The impact of Baby Boomers on the Future of U.S. Stocks

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The impact of Baby Boomers on the Future of U.S. Stocks

Post by Willmunny » Sat Jun 08, 2019 5:48 pm

I don't have the answers to these questions. I am simply concerned. I will write out my concerns in the interest of starting an exchange of ideas on the topic.

I believe I read that we have now reached the point where the average baby boomer (defined as birth from 1946 - 1964) has reached the average retirement age in the U.S. (64). If that is true, then we should expect that we are entering a time (or soon to enter a time) with more retired baby boomers than working baby boomers. The oldest baby boomer was 62 in 2008. That means that during the last significant yearly stock market decline, the only retired baby boomers were early retirees (likely substantially consisting of higher net worth individuals or people who could no longer work or find a job).

Unlike their parents' generation, a significant portion of baby boomers do not have a defined benefit pension. The literature suggests that this generation, on average, has under saved (readers of this forum, no doubt, are not likely to be "average" in this regard). This leads me to two concerns:

(1) If, during retirement, the baby boomers experience another 2000 or 2008, will they, on average, panic sell or stay the course? If the average baby boomer has under saved, and if they panic sell, will they, on average, ever materially participate in the market again? When faced with a meager nest egg relative to life expectancy, will they, on average, elect never to substantially expose that nest egg to loss of principal again?

(2) The passing of baby boomers will represent a massive wealth transfer to Gen X and Millennials. With respect to the passing of the portion of baby boomers who are on the right side of the bell curve for savings and market participation, will the heirs to that wealth, on average, participate in the market to the same extent as the hypothetical deceased baby boomer with a high amount of savings and a high market participation?

There always has to be someone on the other side of a trade. When there is not significant demand to buy a current prices, the price falls to meet demand at a lower price. Do you think these demographic issues create a material chance of leading the U.S. into a protracted bear market in the future? If not, why? If so, how do you account for this risk in your IPS and/or asset allocation?

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by LadyGeek » Sat Jun 08, 2019 6:30 pm

FYI - This thread was temporarily removed for moderator review.
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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by SimpleGift » Sat Jun 08, 2019 6:50 pm

Willmunny wrote:
Sat Jun 08, 2019 5:48 pm
Do you think these demographic issues create a material chance of leading the U.S. into a protracted bear market in the future?
See Vanguard's analysis of your question (which accords with many others that I've seen):
Vanguard wrote:The demographic changes occurring in the United States will have noticeable implications for labor markets, public finance, and political developments. However, Vanguard finds no credible evidence that demographic changes alone will negatively affect future stock returns. Investors and plan sponsors are well advised to ignore scary headlines and remember that an investment strategy focused on discipline, diversification, and patience continues to offer the clearest path to financial success.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by JoMoney » Sat Jun 08, 2019 6:55 pm

Willmunny wrote:
Sat Jun 08, 2019 5:48 pm
... There always has to be someone on the other side of a trade. When there is not significant demand to buy a current prices, the price falls to meet demand at a lower price...
If a company is earning 12% on it's equity, and the market is pricing that equity at 3x book value,
Is it a good thing or a bad thing for investors if the market price went down to 2x book value?
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by Fallible » Sat Jun 08, 2019 7:37 pm

Willmunny wrote:
Sat Jun 08, 2019 5:48 pm
...
(1) If, during retirement, the baby boomers experience another 2000 or 2008, will they, on average, panic sell or stay the course? If the average baby boomer has under saved, and if they panic sell, will they, on average, ever materially participate in the market again? When faced with a meager nest egg relative to life expectancy, will they, on average, elect never to substantially expose that nest egg to loss of principal again?

(2) The passing of baby boomers will represent a massive wealth transfer to Gen X and Millennials. With respect to the passing of the portion of baby boomers who are on the right side of the bell curve for savings and market participation, will the heirs to that wealth, on average, participate in the market to the same extent as the hypothetical deceased baby boomer with a high amount of savings and a high market participation?

There always has to be someone on the other side of a trade. When there is not significant demand to buy a current prices, the price falls to meet demand at a lower price. Do you think these demographic issues create a material chance of leading the U.S. into a protracted bear market in the future? If not, why? If so, how do you account for this risk in your IPS and/or asset allocation?
You're asking what the future holds for the stock market, baby boomers, GenXers, and Millennials, but how could anyone give meaningful answers? We can only speculate, along with authors of many articles on the impact of boomers. Here's a sampling of such articles via Google:

https://www.google.com/search?q=impact+ ... irefox-b-1
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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by Willmunny » Sat Jun 08, 2019 8:42 pm

Fallible wrote:
Sat Jun 08, 2019 7:37 pm
Willmunny wrote:
Sat Jun 08, 2019 5:48 pm
...
(1) If, during retirement, the baby boomers experience another 2000 or 2008, will they, on average, panic sell or stay the course? If the average baby boomer has under saved, and if they panic sell, will they, on average, ever materially participate in the market again? When faced with a meager nest egg relative to life expectancy, will they, on average, elect never to substantially expose that nest egg to loss of principal again?

