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Why we all will need to be more financially astute as we age.
Old 03-28-2010, 08:29 PM   #1
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Why we all will need to be more financially astute as we age.

I read another board of financial traders to get an idea of their thoughts.
All three of the stories below are from 3 different posters but, they stuck a cord with me.
Gold For Bread - Zimbabwe



THE Most Important Chart of the CENTURY


Swarm USA - THE Most Important Chart of the CENTURY

Obamacare and the Death of Detroit, the First U.S. City To Face Extinction

http://www.marketoracle.co.uk/Article18136.html

(Don't focus on the Obamacare part but on Detroit)

I manage the little amount of my money my mother has. The money I manage is the allows here to live in a adult care home. (She confuses me with another relative at this point.)

Now imagine what we - in the USA - all the financial issues we will need to negotiate over the next 30 to ? years. I'm am really convinced that buy and hold as a strategy is dead or it will kill you eventually.
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Old 03-28-2010, 10:27 PM   #2
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I have a friend who was from the Detroit area. He often told me the sad story of how blocks of vacant factories and shops stand as if a neutron bomb has gone off and killed all living creatures and let the structures stand.

It is true that nothing much appears in the media about it. We are all tired, and do not want to think about it anymore, I guess. Could anything be done about it? Could Detroit be saved? And more importantly, what industries will be next?

I don't know what I can do about it, other than owning some foreign equities. Regarding housing, one should be aware of localities with declining economic activities. Maybe keeping mobile with an RV may not be a bad idea. It's depressing!
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Old 03-28-2010, 11:37 PM   #3
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Now imagine what we - in the USA - all the financial issues we will need to negotiate over the next 30 to ? years. I'm am really convinced that buy and hold as a strategy is dead or it will kill you eventually.
After reading about the financial panics around 1913, WWI, the Great Depression, WWII, Korea, 1966-1982, Vietnam, the Cold War, 1973-4, Oct 1987, 2000-2003, and 2008-9, and experiencing nearly half of it...

I refuse to be intimidated by whatever the next century has in store. Bring it on and let me see at least another half of it.

I think it's been mathematically proven that every financial investment strategy will kill you if you stay in the markets long enough.

Or at the very least we'll be able to point at it and say "See, it coulda killed you!!"
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Old 03-29-2010, 12:58 AM   #4
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Well, I am very familiar with the Detroit area, and have a pretty detailed understanding of the Michigan economy, so I think I can easily comment on the Detroit issue, and the article.

The article is really, really, poorly written. It throws out completely random current situations, and then sort of attempts to tie them together.

The biggest problem with the article, was how it described the problems of Detroit. It attempts to say that people are ignoring them, and no one saw the problems coming. That is the main premise of most of the article. That could not be any further from the truth than I could possibly imagine. Detroit has had problems for the last 50 years. It has had crime rates in the top 5 for decades.

The author talks about urban sprawl a bit, but doesn't really explain it well. Urban sprawl, real, big city, urban sprawl, is unique to Detroit. Most of the population of Detroit, and almost all the many business centers, are outside Detroit. The only people living in the Metro area, are the ones who cannot afford to move away, which, sadly, was primarily the African-American families.

The population in Detroit has also been dropping for decades, at a pretty fast pace. Just like its cousin city, Flint. For those who actually have a grasp of the Michigan economy, Flint is a very good example of what Detroit will end up like. It is a city which is 90% vacant, it was that way for 50 years when the auto companies mostly left the city, they are now bulldozing most of it and returning in mostly to nature, since it is so far away from the other major employment centers in Michigan (just like Detroit is). When a city becomes de-populated, it becomes worse than even a rural area, not only is it more dangerous, there are often tax liens on most of the property (making it actually extremely expensive to buy the property, unless it is a non-profit that can exempt itself). It is a shame that once beautiful buildings get destroyed when a city loses its population, but Detroit is far from unique in that area, you only need to look 50 miles away to see another example, and you can easily find many other cities like it in the Rust Belt. Once again, a really horribly written article, it touches on many issues, and then does a horrible job exploring them.
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Old 03-29-2010, 02:48 AM   #5
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I lived in Detroit and actually owned a house inside the city limits in the early 70s. I watched it go from bad to worse as they were attempting what they called Renaissance. They put in fancy new building down town but people didn't go to them much. Gangs ran the city at night so people didn't want to be there. I had to drive my ex to work at about 5am into the city farther we were near the city limit. He told me to keep the windows up and doors locked and if anyone got in front of the car to run over them. Gangs were doing things like pointing at a tire to get you to stop to look then the rest come out to rob you so anyone approaching the car you keep driving and if they think getting in front of you will stop you they are wrong.

