The coming retirement crisis

[BRUTE]

I actually spend more on coffee than I spend on medical care

7Wannabe5 and brute both. brute should check for high deductible coffee insurance with a flexible coffee spending account.

[IlliniDave]

With some imagination one can identify the Achilles' Heel of about any plan.

My plan is simply to "oversave". The underlying risk factors are what has goosed motivation to leave a nontrivial estate to my descendants. I can't solve all the world's problems, or even all of my own. To me the sensible thing to do is drive my risk down to a tolerable level (a personal temperament thing) then live out my life as best I can.

[Jason]

I'd sooner open my door to The Angel of Fucking Death than this guy, but I admit to checking McDonald's stock prices while listening to him as he does seem to be making a good case to invest in goods that poor people will be spending what little money they have on. Maybe John Bogel will step-up and put together a Wellington Old and Brokeass Fund together. I could never own a trailer park because I'm obviously an accept sexual favors in lieu of monthly propane hookup fee type of guy. But I have noticed the expansion of pawn shops in both locations and square footage. I guess maybe Amazon as Jeff Bezos has essentially turned the earth into his own fucking plantation. It just seems like an opportune time to get into the making money off people who don't have money sector.

[jacob]

The thing I pay the most attention to are the structural shifts. For that it doesn't matter that Millenials are larger than Boomers but that there is a hole wrt GenX both in terms of consumption patterns and in terms of income patterns. This will rip things back and forth in the market. First the sale of washers and dryers will go down substantially ... then it will go up again. Can a company like e.g. Whirlpool handle this?

For example, the video mentions the car example. New cars are typically(?) something that's bought by older people with discretionary income. What's going to happen here? Older people can't afford it because 99% of them have no material savings (the reason averages are high is because of the 1% or the 10% if you will). GenX already can't afford them and mostly drive used cars. (I literally do not know anyone who has bought their car new.) And Millenials have Uber and only want a new car if it's a Tesla(?). Can a company like GM handle this?

Trailer parks are mentioned. I wouldn't key in on that. I just take it as a suggestion (at one point I actually was looking into buying one, but you need to put all your ERE money into it. These are a quarter-million and up.) What's more relevant is the enormous malinvestment the boomers put into large low-quality residential construction. GenX don't want to buy that(?) and Millenials can't afford it. Note that roomsharing a large McMansion can substitute for a camper or a single-wide in trailer park. Imagine some renovation that converted these houses into "in-law"-compartments.

[Jason]

My guess is that with McMansion's you're going to have issues with neighbors claiming devaluation of contiguous properties due to increased residents, activity and car parking. I imagine there are zoning issues as well. That's why brothels in high end neighborhoods always end up on the news. People notice the increased traffic in their neighborhoods. I believe it will only work if a community agrees to it. This happened during the last crisis when crime moved out of the city and into the suburbs and as there were significant abandoned or half built houses.

But you have to think it could become the loss of enormous wealth as those looking to downsize do not recapture in primary resident sale what they anticipated due to diminishing demand in the housing market.

I was surprised at two things during the interview. One, that the opioid crisis has been significant enough to impact demographics to the extent it has. I know it impacted the life expectancy of middle aged caucasian women. And unless it was during the time I went to look for a razor blade, I didn't hear the student loan crisis impacting future home sales. Maybe it was on one of his death charts and I just didn't see it.

[tonyedgecombe]

I wonder what the political reaction to this will be, after all one thing boomers are good at is voting.

[TomPie]

It is a good video, so my two cents:

- home country bias. Yes, this pattern seems to be true in the US but the pattern is quite different in India or China. Could they take over the (global, not US) consumption and apple/ amazon will start making most of their profits n the EMs?

- concentration vs. diversification. I raised a separated thread on this topic some time ago. Paper assets are just one type of investment (others are real estate and business - keeping it simple) and diversifying across these asset types not within assets seems like a smart choice to me.

- The level of consumption is breath taking. At least for me (a post communist European;) when I come over to US. Is it sustainable? Probably not. Will there be a backlash? Probably yes, but again let's not confuse the US with the World

[UK-with-kids]

The video is a bit too sensationalist for me, complete with scary music and misleading graphs that don't start at zero. Its sole purpose seems to be to get people to sign up to his video channel.

