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View Full Version : Are the boomers going to keep the stock market low?


furt
12-01-2009, 11:36 AM
Millions upon millions of baby boomers are invested in the stock market, and most of them are just now coming into retirement. They will be either cashing out their 401(k)s, and/or moving the funds into bonds and other low-risk investments. How will this affect the market over the next 10-20 years?

mswas
12-01-2009, 11:38 AM
Hmm, very interesting question.

otternell
12-01-2009, 11:41 AM
I don't know that I agree that "most" are just now coming into retirement. I agree that it is clearly starting and will continue for what - 10 yrs or so? But its not like a mass of them are going to retire in the next 12 mths.

Yes, eventually the market will be dragged down by them selling securities, but many of them are like the rest of us and praying it goes up. Mostly so they can sell at a high point and not have their retirement totally screwed.

Eventually, the market will decline, but since it is being gamed anyway by the big banks, does it really matter? (no I don't have a cite, but if you watch the market especially over the summer, on down days there would be this amazing spike in the last 30 minutes of trading that would bring it up either at a gain for the day or even). High frequency trading - Goldman Sachs. Nuff said.

mswas
12-01-2009, 11:42 AM
I don't know that I agree that "most" are just now coming into retirement. I agree that it is clearly starting and will continue for what - 10 yrs or so? But its not like a mass of them are going to retire in the next 12 mths.

Yes, eventually the market will be dragged down by them selling securities, but many of them are like the rest of us and praying it goes up. Mostly so they can sell at a high point and not have their retirement totally screwed.

Eventually, the market will decline, but since it is being gamed anyway by the big banks, does it really matter? (no I don't have a cite, but if you watch the market especially over the summer, on down days there would be this amazing spike in the last 30 minutes of trading that would bring it up either at a gain for the day or even). High frequency trading - Goldman Sachs. Nuff said.

Right, I saw some graphs a while back where the market spiked but it was tracking high frequency trading of some shell companies by Goldman Sachs and JP Morgan.

otternell
12-01-2009, 11:46 AM
I believe I read an article (WSJ) that broke down how many millions GS made daily (again over the summer) as a result of the HFT.

That's why they were able to get out of Tarp so quickly.

My mom (bless her sweet deluded soul) has an IRA at GS, and when I rant about this, she thinks that its actually good for her. "Sorry mom, but GS doesn't have your back"

furt
12-01-2009, 11:55 AM
I don't know that I agree that "most" are just now coming into retirement. I agree that it is clearly starting and will continue for what - 10 yrs or so? But its not like a mass of them are going to retire in the next 12 mths.That wasn't what I was suggesting. Some are already retired, but most are just now coming into their retirement years -- i.e., the cohort will be retiring over the next decade.

Obviously, if they all cashed out at once, we'd have a crash. My question is whether a ten year rolling series of cashouts will cause either a crash or just a long-term depressed market.

Yes, eventually the market will be dragged down by them selling securities, but many of them are like the rest of us and praying it goes up. Mostly so they can sell at a high point and not have their retirement totally screwed.Obviously. The question is whether or not we expect those prayers to be answered or not.

otternell
12-01-2009, 12:00 PM
Yes, but you missed my biggest point: the market is being gamed by the means of high frequency trading and potentially front-running, by the GS and JPMs of the world. Which means that yes the market will be negatively impacted by the retirees cashing out, but because GS and JPM make money when it goes up, they will fire up the machine and the market will go back up.

otternell
12-01-2009, 12:07 PM
Obviously. The question is whether or not we expect those prayers to be answered or not.

The OP question was "Are the boomers going to keep the stock market low?"

So that's not the same question. Either way, there's not much to debate.

I think that the real thrust of your question is a matter of timing (I could be wrong, I'm truly not trying to be an ass), and anyone with a prediction on timing should have their mouth duct taped shut, since all that is pretty much by-guess and by-golly anyway.

Bill Door
12-01-2009, 12:32 PM
Not if they're like me. My target portfolio stock percentage is based on my age. It's actually (120-age)% in stocks and the rest in bonds. As I age I convert stocks to bonds, but unless I live to 120, I'll always have some stocks, and my stock:bond ratio should never change more than a couple percent a year. I rebalance once a month or so, more frequently in volatile markets, less in static ones.

furt
12-01-2009, 12:33 PM
The OP question was "Are the boomers going to keep the stock market low?"

So that's not the same question. Either way, there's not much to debate.

I think that the real thrust of your question is a matter of timing (I could be wrong, I'm truly not trying to be an ass)Not really, no.

Over the last 20 years, the stock market has grown remarkably. A lot of people have come to think of mutual fund returns of 10-20% or more as "normal," which will come back in a year or two after the current recession eases. I am skeptical of this, because I think that throughout the 2010s, we will see millions of boomers take their money out of the market. My layman's guess is that this will keep the market from growing much over the next 10-20 years. However, I could be wrong; hence my desire to solicit opinions from more financially-knowledgeable people.

otternell
12-01-2009, 12:39 PM
Not really, no.

Over the last 20 years, the stock market has grown remarkably. A lot of people have come to think of mutual fund returns of 10-20% or more as "normal," which will come back in a year or two after the current recession eases. I am skeptical of this, because I think that throughout the 2010s, we will see millions of boomers take their money out of the market. My layman's guess is that this will keep the market from growing much over the next 10-20 years. However, I could be wrong; hence my desire to solicit opinions from more financially-knowledgeable people.

When you put it that way - I do agree that the returns we have been told to expect are quite unrealistic going forward. Look at the last 10 yrs on the S&P, they were basically lost.

However, I still believe that there is enough of the market in corporate hands that the issue will not be greatly impacted by retirees. If it was retirees vs. employees, then yes the market would have a more negative tilt. However, that's assuming we can attribute the market moves on any one thing, which is virtually impossible. Look at this year: the fundamentals are crap and the market was practically on a rocket all summer. Based on companies "beating expectations". Well they beat the expectations, because the expectations were down. Sales were down, profit was down, and yet the stocks went up? during a recession?

I think ultimately the flaw is trying to see the market as a rational group. It is not and it goes up and down based on anything and everything.