At its most fundamental level, the stock market is merely a measure of supply and demand. So as the biggest and wealthiest part of the U.S. population approaches a situation in which its members will start needing to liquidate their vast investment portfolios in order to cover living expenses, it only makes sense to wonder whether all that extra supply of shares will hurt stock prices for years to come.

A recent study tries to quantify exactly what impact baby boomers will have on the stock market. Although the results are indeed alarming, there's a silver lining for long-term investors -- one that should help keep you from making emotional decisions that could threaten the success of your investing plan over the long run.

Selling out
A report from the Federal Reserve Bank of San Francisco  tried to answer the question of what would happen with stocks as baby boomers begin to retire.
http://www.frbsf.org/publications/economics/letter/2011/el2011-26.html
To do so, it looked at the ratio of middle-aged workers in their 40s to older workers and young retirees in their 60s and compared it with the valuation of the stock market. Interestingly, the research found a strong connection between stock prices and this age ratio.

In particular, during the bull market of the 1980s and 1990s, boomers were in their peak earning and investing years, while a relatively small part of the population was approaching or entering retirement. Even assuming that inflation-adjusted earnings continue to grow at past rates -- an assumption that could prove heroic -- the research suggests a 13% real drop in stock prices, with stocks not returning to their 2010 levels on an inflation-adjusted basis until 2027.

The report does admit that other factors, including foreign investment and prices of competing investments like bonds, could affect these projections. But if you want to invest with demographic trends in mind, the key is to figure out which stocks boomers are most likely to want to hang onto -- and to make sure to get out of the ones that boomers will want to sell first.

Link -
http://www.dailyfinance.com/2011/08/25/will-boomers-ruin-stocks-for-the-rest-of-...
============================================

The Truth is, the Ageing Baby Boomer effect is only one of a group of major Economic influencing factors that are in the process of changing the accepted/standard Economic paradigms.

These major factors include -
1) Demographics (Boomer Ageing & Future actual Population Declines)
2) Peak Energy (Fossil Fuels)
3) Peak Debt
4) Climate Change

Individually, these factors would create adverse Economic outcomes!
Combining, as they currently are, these factors will change the way of life, as we have known it!

Following is chart of projected PE ratio's, which The SanFran Fed has recently published.

The current number of non-farm payrolls is below those of 1999-2001. The population has grown from about 280 million in 1999 to approximately 312 million today. So, adjusted for population growth, employment is in much worse condition than the above graph indicates.



The above graph shows that employment levels (as measured by non-farm payrolls) have fallen back to early 1987 levels.

The other factoid taken from the above graph is that population normalized employment has reached the low point of a recession that started at the turn of the century. There was a failed attempt at a recovery 2003-07. Then the recession resumed.

The title of this article could well have been "Non-farm Payrolls at Levels not Seen since Early 1987."

What this graph is specifying in hard data is an employment depression.

While the U.S. stock market can be supported in this massive depression by global earnings, if global economic activity slows down where will support for current earnings come from? And more earnings growth?

Europe is definitely slowing under the austerity demands stemming from the sovereign debt crisis. Asia is slowing under the attempts of central banks to stem inflation.

Where is the growth going to come from?

Link -
http://seekingalpha.com/article/291481-non-farm-payrolls-below-2001-level?source...
=========================================
A few observations -
1) As shown in the first chart, IF US Employment had continued its long term trend, then Non-Farm Payroll numbers would now be around 150 Million.
Instead, those Employment figure is around 131 Million, some 19 Million under where it would have been, IF it had stayed on trend.

2) As shown in chart 2, the Employment numbers to the Total Population ratio clearly Peaked around 2001 and that ratio is now clearly on a downward trend, having already declined from around 47% to about 42%.

3) There are two separate & competing Demographic issues involved in these US figures and they should also be expected in Global trends.
a) First, with total Population levels still continuing to rise, in the US at around 1% PA, this means that at a 60 participation rate that an additional 150,000 jobs NEED to be added to the US Employment figures each month, just to tread water, just to be standing still. Anything less and the US Economy is in Decline. This is shown in chart 1.  
b) On the other hand, as from January 1st 2011, some 80 Million Americans started the "official" transition of US Boomers into retirement.
This means that based on the same 60% participation rate that some 220,000 Boomers are now DUE to retire (on average) each month, for the next 18 years.
In fact, the decline in the Employment to total Population ratio started around 2001 and that ratio will continue to decline, for the next 20 years, following the Demographic trends of the Boomer generation.

