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The real story behind this misleading headline / Blame the Boomers / Zima...ewwwwwwwwwwww

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October 21, 2008 – Comments (4)

Wow, great news.  Look at all of these rosy headlines:

Southern California Home Sales Rise Record 65 Percent - Bloomberg 

Southern California Home Sales Jump 65 Percent, Tracking Firm Says - FOXNews

September home sales up 65% from last year in Southern California - Los Angeles Times

Unfortunately, these headlines ignore the fact that the prices of homes sold in the Los Angeles area in September were down a whopping 33.2% versus the same period a year ago and that half of the homes sold during the month were foreclosures. 

Not only that, but the process of buying the homes that were reported as sold in September probably started in July or August, so these numbers do not even reflect the fact that the economy has significantly weakened since then and consumer confidence that has fallen to a record low.

Also, even though the credit crunch has shown some slight signs of easing, mortgage rates are headed in the wrong direction.  After falling to a low of around 5.75% (I sure am glad that I locked that rate in) mortgage rates have risen to over 6.2%.

While California is not representative of the whole country, I suspect that we will not see a bottom in housing prices there or elsewhere until late 2009 at the earliest.

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Here's an interesting theory about the slowdown in consumer spending that we are experiencing.  The Baby Boomers are causing it...or at least a big chunk of it.

Boomer Bust: How Will the Economy Rebound Without Post-War Babies Financing Their Harleys?

The 79 million people who were born between 1946 and 1964 are called the "Baby Boomer" generation.  If there's one thing that the boomers have been good at over the years, it's spending money instead of saving it.  During the 1990s, they accounted for approximately half of all consumer spending in the United States, according to a report by the McKinsey Global Institute.

When Boomers hit their earning peak in 2000-2005, the U.S. household saving rate fell to 2% of income from a high of 10% in the early 1980s.  All of a sudden as they their 401Ks and IRAs are rapidly falling in value, an estimated $2 trillion of wealth lost has been lost in retirement funds during the recent stock meltdown, Boomers are scared that they won't have enough money for retirement and they are slashing their spending big time.

Here's a great quote from this article:

"Some economists and demographers say the Baby Boomers themselves are driving the current turmoil. As Boomers send their kids out into the world, they are entering the phase of life when income starts to fall, spending slows and houses get sold. The same generational heft that Boomers used to create fads for hula hoops, sport-utility vehicles and Harleys will now work against them as all of them rush to cash out and slow down at once. That puts more houses up for sale to far fewer buyers: a younger generation that is also less able to afford them.

'The generational crash is when there are too many older homeowners and not enough buyers,' says Dowell Myers, a University of Southern California professor.

'This is like winter coming,' adds Harry S. Dent, an author and consultant who says the U.S. is headed for a slump that will last until 2020. It will take that long for the financial wreckage from this boom-bust cycle to be cleared away, he says, and for the 79.4 million strong "Millennial Generation" -- most of whom are still in high school or college -- to enter adulthood and start buying homes, cars and gadgets of their own. 'It happens once every 80 years,' Mr. Dent says of this sort of demographics-driven economic cycle. 'It's going to be difficult.'"

This doesn't even get into the fact that Baby Boomers will soon start to collect Social Security and Medicare and the problems that will cause.  Yuck.

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In other, sadder news, MillerCoors announced today that on October 10th it ceased production of the clear alcoholic beverage Zima. I can't believe that they still make this disgusting stuff, but evidentally they do. I highly doubt that anyone will miss it. Distributors will be able to access the remaining Zima inventory through December so if for some mind-boggling reason you like this nasty sewage, start hording it before it's gone.

MillerCoors ends production of Zima



Deej
Short Zima
No position in SABMiller

4 Comments – Post Your Own

#1) On October 21, 2008 at 5:25 PM, kdakota630 (29.78) wrote:

I had no idea they still made Zima.  I didn't hate it, but I sure didn't like it enough to buy it, and haven't seen it in years.

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#2) On October 21, 2008 at 6:07 PM, dbhealy (32.92) wrote:

i bring a 6-pack home for my nephew every xmas, he can't get enough of the stuff!!  i hope it doesn't go bad like diet drinks do.. otherwise he really will be drinking sewage in a few years (i stocked up).

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#3) On October 21, 2008 at 6:08 PM, dbhealy (32.92) wrote:

oh, forgot to mention they haven't sold it in canada for years (which is why i bring some back his way)

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#4) On October 21, 2008 at 11:42 PM, Tastylunch (29.45) wrote:

Yeah I've thought something similair about the boomers for a long while, another consequence is we may see a large % of boomers give up permanently on stocks  taking a lot of capital out of the market after this bloodbath/wall st pr nightmare. They are being counseled to reduce risk anyway when they retire but I bet most wouldn't have without a catalyst.

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