Pension reform bill - similar effects to the failed SS reforms

Quote from drsteph:


What would happen to the US equity markets if a dollar devaluation and rising long term rates occurred simultaneously? How would foreign investors react if their foreign Eurodollar holdings were to be devalued? Would they buy US equities and prop up the equity market, particularly if from their perspective, US equities were cheap?

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USA is turning into Mexico/Brazil — Huge disparity between rich and poor through inflated assets. Same thing that has been happening for decades as the wages of middle/lower class declines on a consistent base due to corporate cost controls and dollar inflation.

Either way, they need to get rid of that Social Security bullsh*t, from what I understand the privatized social security is optional, hence you do not have to put that otherwise stolen money into the mutual funds.

P.S. Hedge funds on average do not really outperform mutual funds or the major averages. So your theory may have little behind it. Their ability to short has not done much to the market, all they do is get short ripped.
 
USA is turning into Mexico/Brazil — Huge disparity between rich and poor through inflated assets. Same thing that has been happening for decades as the wages of middle/lower class declines on a consistent base due to corporate cost controls and dollar inflation

Slowly but surely ! agree with that 100 % !!
 
Quote from Hydroblunt:

USA is turning into Mexico/Brazil — Huge disparity between rich and poor through inflated assets. Same thing that has been happening for decades as the wages of middle/lower class declines on a consistent base due to corporate cost controls and dollar inflation.
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Its supply and demand? What will happen when the baby boomers retire? Higher wages and declining asset prices? Isn’t this the inverted 1969-1982? Wealth is now transferred from workers to capital owners, back then it was opposite. In the not so distant future it will be opposite once again.
 
For the past 30 years the boomers have been saving and investing which has driven up all asset prices. (ie. high demand)

For the next 20 years the boomers will be selling and spending their assets. (ie. high supply, lower demand)

The younger generations are not rich enough, nor do they have the sheer numbers to absorb all those sales. (low demand, higher supply)

So asset prices (including equities) are headed down. Wall Street and the US govt will certainly try to stem the tide through various policies and marketing, but that's like trying to dam the ocean. Pension reform and SS reform fit in here.


On the other side of this:
1. Illegal aliens and foreign investors will help stem the tide. Can we create enough new consumers to replace the demographic trends?

2. If the Fed prints enough dollars, they might reverse the trend in falling asset prices (in nominal dollars anyway).


That's how I see it anyhow. Many people have been predicting this cycle for decades.
 
And what about demand for energy and commodities. It will go down as the boomers retire? Certainly gold may rise because of inflation fear caused by wage inflation. But in general the stock market is a better place to be?

Luckily corporate balance sheets are healthy, but they will probably empty fast when boomers retire and they have to pay up to compete for workers and capital.
 
IMO, commodities gets you on the right side of the trade:

- the rest of the world is transitioning into consuming more (the US is 300 million. Even if only 10% of China and India become middle class, their consumption of resources would easily replace the entire US. We're negligible.)
- Wall Street and the US govt need external investment and their policies/marketing will cater to it
- commodities' value remains regardless how they're denominated.
 
Quote from FireWalker:

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Problem with that theory is the assumption of baby boomer "wealth". There is a lot of debt on them as well. What about the college tuition they had to cover for their kids? What about the fact that a large percentage of their "wealth" is tied directly to their homes which have been run up on asset inflation?

Baby boomers were still a consumer conditioned generation, even though they actually had a positive savings rate. Their true source of wealth is most likely the company pensions from back in the day when companies actually gave decent pension plans. So their money is already in the market.

China and India have potential for dumb money, but I notice most people assume too much about their newly risen "middle class". All those areas of heavy employment have experienced inflation, just consider Mumbai where wages have been going up and yet everything is still a bit outpriced for the average IT sweatshop worker.
If it's gonna happen, it's going to be leveraged, kinda like the stories we are getting out of china of absurd margins for the average Yang the sweatshop worker.
 
Quote from infolode:

$12 TRILLION/dump

Actually I was questioning this myself; how long would it take to plow this much money into the system?
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So what are they going to spend their money on??

Their children and grandchildren. The "wealth" is going to be spent on kids cars, college education, appliances for their kids houses, clothes and toys for grandkids.

Then on themselves. Some will not want to be taken out of the economic equation, they will want to be productive somehow.

When they "cash in" to pay for their retirement, where's that money going to go. What will their monthly expenses be?? Which companies will feel this money on their income statements??

The same things they've been spending it on for the last 60 years of their lives!! PLUS kids and grandkids who are in need considering the way things are.
 
Here's some fun data on the lifestyle funds.

Note how "Nearly one-quarter of the 401(k) account balances of recently hired workers in their 20s are invested in such funds, according to a recent ICI report." No freaking surprise, since its been set up that way. Note the capital inflows on the order of $300 billion (almost all invested in equities, by the way)

http://biz.yahoo.com/cbsm/070808/202e88acf7964939a56b9d8d8587849b.html?.v=1&.pf=retirement

Financial engineering at its finest.
 
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