So, by current population increases, some 150,000 new jobs would normally be expected each month.
However, because of much higher retirement levels, due to the Boomers, there is possibly another 220,000 jobs being vacated each month by Boomers.

In an Economy functioning at capacity, this could see another 150,000 new jobs each month, to keep up with Population increases and another 220,000 jobs to fill each month, to keep up with Boomer retirements.
That's some 370,000 jobs each month, to keep the Economy rolling, unless productivity can magically increase?  

In short, available worker numbers would normally have been stretched to the limit, with the Unemployment ratio sinking to very low levels.

That scenario has actually happened in some countries, such as Australia, where the Unemployment rate fell below 5%. However, that ratio is now likely to start to increase, following the Global Economic downturn!



Whilst Australia was relatively well placed in Debt levels, the US and much of Europe were not and as both areas started their Economic downturn in the early part of this new century, they are both now approaching catastrophic tipping points, which I envisage will become apparent to almost all, by the end of 2012!  

To exacerbate matters, Global Energy Supplies are now Peaking, with Oil being the intial problem NOW, but all other Fossil Fuels are due to follow within the next 20-40 years and finally, with issues relating to Climate change, it means that another Population explosion to assist Global Economics is not possible this time, as there will be insufficient Food, Water & Energy for another Baby Boom!

So, good luck, watch the Debt and watch the world change!
 

hawil wrote on Sep 13^th, 2011 at 8:11pm:


The only possible answer is NO!

There is neither the Natural Resources, particularly Energy Resources, nor the capacity of Food production, nor the fresh  Water sources, to continue the current Global Population of 7 Billion, at least not for any extended period.

AND, there is certainly no way that the "Exponential Growth Fairy" can continue to weave the magic required to increase the current population, let alone seeing the entire process repeated and having another 7 Billion added, to raise the Global Population to 14 Billion, by the year 2300.

The good news, for the future of Humanity is that the Global Population is set to start declining over the balance of this century.

The bad news, is that process is likely to be fraught with difficulties and it will present enormous Economic problems!

Are The U.S. And Europe Headed Down Japan's Road? (Cont)

2) Energy is one of the two major factors that enabled the massive Global Population Growth, from 1 Billion in 1800 to 7 Billion today, the other is Innovation.
In the last 10 years or so, the growth in the Supply Energy resources has started to fall behind the Growth in Population driven Demand.
This has resulted in substantial increases in the Cost of Energy, which is particularly noticeable in Oil, but those increases are also spreading to other Energy sources, especially Fossil Fuels!

The Massive increases in Energy (Oil) costs to national & Global Economies has already added enormously to Cost levels & to the Debt to GDP ratio's of many countries and that contributed substantially to the GFC MK1 crash of 2008!

Whilst many are now contemplating a possible GFC MK2, I contend that we are still in the grip of GFC MK1, as it was only a massive increase in Public Debt that saw GDP stay above break even and if those increased Debts were subtracted, which they should be, then the actual/effective National & Global GDP levels would still be below zero!

3) Which now leads to the third factor, which is the Debt to GDP ratio!
In many nations, such as Greece, Spain, Italy the levels of Debt are now such that it is Publicly expected that some of the affected nations will Default on their National Debts.
This is now creating the likelihood of self re-enforcing tipping points & loops, much the same as Climate Change, which means that smallish problems such as Greece make other dominoes fall, meaning the problem/s & Debt levels become larger, thus roping in bigger Economies such as Spain, then Italy, the UK & finally the USA.

Unfortunately, what most people do, is they tend to look at issues in isolation and not at the total circumstances. Many people also tend towards a positive view of life, in which all problems will somehow be fixed, perhaps because that's usually the way it has been.

That said, these three factors are now combining to become unique in human history and unless there is some "Unique & until now unheard of innovation/technology, which enables us to Globally overcome Peak Energy & Climate Change (Food & Water) and can magically make Debt instantly disappear from the Global Economy, then that Global Economy has indeed Peaked and we have started to descend down a very slippery Economic aftermath.

So, good luck, watch the Debt and start getting actively involved!