City workers were forced to live inside the city limits but often kept the family miles a way and just the worker had a city address.

High school grads we worked with had about a 5th grade education. Auto plant workers drank and did drugs on the job and quality of work was bad mostly. It was all overpaid union work with record breaking benefits. They were the first workers to get things like vision and dental insurance. Once you got the job you almost couldn't be fired so nobody cared about doing good work or learning skills. My ex was working in one when he slugged a foreman and the foreman tried to fire him. The union sent someone down and not one coworker had seen anything so nothing could be done about it.

After the earliest 70s the stores started having bars on the windows and people were doing the same to houses so it looked even more dangerous.

One night a big event downtown had hundreds of people attend, hundreds of gang members broke in and robbed and raped them, not even large groups were safe in the city. My girlfriend and I want to go to a Tigers game with her teen son but after that our husbands asked us not to.
I am in Seattle now and can go to a ball game anytime with anyone. Once I took an elderly neighbor to see the Mariners and never had a moment of fear.

The people of the city of Detroit got what they deserved, The decent people left 40 years ago, only gangs and drugs are left. Too bad some of the old buildings were very nice, I used to go to plays in them when I was in college.
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Old 03-29-2010, 04:38 AM   #6
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To illustrate the depopulation in Detroit, there are less people now in the city than there were in the 1920s. On top of that, due to the huge youth flight (and brain drain) that is now occurring in Michigan, and particularly in Detroit, it is expected to decrease in population another 20-30% over the next 10 years, and will primarily become an elderly population. Having ones of the worst state economies of any of the states for 10 years has a significantly negative effect. Michigan used to be one of the top 10-15 most productive states 10 years ago and for a very long time before, it is now near 40th, quite a drop, actually it is honestly horrific once you look at the numbers.

Just look at how popular Detroit is as a city:

http://pewresearch.org/pubs/1096/com...ion-top-cities
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Old 03-29-2010, 09:50 AM   #7
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I'm not sure why the three stories resonated with me. I think it is that Zimbabwe reminds me how difficult it is for many in the world have it just to eat. The 'Most Important Chart' reminds me that we have a lot of pain coming out way in the developed world. The Detroit story is an indication of some of the pain we have coming our way.

The what happened to Detroit can happen to many cities - loss of jobs due to industry decline; leads to increase in crime; flight out of the city, leads to government deficits due to falling tax revenue and further decline - it is a declining cycle. The state and city debt and pension burdens could be a large factor in the decline of the inner city in some areas.
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Old 03-29-2010, 10:18 AM   #8
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I have a friend who was from the Detroit area. He often told me the sad story of how blocks of vacant factories and shops stand as if a neutron bomb has gone off and killed all living creatures and let the structures stand.

It is true that nothing much appears in the media about it. We are all tired, and do not want to think about it anymore, I guess
The media is no good at telling slow moving stories. Give them a forest fire or earthquake and they can handle it. Look back a recent history for the stories they missed. Or that we are fighting 2 wars and the lack of attention paid to them.

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. Could anything be done about it? Could Detroit be saved? And more importantly, what industries will be next?
Would you risk a large amount of money to start a business in Detroit? I don't know who would or why they would do it.
Manufacturing will continue to move offshore. The next industries to move offshore will be many of the back office corporate jobs - accounting, computer programming, tax preparation, etc


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I don't know what I can do about it, other than owning some foreign equities. Regarding housing, one should be aware of localities with declining economic activities. Maybe keeping mobile with an RV may not be a bad idea. It's depressing!
The effects of the housing collapse surprised me. In 2007, I thought it would be a 20% decline and then we would continue up from there. The collapse uncovered a whole lot of other problems.

As far as where to live; I would suggest newer cities and suburbs. They do not have the legacy costs - pensions, debts etc that older cities do - generally the southeast US is still OK - but not the major cities. Read up on the current situation in Atlanta. They are doing OK but pension costs are 20% of the city's budget. If they raise taxes, people leave and Atlanta will look like Detroit as people move out of the city. Businesses are moving to Georgia - outside of Atlanta.

