Demographics is Destiny - Part II

[MasterBlaster]

yet another article on the tough-times ahead and the futility of the Feds action. The article suggests it's a tough uphill struggle against retiring Boomers life-cycle spending patterns driving the economy.

Are Stocks Doomed by Demographics? - Businessweek

An economics blog posted a depressing speech given by author and newsletter writer Harry Dent, called “A Decade of Volatility: Demographics, Debt, and Deflation.” “There is,” Dent says, “simply no way the Fed can win the battle it’s currently waging against deflation, because there are 76 million Baby Boomers who increasingly want to save, not spend. Old people don’t buy houses!”
He explains that the peak of the recent housing boom featured upper-middle-class families living in 4,000-square-foot McMansions. “About ten years from now,” he says, “what will they do? They’ll downsize to a 2,000-square-foot townhouse. What do they need all those bedrooms for? The kids are gone. They don’t visit anymore. Ten years after that, where are they? They’re in 200-square-foot nursing homes. Ten years later, where are they? They’re in a 20-square-foot grave plot. That’s the future of real estate. That’s why real estate has not bounced in Japan after 21 years. That’s why it won’t bounce here in the U.S. either. For every young couple that gets married, has babies, and buys a house, there’s an older couple moving into a nursing home or dying.”

 

[marko]

Devil's Advocate: They don't buy houses, but they spend money on other things.

Travel, restaurants, cars, health care are all (non poor) boomer expenses and I'd expect an uptick in those items...stuff they couldn't have/do when they owned that giant albatross they called 'home'.

If the author bases most of his argument on housing I think he's missing the view that the money will be spent differently.

Maybe Harry's comment of "they kids are gone, they don't visit anymore" is more of a subconcious personal gripe than a financial analysis

Most downsized boomers that I know are spending more (or at least as much) as they were before...but now they spend it on 'a better way of life'.

IMHO

 

[devans0]

But those 2000 ft^2 condo/townhouse will be in a good climate, with all the amenities. One replier stated it well when he said that low interest rates are holding up spending. He didn't save all those years to spend down the principle in retirement.

 

[HFWR]

The Changing Demographics of America | 40th Anniversary | Smithsonian Magazine

Between 2000 and 2050, census data suggest, the U.S. 15-to-64 age group is expected to grow 42 percent. In contrast, because of falling fertility rates, the number of young and working-age people is expected to decline elsewhere: by 10 percent in China, 25 percent in Europe, 30 percent in South Korea and more than 40 percent in Japan.

 

[Animorph]

So I guess my planning for constant inflation-sdjusted spending needs to be adjusted downward. I definitely won't be saving much in in retirement. Kind of the opposite by most definitions.

 

[audreyh1]

Hmmm - I read a discussion recently that suggests that we are at the nadir now, and that US demographics will soon turn in our favor market wise.

from Demographics & markets - Morningstar

 

[unclemick]

YOU CAN"T TAKE IT WITH YOU!

I'm spending more than when I was working, saving/investing, paying into SS.

I plan on continuing to party til I puke. And a lot of my friends are downsizing BUT they are spending fairly well on condo remodeling and amenities. I know that doesn't count as data but?



heh heh heh - and then there is the rest of the world out there 'moving on up' hopefully providing portfolio growth while I spend spend spend.

 

[traineeinvestor]

Based on his track record, a bearish call from Harry Dent is probably the most bullish signal we are likely to get: Harry Dent

 

[ziggy29]

People have said "retiring boomers are going to kill the market" for a couple decades now. But the thing is, the financial condition of the boomers is so varied that they aren't all going to retire in one fell swoop. The crash and the bad job market have, I think, removed some of that concern. The bottom line is that I don't think the Boomers will be able to make the mass, sudden exodus out of stocks that has long been predicted.

 

[W2R]

People have said "retiring boomers are going to kill the market" for a couple decades now. But the thing is, the financial condition of the boomers is so varied that they aren't all going to retire in one fell swoop. The crash and the bad job market have, I think, removed some of that concern. The bottom line is that I don't think the Boomers will be able to make the mass, sudden exodus out of stocks that has long been predicted.

Also, I know that I moved my asset allocation gradually towards my retirement asset allocation, over several years. It wasn't instant.

(Good thing, in my case, since my retirement was in late 2009.)

Possibly a good percentage of older boomers who are not retired, have already done the same thing. This would smooth out the curve.