[The Beast1]

I had a realization on the train this morning. How much of an impact will the retirees pulling money from 401ks and pensions be on the health of the stock market?


And how does one insulate himself, better yet profit from such a decline?

[bacon]

P/E ratios are 60% over fair value for equities so it's likely the market will have a correction soon anyways. But for younger investors thinking in investing from a long term view equities are still your best bet for good returns. The older retirees will likely move more of their portfolio into conservative less volitile sectors but I don't think this will be as significant as some are predicting just because they still need to get good returns and little else can provide that these days short of equities. Some will sell their equities to get an annuity but those annuity companies will just move to investing the lump sum they get from retirees back into equities. One guy Harvey Dent has some doomsday predictions on the boomer withdrawl from spending as much as they did when they were younger and how it will impact the overall gross domestic product which would impact equities negatively. That does seem like a viable argument for impacting companies growth domestically IMO.

[Ardbeg]

The demographic bulge of the baby boomers is counter-balanced by the slow increase in total U.S. population. Also, with longer life expectancy, those old fogies will be keeping a chunk of their savings in the stock market for a few decades to come.

Add to that greater financial liberalization around the world. Many foreign pension and insurance funds continue to invest their money in the United States because its liquidity and size.

But if you believe that this is an issue, the best way to profit from this scenario is to invest in companies that cater to the baby boomers. If they are withdrawing massive amounts of money from their 401(k)s they have be spending it on something: Viagra, retirement homes, reading glasses, etc.

[DVY]

@Bacon- why 60%. Is this based on historial- PE ratios/ market cap-GDP/ earnings yield? Whered you pull this # from?

[Spectrumwalker]

Kiyosaki wrote a book a book about this exact thing called Prophecy written back in 2002. It's definitely worth a read. It's specifically about his theory of how the U.S. retirement system turned everyone and their mothers into "investors" and that the market is artificially inflated. He goes into detail about what a huge effect the boomers pulling their funds will have when some million odd baby boomers will enter their 70's come year 2016. It really motivated me to sell what stocks I had excluding stocks that still produce dividends. Like my grandfather used to say, 'it never hurts to take a profit while you can.' For me, I'm out and I'm content with what I earned placing it into real estate instead. I sleep better at night.

[The Beast1]

(06-05-2014 04:35 AM)Spectrumwalker Wrote:  

Kiyosaki wrote a book a book about this exact thing called Prophecy written back in 2002. It's definitely worth a read. It's specifically about his theory of how the U.S. retirement system turned everyone and their mothers into "investors" and that the market is artificially inflated. He goes into detail about what a huge effect the boomers pulling their funds will have when some million odd baby boomers will enter their 70's come year 2016. It really motivated me to sell what stocks I had excluding stocks that still produce dividends. Like my grandfather used to say, 'it never hurts to take a profit while you can.' For me, I'm out and I'm content with what I earned placing it into real estate instead. I sleep better at night.

I'll take a look into it. Thanks for the suggestion!

[Spectrumwalker]

No worries man. Good luck to you.