Conspiracy theory or legitimate explanation?

kuratowski

grumiofoundation said:
Look up 'defined benefit' pensions. 

More precisely, look up unfunded defined benefit pensions...

CreditCardChris

MinuteNoodles said:

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.  

That was the Japanese market? 

bowlhead99

DiggerUK said:

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. 

What real value is an emergency fund when everyone is being told to stay home and incomes can abruptly stop or drop? Gee,I can't imagine how it could be useful to have an amount of money that you had put away for unexpected circumstances here...  Are you for real?

You think it wouldn't be useful to have money put aside to cover the next 3, 6, 12 months' expenses without worry, it would be better to have a slightly lower mortgage payment per month while still needing to pay the rest of the mortgage and all the other bills and commitments and any other unplanned expenditure that might come along but not have any emergency money put aside to cover those things.

There are sensible reasons why personal finance forums tell you to have some money put aside for unexpected circumstances before you leap into paying off a secure, low interest rate mortgage whose servicing cost declines in real terms due to inflation. One can't rely on being able to get new cheap loans or free credit card deals when one loses an income or the credit market deteriorates, because people who don't have much income and need money to cover day to day expenses are not usually seen as the most credit-worthy borrowers (which is why payday loan companies also loan sharks want to charge them hundreds of percent APR).

If your experience of the economy is that you've had a lot of job and health security and where a child gets in financial trouble due to unforseen circumstances they can call on bank of mum and dad, you'll probably think there's no problem with paying down a mortgage on one's home rather than creating a rainy day fund (as long as bank of mum and dad doesn't have unexpected problems at the same time as the child). However, for other people without such safety nets, a savings safety net is a good idea. The safety net of paying off your house is ambitious and can take decades, and even if you have that type of safety net, it doesn't pay for your heating or food.

kinger101

afis1904 said:

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.

I'd say home ownership is slightly more challenging, and it's reflected in the home ownership figures.  But you've missed my central point.  I never claimed housing costs were more.  The opposite in fact.  Just that other things used to cost proportionately more.  On old article I found on the BBC gives an illustration.

https://www.bbc.co.uk/news/business-42735294

Being the child of working class boomer parents who had to both work two jobs to keep up with mortgage payments in the 1980s recession, and seeing periods toward the end of the 70s where my father was unable to work due to industrial action, I can appreciate first hand it wasn't a bed of roses.

afis1904

kinger101 said:

afis1904 said:

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.

I'd say home ownership is slightly more challenging, and it's reflected in the home ownership figures.  But you've missed my central point.  I never claimed housing costs were more.  The opposite in fact.  Just that other things used to cost proportionately more.  On old article I found on the BBC gives an illustration.

https://www.bbc.co.uk/news/business-42735294

Being the child of working class boomer parents who had to both work two jobs to keep up with mortgage payments in the 1980s recession, and seeing periods toward the end of the 70s where my father was unable to work due to industrial action, I can appreciate first hand it wasn't a bed of roses.

This is a comparison between 1957 and 2017 which is not a period where any boomer would have had significant costs as the oldest would have been 11.

 I do agree that some things are better now affordability wise but generally now things do look much more bleak with a big recession followed by a period of incredibly small growth followed by another big recession (most likely). If you look over the last fifteen years real term wages have only just hit pre financial crisis levels whilst in the 70s and 80s they rose on an average of 3% per year. I don't think any anecdotal evidence argue away that boomers and some Gen X had it much better than millennials of which the oldest would have entered the Labour market at a real term wage growth of about 1%. 

kinger101

afis1904 said:

kinger101 said:

afis1904 said:

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.

I'd say home ownership is slightly more challenging, and it's reflected in the home ownership figures.  But you've missed my central point.  I never claimed housing costs were more.  The opposite in fact.  Just that other things used to cost proportionately more.  On old article I found on the BBC gives an illustration.

https://www.bbc.co.uk/news/business-42735294

Being the child of working class boomer parents who had to both work two jobs to keep up with mortgage payments in the 1980s recession, and seeing periods toward the end of the 70s where my father was unable to work due to industrial action, I can appreciate first hand it wasn't a bed of roses.

