PeopleProfitsPensions.com

By Robert F. Abbott

I keep coming across the notion that stock markets in North America will take a hit as the Baby Boomer generation moves into retirement.

The thinking is that as Boomers reach retirement age, they’ll pull their savings out of stocks and mutual funds, and invest them in bonds, GICs, annuities, and the like. This will mean a reduced demand for stocks and mutual funds, pulling down prices overall. Therefore, the thinking continues, that in about 10 years or so, the market will not be a good place to invest.

Since the Boomers are the biggest-ever generational wave, and their passage through the life cycle has triggered countless other societal changes, that’s a reasonable conclusion. And, since succeeding generations are much smaller (the Baby Bust), they won’t have enough critical mass to keep stocks increasing in value over time, as they have for the last couple of hundred years.

Economist and humorist P.J. O’Rourke put it most entertainingly in his book, Eat the Rich (1998):

“We baby boomers have caused everything since 1946. We’ll keep buyings stocks until we retire. But when we hit sixty-five, we’re going to sell stocks. And the stock market is going to go down. And we’re going to wet ourselves. The math is simple: 1946 + 65 = 2011. Buy stocks until 2011, and then buy Depends.”

However, there’s a catch.

As the Baby Boomers get ready to retire, the Asians get ready to invest. In India, China, and other Asian countries, we see a vast new middle class emerging. And what will those new middle class citizens do with their savings?

Invest them in stocks and mutual funds, no doubt. And if North American stock markets offer good values, these Internet-enabled investors in Shanghai, Bangalore, and a million other Asian cities will no doubt find them.

With the Internet growing in both capabilities and geographic reach, there’s no reason for them not to surf the stock markets of the world and invest wherever opportunities exist.

So, I for one, don’t aim to withdraw from the markets for demographic reasons. Yes, demographics has driven much of the change we’ve seen in the past half century. But, the new prosperity of the Asians and the amazing powers of the Internet more than trump the power of the Boomer demographic in this case.

You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.