(2) The passing of baby boomers will represent a massive wealth transfer to Gen X and Millennials. With respect to the passing of the portion of baby boomers who are on the right side of the bell curve for savings and market participation, will the heirs to that wealth, on average, participate in the market to the same extent as the hypothetical deceased baby boomer with a high amount of savings and a high market participation?

There always has to be someone on the other side of a trade. When there is not significant demand to buy a current prices, the price falls to meet demand at a lower price. Do you think these demographic issues create a material chance of leading the U.S. into a protracted bear market in the future? If not, why? If so, how do you account for this risk in your IPS and/or asset allocation?
You're asking what the future holds for the stock market, baby boomers, GenXers, and Millennials, but how could anyone give meaningful answers? We can only speculate, along with authors of many articles on the impact of boomers. Here's a sampling of such articles via Google:

https://www.google.com/search?q=impact+ ... irefox-b-1
It appears from the link you provided that many people have provided meaningful insight into these questions. It goes without saying that no one can provide a definitive answer - only opinions and reasoned arguments. It's just like the countless other threads on topics such as International vs. domestic stocks on a going forward basis. If we were limited to discussing things that we know with certainty, we wouldn't have much to talk about around here.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by jacksonm » Sat Jun 08, 2019 9:05 pm

Harry Dent was (is) big on demographics and I remember seeing ads where he was predicting that the retirement of the Baby Boomers would lead to the next great depression - for reasons you cited and also because they would be consuming less in their retirement years.

Well, the Baby Boomers are now retiring, myself included, and it isn't materializing yet.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by Fallible » Sat Jun 08, 2019 9:42 pm

Willmunny wrote:
Sat Jun 08, 2019 8:42 pm
Fallible wrote:
Sat Jun 08, 2019 7:37 pm
Willmunny wrote:
Sat Jun 08, 2019 5:48 pm
...
(1) If, during retirement, the baby boomers experience another 2000 or 2008, will they, on average, panic sell or stay the course? If the average baby boomer has under saved, and if they panic sell, will they, on average, ever materially participate in the market again? When faced with a meager nest egg relative to life expectancy, will they, on average, elect never to substantially expose that nest egg to loss of principal again?

(2) The passing of baby boomers will represent a massive wealth transfer to Gen X and Millennials. With respect to the passing of the portion of baby boomers who are on the right side of the bell curve for savings and market participation, will the heirs to that wealth, on average, participate in the market to the same extent as the hypothetical deceased baby boomer with a high amount of savings and a high market participation?

There always has to be someone on the other side of a trade. When there is not significant demand to buy a current prices, the price falls to meet demand at a lower price. Do you think these demographic issues create a material chance of leading the U.S. into a protracted bear market in the future? If not, why? If so, how do you account for this risk in your IPS and/or asset allocation?
You're asking what the future holds for the stock market, baby boomers, GenXers, and Millennials, but how could anyone give meaningful answers? We can only speculate, along with authors of many articles on the impact of boomers. Here's a sampling of such articles via Google:

https://www.google.com/search?q=impact+ ... irefox-b-1
It appears from the link you provided that many people have provided meaningful insight into these questions. It goes without saying that no one can provide a definitive answer - only opinions and reasoned arguments. It's just like the countless other threads on topics such as International vs. domestic stocks on a going forward basis. If we were limited to discussing things that we know with certainty, we wouldn't have much to talk about around here.
I understand what you're saying. Meaningful insight, meaningful speculation, whatever, that's why I posted links to these articles. But nobody knows the future, which is a refrain we hear often on the forum. Actually, there is one certainty: the success of the Bogleheads' philosophy. :happy
"John Bogle has changed a basic industry in the optimal direction. Of very few can this be said." ~Paul A. Samuelson

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by JoeRetire » Sat Jun 08, 2019 10:12 pm

Willmunny wrote:
Sat Jun 08, 2019 5:48 pm
(1) If, during retirement, the baby boomers experience another 2000 or 2008, will they, on average, panic sell or stay the course? If the average baby boomer has under saved, and if they panic sell, will they, on average, ever materially participate in the market again? When faced with a meager nest egg relative to life expectancy, will they, on average, elect never to substantially expose that nest egg to loss of principal again?
Just like anyone from any generation, some will panic sell, some will stay the course.

There is no "average baby boomer". There are just millions of individuals. It's silly to talk about any generation as if they all act like one "average" individual and all act the same.
(2) The passing of baby boomers will represent a massive wealth transfer to Gen X and Millennials. With respect to the passing of the portion of baby boomers who are on the right side of the bell curve for savings and market participation, will the heirs to that wealth, on average, participate in the market to the same extent as the hypothetical deceased baby boomer with a high amount of savings and a high market participation?
Once again, some will participate in the market actively, others will not.
There always has to be someone on the other side of a trade. When there is not significant demand to buy a current prices, the price falls to meet demand at a lower price. Do you think these demographic issues create a material chance of leading the U.S. into a protracted bear market in the future?
No.
If not, why? If so, how do you account for this risk in your IPS and/or asset allocation?
Too many individuals acting individually, spread over too many years.

