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How the Baby-Boomers have affected the Boom-Bubble-Bust Cycle

Written on the 1 September 2016 by James Cagney

PART 1 - The Baby Boomers' Spending Trends (Born 1946 to 1964)

I am going to give you the history of the Baby-Boomers in Australia and reveal in a way you may have never have read or heard of before.  The "Demographics" dynamic of the Baby Boomers (BBs from here on) have shaped the nations' economy for six decades.  It is also important to study and understand the past otherwise you will never be able to predict the future.
In the period 1946 through to 1964 we had the biggest baby boom in Australia. Parents had three to four children and the demand for food and clothing soared. Their lives consisted of working hard and keeping their heads above water.   These families did not have the expensive electronic toys we have today nor did they enjoy the high standard of living which Australians currently enjoy.

BBs children left home between 16 to 19 years of age -  taking up jobs and trades which were plentiful in the seventies.  As the children began to leave home parents found that they had disposable income. They began upgrading their worn out furniture, their cars, their white goods and their televisions. They started purchasing video cassette recorders, surround sound systems, cassette players, cameras, video recorders. They could afford better hotels when they went on holiday. At that time credit was largely limited to the purchase of cars and homes. It was mostly a cash society because their own parents had taught them that debt was bad and if they did not have the cash they should do without. This BOOM was the natural progression and it occurred without people giving it too much thought. 

In the seventies the stock market was booming and people began to invest any extra money they had and they most investors did very well.  They paid off their home loans because that is what their parents said they should do. Credit was easy to get and the banks liberally offered credit cards and the debt boom was born. The government offered incentives through HECS loans to encourage young people to further their education and parents did not have to dip their hands into their pockets to cover the tuition fees. 

In the eighties the freely available credit gave Australians the opportunity to travel overseas, buy caravans and travel around Australia. The BBs indulged in more luxuries. Unfortunately inflation began to soar as people had too much credit chasing too many pleasures.  Mortgage interest rates rose to 17%. And then "the Recession that we had to have" said Paul Keating starting in 1987.  Homeowners struggled to pay their mortgages, investors defaulted, businesses went under and many people lost their jobs. The Boom-Bubble-Bust cycle had occurred once again.

Japan in the eighties was booming. The "Technology" boom was on and people worldwide were soaking up Japanese electrical and digital goods. Japanese developers and businesses invested into places like the Gold Coast buying hotels, property and land for high rise developments. Queenslanders were enjoying the economic benefit of Japanese tourism and money. Then came the nineties and Japan went in recession. Two reasons for this:

(1) The global recession of the late eighties and the stockpiling of goods into warehouses as a result of a lack of demand and oversupply.
(2)  Japan had not experienced the same baby boom that western countries had after the war. Therefore a local demand for their goods and services did not exist as their population aged. This is the effect of DEMOGRAPHICS.

In the nineties Australia entered a BOOM period once again. Research shows that the peak spending period of a person's life is between the ages of 46 to 55 years and Australians in the late eighties and early nineties began to invest in property and the share market as never before. However, the research shows that as people reached their late fifty's people tended to worry about their retirement and they slowed their spending and started saving. Banks are less inclined to loan money for property investments to this age group because of the limited period of assured income earning capacity. They have become a higher credit risk. The result of these two factors is that it has a negative impact on demand. Lo and behold - we entered into another BUST period and the recession of 1998. John Howard was in power and the introduction of Goods and Services Tax (GST) did not help as goods and services became more expensive despite the governments promise to the contrary. 

Then a major event shook the western economies:  9/11.  The first world economies were shocked to the core after this event. Many consumers in the Western economies took a step back and the economies stalled for a short time. 

By 2002 the Australian economy entered a BOOM phase again and the BBs born after 1955 were once again investing heavily into real estate and the share market. Property prices were rising at an unprecedented rate and these later BB's were borrowing money on their equity for investment property, caravans, overseas holidays etc. And, just when everything was going so well, the Boom-Bubble-Bust cycle seemed to be a thing of the past when the credit crises in the USA hit the economic world like a perfect storm. Banks in the USA were in trouble and the USA government had to bail them out. The property market in the USA dropped like a lead balloon and Australians got scared stopped spending and the Global Financial Crises of 2007/2008 took hold in Australia.

