Jubilee Prosperity

We are ometimes referred to as the sandwich generation because we may be taking care of both our parents and children. Our generation began the middle of the 20^th Century, with the Beatles, Howdy Doody, Vietnam Peace, and Woodstock free love. We may finally be finding out why our families were so insistent we save for a rainy day.

For a generation raised on consumerism and credit card borrowing, the concept of saving may be entirely alien. We frequently find in our Jubilee Prosperity Seminars, Baby Boomers and their children in denial about what is happening now in the economy. They believe the story of Joseph in Egypt saving 20% during the good years to save a nation is quaint and apocryphal, but not useful.

Boomers may misconstrue the 54% nominal contraction in the Dow and foreclosures in real estate as night terrors that either can’t happen to them, or may soon remedy themselves, with enough government bailouts, cheap borrowing, free lunch, spending and taxing the rich.

Hardly. Our JubileeProsperity work is grounded on generational capital waves going back to earliest recorded ancient times. They are real and work to either build or destroy property and savings.

The typical baby boomer is 60 years old and has another 25 years to live. What if tomorrow real estate and securities begin to make up for lost returns? We would still not recover losses for a long time.

The long-term historical average of real estate is equal to inflation according to Professor Shiller at Yale. The long-term return of stocks is equal to 7% after inflation, according to Professor Siegel at Wharton. Omaha Oracle Warren Buffett warned since 2000, stock returns are unlikely to even be average in coming years. So far he is right.

In real terms, divided by gold, the widely-followed Dow is down from 44 ounces of gold in 1999 to 7, a decline of 84%. Divide 84% by less than 7% a year real return and we are talking more than a dozen years to break even, not the year or two promised by talking heads in media.

By the way, these may be the same talking heads who preached buy and hold at the tops in 2000 and 2007, while we said raise cash or buy bonds, both of which outperformed the real and stock markets for some time. This salvation may soon end for bonds, with growing budget deficits and insolvencies, if it has not already.

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This entry was posted on Monday, April 6th, 2009 at 1:23 am and is filed under Money doctor and Counselor. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.