Don't panic.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by Willmunny » Sat Jun 08, 2019 11:01 pm

JoeRetire wrote:
Sat Jun 08, 2019 10:12 pm
Willmunny wrote:
Sat Jun 08, 2019 5:48 pm
(1) If, during retirement, the baby boomers experience another 2000 or 2008, will they, on average, panic sell or stay the course? If the average baby boomer has under saved, and if they panic sell, will they, on average, ever materially participate in the market again? When faced with a meager nest egg relative to life expectancy, will they, on average, elect never to substantially expose that nest egg to loss of principal again?
Just like anyone from any generation, some will panic sell, some will stay the course.

There is no "average baby boomer". There are just millions of individuals. It's silly to talk about any generation as if they all act like one "average" individual and all act the same.
(2) The passing of baby boomers will represent a massive wealth transfer to Gen X and Millennials. With respect to the passing of the portion of baby boomers who are on the right side of the bell curve for savings and market participation, will the heirs to that wealth, on average, participate in the market to the same extent as the hypothetical deceased baby boomer with a high amount of savings and a high market participation?
Once again, some will participate in the market actively, others will not.
There always has to be someone on the other side of a trade. When there is not significant demand to buy a current prices, the price falls to meet demand at a lower price. Do you think these demographic issues create a material chance of leading the U.S. into a protracted bear market in the future?
No.
If not, why? If so, how do you account for this risk in your IPS and/or asset allocation?
Too many individuals acting individually, spread over too many years.

Don't panic.
Thank you. Just to clarify, I'm certainly not trying to imply that every baby boomer will react in the same way. While I understand that there are millions of individuals and each will behave differently, I don't think it is silly to ask if an unfortunate demographic fact (less than optimal savings owned by the median baby boomer) has a material chance of causing more or less panic selling than we have seen from individuals in prior bear markets. Maybe it leads to less panic selling because of a perceived need to take on more risk given the less than optimal savings at the median. I don't know, I am just inviting discussion on the topic.

I also reference the above average or right side of the bell curve baby boomer in terms of savings and market participation, and wonder if the market participation upon death by the recipients of that wealth will be the same, more, or less.

I'm certainly not trying to imply that every baby boomer will react in the same way.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by Northern Flicker » Sun Jun 09, 2019 12:53 am

In the US, millenials are now a larger demographic group than baby boomers.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by traveler901 » Sun Jun 09, 2019 1:05 am

I've never understood the line of thinking that baby boomers retiring will have any impact on the stock market. For starters, about 40% of baby boomers are already retired. Second, most of them don't have any significant amount of money invested in the stock market anyways. Third, the ones with large sums of money in the market could very well never sell those holdings and will pass on to their children. People didn't just magically stop having babies in 1965.

With regards to point #2 (wealth transfer), this is nothing new. Throughout history people are frequently dying and leaving their fortune to the next generation. Why would it be any different or have any different impact than the people who were receiving inheritance money last year, or 5 years ago, or 10 years ago? I don't have any statistics to back this up but based on anecdotal evidence I don't see any difference in millennial's willingness to invest in the stock market. I am a millennial and most people I know are heavily allocated to equities.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by carolinaman » Sun Jun 09, 2019 6:40 am

I think we tend to overestimate the impact most individual investors have on the stock market.
https://www.nytimes.com/2018/02/08/busi ... onomy.html
"A whopping 84 percent of all stocks owned by Americans belong to the wealthiest 10 percent of households. And that includes everyone’s stakes in pension plans, 401(k)’s and individual retirement accounts, as well as trust funds, mutual funds and college savings programs like 529 plans."

Also, I cannot find a statistic but it is my understanding that institutional investor are a majority of stock market investing.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by Willmunny » Sun Jun 09, 2019 9:21 am

carolinaman wrote:
Sun Jun 09, 2019 6:40 am
I think we tend to overestimate the impact most individual investors have on the stock market.
https://www.nytimes.com/2018/02/08/busi ... onomy.html
"A whopping 84 percent of all stocks owned by Americans belong to the wealthiest 10 percent of households. And that includes everyone’s stakes in pension plans, 401(k)’s and individual retirement accounts, as well as trust funds, mutual funds and college savings programs like 529 plans."

Also, I cannot find a statistic but it is my understanding that institutional investor are a majority of stock market investing.
This is really eye opening, carolinaman. Thank you for posting. It really suggests that my concern #1 regarding the median baby boomer in terms of retirement savings may not be as much of an issue as I first thought. For me, I think it puts more focus on issue #2, those who are on the far right side of the bell curve for retirement savings and market participation.

Thanks again!

