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5 Things To Ponder: Demographics

Tyler Durden's picture




 

Submitted by Lance Roberts of STA Wealth Management,

"Blessed are the young, for they shall inherit the National Debt."  -  Herbert Hoover

I turned 49 this past Monday.  I don't feel like I am half a century old and my wife regularly tells me that she has five children to take of - our four plus me. But yet, here I am, about to be the proud owner of regular prostrate exams.  Oh...the joy.

I am not technically a "baby boomer" as I am one year outside the designated range of individuals born between 1946-1964.  However, the roll off of this massive slice of the population in the years ahead will have a significant and profound impact on the economy and the markets. In my opinion, there is simply not enough attention paid this issue and it is an important one.  However, since demographic impacts take a very long time to mature, they are ignored by the mainstream media which are focused on the 24-hour news and market cycles.  

The impact on the economy and the markets is real.  As I wrote earlier this week:

:With 24% of 'baby boomers' postponing retirement, due to an inability to retire, it is not surprising that the employment level of individuals OVER the age of 65, as a percent of the working age population 16 and over, has risen sharply in recent years."

Employment-65-Over-051414

In this regard, this week's "Things To Ponder" is a collection of articles about the "aging of America" and the potential impacts to the financial markets and the economy.

1) Median Household Income By State by Doug Short via Advisor Perspectives

"Back to the big picture: The median household incomes in 17 states plus DC have fared better than the US median as measured by the real percent declines from peak years. A total of 33 states have suffered greater declines, with four states dropping more than 20%. Delaware is the biggest loser, down a whopping 27.1% since its real median income peak in 2000."

Dshort-median-incomes-051614

2) 22 Facts About The Coming Demographic Shockwave by Michael Synder via Zero Hedge

"Today, more than 10,000 Baby Boomers will retire.  This is going to happen day after day, month after month, year after year until 2030.  It is the greatest demographic tsunami in the history of the United States, and we are woefully unprepared for it.  We have made financial promises to the Baby Boomers worth tens of trillions of dollars that we simply are not going to be able to keep.

The Baby Boomer generation is so massive that it has fundamentally changed America with each stage that it has gone through.  When the Baby Boomers were young, sales of diapers and toys absolutely skyrocketed.  When they became young adults, they pioneered social changes that permanently altered our society."

3) Aging America Heading For Disaster? by Kyle Smith via New York Post

"People tend, for instance, to buy houses at about the same age — age 31 or so. Around age 53 is when people tend to buy their luxury cars — after the kids have finished college, before old age sets in. Demographics can even tell us when your household spending on potato chips is likely to peak — when the head of it is about 42.

Ultimately the size of the US economy is simply the total of what we’re all spending. Overall household spending hits a high when we’re about 46. So the peak of the Baby Boom (1961) plus 46 suggests that a high point in the US economy should be about 2007, with a long, slow decline to follow for years to come."

PCE-GDP-Debt-051614

4) Baby Boomers Reluctant To Retire by Gallup

"Concerns about money likely play a significant role in explaining why so many baby boomers see themselves working longer. Even before the 2008-2009 recession, financial advisers were warning that some baby boomers were carrying too much debt, saving too little, and relying too heavily on Social Security to retire comfortably. And then came the economic collapse -- a perfect storm of layoffs, pension and stock losses, and plummeting home values -- which was particularly ill-timed for boomers who might otherwise have been in financial shape to retire on schedule with the start of their Social Security benefits.

Whether by choice or necessity, baby boomers will remain a sizeable proportion of the workforce in the years ahead, with many expecting to work past the average U.S. retirement age of 61 and even the traditional retirement age of 65."

Also Read: 12 Ways Baby Boomers Will Affect The Nation

5) Baby Boomer's Retirement On The Economy by Ben Casselman via 538

"The U.S. dependency ratio has been improving in recent decades, falling from 65 in 1980 to 61 in 2000 to 59 in 2010. But now the trend is set to reverse. By 2020, the Census Bureau estimates, the U.S. dependency ratio will be back to 65; in 2030, it will be 75, the worst since the 1960s and 1970s, when the baby boomers were children.