RVing is an option and if I knew then what I know now, I would have bought a larger RV and been a fulltimer for a few years. I still might do it.

Atlanta leaders grapple with rising pension costs *| ajc.com
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Old 03-29-2010, 10:24 AM   #9
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Yup - It really can't get much better than this. Another 16 years of ER would be just ducky.

'God Looks After Drunkards, Fools, and The United States of America.' No matter who I'm quoting/mis quoting - eh Nords?

Plus my Target Retirement with sliding asset classes gets me brownie points at parties - I remember the old 60/40 'policy portfolio' fondly as the horse I rode in on. And of course - Pssst Wellesley has a warm place in my heart.

heh heh heh - As for Detroit, I remember Seattle when 'Will the last person leaving Seattle please turn out the lights.' Kobe Japan(our sister city) was sending us Care packages and The Greater Council of Churches was running out of food for the 78,000 people per week in their food lines.

Anywise being unemployed, I left. Agile, mobile and hostile.

And And And - the Saints won the Superbowl! If all else fails this will be a super decade.
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Old 03-29-2010, 10:32 AM   #10
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After reading about the financial panics around 1913, WWI, the Great Depression, WWII, Korea, 1966-1982, Vietnam, the Cold War, 1973-4, Oct 1987, 2000-2003, and 2008-9, and experiencing nearly half of it...

I refuse to be intimidated by whatever the next century has in store. Bring it on and let me see at least another half of it.

I think it's been mathematically proven that every financial investment strategy will kill you if you stay in the markets long enough.

Or at the very least we'll be able to point at it and say "See, it coulda killed you!!"
I"m guessing I only have about 30 years remaining to watch it unfold. I do think I"ll be OK and decrease in SS, medicare will be on those younger than me. The thing is that there will be issues over the next 30 years that will make it depressing and more challenging for everyone - higher systemic unemployment; increased taxes of all types and a VAT or national sales tax, increase in US population to about 400M by 2050 and a world population of 10B by 2055.

With financial panics around 1913, WWI, the Great Depression, WWII, Korea, 1966-1982, Vietnam, the Cold War, 1973-4, Oct 1987, 2000-2003, and 2008-9, the USA was a growing country and had the financial resources to deal with them.
Now the USA is an empire in decline with limited financial latitude and huge unfunded entitlement programs. .
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Old 03-29-2010, 11:50 AM   #11
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Anywise being unemployed, I left. Agile, mobile and hostile.
When I read this post and the referenced articles, my mind kept turning to your second favorite phrase. That is the key on not getting bogged down in this kind of mess - be flexible like Gumby!

Did you guys read the WSJ article that was the source for much of the attached blog post on Detroit? Nicely done, centers on the one house and it's subsequent sales over more than a century. Better written than the blog post, well-done, and gives you more insight into what went wrong in Detroit.
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Old 03-29-2010, 12:03 PM   #12
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With financial panics around 1913, WWI, the Great Depression, WWII, Korea, 1966-1982, Vietnam, the Cold War, 1973-4, Oct 1987, 2000-2003, and 2008-9, the USA was a growing country and had the financial resources to deal with them.
Now the USA is an empire in decline with limited financial latitude and huge unfunded entitlement programs. .
I don't think I'm quite as fatalistic as you are here, but I agree with the assessment that everything seems to be lining up for a real decline in living standards for today's younger generations and perhaps those to follow them, and at least a partial unraveling of middle class lifestyle expectations.

I believe the first 25 or so years after WW2 will be seen as the "golden age" of prosperity and perhaps the best deal that the American middle class ever got -- the high watermark of the "empire" if that's what you want to call it. Unfortunately it was an unsustainable bubble fueled by postwar demand to rebuild the world, and we built entitlement programs with the assumption that it would be sustainable. Since the 1970s or 1980s -- as the world was fully rebuilt and emerging globalization began putting serious pressure on real wage growth -- we've only sustained the illusion of continuing the prosperity gains with debt (individual *and* government), not with real economic growth, and we've reached the point where we can't even pretend it's sustainable with debt any more. And some of the recent assumptions of middle class life -- nuclear families, single-family homes in suburbia, wage growth beating inflation, the annual week-long vacation, a long, comfortable retirement -- are going to slowly become less of an expectation and more of a memory.