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by willthrill81 » Sun Jun 09, 2019 9:38 am

This is a controversial topic, but it seems that, historically, the primary economic driver of most nations was the size of their population. Hence, population growth led to growth in economic output. But after the Industrial Revolution, there has increasingly become a disconnect between a nation's GDP growth and their population growth, mainly due to our ability to use machines, computers, etc. to accomplish more and more. For instance, over the last decade, the U.S. GDP has grown at about 1.8% while the U.S. population has grown at about .6% over the same period. That's not to say that population growth doesn't matter, because it certainly seems to, but the relationship between population size and GDP appears to have weakened over time. Due to declining birth rates in OECD countries, we should hope that the relationship will become even weaker.
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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by Valuethinker » Mon Jun 10, 2019 9:01 am

willthrill81 wrote:
Sun Jun 09, 2019 9:38 am
This is a controversial topic, but it seems that, historically, the primary economic driver of most nations was the size of their population. Hence, population growth led to growth in economic output. But after the Industrial Revolution, there has increasingly become a disconnect between a nation's GDP growth and their population growth, mainly due to our ability to use machines, computers, etc. to accomplish more and more. For instance, over the last decade, the U.S. GDP has grown at about 1.8% while the U.S. population has grown at about .6% over the same period. That's not to say that population growth doesn't matter, because it certainly seems to, but the relationship between population size and GDP appears to have weakened over time. Due to declining birth rates in OECD countries, we should hope that the relationship will become even weaker.
That is more or less the standard story of the Industrial Revolution, beginning in the early 1700s in Britain (but not really visible until c. 1750) and then spreading to the Continent and North America in the next 100 years (and then Japan, Russia in the late 19th century, China in the pre 1937 era etc.).

It also seems to be true.

A related factor was that Britain developed the ability to limit family size (remembering that artificial methods of birth control were illegal until sometime in Victorian times, even for married couples) - so the new surplus was not just eaten up by having more children. Agricultural enclosure of common lands - thus driving the population out of the countryside and thus free to provide the new industrial workforce - was also a factor.

Now you want to be Singapore, which has gone from being no richer per capita than Kenya in 1959 to one of the richest countries in the world, or Taiwan, or wherever, not just somewhere with a huge population (Pakistan, Nigeria).

The rapid aging of developed countries is unprecedented. The levels of immigration that would be required to reverse that are not politically possible - you are talking the sort of mass migrations that ensued from wars like WW2 (first the German--instigated ones then the movement of German-origin nationals back to Germany at the end) or the Wars of Religion of the 17th century (Hugenots to England & America from France, etc.).

There are some analogies to, for example, France after WW1 or Russia after WW2 - where a "missing generation" of (mostly) men meant that even though the birth rate picked up, it never undid all the demographic damage.

Russia will feel the threat particularly in the Far East as the native Russian population declines. In fact this was one of the reasons the USSR broke up - the large Central Asian 'stans had high birth rates (they still do) and high migration into Moscow, etc (despite the internal passport system, still enforced).

The US is in relatively good shape - it will feel the stress but not anything like, say, Italy.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by Orion » Mon Jun 10, 2019 10:14 am

jacksonm wrote:
Sat Jun 08, 2019 9:05 pm
Harry Dent was (is) big on demographics and I remember seeing ads where he was predicting that the retirement of the Baby Boomers would lead to the next great depression - for reasons you cited and also because they would be consuming less in their retirement years.

Well, the Baby Boomers are now retiring, myself included, and it isn't materializing yet.
I read one of his books in the 90s. If I recall correctly, his "2nd Great Depression", based on demographics and baby boomers retiring was to start in 2010 and end around… 2027 I think?

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by CurlyDave » Mon Jun 10, 2019 10:25 am

Orion wrote:
Mon Jun 10, 2019 10:14 am
jacksonm wrote:
Sat Jun 08, 2019 9:05 pm
Harry Dent was (is) big on demographics and I remember seeing ads where he was predicting that the retirement of the Baby Boomers would lead to the next great depression - for reasons you cited and also because they would be consuming less in their retirement years.

Well, the Baby Boomers are now retiring, myself included, and it isn't materializing yet.
I read one of his books in the 90s. If I recall correctly, his "2nd Great Depression", based on demographics and baby boomers retiring was to start in 2010 and end around… 2027 I think?
Yup. I read one of his books, compared to actual results and decided that reading any more was a waste of time.

But, he is back, and making still more predictions, while claiming success for his past predictions.

* * * * * * * * * * * * * *

Now I, CurlyDave, am going to make a prediction which I guarantee will be correct.

For the rest of the lives of anyone reading this site, people with larger portfolios will be better off than people with small, or no, portfolios.

Act accordingly, especially with respect to saving and investing.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by WillRetire » Mon Jun 10, 2019 9:33 pm

Aging populations are a concern to many, including "G20 finance ministers and central bank chiefs", according to this article published today

https://www.breitbart.com/news/in-histo ... al-risk-2/

and similar

https://www.france24.com/en/20190609-hi ... lobal-risk

Not just a concern in the U.S..

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by JackoC » Tue Jun 11, 2019 9:19 am

traveler901 wrote:
Sun Jun 09, 2019 1:05 am
I've never understood the line of thinking that baby boomers retiring will have any impact on the stock market. For starters, about 40% of baby boomers are already retired. Second, most of them don't have any significant amount of money invested in the stock market anyways. Third, the ones with large sums of money in the market could very well never sell those holdings and will pass on to their children. People didn't just magically stop having babies in 1965.
As was said, nobody can know this only give reasoned arguments about what might happen. And those are all valid points. But there are some countervailing ones. For example that liquidations of stock by retirees might pick up eventually after not being so high early in their retirement. And, it doesn't necessarily take a large % of holders to sell something to lower the market clearing price substantially. That depends on elasticity of supply and demand for the item that's not always easy to evaluate until you see what happens.