By 2050, more than 4 percent of the population will be at least 85 years old, more than double today’s figure."

casselman-feature-boomers-3

The demographic shift will have an increasing importance over the next decade or so on the economy and the financial markets.  Ignoring the issue won't make it go away and, somewhat unfortunately, fiscal policy has yet to address any of the issues concerning entitlement reform.

The aging population will provide both headwinds and opportunities for investors and the economy over the years ahead.  However, I suspect that the investment opportunities won't be found in a simple "indexing strategy" but through rather specific targeting of investments relating to the aging of America.

Of course, I'm old, so maybe I am just biased.

 

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Fri, 05/16/2014 - 16:37 | 4767661 nope-1004
nope-1004's picture

I read a few years back on here that the peak consumption year for boomers was 2007.  The consumerism economy is dead going forward when cashing out of the system for retirement and capital outflows for vacationing becomes the plan.

 

Fri, 05/16/2014 - 16:49 | 4767706 NotApplicable
NotApplicable's picture

Had to quit reading when I hit "prostrate exams."

That shit ain't heathcare, yo.

Fri, 05/16/2014 - 16:55 | 4767719 macholatte
macholatte's picture

 

 

Good Bye Boomers - Hello Death Panels

Take your statistics to a new level and factor into it "Denial of Care" and "early retirement" via Obamacare take-a-number and wait in line to die. Morticians rejoice.

 

 

Fri, 05/16/2014 - 17:43 | 4767846 Jumbotron
Jumbotron's picture

"Good Bye Boomers - Hello Death Panels"

 

Here's your Death Panels of the Future.  

 

https://www.youtube.com/watch?v=LSUAAKFLoL0

 


Fri, 05/16/2014 - 18:23 | 4767924 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

These analysis pieces are always based upon the ideas that Boomers are going to live to 100+. Living dinosaurs on earth. I am sorry to break it to you, most Boomers will not see 80. If they don't kill themselves, the years of poor living and drugs will catch up to them.

http://www.washingtonpost.com/local/baby-boomers-are-killing-themselves-...

Fri, 05/16/2014 - 19:23 | 4768037 logicalman
logicalman's picture

In my case, years of working to stay physically fit and eating good food may curse me to live to a ripe old age in this asylum. My dad smoked 40 a day and lasted to 88, my mum is still around at 90 so I likely have good genes too.

As for the drugs, I think I may have partaken a bit more than they did.

One day we'll all take the dirt nap.

I don't really care about the quantity, it's the quality that matters.

 

 

 

Fri, 05/16/2014 - 20:53 | 4768227 Alberich
Alberich's picture

Assuming you are in the boomer demographic and healthy, you must realize you are an outlier. Those who are younger are probably part of a trend. Younger people increasingly seem to realize that health is a personal responsibility and that "society" sure as hell isn't going to fix their lifestyle illnesses for them.

One interesting thing about that "employed 65 and over chart" is that the 65 year olds of the 1950s were massively healthier than today's 65 year olds, to generalize from obesity rates at least.

From that we can guess that mid-century elders worked because they were fit and wanted to. Today's elders work despite their infirmity, because they have no choice.

Choose quality over quantity and you may well get both.

Fri, 05/16/2014 - 20:01 | 4768123 Jstanley011
Jstanley011's picture

You go up to a man, and you say, "How are things going, Joe?" and he says, "Oh fine, fine — couldn't be better." And you look into his eyes, and you see things really couldn't be much worse. When you get right down to it, everybody's having a perfectly lousy time of it, and I mean everybody. And the hell of it is, nothing seems to help much. -Kurt Vonnegut

Sat, 05/17/2014 - 00:58 | 4768674 daveO
daveO's picture

Add in all the trans fats and sugar they've eaten with the fact that the media is actively promoting their suicide. There was an article in a big mag last year about Living Wills. It talked about the 'Baby Boomers' and 'I don't want to be kept on life support indefinitely'. I laughed out loud. My first thought when I saw this was they won't need death panels, after all. For, it's always a given that Boomers do whatever the media suggests! A few more articles like that and they'll be going into debt to purchase a Living Will with an ironclad DNR(Do Not Resuscitate) promise. It just has to be promoted as the ultimate in 'self-fulfillment'. I'm sure Madison Ave. can rise to the occasion.  