This is a comparison between 1957 and 2017 which is not a period where any boomer would have had significant costs as the oldest would have been 11.

 I do agree that some things are better now affordability wise but generally now things do look much more bleak with a big recession followed by a period of incredibly small growth followed by another big recession (most likely). If you look over the last fifteen years real term wages have only just hit pre financial crisis levels whilst in the 70s and 80s they rose on an average of 3% per year. I don't think any anecdotal evidence argue away that boomers and some Gen X had it much better than millennials of which the oldest would have entered the Labour market at a real term wage growth of about 1%. 

OK, they're 1957 prices, but they were still relatively higher.  Here's a USDA graph (food prices are generally lower in the US)

My anecdote might be n=1, but my hazy recollection of the late 70s is at least based on fact rather that your guess (also n=1) about what the future might look like.

You've also misunderstood something about real wage growth.  While real wage growth might be 1% now instead of 3%, today's salaries have benefited from all the historic growth.  They have fallen recently, but in real terms, they were much lower in the 70s and 80s than now.  

DiggerUK

bowlhead99 said:

DiggerUK said:

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. 

What real value is an emergency fund when everyone is being told to stay home and incomes can abruptly stop or drop....Are you for real......
........The safety net of paying off your house is ambitious and can take decades, and even if you have that type of safety net, it doesn't pay for your heating or food.

If you are furloughed, you get 80% of income. More than enough to survive on. An emergency fund is not needed.

If your job disappears then household savings above  £6,000 are a hindrance, not a help, because they reduce the amount of benefit. Over £16,000 household savings your benefit is zip.

Savings get below inflation, it's dead money doing nothing. Paying down debts and mortgages releases up money and increases assets. Emergency funds are wasted capital not being put to good use..._

Edit, it is not necessary to take "decades" to pay off a mortgage. We cleared ours in under eleven years by 2000..._

bowlhead99

DiggerUK said:
If you are furloughed, you get 80% of income. More than enough to survive on. An emergency fund is not needed.

Ah, ok, I didn't realise that in a recession everyone gets to keep their jobs or is moved to a scheme where the government pays their employer or former employer to give them 80% of their salary regardless of what the salary was. 

You're right then, no need for any savings.

If your job disappears then household savings above  £6,000 are a hindrance, not a help, because they reduce the amount of benefit. Over £16,000 household savings your benefit is zip.

Savings get below inflation, it's dead money doing nothing. Paying down debts and mortgages releases up money and increases assets. Emergency funds are wasted capital not being put to good use.

Yes, I expect if I lost my job or had some other crisis and needed £1-2k a month to pay my expenses it's probably better to have nothing in the bank and be able to get £74 a week jobseeker's allowance, than have £10-20k in the bank to get me through the troubling times and get a reduced level of benefits

I can see that pesky emergency £10-20k in the bank being a real millstone around my neck when trying to get through tough times. Better make sure I don't have any savings because it's wasted capital and would only be a hindrance to getting a comfortable lifestyle fully funded by government benefits in the event of any unexpected circumstances.

Edit, it is not necessary to take "decades" to pay off a mortgage. We cleared ours in under eleven years by 2000..._

Ok boomer.

horace972897

bowlhead99 said:

Ok boomer.

LMFAO - Was waiting for this to be said whilst reading the whole thread

DiggerUK

bowlhead99 said:

Yes, I expect if I lost my job or had some other crisis and needed £1-2k a month to pay my expenses it's probably better to have nothing in the bank and be able to get £74 a week jobseeker's allowance, than have £10-20k in the bank to get me through the troubling times and get a reduced level of benefits

You talk of £10-20,000 spare cash in the bank and have the cheek to call me a "boomer"???
Why do you use "boomer" in such a pejorative manner, am I supposed to be grateful you don't refer to me as undermensch  

You may underestimate the seriousness of the current situation, but the only assets that you can't be made to spend before benefits are allowed are pension savings and equity in your property. Any share or equity based assets will have to go first. By way of information there is more to benefits than the basic £74, not much I agree.
What is the sense in building up such long term assets and then using them for today's living expenses.

The point that I make is valid. Emergency funds beyond cash in hand are of no real use today, they are wasted capital. Instead of shooting the messenger, play the ball..._