Every once in awhile I run across an old newsletter that I used to communicate with clients when my practice was at an early stage. The April 1989 issue was directed to Baby Boomers who were between the ages of 25 and 43 at the time. Next year, that same generation will be between 43 and 61. Here are some quotes from almost 18 years ago.
"....The movement of your generation through our economic system has been compared to that of a snake swallowing a rabbit. For example, when you became school age, the educational system was forced to expand rapidly to meet the demand. The result was shortages of teachers, textbooks, and classroom space. ..........The same thing happened as you entered the labor force and competed for a finite number of entry level jobs. Now that you have moved into postitions of increased responsibility, there is a serious shortage of entry level workers and a surplus of managerial and supervisory talent. When you needed housing, the increased demand caused an increase in home prices and interest rates."
".........In some 17 odd years, many of you will be eager to stop working and enjoy the benefit of many years of labor. In the beginning this may not be too dificult; however, as you grow older, the number of workers paying into the retirement system will decrease, making it less likely that you will be able to recoup the funds which you have so faithfully paid into the system."
"......... If baby boomers don't drastically increase their savings habits, they won't have funds available for retirement. If they do, they may drive rates of return down resulting in insufficient retirement assets. What can you do to avoid this competition for high investment returns? The best answer lies in becoming serious about saving and investing before of others of your generation discover the need to do so.........we might also look at the current high interrest rate environment to lock in rates at the current levels. I am about ready to start moving into instruments such as zero coupon treasuries with a 10- year maturity or long-term fixed annuities with a 10-year rate guarantee. ........I believe that there is a 10-20% probability that interest rates in the 90's will return to the low levels of the 60's and I intend to invest accordingly."
These quotations from almost 20 years ago are some examples of what we can do to develop a vision of the future and plan our investment strategies accordingly. Very few people would have beleived that the yield on a 10 year treasury would drop from 9% in 1989 to 4.5% today. During that same time increased investor demand drove the Dow from 2418 to 12,121. It is also an example of statistical information that is "set in stone." We absolutely knew that a large segment of the population would go from the 25-43 range in 1989 to the 43-61 range in 2007. It was only a small step to extrapolate what behavior changes might occur as that change became reality. Following that investment strategy enabled me to enjoy the comfortable lifestyle that I now have..............Now if I could just figure out what to do for the next 18 years. Come to think of it, it is the need to do just that that has prompted me to start this blog in the first place. Give me a call or drop me a quick e-mail if you want to discuss some of these issues and develop a strategy for your own financial independence.
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