Tuesday, July 18, 2017

Boomers Will Cause the Markets to Go Bust

I try to explain it this way;
If every single one of your neighbors had bags of apples for sale at the end of their driveway, so there were more people selling apples than buying apples, what do you think would happen to the price of apples?

That's right!  It would go DOWN!

If there were more people actually selling apples than there were people who wanted to buy apples, it's conceivable that you couldn't GIVE YOUR APPLES AWAY....which means for that particular day, your apples were WORTHLESS.

Get it??

Now let's build on what we know.

We KNOW that 60% of Americans don't have $1000 on hand to pay for an emergency or the deductible on their health insurance....because PEW and USA TODAY just told us that.

We KNOW that one day in the not distant future that baby boomers are going to have massive amounts of stocks for sale as they they sell them to fund their retirements AND as they are forced to sell them at age 70 1/2 as required by the IRS.

So if millions and millions of boomers will soon have stocks for sale like bags of apples....what do you KNOW is going to happen when there are more sellers than there are buyers?


As boomers retire and exit the economic-contribution side of society, we’ll likely see a stock sell-off.

Living in Los Angeles from 1979 to 1995, I grew accustomed to my TV viewing being interrupted by breaking news of car chases. A slightly different TV breakaway event occurred on July 2, 1982, when San Pedro resident Larry Walters, out of sheer boredom, purchased 42 8-foot weather balloons and several tanks of helium.

Larry filled and tied the balloons to his lawn chair and took flight, reaching altitudes of 15,000 feet. “Lawn Chair Larry” drifted into the controlled airspace of LAX airport, prompting pilots to report the safety hazard to the control tower. This stunt captivated the Los Angeles audience for weeks, and the constant car-chase breakaways took a back seat to Larry’s lawn-chair expedition.

Fast-forward to 2017. As we experience numerous bubbles in our economy, I thought it a propos to portray Uncle Sam as Lawn Chair Guy in order to focus on the boomer bubble, and how it affects the markets: we’ll likely see a stock sell-off due to the number of boomers retiring.

A blog post by bestselling author, educator and founder of GoldSilver.com, Mike Malone, brought up some undeniable points about boomers that the general market is not discussing. 

The Employee Retirement Income Security Act (ERISA), enacted on Sept. 2, 1974, requires retirees, starting at age 70 ½, to liquidate their IRA, 401(k) and other retirement accounts within 15 years. The oldest of the baby boomers are now reaching that age, which will start a cycle of substantial stock sales. Malone comments that investing for the long term is drawing to a close. We’ll have too many sellers and too few buyers. 

Over the past 65 years (on a population basis), there were three new buyers for every new seller. Over the next 25 years (on a population basis), there will be three new sellers for every new buyer, says Malone. It can be argued that annual IRA distributions can be moved via a 1035 exchange, but clients will still have to pay taxes on those distributed proceeds, so there will be less money to reinvest. Also, for many retirees, they will be living off those distributions.

What is particularly alarming in the 2030 chart projection is the number of “Max Social Burden” age group, which becomes larger than the number of “Max Savers” age group. How entitlement programs like Social Security will cope is an unknown.

The substantial impact from the legions of boomers has influenced growth surges in housing, education, real estate and the stock market. As boomers retire and exit the economic-contribution side of society, we’ll see a reversal in the bubbles they created, with the stock market poised for increasing downside impact over the next 25 years.

Here;  http://www.wealthmanagement.com/retirement-planning/boomers-cause-markets-go-bust?NL=WM-27&Issue=WM-27_20170718_WM-27_777&sfvc4enews=42&cl=article_1_2&utm_rid=CPG09000005582247&utm_campaign=10083&utm_medium=email&elq2=e78bc82c937a42e5bd655cf743311fba

"But Dennis, that can't happen because the US stock market always goes up over the long term!"

OK...and how many centuries has the US stock market "ALWAYS" been around?

"Ummmm...for maybe a few hundred years?"

OK...and how many times in US history has our society produced an upside-down pyramid that has more workers collecting benefits than there are workers paying in?

"Ummmm....I guess that has NEVER happened?"

So how can you possibly say that the US stock market always goes up when we are facing a situation that no one has EVER seen?


Post a Comment

Subscribe to Post Comments [Atom]

<< Home