Also there are two bigger issues. The first could weigh in either direction and that is that stock prices even in one country aren't just influenced by events, or demographics, in that country. If now poorer countries with younger populations (India, large population countries in Africa, etc) have great growth in wealth and demand for assets, that could have a big positive effect on asset prices in the now rich countries with aging populations even if asset liquidation in those aging countries is enough to significantly dampen returns in a one-country vacuum. Although OTOH the biggest 'up and coming' country, China, has a relatively quickly aging population itself.

The other issue which might be bigger than asset liquidation though is the general effect on country's policies and society of a lot more people being old. Older people have different interests and a different outlook on things, often, which might not always be as in favor of economic growth and innovation. I don't mean people standing up and saying 'I don't want economic growth'. If anything that sentiment might be more common among younger people. I mean reforming things in sometimes painful ways to actually achieve higher growth. Nobody take it personally, I'm far from young myself. :happy But I think this could be a factor, willingness of older populations to embrace needed reforms. And to defuse any 'politics' (which on this forum seems to mean 'US politics') aspect, look at Japan. A lot of people think Japan needs major reform to get out of its funk, which has certainly not been good for investors. A lot of people attribute the reluctance and general failure to enact sweeping reform in part to an older population more resistant to change than a younger one might be.

So in summary this is a hard question to answer under the artificial assumption that it's just about who sells and buys stocks assuming underlying economic fundamentals are a constant, and that it just depends on the numbers of buyers and sellers in the US. Once you view it realistically, where it depends on the whole world's demographics, and where the effect of an aging population on economic fundamentals could be profound, it's a lot more difficult to answer.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by JoeRetire » Tue Jun 11, 2019 9:33 am

JackoC wrote:
Tue Jun 11, 2019 9:19 am
But there are some countervailing ones. For example that liquidations of stock by retirees might pick up eventually after not being so high early in their retirement. And, it doesn't necessarily take a large % of holders to sell something to lower the market clearing price substantially.
Would you imagine that if boomers are gradually selling, then millennials and others are gradually buying?

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by Valuethinker » Tue Jun 11, 2019 9:35 am

JoeRetire wrote:
Tue Jun 11, 2019 9:33 am
JackoC wrote:
Tue Jun 11, 2019 9:19 am
But there are some countervailing ones. For example that liquidations of stock by retirees might pick up eventually after not being so high early in their retirement. And, it doesn't necessarily take a large % of holders to sell something to lower the market clearing price substantially.
Would you imagine that if boomers are gradually selling, then millennials and others are gradually buying?
Or just inheriting.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by nisiprius » Tue Jun 11, 2019 9:39 am

We're all going to try to sell our houses at the same time, too.
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The day to sell your house

Post by Bogle7 » Tue Jun 11, 2019 9:52 am

nisiprius wrote:
Tue Jun 11, 2019 9:39 am
We're all going to try to sell our houses at the same time, too.
Yes. The official date is Tuesday, June 12, 2029.
Look it up.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by Glockenspiel » Tue Jun 11, 2019 10:23 am

The vast majority of stocks are owned by less than 10% of the population. Millennials and Gen Z are buying stocks, just as boomers are selling. With less than 10% of the population owning the majority of the nation's wealth, that less than 10% portion most likely isn't selling during retirement anyway (because they have so much of it), and will just pass on their stocks when they die. The average boomer has very little in retirement savings and will heavily rely on social security to make a living.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by JackoC » Tue Jun 11, 2019 10:40 am

JoeRetire wrote:
Tue Jun 11, 2019 9:33 am
JackoC wrote:
Tue Jun 11, 2019 9:19 am
But there are some countervailing ones. For example that liquidations of stock by retirees might pick up eventually after not being so high early in their retirement. And, it doesn't necessarily take a large % of holders to sell something to lower the market clearing price substantially.
Would you imagine that if boomers are gradually selling, then millennials and others are gradually buying?
There's always a buyer for every seller. That doesn't tell you what the price will be.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by ThrustVectoring » Tue Jun 11, 2019 12:43 pm

JackoC wrote:
Tue Jun 11, 2019 10:40 am
JoeRetire wrote:
Tue Jun 11, 2019 9:33 am
JackoC wrote:
Tue Jun 11, 2019 9:19 am
But there are some countervailing ones. For example that liquidations of stock by retirees might pick up eventually after not being so high early in their retirement. And, it doesn't necessarily take a large % of holders to sell something to lower the market clearing price substantially.
Would you imagine that if boomers are gradually selling, then millennials and others are gradually buying?
There's always a buyer for every seller. That doesn't tell you what the price will be.
Retiree consumption comes from one of three sources - physically storing goods for later consumption, tax transfers from workers, and selling financial assets to workers. The first category is small enough to be negligible, so it's pretty much all "taxes or savings" for how non-workers consume more goods and services than they produce in dollar terms.

