Remember Demographics

It is a good idea to keep demographics in mind whenever you look at the economy and investments. They have a major influence.

Much of what you read about changes in the savings rate and debt levels is misleading. What we see are typical of all generations of investors with ages similar to those of today’s Baby Boomers.

Ed Easterling points out that our liquid assets more than offset our debt. Steve Forbes makes it clear that our economic indicators have misleading names.

Read Savings Rate Statistics dated Wed Jun 08, 2005
Savings Rate Statistics

Demographic research suggests that we are in a secular (prolonged) bear market. The most important demographic turnarounds occur in 2005 and 2018.

The latest market turnaround was early, in 2000. And the market has lagged as much as eight years in the past. This makes for a wide range of variation, from minus five years to plus eight years. Adding to this uncertainty is the fact that many Baby Boomers will delay retirement, both because of good health and because of poor investment habits. This is likely to stretch out the bear market further than indicated.

From the Crestmont's Book thread dated Tue May 17, 2005:
Crestmont's Book thread
Alternative Analysis Based on Demographics

Keep in mind that demographics is ONE factor, but it is not the only factor affecting market returns.

Have fun.

John Walter Russell
September 3, 2005