Another sobering thread on wealth deterioration

[FunSugarDaddy]

http://money.cnn.com/2009/02/25/real_estate/boomer_wealth_evaporating/index.htm?ref=patrick.net

Some interesting tidbits for those interested.

The median wealth of boomers aged 45-54 prior to the stock/real estate crash was around 145,454, now it's currently around 80,000.

Another interesting tidbit which undoubtedly influences the first stat, is that 30% of those in this age category that own homes, are now underwater. (meaning there mortgages exceed the value of their homes)

Sometimes I think we don't appreciate how well off we are here, cause these net worth numbers are shockingly low.

 

[hunsperger]

...

I have a question...

I'm not an economist, but isn't wealth a relative term...

if you woke up tomorrow, and your net worth shrank by 50% along with everybody else's would you not be as wealthy...

also, I remember somebody saying, that if you put all the economists in the world end to end, they still couldn't reach a conclusion...

 

[Sit_on_my_face]

Don't worry, this is slowly happening here in Canada as well, just not as sudden as down south.

Up here I believe the downturn will still continue, but do believe sometime in 2010 could be a turning point for both Real Estate and Stock markets.

Condos in Vancouver could be a different story due to the fact of over priced and supply. Condos prices will continue to decline.

 

[FunSugarDaddy]

I have a question...

I'm not an economist, but isn't wealth a relative term...

if you woke up tomorrow, and your net worth shrank by 50% along with everybody else's would you not be as wealthy...

also, I remember somebody saying, that if you put all the economists in the world end to end, they still couldn't reach a conclusion...

Well there's a host of problems with that thought process. Number one, everyone is going to need a certain amount of income per year for the rest of their lives. The government programs themselves are unlikely to be sufficient.

Secondly I drop in wealth isn't uniform. Some had all their money in GIC"s etc so their wealth wouldn't have dropped.

Thirdly, many of the younger boomer were likely expecting an inheritance so they may also be adversely affected.

But on the other hand, if you were a renter, and you had no assets, you have essentially progressed in a relative sense.

But for the government and society as a whole, it's the first issue that matters. There simply isn't the government funds available to replace someone's lifestyle and as such, the supplemental plans such as private pensions, (deferred benefit plans and defined contribution plans) along with RRSP's were the mechanism the government had been using. Others who many have opted for a different method may have had rental properties. In most cases they are significantly less wealthy then they were only 18 months ago. The possible exception would be the defined benefit plan, where as long as the company was solvent, wouldn't affect the recipient.

The Quebec retirement plan recently lost about 30B dollars last year.

 

[Lady Companion]

Times may seem tougher now than they were last year, but keep in mind that for many people, it is not yet an actualized gain or loss. Until you actually buy or sell your stock, house or other items of value, you haven't made or lost anything.

I also agree that everything is relative. It wasn't that long ago that having a million dollars was the benchmark to being rich. In the 90's it was considered being well off, and up until a couple of years ago - it was merely a good start.

The positive side of the economic downturn is that money is actually worth something again. While your dream home may not necessarily be 'affordable' it is certaily 'more affordable' than just a few months ago. Fuel prices are down, food prices are down, vacation prices are down....you get the picture.

As long as you are a hard worker and adaptable, you will be able to keep or find employment. As long as you weren't foolish with purchasing a house that you and the bank should have never let you purchase (ie low equity and a mortgage streched out over 15 years) then you will be able to ride out the bump and get your original purchase price back in a few years.

As for stocks - well, unless you shorted everything, we all got slaughtered. If you were using the dividends to fund your retirement, then you are probably really hurting. If you don't need the money for a few years, it will bounce back, as it always does. The markets are still very volitile, but if you change your approach in the midterm to being more of a trader than an investor, you will be able to make it back in the next couple of years. It isn't uncommon to see stocks in this envirnoment move 10% in a couple of weeks. If you get that kind of a gain, dump it and wait for it to drop again, or pick up another fundamentally strong yet undervalued stock which is expereincing volitility and do the same thing.

Yes, the economic situation has gone back to a more sustainable level. But if you work hard, invest wisely, and never play with anything you can't afford to lose, you will always be ok.


______________

ClassyAngel - your exlusive travel companion and fun loving courtesan. Now available for duos with some of the finest escorts vancouver has to offer - as well as VIP international escorts for sensual liaisons!