Asset prices determine this exchange rate between financial assets and current production. Lower prices mean some combination of workers saving more or retirees consuming less. If workers are largely financially constrained and are already saving as much as they can afford to, then this basically means lowering the standard of living of retirees. Interestingly, this would mean that raising taxes to pay for retirement programs will largely only work to redistribute wealth from rich retirees to poor ones through depressing asset prices.

Also note that this is financial assets in general, not just stocks. It includes housing (both rent and mortgage payments), student loans, consumer debt, and actual bonds.

Overall, though, I'm not super concerned about all this though. If you save more than your peers, you get more than your peers in retirement. If the economy does well, asset prices go higher and everyone gets to have more stuff when retired. If it doesn't do well, then future retirees will have to tighten their belts and accept that they're not living in as rich of a society as they hoped to retire in. Savings rate is the only thing really under my control, so it's what I focus on financially.
Current portfolio: 60% VTI / 40% VXUS

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by JoeRetire » Tue Jun 11, 2019 1:07 pm

JackoC wrote:
Tue Jun 11, 2019 10:40 am
JoeRetire wrote:
Tue Jun 11, 2019 9:33 am
JackoC wrote:
Tue Jun 11, 2019 9:19 am
But there are some countervailing ones. For example that liquidations of stock by retirees might pick up eventually after not being so high early in their retirement. And, it doesn't necessarily take a large % of holders to sell something to lower the market clearing price substantially.
Would you imagine that if boomers are gradually selling, then millennials and others are gradually buying?
There's always a buyer for every seller. That doesn't tell you what the price will be.
Of course it doesn't.

But you appear to be imagining a short term clearance sale of some sort, which will somehow depress the market, rather than the normal sell/buy situation that will actually happen.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by bhsince87 » Tue Jun 11, 2019 1:11 pm

There is one huge point that was mentioned, but seemingly overlooked.

If the majority of baby boomers have indeed "under saved", then they have very few assets to sell.
Retirement: When you reach a point where you have enough. Or when you've had enough.

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Re: The day to sell your house

Post by JoeRetire » Tue Jun 11, 2019 1:11 pm

Bogle7 wrote:
Tue Jun 11, 2019 9:52 am
nisiprius wrote:
Tue Jun 11, 2019 9:39 am
We're all going to try to sell our houses at the same time, too.
Yes. The official date is Tuesday, June 12, 2029.
Look it up.
Oh dear! Does this mean I have to sell on that date? I sold my primary residence a few months ago and moved into our second home.

Funny thing is, if I recall correctly, when I sold my house I actually had a buyer! I wonder if that would happen again...

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by Rus In Urbe » Tue Jun 11, 2019 1:24 pm

:wink:
Now I, CurlyDave, am going to make a prediction which I guarantee will be correct.

For the rest of the lives of anyone reading this site, people with larger portfolios will be better off than people with small, or no, portfolios.

Act accordingly, especially with respect to saving and investing.
Brilliant! You could have a whole new career as a Financial Pundit! :wink:

(Except that most readers of the financial pages rarely want to hear anything about saving..... :shock: )

Rus
I'd like to live as a poor man with lots of money. ~Pablo Picasso

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by JackoC » Tue Jun 11, 2019 4:49 pm

JoeRetire wrote:
Tue Jun 11, 2019 1:07 pm
JackoC wrote:
Tue Jun 11, 2019 10:40 am
JoeRetire wrote:
Tue Jun 11, 2019 9:33 am
JackoC wrote:
Tue Jun 11, 2019 9:19 am
But there are some countervailing ones. For example that liquidations of stock by retirees might pick up eventually after not being so high early in their retirement. And, it doesn't necessarily take a large % of holders to sell something to lower the market clearing price substantially.
Would you imagine that if boomers are gradually selling, then millennials and others are gradually buying?
There's always a buyer for every seller. That doesn't tell you what the price will be.
1. Of course it doesn't.

2. But you appear to be imagining a short term clearance sale of some sort, which will somehow depress the market, rather than the normal sell/buy situation that will actually happen.
1. So why did you make the point that somebody else would be buying as if that were of any significance?

2. I think you'll have to quote where I said anything like that (hint: I didn't). My points were pretty generic, I debated whether all were too obvious to even say
a) you can't in general specify that only 'a small %' of new sellers will appear and thus say the effect on prices would be minimal. Depends on elasticity besides what 'small' means
b) the question ignores the surely important effect of demographics and/or wealth growth in other countries. That could be a positive or a negative
c) the question ignores the influence of more older people on public policies, which is one person one vote influence as compared to a relatively small % of people owning most stocks. An older society is not IMO likely to be in favor of more dynamic policies or needed reforms to boost growth if they upset the status quo, again see Japan.