Fri, 05/16/2014 - 17:57 | 4767874 garcam123
garcam123's picture

I couldn't agree more!

This criminal cabal government will begin killing boomers as fast as they can and probably already are!

I'm watching this VA scam closely.  I wouldn't doubt that the Administration is as fully involved in this as Chris Chrispy is in something to do with bridges!

I'm going to be afraid to get ANY kind of "care" from this government.....flu shots, food additives, even areosol distribution of disease.  Knowing what the NSA is doing, I don't put anything past these bastards!

If and when, I will be at the barricades......Go that NSA? Me and MILLIONS of ARMED AMERICANS!

I guess if they can do it between commercials! Right?

 

I think I'm moving out of the cell, er....country!

Fri, 05/16/2014 - 23:58 | 4768590 PT
PT's picture

On the plus side, there should be plenty of empty cars and houses so future generations won't have to build their own.  All they'll really have to worry about is feeding themselves - and with machines already built that produce excessive yields to cater for the boomer generation, it should mean more leisure and prosperity for all.

No?

HOW COME IT NEVER WORKS THAT WAY???????????????????????????

WHY IS IT ALWAYS SO ONE-SIDED??????????????????????

SHOULDN'T WE END UP WITH EXCESSIVELY LARGE WATER SUPPLIES AND POWER GRID??????????????
Pre-boomers had to supply water, gas, oil and electricity to their multiple children, as well as themselves, boomers had to supply for themselves and kids.  Where is all that excess capacity as the boomers grow old and die off?  If boomers and pre-boomers could build so much with their primitive technology, why do we have to worry about anything with all of our existing infrastructure and advanced technology?????????????????????????

Sometimes you just have to realize that leisure and prosperity is already here for the taking.  Some fuckwit just stands in the way for no good reason.  He needs a shotgun in his face.

No need to panic Mr Biden - I didn't say, "AR-15".  I said, "Shotgun".


Sat, 05/17/2014 - 09:07 | 4769027 drendebe10
drendebe10's picture

No woories, mate.  Thanx to obamascare, Phoenix VA style health care coming to your neighbothood soon!

Fri, 05/16/2014 - 18:03 | 4767875 garcam123
garcam123's picture

trying to delete doubled comment.

Sorry

Fri, 05/16/2014 - 17:52 | 4767864 Lin S
Lin S's picture

Should we skip them?

Fri, 05/16/2014 - 17:25 | 4767797 whatsinaname
whatsinaname's picture

Wrong !! Traders that dig their fingers deepest into the correct holes are the most profitable.

Fri, 05/16/2014 - 19:25 | 4768039 sherryw
sherryw's picture

Yep. Harry Dent explained it very well. Folks' peak spending years end about ten years before retirement, after the kids have left home, when they realise with a jolt that retirement is looming and they need to save for it starting now. This article would have been much better had Harry written it.

Fri, 05/16/2014 - 16:42 | 4767682 ebworthen
ebworthen's picture

The FED better start the check program - $10,000/month for anyone over 40 should do it - bolster spending, tax revenues, and open up some jobs for the youngsters, prevent riots - all sorts of good stuff.  Probably help out Darden too; they sold Red Lobster too soon.

Fri, 05/16/2014 - 16:50 | 4767711 Slave
Slave's picture

Just think of all the useless Chinese shit we could buy!

Fri, 05/16/2014 - 16:55 | 4767724 NotApplicable
NotApplicable's picture

Everybody knows that would be inflationary. Thus it can never be allowed to happen.

Sat, 05/17/2014 - 01:05 | 4768684 ebworthen
ebworthen's picture

Yeah, that's the official line, yet flooding Wall Street with mountains of cash is neither inflationary nor immoral.  *cough*! 

Anyone shop for groceries lately?  J.H.C.!  I'm seeing 20% increases in just the past two months!

