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Michael Masterson's (Early to Rise) 22 Predictions for 2008

Sid23

Bronze Contributor
Aug 9, 2007
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What do you guys think about these? #8 and #9 are especially dire predictions (especially for me). Masterson is usually a pretty level-headed guy, but this article seems like he's selling fear and has become a "doomsday" prognosticator. Any thoughts?

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January is a time to look ahead and make predictions.
As I look ahead, I can see one major trend. And it's one that will have repercussions for the economy as a whole. That trend involves baby boomers. Boomers have been a major factor in consumer spending, saving, and investing for 50 years. So it's likely they will continue to be. In fact, they will probably affect the economy for the rest of their lives - for the next 20 to 25 years.
If you accept this premise, the following 22 predictions may make sense to you:
1. Baby boomers will get poorer this year. They lost half of their retirement nest egg when the tech bubble exploded. And they have been losing much of the rest of it as real estate prices come down. This will continue in 2008. Credit will be harder to come by. Banks will get tougher with loans. And the many businesses that took stock in the real estate boom will continue to implode.
2. Scared by their shrinking wealth, some boomers will make one final, frenzied attempt to "get back" the wealth they never really had. They'll scrape together their last dollars. They'll borrow money. And they'll use it to make high-risk, leveraged financial investments in such things as currencies and commodities. The greediest sectors of the financial services industry will benefit, temporarily, from this short-term trend. Later, they will suffer from it as their customers disappear.
3. As 2008 ends, boomers' speculative investments will fail to rescue them. So they will grudgingly accept the fact that they will never be as wealthy as they wanted to be. They will feel defeated, and they won't have the energy to start anew. As a result, they will drastically decrease their discretionary spending.
4. Following the boomers' lead, consumer spending in general will slow down. The Fed will do what it can, but it won't be enough. Lower credit rates won't be enough to stimulate the economy. Growth will slow. Businesses will continue to go bankrupt at record rates.
5. With decreasing revenues on one side and increasing fixed costs (related to real estate) on the other, retail will be especially hard hit. Many, if not most, medium-sized retail businesses that exist today will be defunct within 10 years.
6. On the bright side, Internet spending will continue to grow. But the growth will be much slower than in the past. Lots of opportunities will allow people to make money by marketing products and services on the Internet. But many of those who are in business today will go bankrupt as the market becomes more competitive.
7. Estate homes and multimillion-dollar condominiums will tumble in value, even below current prices. Many will be left vacant. It will take at least seven years for many of the properties that have been built in the past two years to be occupied. Investors in these properties will be wiped out.
8. More than 80 percent of the existing real estate development industry will go bankrupt.
9. Following real estate development will be the larger part of the banking and financial services industry. Thousands of young investment bankers and hedge fund managers will be out of work. This could happen as early as the middle of next year.
10. As the U.S. economy slides into a protracted recession, baby boomers will recognize that they are poorer than their parents were when their parents were in their early sixties. Without the appreciation of a house to cash in on, they will give up their long-held dreams of retiring comfortably at 65.
11. Luxury will be uncool. Understated elegance will be in.
12. The campaign against conspicuous consumption will accelerate. Twelve-cylinder cars will be ridiculed and possibly outlawed entirely.
13. Hippie values will return. Peace and love and blue jeans will prevail... simply because baby boomers won't be able to afford to indulge themselves materialistically as they have been doing for 40 years.
14. Technology and the baby boomers' shrinking wealth will favor products that are simple and small.
15. The wristwatch will begin a 20-year disappearing act.
16. Yoga, meditation, and Pilates will continue to increase in popularity. Aerobics, weight training, and kickboxing will diminish.
17. Yachts, luxury automobiles, and Learjets will stand in warehouses, unused.
18. Migration to the Sun Belt will slow because of hurricanes and high prices. Local Sun Belt municipalities will be forced to lower taxes. Services will decline.
19. Technical jobs will continue to be outsourced to India and Latin America. And in the U.S., boomers will start to agree to work phones and read X-rays for minimum wage.
20. The information-publishing industry - particularly the specialized information-publishing industry - will continue to grow, outpacing the general economy. Entrepreneurs who understand the difference between information, advice, and opinion will make fortunes.
21. Direct marketing will continue to grow as general advertising declines. Businesses that are unskilled at direct marketing will have a tough time staying competitive. Many will fail.
22. Boomers will "decide" to continue working during their retirement years. But many of them - lacking the skills to contribute to the Internet, information-publishing, or direct-marketing industries - will go unemployed.
Those are my predictions for 2008. But what good are such predictions? Can they make you any money?
I don't know. I do know a few things about investing in trends, though. Lessons I've learned from a lifetime of starting all sorts of businesses. For example:
* You can make the biggest money on a new trend that emerges quickly and grows strongly... if you get in early.
* It's difficult to predict new trends with precision. You can sometimes see that a certain change is inevitable, but it is often difficult to know when it will happen. Usually, it happens later than you expect.
* For any given day or week or month, chances are good - some studies say 70 percent - that things will remain the same the following day or week or month. That's why it doesn't usually pay to play trends in the stock market. Unless, that is, you know what you're doing or are getting good advice from someone who does.
* The sensible way to invest in trends is to buy into good businesses that provide neutral or positive cash flow. That gives you a Plan B. You can sit out short-term fluctuations while you wait for the long-term trend to take hold.
* Sometimes even medium- and shorter-term trends are more obvious. This is especially true on the downside. Such is the case with the baby boomer driven economy today.
Emmett, a friend and business partner in real estate development, doesn't like it when I speak negatively about the future of the economy, and real estate in particular. He feels like I am being disloyal to the businesses he is running. He would rather have me encourage him to go full steam ahead. He seems to feel that if I were more positive, things would get better.
"I hope you're right," I tell him. "But no amount of hoping is going to make the U.S. debt go away. And no amount of positive thinking will get people to buy property if they don't have any money and can't get credit."
"Anything you can conceive, you can achieve," he tells me.
"So long as you achieve it before you go broke," I reply.
Hope for the best. But make your business plans based on a realistic assessment of current trends. Hoping against hope works in fairy tales. But in the real-life world of business, it's better to put aside the rose-colored glasses.
If I am right about the future for baby boomers, it won't be the end of the financial world. People who are smart enough to put their time and money into developing industries (such as direct-marketing, information-publishing, and Internet-related businesses) will do well. Others, like my friend Emmett who lives in Never-Never Land, will get poorer.