Having said that, the decline I expect in "middle class" standard of living is a decline off of a VERY high level, and compared with much of the rest of the world and over the course of most of recorded history, even these "diminished expectations" in the decades to come are probably more fortunate circumstances than 95% of the folks ever to walk the planet have had.

Some of us "younger" folks may not get the good deal our parents or grandparents got, but overall, still rather blessed.
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Old 03-29-2010, 01:25 PM   #13
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Some of us "younger" folks may not get the good deal our parents or grandparents got, but overall, still rather blessed.
I think we are on the same page. I just see a lot more mines in the field and closer than I thought they were.
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Old 03-29-2010, 01:54 PM   #14
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With financial panics around 1913, WWI, the Great Depression, WWII, Korea, 1966-1982, Vietnam, the Cold War, 1973-4, Oct 1987, 2000-2003, and 2008-9, the USA was a growing country and had the financial resources to deal with them.
Now the USA is an empire in decline with limited financial latitude and huge unfunded entitlement programs. .
I read an article last year sometime that talked about the decline of the British empire from 1900 through 2000 yet in 2000 the folks on average had standards of living 9 times better off than 1900. I don't think the USA is going to fare any worse than Britain did over this next 100 years.
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Old 03-29-2010, 02:46 PM   #15
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I don't think the USA is going to fare any worse than Britain did over this next 100 years.
The US population is more mobile than the British. So the Detroit phenomenon could never happen in Britain. Without people, places become ghost towns. (Went to Detroit in the late 60s from 70 miles away.)
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Old 03-29-2010, 03:35 PM   #16
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The US population is more mobile than the British. So the Detroit phenomenon could never happen in Britain. Without people, places become ghost towns. (Went to Detroit in the late 60s from 70 miles away.)
During the 80's and 90's with the collapse of the mining, ship building and coal industries there was a lot of movement out of the industrial northern towns. In my home town there was 80% unemployment, in central Middlesboro it was 90%. I remember one time visiting my family in the early 90's and we stood with our kids in my folks front room watching a running battle between police and squatters from the the abandoned houses in the streets opposite. It was a bad 10 years or so but eventually the authorities bulldozed a lot of streets and cleaned up the area, and light industry and tourism moved back in. The town's population that had left didn't come back however and many of my sisters' neighbors these days are from the eastern bloc countries. My brother was one of the folks who left, going to London in 92, then emigrating to Australia in 94, joining the "brain drain" of the period. I was due to return to that area in 91 from my assignment in the USA but after a visit back things looked so bleak we asked to stay here and were delighted to do so.

I agree it is easier to move around in the USA because of the size of the country (all speaking English) but take away jobs and standard of living, and those who can will move to where there are jobs. The European Union rules about anyone being able to work anyway benefits the British immensely as English is the most common language. (One of the problems the folks in Greece have at present is that it is very difficult for them to work in other countries because of language issues ).
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Old 03-29-2010, 03:45 PM   #17
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I read an article last year sometime that talked about the decline of the British empire from 1900 through 2000 yet in 2000 the folks on average had standards of living 9 times better off than 1900. I don't think the USA is going to fare any worse than Britain did over this next 100 years.
Yours is the relevant point. The U.S. isn't a nation in absolute decline, our economy is still growing. It's in relative decline. But so what? It matters, of course, in a geo-political sense. But that is not what people are afraid of. People have this erroneous assumption that the world economy is a zero sum game. That if China and India become more wealthy, than we must become less wealthy in absolute terms. It's not true. And Alan's post makes it abundantly clear. The citizens of the United Kingdom aren't impoverished. And yet their country has been in relative decline for a century.

And its not like the U.K. didn't have debt issues of its own . . .
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Old 03-29-2010, 03:53 PM   #18
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G4G,

Cool chart, thanks
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Old 03-29-2010, 04:00 PM   #19
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And the U.S. by comparison (notice the scale) . . .
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Old 03-29-2010, 08:02 PM   #20
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Great charts. These trends generally last longer than single life times. Individuals often don't even notice the big trends. Perhaps the USA has seen it's best days-at least in relative terms. Hope not.
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