Does anyone have any predictions what is going to happen with interest rates over the next 20 to 30 years?
Where... to... begin...
Nobody that is knowledgable about financial markets would make a predication about any asset class 20-30 year out. Yes you see idiotic predictions around this forum about elections 1 year out. You can ignore them. Those people are just running their mouths.
The Treasury yield rates have been on a slow steady decline for 30 years, and that seems to have been the reason for the stock market run of 30 years.
Errr... no. Many factors contributed to the rise in the stock market. It wasn't purely low interest rates. A few years back they invented this thing called the internet. That raised the price of some stocks like a company called Google. There's another one called Apple.
The yield cannot follow the same line for too long, as it is approaching zero.
One word... Japan. Heck interest rates can go negative. Again ask the Japanese or high net worth individuals who have their money at BONY.
If they raise rates, it could crash the stock market and 401k's.
Maybe maybe not. How is this different than any other time in history?
And if they don't raise rates, retirees can't live on fixed interest or convert to annuities.
In America we have something called social security. Most people retire with pretty much zero. They may have some equity in their home but that's usually about it. If you are worried about the income from your bond fund or whether you are going to get a good deal on an annuity consider yourself lucky. You are officially upper class.
Next, the AMT tax has not been patched for 2012 yet, the payroll tax extension expires in a few weeks, and the Bush tax cuts expire at the end of the year.
The patching cannot continue year to year. The whole tax system is sure to be overhauled over the next decade.
The tax code is always changing. We'll figure somthing out. We had fun with the credit card. Now it's time to pay it off.
Lastly, the baby boomers are retiring, and if even a small portion of high tax state boomers decide to move to cheaper Southern states, it will devastate the housing markets in the high tax states. Younger adults are just not making large enough salaries to handle the taxes and upkeep in these high tax states, and buy the boomers houses.
How is all this going to unfold in the next 20 years? This really sounds bad for the Northeast to me, and maybe California. But could start some major booms again in the rest of the country.
That's the free market for you. If the housing market collapses because people move to other states then some other people will see bargains and move in. If Texas gets too expensive people will stop moving there. What I do know is no one living to New York would move to Texas if it was so cheap. Well some would for the weather and there would be others that just want to get out of the rat race.
