Calculating Your Personal Cost If Stock, Bond And Home Prices Return To Average

We currently have well above average prices for stocks, bonds and homes. This raises a simple question – what would happen to the average retirement account and to home equity for the average homeowner, if valuations were to return to what long term averages show us are normal valuations?

Using decades of valuation information on stocks, bonds and homes, this analysis develops numbers in each category that show how much of current national stock, bond and home prices represents average values, and how much is a premium above normal valuations.

Using those historical values and the illustration of an example homeowner and retirement account investor, it is demonstrated that the current premium is around 59% above long term average valuations. How the loss of such a premium could have life changing implications for tens of millions of homeowners and retirement account investors is reviewed.

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A Wealth Tax Consumes Capital

By Keith Weiner – Re-Blogged From Gold Eagle

It seems one cannot make a name for one’s self on the Left, unless one has a proposal to tax wealth. Academics like Tomas Piketty have proposed it. And now the Democratic candidates for president in the US propose it too, while Jeremy Corbyn proposes it in the UK. Venezuela finally added a wealth tax in July.

A Wealth Tax

So how does a wealth tax work? The politicians quibble among themselves, as if the little implementation details that differ between them are important. But they share the key idea. The wealth taxman is to go to the people who have wealth, and take some. And next year, come back and take more. And so on.

It should be obvious that this is morally wrong. But we want to focus on the economics. To do that, we need to drill down into the nature of wealth. What is wealth?

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How Fed Cycles Exponentially Reduce Long-Term Wealth Creation

The most historically reliable way to create long term wealth is the reinvestment of cash flows over time, as earnings are earned on earnings, which are earned on earnings.

Compound interest is the best known example, but the same principle of compounding cash flows is also the most powerful and stable source of wealth with the stocks and real estate over the long term as well.

Reinvested (and increasing) dividends are a more important and stable source of stock market wealth than price gains.  Reinvested (and increasing) net cash flows are the most stable and important source of wealth with real estate and REIT investments as well.

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The Prodigal Parent

By Keith Weiner – Re-Blogged From Gold Eagle

The Baby Boom generation may be the first generation to leave less to their children than they inherited. Or to leave nothing at all. We hear lots—often from Baby Boomers—about the propensities of their children’s generation. The millennials don’t have good jobs, don’t save, don’t buy houses in the same proportions as their parents, etc.

We have no doubt that attitudes have changed. That the millennials’ financial decision-making process is different. And that millennials don’t see things like their parents (if you’ve ever seen pictures of Woodstock, you may think that’s not a bad thing). However, we believe that the monetary system plays a role in savings and employment. And the elephant that is trumpeting in the monetary room is: the falling interest rate. Interest has been falling since 1981. That’s when the first millennial was born.

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Greatest Demographic Shift In History

By Marin Katusa – Re-Blogged From Silver Phoenix

The economy depended on the spending habits of baby boomers the last three decades.

The success and failure of many companies depended on the spending habits of those same baby boomers.

It was all about the baby boomers.

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Median Household Wealth Has Declined by 40 Percent Since 2007

By John Mauldin – Re-Blogged From http://www.newsmax.com

Nominal US household wealth is at an all-time high. But my friend Marc Faber (publisher of the Gloom Boom & Doom Report) says that’s mostly an illusion.

Below, Marc looks at the relationship between asset prices and US household wealth, and the effect of that relationship on the economy.

It seems the wealth of the top 0.1% has vastly improved in recent decades (and the top 10% haven’t done at all badly). But “the median household’s or asset owner’s wealth has declined by close to 40% in real terms (adjusted by the CPI) from its peak in 2007.”

Image: Marc Faber: Median Household Wealth Has Declined by 40 Percent Since 2007

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How The Filthy Rich Create Jobs Directly & Indirectly!!!

By Jonathon Dunne – Re-Blogged From Freedoms Disciple

Let me start this column by asking you some questions. How much do you HATE rich people? How many think they hold poor people down? How many feel they are disadvantaged and put out by them? How many feel they don’t pay their “fair share”?

Let me introduce you to person X. He has a net worth of over $450 million and earned a massive $88 million in the last calendar. His “day-job” pays him around $26 million a year. You hate him already, right? Damned millionaires and billionaires!!! Right?

Well it gets worse so trigger warning. He is just the third person in history to sign a life-time contract with an un-named company worth $14 million a year and has other contracts that pay handsomely over the course of the year. Lastly he has hotels in four different cities.

How sad is the world we live in, that a chunk of the population including our friends on the left would read the above paragraph’s and hate him and seek to tear him down. I bet some of you have already messaged some of your friends wanting to start a protest, right?

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The Cruelest Tax Of All

[This is a companion piece to the previous post.]

By Willis Eschenbach – Re-Blogged From http://www.WattsUpWithThat.com

A “progressive” tax is one where the wealthier you are the higher percentage of tax you pay. On the other hand, I’ve said before that a tax on energy, the so-called “carbon tax”, is one of the most regressive taxes available. It is the reverse of progressive, it hits the poor the hardest. This is because poor people spend a larger percentage of their income on energy than do rich people.

Someone challenged me on this claim about energy taxes the other day, and I realized I believed it without ever checking it … bad Willis, no cookies. So of course, having had that thought I had to take a look.

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62% Of Americans Don’t Have Even $1,000 In Savings

By Sol Palha – Re-Blogged From http://www.Silver-Phoenix500.com

A key sign of financial health is savings; if one does not have a decent amount of money tucked away for a rainy day, it is a sign that all is not well. Americans have a very hard time sticking to a budget and saving, compared to their Asian counterparts. This is reflected in the startling revelation that over 62% of Americans do not even have $1,000 in their savings account.  Foreigners are shocked when they find out that Americans have so little money saved for a rainy day.

“It’s worrisome that such a large percentage of Americans have so little set aside in a savings account,” said Cameron Huddleston, a personal finance expert and columnist for GOBankingRates. “It suggests that they likely don’t have cash reserves to cover an emergency and will have to rely on credit, friends, and family, or even their retirement accounts to cover unexpected expenses.”

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Self-Made Billionaires

By Frank Holmes – Re-Blogged From http://www.Silver-Phoenix500.com

Many of us are aware that 400 billionaires appear on Forbes’ list of the wealthiest Americans. But if you had to guess what percentage of them is self-made, what would you say? A quarter? A third?

Before I give you the answer, let me posit which way Thomas Piketty might lean.

If you’re unfamiliar with the name, Piketty is the socialist economist whose book Capital in the Twenty-First Century was published a little over a year ago. It was an instant bestseller and elicited much debate not just in academic circles but also the popular media.

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The Economic Benefits of Common Sense

The link between economic freedom and prosperity is clear: States that support low taxation, limited government and flexible labor markets see greater economic growth, while states with lower levels of economic freedom see lower living standards and less economic opportunity.”

–Fred McMahon, Fraser Institute

By Alan Dowd – Re-Blogged From http://www.fraserinstitute.org

Common sense is something of a misnomer, since common sense is not all that common. After all, common sense tells us that lower taxes, smaller government and flexible labor markets create an environment that encourages economic growth. The Fraser Institute’s just-released Economic Freedom of North America report (EFNA) offers proof of that sensible but not-so-common approach to public policy.

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