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Monday, May 01, 2006

Trend: Banking on certainty

A number of things I've been reading and watching in the last few weeks have made me think more broadly about my investing and spending strategies. For my wife, the idea of one day living by the beach is hugely appealing. We've often fantasized about some day buying a place on the coast to retire in. Beachfront property is at a premium and it's probably going to get more expensive. So every now and then we think about trying to buy into somewhere that's cheaper now and wait for it to appreciate.

However, how smart is that really? While we don't want to face it, global warming is a certainty. A result is that weather patterns and coastlines will change drastically within our lifetimes. People are already mapping what will happen as a result of the climate change that's irreversible. One outcome of this is that the Atlantic and Gulf coasts will all be flooded. Should I simply wait here in Minnesota for the coast to come to me? And, isn't it ghoulish to be investing based upon an impending disaster? Yes, but that won't stop people from doing it.

So, if beachfront real estate isn't a great investment, then should I just keep my money (if I had any) in stocks. Well, it turns out that's also another area to be cautious of. Japan's great recession (11 years) was in large part driven by the same population trend that's about to descend upon the US. As Baby boomers, en masse, leave the workforce, they will produce, consume and spend less simply because they're older. This will have a huge impact upon the economy. A direct result is that corporate profits will slow and stocks and real estate will become a far less tempting investment than they are currently. People like Harry Dent, a forecaster famous for having predicted the bubble, are already urging people to dump their stocks in 2009 in favor of bonds.

The common thread between these events is that they're fact. They are both going to happen and while our natural inclination is to ignore things that far off, someone's going to make a lot of money by doing the opposite.


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