Lower your expectations and get rich slowly

Add 4.3 per cent in dividends and you had more than three decades of 16 per cent returns annually. Invested in the All Ords, one dollar turned into $134.

It has been an incredible three decades of asset speculation and price appreciation - in both shares and property - driven by people borrowing money to invest.

At its peak, one of the big four banks had an advertisement featuring a bloke looking enviously over the fence at his neighbour on a new motor boat, with the neighbour saying, "Equity maaate," like it was clever. Borrowing to spend. Such was the confidence in the assumption of perpetual house-price appreciation.

No wonder share prices went up. No wonder we never questioned fees. It was a 33-year gravy train.

The question now is whether it can continue. For the past five years, it hasn't. The sharemarket has gone down 40 per cent. The word has gone out on borrowing, as has the wisdom of driving asset prices up with money you don't own in a game of eternal hot potato. It is no longer considered smart and with the US and Europe saddled with unfathomable liabilities serviced by the printing of even more liabilities, it is going to be years - decades even - before it becomes fashionable again.

In which case, if you are one of the 65-year-olds to 75-year-olds who rode the asset-price appreciation during the 33 years to 2007, you should consider yourself very lucky because chances are, we will never see that happen again.

Your stocks, your property and your business have all been flattered by a boom in debt. You now need to count your chickens, not your eggs, and be grateful for them because a lot of eggs are never going to hatch. You are a millionaire retiree thanks to a freak wave and you should count your lucky stars. And if happiness is expectations met, you will be much happier with lower expectations for the next 33 years, ignoring the whole finance and property industry, which is still relying on the "Perfect Wave" miraculously returning.

But they fail to tell you that for the 33 years before the "Perfect Wave", the sharemarket only went up 2.9 per cent a year and inflation was more than 4 per cent. People didn't make money in the sharemarket unless they could pick stocks they didn't invest and expect to make money out of the trend. They invested in specific stocks.

Wouldn't we be better off making 2.9 per cent our base assumption rather than 16 per cent. Won't we be much happier with that. Then if we do get a bull market, it will make us happy. At the moment, the "Perfect Wave" is our base expectation, but it's unlikely to be met so it will make us unhappy.

And for those of you who are not millionaire retirees because you spent the past 33 years living above, rather than below, your means, sorry, but you have squandered a once-in-a-lifetime opportunity.

And for those of you who were born too late and haven't ridden the wave and been transformed by other people's debt-fuelled exuberance, the only thing you can say is "hard luck". It was a moment and it has gone and you would be well advised to assume that the future for you is going to be something different.

But even you can thank the lord for small mercies because you could have been one of the unfortunates who saddled themselves with overpriced assets somewhere near the top, who funded them with speculative debt, and now have little or no chance of getting their money back. Spare a thought for them. They not only didn't make money, they lost it.

This is not pessimism, this is not a prediction, it is about expectations. If happiness is expectations met, you may need to challenge your expectations to be happy.