Discretion and fun guaranteed!
http://www.ClassyAngel.com
604 583 4998

 

[North Poler]

Wow, Lady Companion, someone who has never studied finance of economics might think you know what you're talking about. You throw around a few terms and seem to know the lingo but you don't have your facts straight.

 

[wess]

Just because something was like something else before doesn't mean it will be again. That's the problem with everyones' reasoning here. We've seen depressions, we had lots of recessions; we're down for a while, then we bounce back, usually stronger than before. Always have, always will.

That's sheep talk. Yup everybody says it; must be true. Why? Why does it have to be like that? Dunno but it always has.



I've posted this quote before but it bears repeating. What Steve is telling us is to get used to a reduced lifestyle--not for a while or 5 or 10 years--get used to it.

He's not the only one. There is a small number of thoughtful people who are seeing what's happening. There is not enough, food, energy, room on the planet to live like we lived in the last decade, or even the last hundred years for that matter.

And how long did we live like that? Not very long. At the extreme end of consumer spending perhaps a decade. Before that we were creating the consumer society for a few decades but in terms of even recent history it wasn't long.

We lived in a bubble and it's bursting now in slow motion--oh see the pretty colors. 'Cept soon it's gonna get ugly.

This recession is actually way more stable then the great depression in 1929. If you read up on the crash in 1929 then you have a different prospective on this one now.

Did you know that the summer of 1928 brokers loans increased at a rate of $400000000 a month and ended at 7 billion ? That was way more out of hand then this is now but that did follow with 27% unemployment.

 

[Krustee]

Wow, Lady Companion, someone who has never studied finance of economics might think you know what you're talking about. You throw around a few terms and seem to know the lingo but you don't have your facts straight.

This is the kinda 'cut & run' chicken shit that really pisses me off!

If your gonna criticize somebody here, you little weasel, you should have the wherewithal to come up with a worthy counter point with that snide remark.

I find Angel has a good bit of knowledge about business matters & seems competent with investing.

Keep in mind there weasel that a person does not need to know everything about everything to be successful.

A person of average intelligence & the will to learn can read or seek advice from professional consultants to pick up tips on investing & business practice.

The most successful people in history were not experts at any one thing but their genius was their ability to assemble a team of expert advisers which kept them abreast of their business matters.

Try looking up Henry Ford & for a local reference there's Jimmy Pattison.

I may be the biggest horses ass & the most critical person on this board but you will never catch me pulling a cut & run attack like you did.

If I'm gonna seriously criticize somebody, I'll have the common decency to show some semblance of scruples & provide a sagacious reason for it.

That is all.

 

[wess]

Wow, Lady Companion, someone who has never studied finance of economics might think you know what you're talking about. You throw around a few terms and seem to know the lingo but you don't have your facts straight.

I honestly thought everything she said made sense.(No ass kissing intended, I just hate financial advisors. ) Are you a " financial advisor " ?

If you think that you can " study " everyone rich then why are you not retired ?
The only thing an advisor knows is how to keep investors paying their fees.

If you were you would have said something but you said nothing which makes you a coward.

 

[trackstar]

This is the kinda 'cut & run' chicken shit that really pisses me off!

If your gonna criticize somebody there you little weasel, you should have the wherewithal to come up with a worthy counter point with that snide remark.

I was thinking the same thing

 

[festealth]

I have a question...

I'm not an economist, but isn't wealth a relative term...

if you woke up tomorrow, and your net worth shrank by 50% along with everybody else's would you not be as wealthy...

also, I remember somebody saying, that if you put all the economists in the world end to end, they still couldn't reach a conclusion...

I guess nobody would actually be "poorer" if everyone lost 50%... but unfortunately the costs of living never seems to drop 50% to match it.

I don't think wealthy is really the correct term use. When I think of wealthy, I think of the Middle class and above. Middle class with: million dollar homes, 2-3 cars with total values of 150k, and easily exceed 100k in liquid assets (not including RSP/long-term investments, or other valuables).
The middle class isn't: family with both parents working, save everything for retirement, house in the suburbs, car + station wagon/van, school funds for kids and maybe 1 vacation a year. That's is called Working Class/Lower Class.
Just everyone thinks they're middle class when they're not, but they except their lifestyles to be as it is.

 

[FunSugarDaddy]

Just because something was like something else before doesn't mean it will be again. That's the problem with everyones' reasoning here. We've seen depressions, we had lots of recessions; we're down for a while, then we bounce back, usually stronger than before. Always have, always will.