But my main conclusion I think was clearly stated as, 'who knows?' :happy

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by JoeRetire » Wed Jun 12, 2019 6:38 am

JackoC wrote:
Tue Jun 11, 2019 4:49 pm
But my main conclusion I think was clearly stated as, 'who knows?' :happy
'Who knows' is certainly a handy conclusion regarding anything that may or may not happen in the future.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by CyclingDuo » Wed Jun 12, 2019 7:23 am

ThrustVectoring wrote:
Tue Jun 11, 2019 12:43 pm
Overall, though, I'm not super concerned about all this though. If you save more than your peers, you get more than your peers in retirement. If the economy does well, asset prices go higher and everyone gets to have more stuff when retired. If it doesn't do well, then future retirees will have to tighten their belts and accept that they're not living in as rich of a society as they hoped to retire in.
It never hurts to step back and take it all in context on a global basis... :beer

•An income of $32,400 per year would allow someone to be among the top 1% of income earners in the world.

•To reach the top 1 percent worldwide in terms of wealth—not just income but all you own—you’d have to possess $770,000 in net worth.

https://www.investopedia.com/articles/p ... -world.asp

On the other hand, the asset allocation of Baby Boomers is worth consideration:

Image
https://www.cnbc.com/2019/03/20/baby-bo ... pardy.html
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by renue74 » Wed Jun 12, 2019 7:50 am

traveler901 wrote:
Sun Jun 09, 2019 1:05 am
I've never understood the line of thinking that baby boomers retiring will have any impact on the stock market. For starters, about 40% of baby boomers are already retired. Second, most of them don't have any significant amount of money invested in the stock market anyways. Third, the ones with large sums of money in the market could very well never sell those holdings and will pass on to their children. People didn't just magically stop having babies in 1965.

With regards to point #2 (wealth transfer), this is nothing new. Throughout history people are frequently dying and leaving their fortune to the next generation. Why would it be any different or have any different impact than the people who were receiving inheritance money last year, or 5 years ago, or 10 years ago? I don't have any statistics to back this up but based on anecdotal evidence I don't see any difference in millennial's willingness to invest in the stock market. I am a millennial and most people I know are heavily allocated to equities.
+1 100%. I agree with this.

I look at personal info. My mother is a baby boomer and basically has nothing but about $20,000 in a MM account. She lives on $1100/month and she works as a caregiver to older folks who's kids pay her $15/hour to be a live person in their homes. Cook, clean and socialize.

On the other hand, my inlaws are also baby boomers and have accumulated $1.2M through regular blue collar work over the years. Electrician and postal worker. But, they also receive a large stipend from the VA and their SS income....so they don't even touch their portfolio at all. They have 5 children and will possibly leave their portfolio to them. Those 5 kids are all Gen X'ers and to my knowledge participate at the same rate in 401k accounts, mutual fund investing, etc. as their parents. Nobody is hiding cash under the mattress.

I know these are just 2 examples, but....I would be more worried about the baby boomer strain on SS and Medicare, along with the massive brain drain of wisdom/knowledge as more people retire and we have a younger working population.

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by Barsoom » Wed Jun 12, 2019 8:12 am

I look at it this way, rightly or wrongly.

During the accumulation phase, boomers like me invested in companies via equity ownership (company stock, 401(k), etc.). In retirement, I will be converting from ownership to consumption, that is, sell stocks to buy goods and services.

The effect is a wealth transfer of sorts, from ownership to profits. The companies that I buy from, whether foods, autos, airlines, cruise lines, etc., will get my money as profit instead of capital investment. Either way, their market value still benefits from me. The difference is that instead of concentrated positions in market segments via ETFs or direct stock ownership, my wealth becomes more spread around as I spend my money on specific products across more broad market segments over time.

Does this change how the markets react? Perhaps. Is the change from capital investment to market share significant to how companies operate? I don't know. Cash is fungible. It's all about cash flow in the end. How much of it comes in via stock purchase, or product purchase, it still comes down to how the company deploys it. Stock ownership often burdens the company with dividend obligations. The cash to pay the dividends comes from profits. If I reduce my dividend draw while increasing my purchases, the company nets a positive, right (I guess that assumes a buyback instead of a trade to another shareholder)?

But then, I'm just one retiree.

-B

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by David Althaus » Wed Jun 12, 2019 10:41 am

Consider that this is common knowledge--discussed since at least 1996--and any effect has already been arbitraged into the market. Nobody knows for sure.

All the best

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by Jeff Albertson » Wed Jun 12, 2019 5:34 pm

Totally ignored is the fact that 10% of households own 84% of stocks. Most of those households can live on dividends & don't need to sell many/any stocks in retirement. What the other 90% of households do, with 16% of stocks, may be relatively insignificant.
National Bureau of Economic Research, figure 15:
https://www.nber.org/papers/w24085.pdf

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by willthrill81 » Wed Jun 12, 2019 6:47 pm

Barsoom wrote:
Wed Jun 12, 2019 8:12 am
I look at it this way, rightly or wrongly.

During the accumulation phase, boomers like me invested in companies via equity ownership (company stock, 401(k), etc.). In retirement, I will be converting from ownership to consumption, that is, sell stocks to buy goods and services.

The effect is a wealth transfer of sorts, from ownership to profits. The companies that I buy from, whether foods, autos, airlines, cruise lines, etc., will get my money as profit instead of capital investment. Either way, their market value still benefits from me. The difference is that instead of concentrated positions in market segments via ETFs or direct stock ownership, my wealth becomes more spread around as I spend my money on specific products across more broad market segments over time.