Shrinking workforce may dampen expansion for decades

WASHINGTON —

Women and baby boomers entering the American workforce after 1950 helped to supercharge expansions in 1975 and 1983 by filling an increasing number of jobs and purchasing more goods and services. Now as the share of women with jobs falls and older Americans age into retirement, the shrinking — or, at best, slowly growing — workforce will weaken economic activity for the next two decades.

The demographic changes may be the biggest and least-appreciated reason why the two-year recovery has slowed, because the rate of growth for labor and capital is “the most important determinant” of economic expansion,

said James Paulsen, chief investment strategist for Wells Capital Management in Minneapolis.

More retirees mean slower household formation, reduced consumer spending and downward pressure on equity prices as retirement cuts people’s purchasing power, according to John Lonski, chief economist at Moody’s Capital Markets Group in New York, and Gus Faucher, director of macroeconomics at Moody’s Analytics Inc. in West Chester, Pa.

“A weaker labor force does dampen the pace of the rebound,” along with “our expectation for what an expansionary trend is,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “We should be lowering our sights on potential GDP compared to when our population was younger.”

Anemic gains in the number of new workers has effectively cut the long-term “speed limit for growth” to 2.25 percent, estimates Maki, a former senior economist at the Federal Reserve. That compares with the Fed’s estimated 2.5 percent to 2.8 percent rate for gross domestic product and average growth of 3.2 percent from 1980 to 2000.

Automakers General Motors, Ford and Toyota, motorcycle maker Harley-Davidson and natural- foods grocer Whole Foods Market may be hurt by the shift because most retirees will cut spending on big-ticket items and nonessentials, said C. Britt Beemer, chairman of America’s Research Group in Charleston, S.C., a consulting company that studies consumer behavior.

“Older people tend to have lower incomes, their consumption tends to be lower and in that sense, consumer-spending growth would be weaker as well,” said Moody’s Faucher. “There will be fewer people in prime car-buying years,” and “recreational goods and services are a young-adult thing.”

The aging population also may hold down stock values for the next two decades as boomers sell shares to finance retirement, according to a Federal Reserve Bank of San Francisco research paper released Aug. 22.

“The mentality has shifted to preserving wealth rather than growing wealth, with less-risky portfolio allocations,” said Emily Sanders, president of Sanders Financial Management Inc. in Norcross, Ga., whose largest group of clients is aged 55-65. A typical 65-year-old may have 50 percent of his portfolio in stocks, which would drop to 30 percent at age 80, she said.

Faucher forecasts changing demographics will lead to a period when nominal GDP growth — which includes the impact of inflation — slows to 3.3 percent compared with 5.5 percent before the 18-month recession. That means the rise in corporate profits and equity prices would slow to about 3.3 percent from 5.5 percent as well, he said.

An estimated 72 million people, or 19.3 percent of the population, will be 65 and older by 2030, compared with 40 million, or 13 percent, in 2010, the Census Bureau estimates.

“We are at the threshold of retirement mountain: a huge, huge change in the numbers of people who are reaching the age where they are leaving the labor force,” said Neal Soss, chief economist with Credit Suisse Holdings USA in New York.

While losses from declines in the value of 401k and similar accounts may force some to delay retirement, these delays will be temporary, he said.

“Maybe one of the solutions here is that they work a year or two longer,” he said. “Do we really think we are going to have a lot of 80-year-olds in the workforce? It sounds good until you start thinking about the practicalities of it.”

The baby boom, the population bulge born after World War II between 1946 and 1964, added 9.4 million people in the 16-24 age group during the 1960s and 7.3 million in the 1970s. The percentage of women in the workforce almost doubled to 60.3 percent in 2000 from 33.6 percent in 1953, according to the Labor Department.

Boomers started turning 65 this year, and every day for the next 18 years, about 10,000 more will hit the age that historically has been associated with retirement, according to the Pew Research Center in Washington. Women’s participation in the labor force may decline slightly during the next 40 years to about 57 percent because fewer will have jobs as they grow older, the Bureau of Labor Statistics projects.

While GDP has grown at an average annual pace of 2.4 percent in the eight quarters since the December 2007 recession ended, that compares with an average of 6.3 percent after the July 1981 slump and 4.7 percent following the November 1973 contraction, both of which lasted 16 months.

