You have no doubt heard of the "Baby Boomers", those individuals born between 1943 and 1963. Following World War II, Australia's population grew at record levels. Australia was not alone in this phenomenon. The United States, New Zealand and Canada all experienced Baby Booms at a similar time.
The Baby Boomers are an important phenomenon to understand. They have had dramatic effects on society and will substantially impact the way the stock market performs over the next 20 years. For this reason, it is important to understand some of the background on this interesting group of people. As mentioned, the Baby Boom was experienced in various countries around the world. Part of the reason for the "Boom" was that these countries were immigrant receivers and immigrants tend to be in their 20's, the prime childbearing years. At its peak in 1957, the US boom hit 3.7 children per family. Canada hit its peak in 1959 with Canadian women averaging 4 offspring each; that was over 479,000 new births that year alone! Australia's boom was not quite as big as the Canadian or US booms; however, we still have a disproportionate number of people who are today in their 40's and 50's. Following the Baby Boom, we had a Baby Bust. Far fewer children were born during the late sixties, leaving Australia with an asymmetrical population graph.
The Baby Bust group, born between 1964 and 1976 are a much smaller group than their predecessors and are commonly referred to as Generation X.
Baby Boomers are a very significant and important group. It is not that, individually, they are any different than any other group who preceded them, it's just that there are so many of them. Due to their large numbers, Baby Boomers have had a significant impact on our society, making substantial changes as they grew. They have changed the economy, driven housing and other markets and transformed social attitudes and lifestyles.
In Australia and North America today, the fastest growing industries, apart from technology, are financial management, leisure activities and health care. It is very easy to see why. Boomers have been working all their adult lives, usually for someone else. They have raised their children and are now focusing on their retirement. They have had a magnificent time. They have not endured wars, or a depression like their parents and grandparents. They have enjoyed fantastic luxuries such as cars, world holidays and computers. They have been at the forefront of the age of discovery.
Unfortunately, the majority have not prepared themselves financially for their retirements, believing instead that like their parents, they would enjoy a comfortable pension from their employers and/or government. The stark realities are now coming to light. Everybody, especially the Boomers, must take responsibility for their financial futures. Our government will simply not be in a position to provide adequate pension incomes for a growing number of retirees. Today, for every person who is retired, there are four people working, providing income to the government. By 2025, there will be only 2 people working for every retiree. What's more, the Boomers, as they start to retire, will live longer than any group before them, well into their 70's and 80's on average. As a result, it is up to each of us as individuals to take responsibility of our own personal financial planning.
The Australian government has made substantial improvements and preparations for the growing populations. They have introduced a compulsory superannuation scheme which all employers and employees must participate in and which is gradually rising in required contributions, but it will be too little, too late. The key to investment growth is time, a luxury many Boomers no longer possess.
Consider this fact, that at a return of 8% per annum, net of tax, an investment of $30,000 would require over 15 years to triple in value, not even considering the effects of inflation. Most investment strategies commonly promoted to the public boast returns of 4% to 10% per annum. We often see managed funds, superannuation schemes, bank term deposits and property investments offering such results. Many people consider these returns appropriate and even good! Unfortunately, many members of the public require a much greater return on their investments to adequately improve their financial positions before they retire (if they can ever afford to!).
In future issues we will explore ways of generating high returns and how to self manage your own super.
http://www.danielkertcher.com
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About the Author
Daniel Kertcher is a licensed stock market educator. Daniel has trained many people from North America, Australia and Europe in various trading systems. Join his trading mail list http://www.platinumpursuits.com and read more about him at his personal website http://www.danielkertcher.com
Saturday, September 22, 2007
Controlling The Speed Of Money by Kalinda Rose Stevenson, PhD
Of all the ways the Federal Reserve controls the money supply, the one that gets the most publicity concerns interest rate changes.
Before scheduled Federal Reserve meetings, you'll hear a lot of speculation about what the Fed will do. These speculations affect the stock market. Media reports also speculate about the effect of possible interest rate changes on consumer credit cards, mortgages, and auto loans.
This media attention obscures an important fact. The interest rate, which is also called the discount rate, concerns the rate commercial banks must pay when they borrow money from Federal banks. The interest rate changes do not directly affect your credit card interest rate.
Whenever the Fed changes the discount rate, it does so to either make it more or less profitable for the commercial banks to borrow money from the Fed to make loans.
These are the essential points to keep in mind: 1. The purpose of the Federal Reserve system is to control the amount of money in the system. 2. The purpose of commercial banks is to make money. They make money by loaning money to borrowers.
It is a matter of profit. If the banks must pay more to borrow money whenever the Fed raises the interest rate, the banks make less profit from their loans to customers. If the banks can pay less to borrow money whenever the Fed decreases the interest rate, the banks increase their profit from loans to customers.
When the Fed changes the interest rate it charges banks, this affects the speed of money in the economic system. The lower the interest rate, the faster banks can loan out money and increase the amount of money in the system. The higher the interest rate, the slower banks can loan out money. So, even though the interest rate directly affects banks, these rate changes matter to all of us.
The bottom line fact is that the Fed does not change consumer interest rates. The banks might decide to change interest rates on credit cards and adjustable rate mortgages, but these changes are not directly tied to any changes the Fed makes in the rate it charges banks to borrow money.
About the Author
Are you earning money or making money? Check out real estate investing book book, "No Money Limits," to find out how banks make money. Use owner financing to increase your profit.
Before scheduled Federal Reserve meetings, you'll hear a lot of speculation about what the Fed will do. These speculations affect the stock market. Media reports also speculate about the effect of possible interest rate changes on consumer credit cards, mortgages, and auto loans.
This media attention obscures an important fact. The interest rate, which is also called the discount rate, concerns the rate commercial banks must pay when they borrow money from Federal banks. The interest rate changes do not directly affect your credit card interest rate.
Whenever the Fed changes the discount rate, it does so to either make it more or less profitable for the commercial banks to borrow money from the Fed to make loans.
These are the essential points to keep in mind: 1. The purpose of the Federal Reserve system is to control the amount of money in the system. 2. The purpose of commercial banks is to make money. They make money by loaning money to borrowers.
It is a matter of profit. If the banks must pay more to borrow money whenever the Fed raises the interest rate, the banks make less profit from their loans to customers. If the banks can pay less to borrow money whenever the Fed decreases the interest rate, the banks increase their profit from loans to customers.
When the Fed changes the interest rate it charges banks, this affects the speed of money in the economic system. The lower the interest rate, the faster banks can loan out money and increase the amount of money in the system. The higher the interest rate, the slower banks can loan out money. So, even though the interest rate directly affects banks, these rate changes matter to all of us.
The bottom line fact is that the Fed does not change consumer interest rates. The banks might decide to change interest rates on credit cards and adjustable rate mortgages, but these changes are not directly tied to any changes the Fed makes in the rate it charges banks to borrow money.
About the Author
Are you earning money or making money? Check out real estate investing book book, "No Money Limits," to find out how banks make money. Use owner financing to increase your profit.
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