Fri, 05/16/2014 - 18:00 | 4767884 garcam123
garcam123's picture

Red Lobster sucked.  They got voted on by America.  That's why they were sold.

 

Now Outback and that wonderful Prime Rib and those wonderful Bloomin Onions and salads.....I'm way good with that!

Sat, 05/17/2014 - 01:07 | 4768691 ebworthen
ebworthen's picture

Olive Garden sucks too.

Management infected with MBA's who never worked a day in a restaurant.

Fri, 05/16/2014 - 16:42 | 4767692 Dr. Richard Head
Dr. Richard Head's picture

What are some publicly traded pet food companies that I can invest in?  Looks like it will be a bull market for that...and depends.

Fri, 05/16/2014 - 16:45 | 4767697 Comte d'herblay
Comte d'herblay's picture

"We have made financial promises to the Baby Boomers worth tens of trillions of dollars that we simply are not going to be able to keep".

 

Dispute this utterly.  The FED is already funding those 10,000 per day retirees. Where do you think Bill Clinton, Geoerge Bush, and lesser lights are getting their monthlyi pension checks from??

 

Those holding the securities that were bought to fund Bill and George's pensions are having to sell securities to pay them each month.  They are monetiizing their securities by selling them to another Insurance company, Bank, investment bank and the FED is standing guard to assure the buyer that they will be made whole if the  security they bought enters a freefall zone, which is not going to happen. 

 

The QE program is designed to ward off mass liquidaitons by our institutions to get the cash to pay retirees, including those on Medicare.   

 

You are rasing a false flag because you either are not aware of what is really going on at the Primary Dealers, and any other institution on the hook to pay out pension money OR you do know and are employing scare tactics to accomplish some other agenda.

 

We won't see any major fall in the securities markets because the FED will see to it, no matter what it takes.  The Boomers will be paid their 401K cash, and defined benefit/contribution plans, and Social Security recipients will have their quadrillion dollar fund.  

 

The real question however is---- as we move thru time---- what will that monthly payment buy or more likely not buy that it can today?

Fri, 05/16/2014 - 16:58 | 4767732 NotApplicable
NotApplicable's picture

How can he not know this when your post is but a paraphrase of Greenspan's quote about the ability to meet any and all liabilities, but not any guarantee of their purchasing power?

Fri, 05/16/2014 - 17:30 | 4767812 Dick Buttkiss
Dick Buttkiss's picture

Yes, this gap will be fairly hard to close in today's dollars:

https://www.youtube.com/watch?v=geLPi3pJBeo

 

Fri, 05/16/2014 - 16:46 | 4767699 johnconnor
johnconnor's picture

Humanity is so fucked

Sat, 05/17/2014 - 12:55 | 4769426 old naughty
old naughty's picture

Humanity is so fuk-u-shimaed. Fixed for you.

Fri, 05/16/2014 - 16:50 | 4767708 Cattender
Cattender's picture

it's a Recovery!!!! time to go out and buy a New Car!!!

Sat, 05/17/2014 - 13:03 | 4769443 old naughty
old naughty's picture

Yes, please help out...

or the unsold cars go to die !

Fri, 05/16/2014 - 16:55 | 4767725 Cattender
Cattender's picture

i'm 49 also.. still driving my PAID FOR 2002 Mustang... (only 87,000 miles!)

Fri, 05/16/2014 - 21:40 | 4768359 Kprime
Kprime's picture

56, still driving my long ago paid for 2000 F150.  150K miles.  No plans to ever trade.

Fri, 05/16/2014 - 17:00 | 4767733 AdvancingTime
AdvancingTime's picture

 The generation that is now beginning to retire seems to have leverage its size into favorable policy that it will enjoy in later life. An American born in 1945 can expect nearly $2.2m in lifetime net transfers from the "state" far more than they pay in, and far more than any previous group.

A study by the International Monetary Fund in 2011 compared the tax bills of what different age citizens pay over their lifetime with the value of the benefits that they are forecast to receive. The boomers are leaving a huge bill. Those aged 65 in 2010 may receive $333 billion more in benefits than they pay in taxes. More on this subject in the article below.

http://brucewilds.blogspot.com/2013/03/the-young-will-be-burdened.html

Sat, 05/17/2014 - 09:59 | 4769097 Atticus Finch
Atticus Finch's picture

333 billion.