That's sheep talk. Yup everybody says it; must be true. Why? Why does it have to be like that? Dunno but it always has.



I've posted this quote before but it bears repeating. What Steve is telling us is to get used to a reduced lifestyle--not for a while or 5 or 10 years--get used to it.

He's not the only one. There is a small number of thoughtful people who are seeing what's happening. There is not enough, food, energy, room on the planet to live like we lived in the last decade, or even the last hundred years for that matter.

And how long did we live like that? Not very long. At the extreme end of consumer spending perhaps a decade. Before that we were creating the consumer society for a few decades but in terms of even recent history it wasn't long.

We lived in a bubble and it's bursting now in slow motion--oh see the pretty colors. 'Cept soon it's gonna get ugly.

Did it ever occur to you that nobody really knows how things are going to unfold, including Steve..that's the reality of the situation. In terms of a course of action..think about this, if you were willing to be 2X for Walmart shares a few months ago..why wouldn't you pay X for them today, if the P/E ratio and dividend payout and cashflows were simiar, or least adjust for these differences?

Having said that, I don't believe the markets will ever fully recover, as babyboomers etc. will make a permanent shift towards safety and then they'll be required to convert their RRSP's to RRIF's and the flow of money will start leaving the system.

Essentially the key is P/E multiples, dividend pay out records, corporate cash flow and things of that nature.

 

[FunSugarDaddy]

Times may seem tougher now than they were last year, but keep in mind that for many people, it is not yet an actualized gain or loss. Until you actually buy or sell your stock, house or other items of value, you haven't made or lost anything.

I also agree that everything is relative. It wasn't that long ago that having a million dollars was the benchmark to being rich. In the 90's it was considered being well off, and up until a couple of years ago - it was merely a good start.

The positive side of the economic downturn is that money is actually worth something again. While your dream home may not necessarily be 'affordable' it is certaily 'more affordable' than just a few months ago. Fuel prices are down, food prices are down, vacation prices are down....you get the picture.

As long as you are a hard worker and adaptable, you will be able to keep or find employment. As long as you weren't foolish with purchasing a house that you and the bank should have never let you purchase (ie low equity and a mortgage streched out over 15 years) then you will be able to ride out the bump and get your original purchase price back in a few years.

As for stocks - well, unless you shorted everything, we all got slaughtered. If you were using the dividends to fund your retirement, then you are probably really hurting. If you don't need the money for a few years, it will bounce back, as it always does. The markets are still very volitile, but if you change your approach in the midterm to being more of a trader than an investor, you will be able to make it back in the next couple of years. It isn't uncommon to see stocks in this envirnoment move 10% in a couple of weeks. If you get that kind of a gain, dump it and wait for it to drop again, or pick up another fundamentally strong yet undervalued stock which is expereincing volitility and do the same thing.

Yes, the economic situation has gone back to a more sustainable level. But if you work hard, invest wisely, and never play with anything you can't afford to lose, you will always be ok.


______________

ClassyAngel - your exlusive travel companion and fun loving courtesan. Now available for duos with some of the finest escorts vancouver has to offer - as well as VIP international escorts for sensual liaisons!

Discretion and fun guaranteed!
http://www.ClassyAngel.com
604 583 4998

Very articulate post, you've definately got the fundamentals down pat.

 

[island-guy]

If we're going to use the great depression as a comparison to now..

How do we get Germany to invade France and solve the unemployment problem?

 

[wess]

If we're going to use the great depression as a comparison to now..

How do we get Germany to invade France and solve the unemployment problem?

No worries. Israel will need to attack Iran in the next 24 months and then Iran will close the Strait of Hormuz and then no ME oil will make it to the US.

 

[hunsperger]

...

Times may seem tougher now than they were last year, but keep in mind that for many people, it is not yet an actualized gain or loss. Until you actually buy or sell your stock, house or other items of value, you haven't made or lost anything.

I also agree that everything is relative. It wasn't that long ago that having a million dollars was the benchmark to being rich. In the 90's it was considered being well off, and up until a couple of years ago - it was merely a good start.

The positive side of the economic downturn is that money is actually worth something again. While your dream home may not necessarily be 'affordable' it is certaily 'more affordable' than just a few months ago. Fuel prices are down, food prices are down, vacation prices are down....you get the picture.

As long as you are a hard worker and adaptable, you will be able to keep or find employment. As long as you weren't foolish with purchasing a house that you and the bank should have never let you purchase (ie low equity and a mortgage streched out over 15 years) then you will be able to ride out the bump and get your original purchase price back in a few years.

