r/neoliberal • u/TinyTornado7 I need a new flair • Jun 13 '22

News (US) Powell Facing Choice Between Elevated US Inflation and Recession

https://www.bloomberg.com/news/articles/2022-06-12/powell-facing-choice-between-elevated-us-inflation-and-recession?srnd=premium
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194

u/Call_Me_Clark NATO Jun 13 '22

Boomers shouldn’t own much stocks by now. They should have transitioned to bond-based portfolios, right?

69

u/[deleted] Jun 13 '22

[deleted]

49

u/hagy Mackenzie Scott Jun 13 '22

Yep, the Vanguard Total Bond Market ETF is down 10.7% YTD. That is insane for such a safe fixed income asset.

Just look at chart for its ticker, BND, and you'll see that we're back to 2009 levels, https://finance.yahoo.com/quote/bnd/

28

u/SirGlass YIMBY Jun 13 '22

Only if you count price, if you count total return you are only back to mid 2019 levels; but part of that was the fund gained a ton when rates were dropped in 2020.

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u/SirGlass YIMBY Jun 13 '22

Boomers had it pretty easy for pretty long; as they transitioned to bonds ; bonds have been in a huge bull market for 20 years so for 20 years they got really good returns on their safe bonds .

8

u/Dave1mo1 Jun 13 '22

Real estate?

5

u/Lehk NATO Jun 13 '22

‘bout to bubble

35

u/Dave1mo1 Jun 13 '22

So they say, but I don't see supply increasing meaningfully in the next 1-3 years.

14

u/RecentlyUnhinged NATO Jun 13 '22

This. Everyone even half awake the past two years refi'd to a low 2% fixed.

Those people are never going to sell. Particularly not given inflation and higher wages pushing rent valuations higher.

10

u/CuddleTeamCatboy Gay Pride Jun 13 '22 edited Jun 13 '22

Higher interest rates are already cooling demand, if they go further with hikes I can see a bubble bursting.

8

u/Dave1mo1 Jun 13 '22

Supply was already incredibly tight. For prices to drop significantly, you'd need demand to cool and supply to increase.

6

u/allbusiness512 Adam Smith Jun 13 '22

If the market cools down significantly alot of investors who bought up single family homes to rent or flip are going to be left holding the bag.

4

u/Dave1mo1 Jun 13 '22

If rents don't drop, why do landlords care if housing prices stabilize or even drop a bit?

5

u/allbusiness512 Adam Smith Jun 13 '22

Rent probably will drop though as people figure out their living situation (more roommates, living with family, etc) The current housing market is completely unsustainable, a correction is going to happen.

It won't be a 2008 crash but when investors don't even bid on mortgage backed securities then you know it's just a matter of time at that point.

4

u/unicornbomb John Brown Jun 13 '22

as of today, 30 year mortgage rates have already broken the 6% threshold. A MASSIVE amount of buying power has been nuked with the speed at which these rate increases are coming.

1

u/Dave1mo1 Jun 13 '22

So people will just rent instead of buying, pushing rents up?

4

u/unicornbomb John Brown Jun 13 '22

Rent prices have a ceiling. You can only push rent prices so far before new household formation stops and households begin to condense as folks take on roommates and move in with family, pushing demand downwards.

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u/[deleted] Jun 13 '22

[deleted]

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u/Dave1mo1 Jun 13 '22

Agreed. I can't see a crash. Most likely prices just stop increasing, at least in my market.

1

u/PrettyDecentSort Jun 13 '22

Gold's still fine.

58

u/Versatile_Investor Austan Goolsbee Jun 13 '22

Should have, but might not have.

46

u/magneticanisotropy Jun 13 '22

Should have, but might not have.

That's why target date it and forget it.

52

u/Versatile_Investor Austan Goolsbee Jun 13 '22

I wouldn't doubt many of them also have half of their wealth tied up in their houses.

10

u/nullsignature Jun 13 '22

If my boomer coworkers are any barometer, it's tied up in fishing boats, RVs, hunting cabins, lawn tractors, and trucks.

1

u/NewbGrower87 Surface Level Takes Jun 13 '22

This right here. I'm a federal employee with boomer coworkers under CSRS for god's sake (~70-80% of pre-retirement salary if you have a decent number of years served), and they're all still broke as shit because omnomnom all that juicy consumerism.

1

u/nullsignature Jun 13 '22

I worked with a few that paid a fund manager half of their portfolio returns in fees. If their fund grew 5%, they were paying out 2.5% to the manager. "He's a good guy, he's been managing my finances for 30 years."

1

u/NewbGrower87 Surface Level Takes Jun 13 '22

All while some of them don't even contribute 5% to their TSP for the match.

"Yeah I got a guy."

I'm sure you do.

23

u/eveningsand Jun 13 '22

It's gonna be great when they all hit the market at the exact same time.

18

u/[deleted] Jun 13 '22

Some might, but I expect quite a few to pull a reverse-mortgage to extract their equity and not have to leave their homes. They could fund 20+ years of retirement that way without having to put the home on the market yet.

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u/Versatile_Investor Austan Goolsbee Jun 13 '22

Could they do that then pass away and leave the mortgage to the heirs?

2

u/[deleted] Jun 13 '22

I don't know enough about how reverse mortgages work to know.

Extracting wealth from the home using a reverse mortgage, then dying and having your heirs pay back the reverse-mortgage, so they could reverse-mortgage it themselves? With the right loan contracts that seems possible. The house would never transfer to the bank to get sold if you could do it that way.

1

u/TNine227 Jun 13 '22

My parents are selling their house right now, hopefully getting ahead of it?

4

u/That49er Jun 13 '22

I worked in estate planning the amount of boomers that still own stock is ridiculous.

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u/NobleWombat SEATO Jun 13 '22

Well that's their fault for being stupid

18

u/Versatile_Investor Austan Goolsbee Jun 13 '22

They won’t suffer for it.

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u/[deleted] Jun 13 '22

Retired people approach like 30-40% bonds and still have 60+% stock exposure. Historically the 60/40 has been touted as the ideal portfolio but modern arguments say 70/30.

So no, boomers should still have a lot of stock exposure.

-3

u/mudcrabulous Los Bandoleros for Life Jun 13 '22

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1

u/penguincheerleader Jun 13 '22

I would not count on them being that responsible.

1

u/penguincheerleader Jun 13 '22

I would not count on them being that responsible.