[quote=CA renter]
Don’t project the price trends over the past ~50 years to continue. Asset owners have had the effects of baby boomers entering their peak purchasing years (they are going to be entering their peak selling years now), and continuously lower interest rates over the past ~30 years. I think there is a definite danger of a prolonged period of asset price declines if interest rates ever get away from the Fed, or even if they start rising in a “controlled” fashion.
I think this is a dangerous trap that many are getting into. Just my 2 cents…[/quote]
If you just look at how the population budge of the boomers moved over time you can really explain just about everything we’ve seen economically. In the 1970’s boomers were finishing school, getting jobs, and starting families. The demand for home was high and the demand for loans was high so we ended up with an environment where home prices and interest rates went up.
In the 1980’s private companies started realizing that there was no way they’d be able to make good on pension promises and the government created 401Ks for retirement. So people started plowing money into 401Ks and the stock market because they had a long time until retirement. Behold the stock market goes on a 20 year bull run as the boomers start investing for their retirement.
In 2000’s the boomers have to start paying for their kids college, start having to think about more conservative investments and the stock market starts suffering while income producing assets increase (bonds, rental properties, etc go up). People nearing retirement start gambling in bubbles because they are short of funds for retirement. In the decades going forward this boomer demographic will likely sell assets, and will likely drive income producing assets to microscopic yields. Boomers are in the peak asset collection phase right now. They move to a liquidation phase later as they trade assets for goods and services.
I expect stocks the suffer the most, then bonds, and finally real estate. It’s really a simple game of competing for goods and services that next generation will produce. What does that next generation value and how many goods and services are available after they provide for themselves.
