Boomers, Markets & Money

A Down-to-Earth Discussion of Financial and Lifestyle Information for Baby Boomers


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LIFESTYLE CONSIDERATIONS WHEN BUYING A SECOND HOME

Many Baby Boomers are using the real estate downturn as an opportunity to buy a second home.

Kayaking the East End of Sanibel

Kayaking the East End of Sanibel (Click to Enlarge)

Quality of life features should be considered before making such an important decision.

We have all daydreamed about living in an exotic location that we’ve seen in a movie or a National Geographic special. But if you want to enjoy your vacation home as long as possible, you need to consider practical details as well as dramatic scenery.

What to Look For in a Vacation Community

An Environment that Encourages Physical Activity

Research has shown that regular exercise is key to a vigorous old age and good mental and cognitive health. Exercise that has a social aspect to it encourages people to get out. Many boomers are enjoying kayaking and biking clubs, as well as recreation centers. A mild climate helps.

Kayaking Sanibel Canals

Kayaking Sanibel Canals (Click to Enlarge)

Opportunities for Intellectual Growth

The average lifespan is increasing, creating opportunities to learn new things. It also helps us stay adaptable in a world that is changing rapidly.

Purpose in Life

Research has shown that people live longer and have less depression if they pursue an activity that is meaningful to them.

Patrica Boyle, PhD, a neuropsychologist with the Rush University Medical Center found that people with a higher purpose in life had lower mortality rates among older adults. Research has even shown that volunteering has a positive impact on health.

A Curious Site While Kayaking on a Sanibel Canal (Click to Enlarge)

Opportunities for Social Interaction

People often find that they have to make more of a conscious effort to see people after they retire. Check out the availability of clubs and activities. Of course, if you want the grandchildren to visit, make sure there are fun activities for them, too.

Easily Accessible, Good Quality Healthcare

Let’s face it. We are going to need to visit the doctor more often and you never know when an emergency will happen.

Reasonable Travel Times and Cost

Keeping travel costs and distances as low as possible ensures that you will use your new home more.

Some Baby Boomers are choosing traditional warm weather vacation spots. Others are choosing to purchase second homes in college towns. College communities provide recreational and educational opportunities. Small college towns may also have an intergenerational atmosphere that many find appealing .

Keep an eye out for a future post on financial details to consider when buying a second home.

Sources

“Under the Microscope: Purpose in Life May Protect Against Alzheimer’s Disease” Rush University Medical Center

“During the holidays and beyond, helping others will also help you stay healthy” Rush University Medical Center

Book Review — “The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It”

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Two experts wrote a book about the recent financial meltdown and our broken banking system.

What’s different about this book is that it is written so simply and clearly that anyone can understand it. Academics Anat Admati and Martin Hellwig, who have spent their careers studying the financial system, picked apart the causes of the 2007-2009 crises. They have come up with simple, cost-effective changes that can make the banking system safer for everyone.

Now, I’m not going to lie to you. It’s not going to be as much fun as reading a favorite murder mystery or, dare I say, Fifty Shades of Grey.

But I highly recommend you read this book because:

  • Nothing has changed. “As of this writing, in October 2012, this system does not appear to be better equipped than it was in 2000-2006 to limit the buildup of risks or than it was in 2007-2009.”
  • The average, responsible person has paid as steep price for the reckless behavior of others. “…in discussing the costs of the intervention politicians and regulators, like bankers frequently ignore the enormous costs of the crises to the broader economy—the loss of output in the recession, job losses, and hardships associated with foreclosures.”
  • You will be able to understand arguments that are used to scare and confuse people.

Admati and Hellwig’s recommendations for bank reform

  • Figure out which banks are insolvent and unwind them in an orderly way.
  • Higher equity levels should be required by law. Banks’ functions do not require so much debt. However, bankers’ compensation often gives them an incentive to borrow too much.

If you read this book you will be better able to understand arguments made by bankers, lobbyists, politicians, and regulators. We all need to stand up for safer banking practices. We need and deserve a safer, more stable economy.   ####

My post “Book Review- Exile on Wall Street: One Analyst’s Fight to Save the Big Banks From Themselves” discusses the banking industry from a bank analyst’s point of view.

I added some photographs of architectural details of a beautiful Providence, Rhode Island landmark. Old Stone Bank, founded as a mutual savings bank, is defunct. Click on any of the images to see a short slide show.

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Why are interest rates so _______ ______ low?

This post will pass along some interesting snippets of conversation about interest rates from a financial conference I attended on Friday. This article will close with a few easy-to-use, educational resources on fixed-income investing for you.

There was a fascinating discussion on the fixed-income markets* at the Archway Investment Fund Forum at Bryant University.

HERE ARE SOME OF THE VIEWPOINTS:

The Federal Reserve Influences Interest Rates

The Federal Reserve Influences Interest Rates

Interest rates are projected to stay low until 2015. That’s good for borrowers but bad for others such as individual savers, pension funds, etc.

Causes of Low Rates

The Federal Reserve intervenes in fixed income markets in two ways:

  1. The overnight rate is kept near zero.
  2. By purchasing long-term Treasury bonds and mortgage-backed securities, the Fed lowers the ten and thirty-year rates.

There are other reasons for record low rates:

Regulators Force Banks to Cut Leverage

Regulators Force Banks to Cut Leverage

  • There is massive deleveraging (paying down debt) throughout the economy. This is a legacy of the credit bubble.
  • Regulators are forcing banks to delever.
  • Each generation in the U.S. goes through a financial crisis and is forced to delever. Similarly, each generation in Europe, in its own cycle, has a crisis and is forced to delever. However, every 1.5 generations, both the U.S. and Europe go through a crisis that leads to deleveraging at the same time. We are going through one of these periods now and that’s why the recession is so severe.
  • Investors buy Treasuries When They Panic

    Investors Buy Treasuries When They Panic

    Panic. Treasuries are seen as the safest investment around the globe. Whenever there is bad news, everyone rushes to buy Treasuries, driving down interest rates. Ironically, even when a ratings agency downgraded the U.S. Federal government, investors panicked and bought Treasuries.

Other Opinions on the World Economy

Italy, Spain, and France need to make painful cuts. Japan and Europe are losing population. One participant was optimistic about the U.S. because the country has population growth, productivity, and labor mobility.

When will rates go up?

  • When economic growth is greater than expected
  • Inflation is expected in the next two to three years

RESOURCES FOR FIXED INCOME INFORMATION

  • “Investors’ 10 most common mistakes” by Barry Ritholtz, Washington Post.    I liked this quote from the article,  ‘Reaching for yield: there are few mistakes more costly than ‘chasing yield’…”                  “There are three common ways to chase yield: 1.) by buying longer-dated bonds: 2) by buying junkier, riskier paper; or 3) by    using leverage, which amplifies your gains but also amplifies your losses.”

*Fixed Income and Alternative Investments Panel: Erica Vaters, Fidelity; Howard Jones, BlackRock; Joseph Fazziono, United Technologies; and Tom Tzitzouris, Strategas Research Partners.