Barn Fund-Raising, or Will Baby Boomers Make Saving Trendy Again?

Remember Harry Dent?

He’s the one who forecast the Dow at 40,000, based upon his reading of demographic trends. All those aging baby boomers had to save for their retirement, he said. And the logical place for them to put their money was in the stock market.

Well, as the years have passed…it now becomes clearer that the boomers aren’t all that interested in saving money – not when credit is easily available and when their houses are rising in price. So, this past November, Dent felt it was time for a little backtracking. Now he says the new bubble will reach its maximum in late 2009, with the Dow near 20,000 and the Nasdaq at 5,000.

Could he be right? Anything is possible. We suspect that the boomers will start saving again. They’ve been on a spending binge for the last 10 years. They’re probably about ready to go on a saving binge. Not only will they need the money, we’ve noticed signs that saving money is becoming avant-garde. There may be a backlash against conspicuous consumption coming. We’ll have to explain more tomorrow – when we take up our new theory of modern politics, but there are times when spending is hip, stylish and trendy. There are other times when spending is regarded as vulgar, crass and foolish. The times could be changin’ now.

If boomers begin saving…what will they do with their money? Will they put it in stocks? Or real estate?

We noticed, recently, how much of a drag owning real estate is. You’re not bothered by it when prices are rising sharply. But when they begin to flatten out…and when sales sag…you begin to resent having to fix the roof or the dishwasher.

This came home to us when we looked at what it costs us to hold onto our farm in Maryland. There are a couple of houses on the farm, which are rented out. It should be making money for us, but instead, we get this message from our property manager:

“Last year there was around an $8,500 loss. The main house was rented for $2,500 a month for six months. We had to replace an HVAC in the dairy apartment, a water heater in the tenant house, a heating stove in the barn, carpet in the dairy apartment. Last year we spent the following for maintenance and repairs (parts & labor) on each of the buildings:

Dairy $3,667
Main House $17,250
Tenant house $890
Grounds $9,659 ($2,547 for labor, the rest for mulch, gravel, etc.)
Management $2,770.00”

We doubt boomers will want to deal with these problems. And we wouldn’t be surprised to see attitudes to real estate revert back to what they were 30 years ago – when people regarded property as an expensive burden, not as an investment.

Want to buy property where property is still going up? Buy in Japan. For the first time in 16 years, Japanese real estate prices are going up nationwide.

The biggest gains came in Tokyo commercial property – where prices were up by 9.4% in 2006.

Bill Bonner
Markets and Money

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors. Founded in 1999, Markets and Money is published in 7 countries with a worldwide readership of almost 1 million people.

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