Michael, I believe that baby boomers are defined to be those who were born between 1946 and 1964 (in the U.S.A. that is, for the non-U.S.A. threaders reading this). The average age of the boomers is about 40 now, however (not a symmetrical curve), and Harry Dent argues that the peak effect on the economy and stocks will happen when the average person reaches age 47.5 in 2009 (approximate peak in earnings, spending, saving - used to be earlier, but each generation is taking longer to peak). As I mentioned, I think this boomer argument is very sound, but if everyone reads The Roaring 2000's ahead of time, the market may peak far in advance of when it theoretically should.
One interesting counter argument: I have a book that says if you plot the percent turning 45 (they use 45 vs. 46.5/47.5 used in Roaring 2000's) vs. the inflation adjusted S&P, it looks like it will have a lesser effect than when plotting the number of people turning 46.5 vs. the Dow, as in the R2K book. In fact, it suggests the market will peak about now instead (which does not make sense to me). The author argues that plotting the data the other way is in error. However, I notice from the Roaring 2000's they adjust their birth curve for immigration, which makes sense. It seems reasonable that the percent turning the designated age would be the correct comparison, but that immigration should also be factored in, and inflation also. But maybe the way Mr. Dent does it is more correct, I am not sure. I am not going to worry about it though, I think the boomer effect is a positive for the market for at least five years. Unless of course everyone reads the R2K's book in advance, and believes it. That is why I say 5 years, I think the market will anticipate the peak to some extent.
One other positive. Cutting tax rates should help out over the next 5-10 years. I think that helped us back in the 80's.
John |