Wow, that's almost like the money the US spends on wars and destabilizing other societies around the world every single day.

Fri, 05/16/2014 - 17:08 | 4767745 BrosephStiglitz
BrosephStiglitz's picture

All I can say is: Fuck Keynes.

Fri, 05/16/2014 - 17:23 | 4767789 Der Wille Zur Macht
Der Wille Zur Macht's picture

Well he was gay, so if you step up to bat, so to speak, I'm sure he'd regard it as a kind gesture.

Fri, 05/16/2014 - 17:35 | 4767821 Stimulati
Stimulati's picture

Hey, shouldn't all you folks be at the Operating Spring Rally?  

Fri, 05/16/2014 - 17:56 | 4767872 Spungo
Spungo's picture

Where is Harry Dent when you need him?

One thing we can expect is massive bond selling. The people who saved for retirement mostly hold bonds. What happens when millions of people start selling bonds? The president goes on TV to announce some bullshit program that encourages young people to participate in the ponzi scheme.

Fri, 05/16/2014 - 20:29 | 4768193 malek
malek's picture

That is easily answered: The central bank steps up and buys up (redeems) all bonds with freshly printed fiat money.

Sat, 05/17/2014 - 00:06 | 4768604 PT
PT's picture

In my country:  Compulsory superannuation rate gets lifted from 9% to 12%, you know, because otherwise you might not save enough for your retirement!  hehehehehehehe

Sat, 05/17/2014 - 01:06 | 4768690 daveO
daveO's picture

MyRA. The trap is being set.

Fri, 05/16/2014 - 18:01 | 4767886 redux2redux
redux2redux's picture

Soylent Green

Fri, 05/16/2014 - 19:19 | 4768031 Abi Normal
Abi Normal's picture

.....is people!

Fri, 05/16/2014 - 18:07 | 4767899 Spungo
Spungo's picture

It's fun to predict what will happen as a result of the demographic cliff. Harry Dent thinks it will cause massive deflation because productivity and spending drop like a rock when people retire. Guys like Peter Schiff think it will lead to massive inflation because the drop in GDP would cause huge government deficits. Cutting pensions and medicare are politically impossible, so the only solution is to print tons of money to pay for those things.

I think Schiff is right because he has lots of history supporting him. Printing tons of paper money or switching from silver coins to base metal coins happened many times in history. Budget problems almost always lead to inflation. They rarely lead to fiscal responsibility.

Fri, 05/16/2014 - 19:22 | 4768034 Abi Normal
Abi Normal's picture

just depends on the interest rates IMO, which way it would go.  I think boomers (such as myself), when the last of us retire and stop buying...look out below!  DEPRESSION.

Sat, 05/17/2014 - 09:14 | 4769037 drendebe10
drendebe10's picture

I vote for Schiff.

Fri, 05/16/2014 - 18:28 | 4767935 alfbell
alfbell's picture

 

 

The negative demographic influences that will be coming from Japan, Europe & USA; the baby boomers of the USA retiring, spending less, selling assets, deleveraging, collecting pensions, social security and medicare; the globalized economy; more taxation on the municipal, state and federal and global levels; etc. etc. are all deflationary influences that will feed on each other and hasten the downward spiral. Central banks and governments can't possibly fight this trend with their puny Keynesian monetary and fiscal stimuli. All they can do is try to keep things floating or help to create "soft landings". USD (in digital form) will be around for a long time. Things will slow down. No Armageddon or Max Max scenario. Just a slow and sickly deterioriation. The accent will be on enjoying what you have and trying to make it last as long as possible.    

Sat, 05/17/2014 - 00:51 | 4768662 Serenity Now
Serenity Now's picture

Great post, and I agree 100%.  People are waiting for growth to return, and it's just not going to.  (I don't say this with any degree of happiness or smugness.)