As for stocks - well, unless you shorted everything, we all got slaughtered. If you were using the dividends to fund your retirement, then you are probably really hurting. If you don't need the money for a few years, it will bounce back, as it always does. The markets are still very volitile, but if you change your approach in the midterm to being more of a trader than an investor, you will be able to make it back in the next couple of years. It isn't uncommon to see stocks in this envirnoment move 10% in a couple of weeks. If you get that kind of a gain, dump it and wait for it to drop again, or pick up another fundamentally strong yet undervalued stock which is expereincing volitility and do the same thing.

Yes, the economic situation has gone back to a more sustainable level. But if you work hard, invest wisely, and never play with anything you can't afford to lose, you will always be ok.


______________

ClassyAngel - your exlusive travel companion and fun loving courtesan. Now available for duos with some of the finest escorts vancouver has to offer - as well as VIP international escorts for sensual liaisons!

Discretion and fun guaranteed!
http://www.ClassyAngel.com
604 583 4998

you my friend are a very wise lady...

beautiful and intelligent, very intimidating, but that's my problem...

to be continued...

 

[Krustee]

Did it ever occur to you that nobody really knows how things are going to unfold, including Steve..that's the reality of the situation. In terms of a course of action..think about this, if you were willing to be 2X for Walmart shares a few months ago..why wouldn't you pay X for them today, if the P/E ratio and dividend payout and cashflows were simiar, or least adjust for these differences?

????????

Having said that, I don't believe the markets will ever fully recover, as babyboomers etc. will make a permanent shift towards safety and then they'll be required to convert their RRSP's to RRIF's and the flow of money will start leaving the system.

Essentially the key is P/E multiples, dividend pay out records, corporate cash flow and things of that nature.

You bring up a good point here FSD - what most have not factored into this whole downturn is the effect it is having on those who are close to or currently in their retirement.

I have heard of several people where I work who are now needing to continue working after their planned retirement date due to losing so much money in their RRSP's.

With the massive Baby Boomer generation heading in to retirement currently & in the near future, it will most definitely have an impact on the market.

I, like you tend to think that there will be some hedging & very conservative spending practices as these retirees try to live on what remains from their investments that were slashed by this & the '99/'00 drop in the market.

With that many boomers out of the earning system & conserving their money as opposed to spending like we've seen the past 7 years.

Add this to the spiraling economy where I predict 8+% unemployment here in Canada by the end of this year & up to 10% after 2010, & you have a recipe for disaster.

I will say this again - we are looking a the very real possibility that this recession/depression may exceed the crash of 1929 in many aspects of losses.

We have seen a huge increase in cost of housing, oil, metals & many other commodities over the past decade.

The only thing driving these increases in price was demand & market manipulation by large corporations & cartels.

Easy money from lenders & STUPID people who took the loans with no real possibility of affording to pay to term made houses see a false market inflation.

The big thing to understand here is that these upward trends in price did NOT equate to any real VALUE!!

As has been mentioned many times by many people, we are seeing the BUBBLE of this economy bursting & what is going to happen is the price will more closely match the actual value of these commodities once this economy shakes out & settles on solid ground again.

We have a long way for this economy to fall before that happens!

Sorry for the bad news but if you study the markets, the indicators of GDP output the last 2 quarters, massive debt load by individuals with correlating bankruptcies & the stingy lending practices of the financial sector, you are left with an economy that has nothing to prop it up.

Governments around the world have been dumping funds in to save these fundamentals of capitalism & the money gets sucked up in the black hole of this economic implosion.

There is so much bad credit out there with no assets backing it up that currencies around the world are fluctuating like a ping pong ball in the ocean.

The fundamentals must be in place for us to have a stable economy & there's not one expert out there who will tell you they are OK.

This should scare the pants off of you folks because that means that the so called experts have no clue about when, what or where this thing will end up.

I am still advising everyone to buy & hold precious metals like Gold, copper & silver. (those will remain in demand no matter what - Gold will rise on speculation)

TIME TO LISTEN UP FOLKS!

 

[hunsperger]

...

This week's sign of the Apocalypse...

many of the younger boomer were likely expecting an inheritance so they may also be adversely affected.

makes me ashamed that I'm a boomer...

only our generation would factor their parents death into their financial plan...

"gee honey, if only Mom and Dad would croak we could afford that new BMW"...

simply pathetic...