Demographics negitive effect on equities

[jimhcom]

Originally Posted by mathjak107

i agree demographics will have little effect on markets for many reasons.

baby boomers span many decades and most who own equities need to own them through retirement to make ends meet. it isn't like you wake up one day and go i don't need stocks anymore. you may tone things down like i did but equities are part of the long term plan.

80% of the market is owned by the 20% of the wealthiest population. most of these wealthy folks are not selling stocks to live on.

baby boomer kids stand to inherit more than a trillion dollars which can be invested


foreign investors are buying like never before as entire populations who had little money are made wealthy.

we are the best place in the world to invest as of now.

The majority of retirees own 401K's which they will begin to use for income purpose's once they retire.
During years when the market is flat or performs badly, the principal of those accounts will probably need to access principal to maintain income which will mean the sale of stock either directly or by the selling of shares of mutual funds.
Health care costs also effects seniors withdrawals. As principals shrink the portfolio earns less making the sale of principal assets necessary more often. It is a downward spiral.
It is not necessary for the 80% to sell their stock to cause a market reversal, only the 20%.

[jimhcom]

Originally Posted by Hoonose

Demographics are no doubt important, like in health care, but with equities in general more difficult to predict longer term. Especially as the markets are more global. Personally I look more medium and short term. I started planning, saving and investing in the late '70's, and with these sorts of broad and distant changes, one has to tackle and adjust as retirement is approaching.

"extending the Liu-Spiegel model’s sample through 2013 suggests that the P/E ratio will decline even more, from about 17 in 2013 to 8.23 in 2025,"

If this scenario is accurate, then we are looking at the decline of nearly 50% by 2025. That is a significant adjustment that will have major implications for retirees.

[lchoro]

PE ratios for the S&P 500 are highly inaccurate (and intentionally so). Blackrock's latest investment letter makes reference to this accounting fraud.

http://www.zerohedge.com/news/2014-1...ccounting-fudg

I've read of it for more than 10 years. The actual EPS for the S&P 500 is about 40% less than the GAAP EPS that's being reported and even much less than the as-reported EPS.

Market index PE ratios can't be used for serious analysis or forecasting. They're essentially a marketing gimmick for investment firms now.