Sat, 05/17/2014 - 01:05 | 4768685 tickhound
tickhound's picture

Why not say it smug.!? Why assume growth a good thing? 2, 4, 8, 16.... Why? All just to beat inflation???? All simply to adhere to an exponential economic model? And when does it end? At 2 trillion people, 4 trillion, 8???

No matter. What too many idiots around here STILL don't get (or choose to ignore) is that labor is a COST the economic model insists on reducing. And it's happening. And it won't stop.

Growth model has succeeded. We can replace our own labor.

I appreciate zh mocking the inefficiencies of this system and the failures of our appointed leaders... But time for even zh to stop trying to fit square pegs in round holes.

Fuck ancient 'market' measurements. Models are busted. We need to 'what next.'

Sat, 05/17/2014 - 17:49 | 4769978 AdvancingTime
AdvancingTime's picture

While you make some very good points The modern economy that has evolved over the last several decades is loaded with interwoven contracts reeking of contagion. If faith drops in these intangible "promises" and money suddenly flows into tangible goods seeking a safe haven inflation will soar. Never before has mankind diverted such a large percentage of wealth into intangible products or goods.  I contend this is the primary reason that inflation has not raised its ugly head or become a major economic issue. Like many of those who study the economy I worry about the massive debt being accumulated by governments and the rate that central banks have expanded the money supply.

The timetable on which economic events unfold is often quite uneven and this supports the possibility of an inflation scenario. A key issue being one of timing. If the price of gas jumps to $8 a gallon overnight do you buy gas and not make your car payment or stop driving the twenty miles to work? Answer, it could be months before your car is repossessed so you buy gas. It is important to remember that debts can go unpaid and promises be left unfilled. Is this possible and if so where would that leave us? Chaos and major disruption would result from such a scenario. As we have seen from the economic crisis of 2008 and following many other unsettling developments legal actions can continue to drag on for years.  More in the article below.

http://brucewilds.blogspot.com/2014/04/inflation-seed-of-economic-chaos....

Sat, 05/17/2014 - 09:54 | 4769091 Atticus Finch
Atticus Finch's picture

I'm sure that the bail-ins won't exacerbate this problem, err,I mean challenge.

For a second there, I forgot that we no longer have problems, only challenges.

Sat, 05/17/2014 - 09:54 | 4769092 The Pop In
The Pop In's picture

MMT to the rescue !! 

We can just print, print, print the money.

PLUS, every new retire gets a free new car from the government (helps get rid of the millions of new unsold cars). "There are no problems, only solutions" ~ John Lennon. 

;-)

Sat, 05/17/2014 - 11:06 | 4769208 Stuck on Zero
Stuck on Zero's picture

While baby boomers are waiting to collect money paid for by the hard work of  the 20-50 age group that group is busy collecting food stamps, welfare, and disability. 

 

Sat, 05/17/2014 - 14:03 | 4769556 RabbitOne
RabbitOne's picture

My brother has had his own business as a steam fitting distributor since 1982. He said to me in early 2007 that he expected to retire this year at age 65 in December. When we got together two months ago I breached the question “…still going to retire this year?…”

My brother frowned and said “…there is no way in hell I see myself retiring anytime soon…my businesses gross receipts are down on average 32% each year since 2007…my retirement funds have not fully recovered from 2007… my retirement funds should be 50% above the amount I had in it December 2007…and now my small business health insurance cost is 41% higher thanks to Barry…so No I see no way out except to keep working the rest of my life…” 

Sun, 05/18/2014 - 16:22 | 4771750 kurt
kurt's picture

Social Security Hit Piece by Blackrock/Peterson

Watch out for these Greedy Bastards

 

 

 

Social Security is a Contract and solemn promise that must be honored. Take a look at the waste in Defense: do we really need to "pivot" in asia. Do we really need to reduce Syria to rubble? Do we really need to cause a shooting war with Russia? Provoke China? How many more, formerly westernized Arab countries do we need to destroy? Why can't we leave Venezuelan oil to Venezuela? Why all the money spent on propagandizing the American Citizen? Why the spying? Why the armored cars to the police? Why massive black bugets?

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