Baby boomers become free trading


April 2007

Many share holders will know what happens when shares become free trading that have been issued at a lower price than the current trading price. The share price will as sure as clockwork fall based on the following conditions:

1. The number of shares becoming free trading comparative to normal trading volume is large.
2. The different between obtained share price and current share price is large
3. There is no fantastic news that will offset the selling .
4. There are less buyers than sellers

Now imaging a stock that has 40% of its shares in private placement gained at a price less than half the current value that will have these shares becoming free trading starting now and continuously building for the next 15 years, with no fantastic news to be released and worst of all very few buyers. Sounds bad? Well that’s what housing and securities in general look like to me.

To further explain, the baby boomer generation is normally regarded as starting 1946 and ending in 1964 and peaking in 1957. So 1946 makes the beginning of this generation 61 now so we will see the start of the boomers retiring now.
But actually if you look at a population / age chart of a western type country you will see that the boomers start off with a bang, in other words there is a big jump at the start as you can see this in the graph below. Also the number of boomers heading into retirement grows from the jump and continues for the next 10 years at least.
Now this will unlock vast amounts of “paper capital gains” into the market, housing, stocks (mutual founds) etc. This must have an affect on the market.

Remember that assets can only stay up when becoming free trading if there is:
a) Very good news released &
b) There are more buyers than sellers

Both these things are very unlikely for housing as we have a massive monitory mess and are no longer competitive in the global market.
But the main factor is that boomers are relying on the next generations to buy their assets from them otherwise they will have no one to sell to, not only are the boomers a bigger generation but the next generation is broke!
Broke with credit card dept, student loan dept, personal loan debt and many other types of debt and in a very inflationary environment, so who will buy the houses and securities?
Maybe Asian’s will buy US securities but not the housing, and debt riddled young westerners will not be able to afford housing unless it is much cheaper.

Ever increasing house prices is like a pyramid scheme that relies on the next people entering the scheme to have more money than the last, or more of them otherwise it falls over.
And why will they need to sell their stuff? Because of the expense of living, medical bills etc.. etc.. The stats show they sell.

Add: Remember when looking at the above chart to move everything forward by 4 years as it is from 2003.

Boomers are starting to retire now with a jump, and then the number will grow continually over the next ten years.

There is a real mind block in the western world, people just don’t understand the concept of not being able to get stuff that you can’t afford even if you really need it.

Take housing for example I have had many people tell me that houses can’t go down because everyone still needs a place to live, sorry that is just plain Bullocks. If you can’t afford it you can’t have it even if you need it. That is how most of the world works, there is plenty of housing, it’s all relative. Most people in the world have their whole family in one room. Yes it means lowering ones standard of living to reflect the reality, the reality that you cannot live on borrowed money forever. In NZ we have not had a trade surplus since 1973 and we spend a horrific 8% more than we earn, everything will not be fine and will end badly if we don’t turn this around.

From Doug Casey:
See full article:
(If you have not already read this you need to)

78 million is the number of baby boomers who are in or approaching retirement. That’s the biggest demographic bulge in U.S history, fully 26% of the population.
And many of those 78 million are in a jam. As they approach retirement, they are still carrying historic levels of debt and, on average, have woefully inadequate net worth -- and much of that based on shaky housing prices.
In fact, 25% of the retiring boomers – nearly 20,000,000 in all -- are facing retirement with a net worth of less than $50,000. You don’t need to be an accountant to see that, with today’s degraded currency and longer life expectancies, they won’t get very far on so little.

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