko.

IMO Danko's behavior puts him one step above Robert Kiyosaki. Lock up your wallet and maybe even bring a pair of earplugs.

John Galt is right. You'll always find valuable real estate, even if you have to work your assets off like Panhead to make it profitable.
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Re: Excellent Retirement Crisis Analysis
Old 09-16-2004, 08:44 AM   #77
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Re: Excellent Retirement Crisis Analysis

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I haven't read any of Dent's books. *What's his argument for deflation?
There are two arguments for deflation. The first is a small time scale argument. The average spending of families increases until about the age of 46 (age of head of household) and after that drops away. By about 2008 all of the boomers will have past this peak. With less spending there will be fewer dollars chasing the same numbers of goods.

Now that covers local jiggle around the long term inflation. He argues that over much of history inflation has been zero and only a major factor in 3 time blocks: the "commercial revolution" from ~1100 to ~1200; the "capitalist revolution" from ~1450 to ~1600; and now in the "information revolution" from early/mid last century. The industrial revolution did cause inflation too but it's a blip compared to the other 3 at about 1/3 or so in magnitude. After this revolutionary transformation happens then society goes back to relatively close to zero inflation. I've actually seen this long term inflation chart from someone else too - I think it was on of the Bernstein's (William or Peter)?

Combine these too and we get deflation - the ending of this current revolutionary inflation and the passing of the peak boomer spending.
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Re: Excellent Retirement Crisis Analysis
Old 09-16-2004, 05:14 PM   #78
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Re: Excellent Retirement Crisis Analysis

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Combine these too and we get deflation - the ending of this current revolutionary inflation and the passing of the peak boomer spending.
That seems like a pretty wacky argument, but then people buy his books, so what do I know.

I wonder if there has ever been a long stretch of deflation in any economy with a fiat currency like ours. All the fed has to do is print more money and the threat of deflation goes away, which is another reason I think inflation is a pretty safe bet.
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Re: Excellent Retirement Crisis Analysis
Old 09-16-2004, 05:43 PM   #79
 
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Re: Excellent Retirement Crisis Analysis

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I wonder if there has ever been a long stretch of deflation in any economy with a fiat currency like ours.
There has been periods in the U.S. economy where we have seen deflation. Not sure when, but in the 1800's and early 1900's - I think there were 3 major periods. Someone may wish to contribute here.
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Re: Excellent Retirement Crisis Analysis
Old 09-16-2004, 05:50 PM   #80
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Re: Excellent Retirement Crisis Analysis

Quote:
There has been periods in the U.S. economy where we have seen deflation. Not sure when, but in the 1800's and early 1900's - I think there were 3 major periods. Someone may wish to contribute here.
Yes, but that was back when we were on the gold standard. Deflation is easy to whip up if you've got a tight money supply. We've only had a true fiat currency since 1971.
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