Article written by Michael Masterson Early to Rise, the Internet's most popular health, wealth, and success e-zine. For a complimentary subscription, visit http://www.earlytorise.com.
 

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PEERless

Bronze Contributor
Jan 23, 2008
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6. On the bright side, Internet spending will continue to grow.
About the only prediction I agree with. How couldn't it?
7. Estate homes and multimillion-dollar condominiums will tumble in value, even below current prices...Investors in these properties will be wiped out.
Doubting that "wiped out" is the proper expression. Responsible investors can ride out any waves.
11. Luxury will be uncool. Understated elegance will be in.
What? The rich kids are the cool kids -- always have been. You might hate their guts and burn with envy, but luxury will always be cool.
12. The campaign against conspicuous consumption will accelerate. Twelve-cylinder cars will be ridiculed and possibly outlawed entirely.
Maybe. This has been predicted for 40 years.
15. The wristwatch will begin a 20-year disappearing act.
:wtf:WOW! This came out of left field. Another of those things that has been promised for decades. Not gonna happen! Those of us who love a fine automatic watch will never be satisfied to check the screen of our phones.
17. Yachts, luxury automobiles, and Learjets will stand in warehouses, unused.
SO off-base! The owners of these devices fly much higher than the roiling storms below.:smx1:
 

andviv

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I was seriously following his comments, and then.... it is a subscription e-zine?

He is doing what the rest of the "information business" (i.e. news outlets) do. Spread fear to increase their ratings. Fear sells.

People rather pay for subscriptions to information about what is wrong and how to avoid it rather than what is positive and how can I benefit.
 

CRBFL

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Oct 9, 2007
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That was far more doom and gloom than I cared to read. The public loves fear. If misinformation like this becomes commonly believed will some of it result in self-fulfilling prophesies or will it result in smart entrepreneurs banking? I know where my money is...
 

Jill

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Wow. Isn't he just a ray of sunshine!?

I do think that we have some bumpy roads ahead, as we as a nation face the reality of globalization. e.g. We can't expect to pay Detroit factory workers $40/hr for relatively unskilled labor when citizens of developing nations are willing to work for $4/day. We will no longer be able to compete. The math simply doesn't work. I could go on for pages about areas which are going to be reality checks for us if we don't start facing it now.

