Blame It on the Boomers
You may have heard that we will not have another recession but instead a “protracted recovery”.
Don’t get giddy yet.
I think we will have another recession…and soon. And in this day and age of finger wagging and scapegoating, I know just whom to blame. Blame it on the Boomers.
There are 80 million Baby Boomers and they have just started to retire. Those who were buying stocks for the past 30 years will now be selling them for the next 20 years. The Boomers will be spending less in retirement and the government will be spending more on their Medicare and Social Security costs. Do the math.
Eventually all 80 million Baby Boomers will be selling their homes. Who will buy them?
There are only 65 million Gen Xers. They do not have the wealth that the Baby Boomer generation has. We are looking at a glut of housing for the next 20 years. That means housing will not start trending up until 2030. Blame it on the Boomers.
The rub is that Americans have built a lifestyle around a 3 to 4% GDP growth rate for the last seven decades. Most Boomers lived their whole life in this robust GDP growth. It is unlikely we will see GDP growth exceed 1 to 2% over the next decade. As Gen Xers would say, “That sucks!”.
Now down to the technical part. A recession, by definition, is two consecutive quarters of negative GDP growth. It is very likely that we will have two consecutive quarters of negative GDP growth in the next 12 months. It won’t take much for our fragile economy to be pushed into negative numbers. What does this mean for the stock market? The average fall for the stock market during a recession is 40%.
The next decade will bring an erratic stock market and a down housing market. Blame the Boomers.
What can you do?
You need to reset your expectations during this “protracted recovery”.
– If you are expecting your house to return to its previous peak anytime soon, it won’t.
– If you are expecting the stock market to have a meteoric Bull Run in the next five years, it won’t.
– If you are expecting your taxes to go up…they will.
There are ways to come out of this “protracted recovery” with money in your pocket and I will continue to show you how.
So can you really blame the Boomers for this? I can. I blame my parents for everything, don’t you?
Together, we are growing and protecting your money,
PS – Remember, it's your behavior, not the stock market, that determines your wealth.
2 Comments
David
August 25, 2011I believe you are absolutely correct. Between the large amount of people leaving the workforce, our high government debt and the social structure that we have, the US has already peaked and we will quickly see the demise of the US as the world power.
We will continue to innovate and, I believe, the US economy will continue to grow at a slow pace over the next several decades. The Fed and the Government will continue to try to devalue our currency as much as they possibly can to try to fuel inflation and promote growth, but the growth just won't be there. (Look at Japan.)
Also, we will continue to see slow growth in Europe. They have zero population growth and a social structure that we have been trying to emulate for the past 80 years.
India isn't going to be as much of a global factor as they could be unless they can fix the massive amount of corruption that is rampant in the country. The people who run the "system" in India don't want the change because they are on the gravy train. Why should they fix something that is working very well for them?
China is going to be the global workhorse, building wealth for the entire world. However, if the countries that have 60-70% of the wealth aren't growing, it will be difficult for China to grow at the pace that it has over the past 3 decades, especially since they have an aging populace as well.
The US government and the Fed will continue to try different economic fixes, but nothing will work.
In order to fix the problem quickly, the US and Europe will need to have massive government downsizing, especially social programs and defense, and major overhauls in legislation and tax codes for us to move forward again. We will all need real austerity programs.
Maybe we need a major depression to fix the problem. If we continue to limp along, the mess won't be fixed for decades or maybe a century or more.
Nevertheless, it is still a great time for those who are willing to grow and expand themselves. People who can look ahead and embrace the changes, as they come, will do very well. Those who are going complain about the issues or file into the streets to protest are going to be left behind.
Though I am not wealthy, I am looking forward to the future. There will always be ways to make a great living. You will just need to have the right mindset and make the best of every situation that comes your way.
IvanH.
September 26, 2011Great tip/reminder in the P.S. at the end of your post.