Conspiracy theory or legitimate explanation?

steampowered

DiggerUK said:

We paid the last of our mortgage in 2000. Post 2000, an examination of our equity type investments showed me that there was a declining real return on monies invested. Long story short, it's what economists refer to as the declining rate of profit.

So we decided  to put our savings, in whatever form we had them, into non equity 'cash' homes. NSI Index Linked, Premium Bonds, Building Societies and Gold

So because the returns on equities had declined from perhaps 10% to 8% per year, you decided to put your money into premium bonds which return on average 1.4%?

grumiofoundation

DiggerUK said:

Yes, I read your previous post. 

We are well up to date on problems of those entering the workforce over the last twenty years.  Bank of 'Mum 'n Dad' has been raided on four occasions, in laws have also found out that the first eighteen years of parenthood are expensive, the second eighteen bankrupt you.
All we keep banging on about with them is one thing, forget savings and emergency funds, pay down the mortgage. After all, what real value are they in the current economic situation. To one degree or another, it's what they 'claim' to have done..._

Well if you give out advice like this is explains why you are having to bail out your children. The financially incompetent apple...

STOP advising people not to have an emergency fund. 

DiggerUK

steampowered said:

DiggerUK said:

We paid the last of our mortgage in 2000. Post 2000, an examination of our equity type investments showed me that there was a declining real return on monies invested. Long story short, it's what economists refer to as the declining rate of profit.

So we decided  to put our savings, in whatever form we had them, into non equity 'cash' homes. NSI Index Linked, Premium Bonds, Building Societies and Gold

So because the returns on equities had declined from perhaps 10% to 8% per year, you decided to put your money into premium bonds which return on average 1.4%?

I can't remember what the coupon on PB's was in 2000, it wasn't 1.4% that's for sure. We only keep cash in hand in PB's now, all our ISA savings accounts are gone except for about £100.

You misunderstand the theories and explanations given for declining rate of profit arguments in economics. It is not the drop in return that is the issue. It's the real rate of return over time that declines, that can happen even when the asset class you are invested in and the dividends both rise nominally.

In these days of cheap loans, especially zero rate credit cards, emergency funds are not a necessity. They become a liability if a household has between £6,000 and £16,000 in savings and then finds themselves on benefits. 

If the cheap loans disappear then by all means build a reserve, but for now don't bother, much wiser to pay mortgages and debts down..._

DiggerUK

grumiofoundation said:

DiggerUK said:

Yes, I read your previous post. 

We are well up to date on problems of those entering the workforce over the last twenty years.  Bank of 'Mum 'n Dad' has been raided on four occasions, in laws have also found out that the first eighteen years of parenthood are expensive, the second eighteen bankrupt you.
All we keep banging on about with them is one thing, forget savings and emergency funds, pay down the mortgage. After all, what real value are they in the current economic situation. To one degree or another, it's what they 'claim' to have done..._

Well if you give out advice like this is explains why you are having to bail out your children. 

Let's put the snarky comments to one side shall we, they weren't "bailed out" 
In common with most today they had huge problems getting a sizeable deposit together. All we did was promise them an equivalent sum if they reached a savings target we set them. They reached that target and got their assistance, in-laws also helped out.

This allowed them to have a better LTV and a better mortgage deal..._

kinger101

CreditCardChris said:

In 1950 the average salary in the US was $3,300 and the S&P500 was trading at $18. Now the average salary is $48,672 and the S&P500 is trading at $2836. This means in 1950 your annual salary could buy you 183 units of the S&P but now your annual salary can buy you only 17 units, that means 1 unit is now 10.7 times more expensive relative to income!

Largely meaningless.  I doesn't matter how many units one purchases.  Only the income and capital growth in between the period they're bought and sold.  

Boomers probably have had it good, but there's a lot that's overlooked. Their houses might have been cheap, but they would have needed to spend a larger proportion of their income on most the other stuff they purchased.  Like food and clothes.  And usually, from an income which attracted a higher marginal rate of tax.  

Grass in greener and all that.

uknick

CreditCardChris said:

....  And his explanation is basically all the boomers in government, which the majority of the government is, have their pensions in the stock market and they don't want them (and themselves) to go broke so they're doing literally everything in their power to prop up the stock market and not allowing the market to go through its nature cycle. 

Except, and this might be a big flaw in the conspiracy argument, government and civil service pensions aren't based on investments in the markets.  They're paid from current taxation income.  Swings in the markets have no effect on them.  To pay them may mean higher public sector borrowing and, whilst this may affect current tax payers, it has no effect on the pension payments.

afis1904

kinger101 said:

CreditCardChris said:

In 1950 the average salary in the US was $3,300 and the S&P500 was trading at $18. Now the average salary is $48,672 and the S&P500 is trading at $2836. This means in 1950 your annual salary could buy you 183 units of the S&P but now your annual salary can buy you only 17 units, that means 1 unit is now 10.7 times more expensive relative to income!

Largely meaningless.  I doesn't matter how many units one purchases.  Only the income and capital growth in between the period they're bought and sold.  

Boomers probably have had it good, but there's a lot that's overlooked. Their houses might have been cheap, but they would have needed to spend a larger proportion of their income on most the other stuff they purchased.  Like food and clothes.  And usually, from an income which attracted a higher marginal rate of tax.  

Grass in greener and all that.

Housing costs, especially rent, as a percentage of salary (which will already be the biggest expenditure for most) have gone up by up to two thirds in the last twenty years in some places whilst average food costs have been going down by about a fifth or less. I don't really think you can argue much that especially for working class or lower middle class people it has become a lot more difficult to own your own house - with some regional differences obviously.

CreditCardChris

uknick said:

CreditCardChris said:

....  And his explanation is basically all the boomers in government, which the majority of the government is, have their pensions in the stock market and they don't want them (and themselves) to go broke so they're doing literally everything in their power to prop up the stock market and not allowing the market to go through its nature cycle. 

Except, and this might be a big flaw in the conspiracy argument, government and civil service pensions aren't based on investments in the markets.  They're paid from current taxation income.  Swings in the markets have no effect on them.  To pay them may mean higher public sector borrowing and, whilst this may affect current tax payers, it has no effect on the pension payments.

What? So an MP's pension isn't in a pension fund? Pension funds invest in the stock market or bonds don't they? 

grumiofoundation

CreditCardChris said:

uknick said:

CreditCardChris said:

....  And his explanation is basically all the boomers in government, which the majority of the government is, have their pensions in the stock market and they don't want them (and themselves) to go broke so they're doing literally everything in their power to prop up the stock market and not allowing the market to go through its nature cycle. 

Except, and this might be a big flaw in the conspiracy argument, government and civil service pensions aren't based on investments in the markets.  They're paid from current taxation income.  Swings in the markets have no effect on them.  To pay them may mean higher public sector borrowing and, whilst this may affect current tax payers, it has no effect on the pension payments.

What? So an MP's pension isn't in a pension fund? Pension funds invest in the stock market or bonds don't they? 

Look up 'defined benefit' pensions. 

MinuteNoodles

I watched the same video. What made me suspicious is how he said the markets in the UK peaked in 1990 and had been trading sideways since. Strange but when I look at historical graphs I don't see the same.