The buggy-whip didn't need to be re-tooled; the buggy-whip maker's union contract didn't need to be re-negotiated. He had to find a totally new career, even though it "wasn't fair". We've gotten soft. But I digress.

That said, I'm actually as excited about my prospect for financial freedom as I ever have been. Lots of great opportunites when things are changing. It's those who want to keep doing the things that they've been doing who will be hit the hardest, IMHO. Those who are willing to adjust their sails will prevail.
 

camski

Contributor
Jul 24, 2007
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Noblesville, IN
If you accept this premise, the following 22 predictions may make sense to you
I dont accept the premis that baby boomers will affect the economy as much as he does. The younger generation on the whole spends more of their overall income than the baby boomers. Gen X and younger dont know how to save, they typically spend all they bring in.

1. Baby boomers will get poorer this year. They lost half of their retirement nest egg when the tech bubble exploded. And they have been losing much of the rest of it as real estate prices come down. This will continue in 2008. Credit will be harder to come by. Banks will get tougher with loans. And the many businesses that took stock in the real estate boom will continue to implode.
2. Scared by their shrinking wealth, some boomers will make one final, frenzied attempt to "get back" the wealth they never really had. They'll scrape together their last dollars. They'll borrow money. And they'll use it to make high-risk, leveraged financial investments in such things as currencies and commodities. The greediest sectors of the financial services industry will benefit, temporarily, from this short-term trend. Later, they will suffer from it as their customers disappear.
seems a little contradictory here, dont you think?

4. Following the boomers' lead, consumer spending in general will slow down. The Fed will do what it can, but it won't be enough. Lower credit rates won't be enough to stimulate the economy. Growth will slow. Businesses will continue to go bankrupt at record rates.
I actually agree with the premise that the economy will slow but that is what economies do. They rise and fall. They are cyclical in nature, we are due for a downturn.


8. More than 80 percent of the existing real estate development industry will go bankrupt
I think that apartment construction will increase as will assisted living developments. As foreclosures rise and people get booted out of their houses they will still need places to live. Those people will flock to apartments, especially the ones who accept government subsidies ( I am not an expert on this but I think it is called section 8???) Many of the baby boomers have owned their homes a very long time and even with falling home values they are still worth more than they paid for them and I think they will still cash out and move into asssisted living developments.

11. Luxury will be uncool. Understated elegance will be in.
Living in Luxury is everyones dream. Dreams never go out of style.

Overall I agree with the premise that 08 will be a tough one. The smart ones (if they havent already) will start to really focus on decreasing debt and looking for good bargains in investments ( I for one think real estate is where you should be looking to buy). I am 40 so I still have a decent amount of earning years left but I truly believe that right now is my opportunity years. This is the time that I can take advantage of the economic downturn and strike while the iron is hot. The one thing that everyone needs to remember economic hardships doesnt translate into hardship for everyone. for the smart ones downturn spells opportunity
 

8 SNAKE

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Aug 15, 2007
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What? The rich kids are the cool kids -- always have been. You might hate their guts and burn with envy, but luxury will always be cool.
There's a difference between elegance and opulence. Both require money, and both come in and out of favor over time. Opulence has been popular for quite a while, so I could easily see understated elegance make a strong comeback. Bling will become very passé.
 

Diane Kennedy

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Aug 31, 2007
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One of the things I love about this forum is the diversity we find here.

I'm a Boomer and I understand, and agree, with most of his predictions, but only from the perspective of how they resonate with me.

Strictly as a Boomer, there is a longing that I experience for the simpler times: peace love and hope.

We were the generation that was going to change the world. We verbally rejected the need for material luxuries, and what did we do? We created the Home Shopping Network.

Camski hit it squarely though. Will Boomers completely sway the economic climate? There is a saying that we are the "pig in the python", moving through the system. As we went to school, the need for schools was acute. As we age, the need for services for the ageing will increase. At the same time, we're the healthiest generation to reach this part. Most of us don't want to sit on the porch in rocker at 65 waiting for our inevitable death in 3 years. (Can you believe that when I was a kid, the average life expectancy was 68 years?)

I believe that there are simply too many factors at play to point at one (the ageing of the Boomers) and say that will determine everything.

