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This article first appeared on this site as a blog from our Retired Old
Blogger. That's him in the picture! We consider it quite thought provoking and, as it contains some
ideas on investments, we decided to place it in this section in case
you missed the original.
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‘Baby boomer’ is not a phrase that I particularly like, butthen I’m not over-fond of putting labels on groups. It also sounds a bit American, not that thereis anything wrong with that of course, but it just jars a bit on my Englishsensitivities. Anyway if you were bornbetween 1946 and 1964 you fall into that category, like it or not.
Statisticians, as is their wont, come up with all sorts ofinformation and figures about Baby Boomers. There are the obvious implications including more competition to getinto school and university, more job applicants, greater demands on socialservices and so on. However, there arealso more nefarious statistics. For example,as we reached middle age we had an impact on the stock market because therewere more of us buying shares with our income and savings. It has been argued, with some logic, that wewere responsible for the boom years because we bought more ‘product’ andinvested more in stock markets. Houseprices forged ahead because the population bulge created a demand that exceededthe supply.
The doom mongers are now predicting the oppositeaffect. As we come up to retirement weare more likely to downsize our houses, consume less ‘product’ and we arelikely to sell our shares to finance our retirement. This apparently is going to result indepressed stock markets in those countries that actively participated in theSecond World War. Some doom mongers arepredicting a fall in the American S & P 500 of something like 40% over thenext 10 years or so. Pessimists ingeneral are having a field day. Not onlyare stock markets going to be affected by Boomers selling shares, but companieswill be less profitable; P/E ratios will fall; double-dip recession isinevitable, and all this is on top of a very shaky financial situation withinthe EU likely (according to the doom mongers) to bring about the demise of theEuro and/or the EU itself, at least in its present form.
So, what to do? Whereto invest? How to rebalance ourportfolios? The answer is to buypharmaceuticals; cruise companies; care home providers and other sectors thatare likely to benefit from an aging population. You might also like to think about income generating asset classes. Consider investing in areas like SouthAmerica; sub-Saharan Africa; the Middle East or the northern parts of SoutheastAsia (ex-Japan) where working populations are expanding.
On the other hand, be an optimist and say to hell with itall and just enjoy your retirement. Thenext generation are unfortunately going to bare the brunt of this demographicanomaly because the longer-living Boomers are rapidly spending theirinheritance.
It’s a hard life.