Does this change how the markets react? Perhaps. Is the change from capital investment to market share significant to how companies operate? I don't know. Cash is fungible. It's all about cash flow in the end. How much of it comes in via stock purchase, or product purchase, it still comes down to how the company deploys it. Stock ownership often burdens the company with dividend obligations. The cash to pay the dividends comes from profits. If I reduce my dividend draw while increasing my purchases, the company nets a positive, right (I guess that assumes a buyback instead of a trade to another shareholder)?

But then, I'm just one retiree.

-B
And to top it all off, baby boomers aren't going to be selling all of their stock on day 1 of their retirement. The selling will take place over decades.
Jeff Albertson wrote:
Wed Jun 12, 2019 5:34 pm
Totally ignored is the fact that 10% of households own 84% of stocks. Most of those households can live on dividends & don't need to sell many/any stocks in retirement. What the other 90% of households do, with 16% of stocks, may be relatively insignificant.
National Bureau of Economic Research, figure 15:
https://www.nber.org/papers/w24085.pdf
Good point.
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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by dknightd » Wed Jun 12, 2019 7:09 pm

Willmunny wrote:
Sat Jun 08, 2019 5:48 pm
I don't have the answers to these questions. I am simply concerned. I will write out my concerns in the interest of starting an exchange of ideas on the topic.

I believe I read that we have now reached the point where the average baby boomer (defined as birth from 1946 - 1964) has reached the average retirement age in the U.S. (64). If that is true, then we should expect that we are entering a time (or soon to enter a time) with more retired baby boomers than working baby boomers. The oldest baby boomer was 62 in 2008. That means that during the last significant yearly stock market decline, the only retired baby boomers were early retirees (likely substantially consisting of higher net worth individuals or people who could no longer work or find a job).

Unlike their parents' generation, a significant portion of baby boomers do not have a defined benefit pension. The literature suggests that this generation, on average, has under saved (readers of this forum, no doubt, are not likely to be "average" in this regard). This leads me to two concerns:

(1) If, during retirement, the baby boomers experience another 2000 or 2008, will they, on average, panic sell or stay the course? If the average baby boomer has under saved, and if they panic sell, will they, on average, ever materially participate in the market again? When faced with a meager nest egg relative to life expectancy, will they, on average, elect never to substantially expose that nest egg to loss of principal again?

(2) The passing of baby boomers will represent a massive wealth transfer to Gen X and Millennials. With respect to the passing of the portion of baby boomers who are on the right side of the bell curve for savings and market participation, will the heirs to that wealth, on average, participate in the market to the same extent as the hypothetical deceased baby boomer with a high amount of savings and a high market participation?

There always has to be someone on the other side of a trade. When there is not significant demand to buy a current prices, the price falls to meet demand at a lower price. Do you think these demographic issues create a material chance of leading the U.S. into a protracted bear market in the future? If not, why? If so, how do you account for this risk in your IPS and/or asset allocation?
I'm pretty sure that people will come along to buy what I have to sell. I'm pretty sure the "baby boom" is over rated. I'm pretty sure that there are many people younger than me that will want to retire one day. Likely they will want to buy when I want to sell. I used to think about the baby boom, but now I realize it is essentially meaningless. It is not a boom - it is just a slow change in the population. Of course, I could be wrong . . .

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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by bizkitgto » Thu Jun 13, 2019 1:28 pm

willthrill81 wrote:
Sun Jun 09, 2019 9:38 am
This is a controversial topic, but it seems that, historically, the primary economic driver of most nations was the size of their population. Hence, population growth led to growth in economic output. But after the Industrial Revolution, there has increasingly become a disconnect between a nation's GDP growth and their population growth, mainly due to our ability to use machines, computers, etc. to accomplish more and more. For instance, over the last decade, the U.S. GDP has grown at about 1.8% while the U.S. population has grown at about .6% over the same period. That's not to say that population growth doesn't matter, because it certainly seems to, but the relationship between population size and GDP appears to have weakened over time. Due to declining birth rates in OECD countries, we should hope that the relationship will become even weaker.
I think Japan might have a few things to say about population decline.
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Re: The impact of Baby Boomers on the Future of U.S. Stocks

Post by nativenewenglander » Thu Jun 13, 2019 3:48 pm

jacksonm wrote:
Sat Jun 08, 2019 9:05 pm
Harry Dent was (is) big on demographics and I remember seeing ads where he was predicting that the retirement of the Baby Boomers would lead to the next great depression - for reasons you cited and also because they would be consuming less in their retirement years.

Well, the Baby Boomers are now retiring, myself included, and it isn't materializing yet.
I am a born in 1961 boomer and retired. I still have lots of stocks and will keep them to stay ahead of inflation. My dad who was born in 1930 had few bonds during his entire retirement. I don't recall, him selling much of anything just taking the dividends as they rolled in each quarter. The only bonds he had were munis, it was 5% of his portfolio. Most retired friends are more invested in stocks than me at 30/70.

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