Ka - Boomer

Let’s say that I am the perfect Baby Boomer. I was a war protesting, drug using hippy, because that is how I got attention and got laid in the 1960s. I promptly became a “No New Taxes” conservative when I got a job and actually had to pay taxes. I have voted against any spending, for every tax cut, and for free trade, because I was told that these things would make me rich.

Now I have no pension. There are no safety nets. But I have my stock-filled IRA and 401k, and I’ve got my house. And every expert in the universe has told me that:

a) House prices never fall, and

b) Stocks always go up in the long run.

The problem is that house prices are falling off of a cliff, and my long run isn’t so long any more. I want to retire in 5 years. I don’t want to wait 20 years for the market to come back. What should I do Mr. Blogger?

Well let me tell you a story of another bubble. The last bubble ( yes, despite the manipulation and lies by the real estate profession, there have been many housing bubbles in the U.S.) to hit California peaked in about the middle of 1989. Prices did not return to their peak levels for 10 years. That means that if you bought in 1989, you could sell it for the same price in 1999 or 2000. But if you wanted to sell in 1994, the bottom of the hole, you lost 20% to 50% of your home's total purchase price.

Now that was a cute cuddly little bubble compared to this one. Even though I have extensively researched the situation and the history, I am shocked by how bad it looks. And now we have the Fed, President, and Congress throwing everything and the kitchen sink at the problem over the course of 8 days. I’m guessing they know it is a train wreck and they’re trying to qualify themselves for “Heckuva Job” status for their failed attempt to save the day. But more on that in our next post.

And see what the LATimes says in this Jan30, 2008 article -

High anxiety for 401(k) investors