Posted on 03/16/2012 6:02:52 AM PDT by SeekAndFind
AGING populations in America and Europe raise many economic concerns. A popular one is whether aging baby boomers will tank the stock market. That’s story in this Wall Street Journal article, which says that when baby boomers bought stock to fund their retirement, that drove up share prices in the 1990s. Now, on the cusp of retirement, they will sell their shares so prices must fall. This theory appears to be confirmed by a figure from the San Francisco Fed, which shows a strong correlation between the price/earnings ratio and what they call the M/O ratio, the ratio of people age 40 to 49 to people age 60 to 69.
Does this mean we’re doomed for a bearish decade? Perhaps, but I am not convinced. First it’s unlikely that each cohort of retiring baby boomers will sell shares en-masse. Most retirees don’t annuitise or hold a significant amount of inflation-linked securities, so many will probably keep some equity in their portfolio to hedge against inflation in retirement. And if investors expect liquidity to dry up, wouldn’t that already be reflected in prices? Perhaps the number of equity buyers won’t fall. Many boomers don’t own stock; according to the 2007 Survey of Consumer Finance about 60% of households with a boomer head own some stock. If owning equity becomes more popular then the supply of buyers could increase, even as the population ages. Most people only own shares through their retirement account, so the growing ubiquity of private pension accounts (which covers a larger share of the American population than defined-benefit plans ever did) could increase stock market participation.
Global markets are also more integrated and it’s the global population of investors that matters.
(Excerpt) Read more at economist.com ...
Just a hint from Obama and democrats that they are looking at the multi-trillion dollar golden egg of 401k investments will kill the stock market.
It will be all of the banksters who put all of the stimulas money in the market to give the illusion that our economy is thriving...
Once they con you into putting all of your money in, they will take “proffits” and of course, “blame those evil rich white baby boomers”....
Either way, I think they might get the next civil war if they try to do this.
Yep, that would push a lot of folks over the edge.
Just a hint from Obama and democrats that they are looking at the multi-trillion dollar golden egg of 401k investments will kill the stock market.
Just “looking at?”, I believe that they are salivating like Pavlov’s dogs at the mere thought of getting control of the funds that the 401(k)’s represent.
My worry here is that many people who do have 401(k) plans think they will have time to cash them out if the Congresscritters really get serious about confiscation. The scenario I foresee is that the market will tank on that news the 401(k)’s decrease massively in value and then the Feds announce that the value in the 401(k)’s will be set at some date prior to the meltdown and each person will have an GIRA opened for them with that amount as it’s initial starting point.
And they will GO FOR IT in massive numbers never realizing all of the negative effects for themselves or heirs in the future. Short term bottom line thinking versus long-term thinking will end up hurting them a lot more.
The only thing keeping this market going has been the Federal Reserve colluding with primary dealers, US Treasury, all to keep interest rates at rock bottom, with equities as the only viable alternative for many and a tax law that gives equities a huge advantage. The Fed has been the ultimate pump and their friends on Wall St are in on the dump regarding fixed income bubble.
Insurance Cos, pension funds, annuities, and senior citizens have all been financially put at risk by reducing the availability of normalized fixed income options as a portfolio balance.
“it’s that damned Glenn Beck telling them all to buy gold...”
Will they grab and tax a big chunk at once? Or will they boil the frog by turning up the heat a little at a time. For example, would you cash out your 401k and pay taxes and penalties on it now if the government made the "reasonable" requirement that 10% of the assets be invested in "safe" government bonds. After all, it's for safety, not just a grab of 10% of every 401k. In a couple of years some research will find that savers' money is still at far too much risk and the minimum bond requirement will be bumped up to 20 or 25%. Do you bail out then and lose a third or more immediately?
Stock price is all about supply and demand regardless of the merits in the underlying company. If there are more people selling stock than buying, then expect price to drop. Of course baby boomers will be selling stock to finance their retirements, and the question is how many younger people will step in to buy? Given today’s economy, high personal debt, record number of young adults living with their parents, no buyers will be stepping into the breach anytime soon. However, maybe Chinese investors can take up the slack.
It's an absolute certainty.
Effective US and global tax and trade policies though can help to counteract such a decline, especially if the next generation in the US is encouraged to innovate and to invest in the country and we get control over our wayward public finances.
If so, the US will be inherently far better off than China and other now rising economies that are beginning to fall into the "middle income trap" in which innovation and growth become harder due to corruption, entrenched predatory national elites, and a lack of security for the owners of property and ideas. In such a context, relatively modest but secure investment gains in the are highly attractive.
Indeed, the cultural and economic attractions of the US seem likely to endure over the coming decades, with the ambitious and capable around the world drawn to the US as investors and immigrants the sake of personal freedom and opportunities for themselves and their families. This of course assumes that we will reverse from the path of decline marked out and favored by the policies of Obama, the Democratic Party, and the Left.
Which is why they are going to use inflation to steal bank accounts and 401k’s.
The stock market is so unstable, you could lose your lifetime earnings very quickly.
Gold can be confiscated or win-fall taxed to death.
It might be that the best investments right now are education for you or family (real degree’s) or a investing in your own business.
Either that or just spend your money now and get the full use out of it...
One of my professors taught me THE RATIONAL MAN THEORY OF THE STOCK MARKET. Nice theory......nobody uses it. My Dad taught me THE BIG MONEY GAMBLING THEORY. He said that whenever there’s big money involved, someone’s going to find a way to cheat.
This has been utterly predictable for 20+ years. The baby boomers simply did not have enough kids to be able to sustain our economy. Their “retirement” is going to be crappy and tumultuous. Demographics can tell you a hell of a lot if you’re listening.
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