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Baby Boomers Retiring May Depress Stock Market

Posted By Jim On 08/31/2011 @ 7:06 am In Investing | 16 Comments

Last week, my Devil’s Advocate post argued against saving for retirement [3] because the stock market is a big Ponzi scheme. While that’s a cynical way of looking it, the reality is that the market does rely on more investors putting more money into the system. When people start pulling money out, and not reinvesting it elsewhere, values have to go down because demand is lower. It’s a gross oversimplification, I admit, but it’s valuable in helping us understand that argument.

It turns out that the Federal Reserve Bank of San Francisco, as reported by Bloomberg [4], has come to the conclusion that stock market values are likely to be depressed as baby boomers, those born between 1946 and 1964, start to retire. As they pull out their funds to help pay for retirement, the market will see “depressed” values as a result. And if you think that demand will be replaced by foreign investors – turns out their in worse shape:

“For many primary purchasers of U.S. equities outside the U.S., their demographics are even worse than ours, in particular Europe and Japan, which have older age profiles prevailing than the U.S. does,” Spiegel, vice president of the bank’s research department, said in a telephone interview today.

I’m not an investing guru and I don’t have any advice (I’m doing exactly what I’ve been doing for the last ten years), but this does fortify the Devil’s Advocate argument, doesn’t it?


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[2] Email: mailto:?subject=http://www.bargaineering.com/articles/baby-boomers-retiring-depress-stock-market.html

[3] Devil’s Advocate post argued against saving for retirement: http://www.bargaineering.com/articles/save-retirement.html

[4] Bloomberg: http://www.bloomberg.com/news/2011-08-22/baby-boomers-selling-shares-may-depress-stocks-for-decades-fed-paper-says.html

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