One thing should be evident in this Boom-Bubble-Bust scenario is that a BUST period occurs approximately every ten years, 1987, 1997 and 2007. The next Bust 2017 / 8 ?? Well it won't be far off that so take ACTION now to protect your assets and take advantage of the opportunities that will arise thereafter. Call James Cagney on 0416 137 645 or click >>>HERE to find out more.

Fortunately for Australia the Coalition party had accumulated a massive surplus in the budget of $600 Million. The Rudd & Gillard Labour government spent this plus another $400 million on an economic stimulation package in an attempt to protect Australia from the magnitude of the GFC which the USA and Europe had to bear. This stimulation package and strong immigration numbers shielded our economy and property prices continued to rise, especially in the State capitals where people could find jobs.

Fortunately for Australia another phenomenon happened.  The long overdue industrialization and modernization of China took place. Australia entered a commodity boom never seen before in our nation. We were in BOOM once again. Property in regional mining towns like Port Hedland, Karratha, Gladstone, Rockhampton, MacKay and Emerald took off like a rocket. Investors clambered to get a piece of the pie and paid whatever it cost because miners and labourers were being paid a fortune and could afford to pay high rents. The market for SUV's, pleasure boats, caravans was buoyant and money flowed into these areas.

Then in 2014 the cracks in the Chinese economy started to appear. Mines closed as commodity prices plummeted. People lost their jobs, motor cars, boats, caravans and properties. The Bubble had happened before it's time and we were once more in a BUST situation in these regional areas. People in the regional areas moved back to the cities propping up the demand for rental properties and therefore investors are still benefiting from property investment in these State capitals.

However, the "Spending" cycle is now starting to affect the Australian economy again. These ex miners and labourers have considerably less disposable income as there is an oversupply of labour and wages are declining. In addition the low growth in wages throughout Australia is a major factor in the declining rate of inflation. Although this is good for property investors as mortgage rates follow suit it does not help consumer spending.  In my article "Inflation the Friend of the Rich and the Foe of the Rest" I showed why you need to be a landlord in order to be able to prosper in the future. Click on >>>> INFLATION to understand why this is and how to protect your assets and take advantage of the future economic BUST in Australia.

DON'T BE SURPRISED BY THE NEXT BUST - IT's THE DEMOGRAPHIC CYCLE.    So if you want to protect your Assets during the eminent Bubble-Bust and take advantage of the opportunities during and after this bust you need to call James Cagney on 0416 137 645 or click >>> HERE.

To make things worse the BBs are going to affect the economy in an even more significant way BBs are retiring in huge numbers and Generation X's and Y's are totally unprepared for this economic burden. I covered this economic drain on the economy in an article I recently published which is titled "Why the Australian government is doomed to fail". Make sure you to get the full picture by clicking >>> BURDEN.  Sorry BBs - I need to show the future generation what they are going to have to pay for the rest of their lives for the welfare of the BBs. By the way I am a Baby Boomer myself so I will thank Generation Xs in advance.

PART 2 - The Generation X Spending Trends (born 1965 to 1979)

To access this information and gain valuable insight into how the spending trends of this dynamic demographic group will affect the economy of Australia click >>> GEN X .

To protect your assets and to take advantage of the oprtunities that will arrive in the coming BUST in the Boom-Bubble-Bust cycle call James Cagney on 0416 137 645 or click >>> HERE.

In the Finance and Property Update to be released on the 16th September 2016 I will cover this in more detail about Generation Xs' effect and the influence they will have on the Australian future economy. Hold onto your seats for the roller coaster ride that is soon to come.

Do not keep this important information to yourself.  Please share it with family, friends and colleagues. The insight this information will give them will be invaluable now and into the future. Please forward the Finance and Property update and they will thank you.

Disclaimer
This is not financial advice. You should not act solely on the basis of the material contained in this Property Update for your investment strategies. Changes in government and legislation occur frequently and without prior notice and financial markets are unpredictable.
Please note that the information herein is of a general nature only and is not intended as specific advice for any particular person or entity.

This information was written and compiled by James Cagney.  The opinions expressed herein do not necessarily represent the views and opinions of his associates including
Asset Finance Pty Ltd.


Author: James Cagney
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