The fact is that doom mongers will always be right eventually as busts will eventually follow booms and then we look back and see who was warning about it that week and hail them as some kind of insightful genius.

That's not to say there aren't some interesting and valid points made in the video, but I think the way he extrapolates so many consequences from one certainty (demographics) is way over the top. What if the baby boomers carry on consuming but they buy services to look after them in old age, which leads to a boom in robot technology, which makes robots cheaper, which raises productivity and wages for younger workers, who can suddenly afford all the big houses which start coming onto the market as the boomers die off. I'm not saying any of that is going to happen, just that there are so many possibilities that nobody can predict the future with much certainty. In the 1950s everyone thought we'd be working a few hours a week and living in the age of leisure by now - just look how that turned out. Only Tim Ferrises and ERE experts have managed that trick so far.

And yes, the comments about Bitcoin and fast food are completely ridiculous.

[jennypenny]

Another good video from Real Vision, this time with Niels Jenson. He discusses the retirement crisis as well as other big risk factors on the horizon.

Has anyone read his book The End of Indexing: Six structural mega-trends that threaten passive investing?

[TopHatFox]

That’s interesting, wouldn’t the end of indexing basically mean the end of a generally positive stock market? (the largest asset class probably) Instead being replaced by a stock market that does kinda meh or bad overall, but better in some places and bad in other places? Wouldn’t that be a literal sign of the end of capitalism’s heyday? If so, I wonder if the government would step in to keep the stock market valuations afloat, and therefore index investing.

[Mister Imperceptible]

That’s interesting, wouldn’t the end of indexing basically mean the end of a generally positive stock market? (the largest asset class probably) Instead being replaced by a stock market that does kinda meh or bad overall, but better in some places and bad in other places? Wouldn’t that be a literal sign of the end of capitalism’s heyday?

Capital markets are intended to function as a price discovery mechanism, so indexing is not inherent to the success of wise capital allocation. Masking the signals of price discovery so everything does well is a perversion of capitalism.

If so, I wonder if the government would step in to keep the stock market valuations afloat, and therefore index investing.

They will step in and do everything in their power to try and do so. This is the traditional Central Banker Put that everyone is “banking” on. Whether they succeed or not, I have no idea. I wouldn’t bank on it.

https://en.m.wikipedia.org/wiki/Bernanke_doctrine

[jacob]

@THF - Not necessarily. Reminder: The equity market is not the economy. It is, in fact, even just a small fraction of the financial markets. The bond market is bigger and the derivatives market and amount of unfunded pension et al. promises bigger still. The stock market is just the tail end of the dog.

But as you note, the stock market is ultimately a market of stocks and so if it goes sideways or down, there's still money to be made and capitalism still exists even when the tide goes out. See other countries for examples. It's just that funding will no longer be supplied via equity that is sponsored by the public. Or at least ... I imagine it won't take that many years before a large part of the investing public stop believing that everything goes up in the long run. It only took a few months in 2008 before the acolytes started doubting.

[ElysianFields]

Admittedly I'm arriving at this conversation several months late, and the video outlines multiple valid factors reducing aggregate demand in the coming years, including baby boomer retirements and millennial student debts.

Nevertheless, unlike Japan to a very large extent, and Europe to a somewhat lesser extent, the U. S. (and Canada) welcome comparatively very many immigrants, who keep the population increasing (despite a negative birth rate) and add to aggregate demand (despite the massive number of baby boomer retirements). Thus I find the overall thrust of the video overblown.

[George the original one]

Nevertheless, unlike Japan to a very large extent, and Europe to a somewhat lesser extent, the U. S. (and Canada) welcome comparatively very many immigrants, who keep the population increasing (despite a negative birth rate) and add to aggregate demand (despite the massive number of baby boomer retirements). Thus I find the overall thrust of the video overblown.

Trump is dismantling the immigration angle... https://www.pewresearch.org/fact-tank/2 ... d-changes/

[Nomad]

This looks quite different from the graph in the video?

https://www.populationpyramid.net/unite ... rica/2019/

[conwy]

Die young and save yourself.

Could make the opposite argument. Live healthy and stay fit, because you might need to make do with minimal healthcare when you get old. There are good and bad ways to die.