Our economy is based on spending, and we have a generation of massive spenders hitting their stride. We're greatly influenced by our neighbor to the South. Mexico is going through their Baby Boom NOW. They are into their 6th year of Post-PRE government with slow, but in my opinion, steady process of rebuilding the infrastructure of their nation. They have massive oil reserves. They have massive silver deposits. Usted habla Espanol amigo? You may need to soon.

I would add one more - the need for tax reform will create even more complexity. AMT will have to be addressed and my guess is a version of Rangel's plan (raise maximum federal income tax rate from 35% to 48%, lower corporate tax rate) will eventually get passed. I believe that there will eventually (most likely 4-5 years from now) be a national sales tax. And, I believe that more virtual companies will move outside of the confines of the US tax system, further depressing commercial and luxury real estate.

But, that's only my opinion. I am pulling out of commercial real estate, though, and moving into more business as a result.
 

8 SNAKE

Contributor
Aug 15, 2007
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7. Estate homes and multimillion-dollar condominiums will tumble in value, even below current prices. Many will be left vacant. It will take at least seven years for many of the properties that have been built in the past two years to be occupied. Investors in these properties will be wiped out.
He's painting with very broad strokes here. Great properties in desirable locations will always be in demand. I agree that luxury condos are going to take a dive, and I also think that the McMansion fad will go away. There are a lot more boomers looking to downsize than there are Gen X and Y'ers that can/will come in and buy their estates. I think we'll see more demand for urban housing, as the X and Y generations move back toward cities to avoid long commutes and high fuel prices.

8. More than 80 percent of the existing real estate development industry will go bankrupt.
His number is high, but I agree that there are too many players in the RE development game. There's a lot of fat that needs to be trimmed, but the developers that pay attention to what the market demands will do just fine. Those that continue chopping up pastures into square lots and building 4,000 sq ft homes on top of each other will go broke in a hurry.
 

8 SNAKE

Contributor
Aug 15, 2007
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Midwest
Strictly as a Boomer, there is a longing that I experience for the simpler times: peace love and hope.
Diane, you bring up an excellent point that I relate to the housing market. As Boomers look to downsize, they're not going to look for complicated new technologies or densely populated housing communities. They'll want simple, efficient homes that remind them of simpler times, while remaining close to medical facilities and other services. I could easily see developments like this popping up around the country.
 

piranha526

Contributor
Aug 20, 2007
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New Jersey
What do you guys think about these? #8 and #9 are especially dire predictions (especially for me). Masterson is usually a pretty level-headed guy, but this article seems like he's selling fear and has become a "doomsday" prognosticator. Any thoughts?
"Those who have knowledge, don't predict. Those who predict, don't have knowledge." - Lao Tzu

That's I feel about the above and anyone who makes predictions!
 

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kimberland

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Jul 25, 2007
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1. Baby boomers will get poorer this year. They lost half of their retirement nest egg when the tech bubble exploded. And they have been losing much of the rest of it as real estate prices come down.
I had to stop reading right there
because I try not to fill my mind with junk
(it is already full of 80's song lyrics).

Money doesn't simply appear and disappear, it moves.
So if someone gets "poorer", then someone else gets "richer."
If that simple concept is not understood...
 

Diane Kennedy

Bronze Contributor
Aug 31, 2007
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Following up on my comment about Mexico and its impact on the US.

The richest man in the world is Mexican - owner of TelMex.

I'm reading a fantastic book right now, "The Long Tail." The US is becoming a nation of niches. There are no such thing as "blockbuster" TV shows anymore, simply because there is so much diversity. Mexico, on the other hand, is where we were 10 years ago. They have fewer stations, fewer choices - and so are creating blockbusters. That's why TelMex is so huge, there aren't many other choices. Hit that market right and you'll make a whole lot of money.

Bottomline, it's all about change. It has always been. If you are flexible and adaptable with good financial skills and the emotional ability to quickly cut a loser and know how to make the most of a winner, you'll succeed. No matter what.
 

max momo

Contributor
Mar 15, 2008
198
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California
Masterson's 'predictions' for 08 and beyond were incredibly accurate.

I really enjoyed all the folks that poo-poohed his reasoning; precisely the exhibit why shorting a stock can be so profitalbe - those on the other side hang on to emotions rather than critically examine the present situation.
 

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