As the world's population reaches 7 billion this month, there is renewed soul-searching about overpopulation. But in much of the rich world, we have slammed on the demographic brakes so hard that it may be helping drive our current economic tailspin.

Exhibit A is Japan.
Economists say the developed world is entering now what Japan first experienced back in the 1990s, when it suffered a "lost decade" of economic stagnation from which it has never recovered.

Japan has the world's oldest people – average female life expectancy is 86 years – and it has among the world's lowest fertility rates. At just 1.2 children per woman, it has not much more than half what it needs to maintain population numbers. Meanwhile, the average age is well over 40, and one in four people are over 65.

This is an extraordinary turn-round. Japan used to be young. When it was the poster child of Asia's economies, it profited from a huge population of young adults, and not many old dependents. Result: the land of the rising sun has become the land of the setting sun.

And where Japan went, so goes the rest of the world. Europe's emerging economic basketcase is Silvio Berlusconi's Italy. Population changes have undoubtedly played a role in this. Thanks to a generation of ultra-low fertility, the last western European country with a prime minister born before the second world war now has the world's second oldest population.

The economic whirlwind of growth in other Asian tiger economies is blowing out as fertility falls and populations age. China is today young and vibrant, but the one-child policy is shutting down population growth. Within a decade, its numbers may be falling and China will have the largest ageing population the world has ever seen. Boom may soon turn to bust.

The Middle East is at an earlier stage on this demographic road. But with falling birth rates, many countries there have a bulge of young adults in their population pyramid. Governments have failed to harness this demographic potential for economic growth, but arguably those young adults drove Muslim radicalism, and now the Arab spring.

The people on the streets in Egypt, Tunisia and Syria demanding democratic reform – and manning the ragtag army in Libya – would a generation ago have been at home minding the children. Whether driving economic growth or demanding democracy, young adults are dynamic forces for change in any society. But as societies age, that dynamism dies.

And ageing is the new way of the world. You wouldn't guess it from the public debate so far about the seven billion landmark, but the average woman in the world today has half as many children as her mother or grandmother did 40 years ago: 2.5 children, compared to five. And the number keeps on going down. Dozens of countries are already below two, including Iran, Burma, Vietnam, China of course – and much of southern India, too.

In the long run, that's not enough to keep up numbers. Many expect world peak population by mid-century, and decline thereafter. Whether it happens then or later, mass global ageing is now a certainty.

I suspect that the global economic binge of the 20th century was a product of a booming, youthful population. It will die as we age. Japan's lost decade, and its likely repetition now across the western world, is perhaps the first sign. About time too. We all know that we cannot go on as we have. The planet cannot stand it. The party is over.

Link -
http://www.guardian.co.uk/environment/2011/oct/26/population-crash-economy-good-...
=======================================

Population Growth, it has been THE Economic driving force of history, but in particular, the last 200 years.

Around the year 1800, the Global Population hit 1 Billion,  it hit 2 Billion around 1930 and now, only some 80 years later, it is about to tip over at 7 Billion.

This massive & unprecedented Growth in Global Population has been enabled, largely by 3 major factors -
1) Cheap Energy - that being Fossil Fuels, predominantly Oil.
2) Innovation/Tecechnology - Humanity has undergone massive change, to keep up with our Population Growth.
3) Climate - A largely benign Global climate, over the last 200 years, has aided new Technology/Innovation & Cheap Energy, in ensuring that Food Production & the availability of fresh water, has kept up with the Global Population Growth.  

However Japan has led the way, showing what happens as Population Growth starts to decline, although they were partially supported by Global Growth, which was still continuing.

That Global Growth is now also slowing & is most likely to Peak around 2030, which is earlier than generally expected.

That said, it really can't happen quick enough, because the total Population Demand on all Products is now starting to reach tipping points, where Supply of various Products are starting plateau, before going into permanent decline.

Oil & other Fossil Fuels, are prime examples of this Peaking process and we have already witnessed huge Price swings & impacts on the Global Economy, arising from Peak Oil.  

It is a law of nature that everything has limits and we are now very close to finding out what some of those limits are and what that will mean to the Global & OZ Economy!

1950
http://populationpyramid.net/?country=Australia&year=1950
http://populationpyramid.net/?country=Japan&year=1950
http://populationpyramid.net/?country=Europe&year=1950
http://populationpyramid.net/?country=United_States_of_America&year=1950
http://populationpyramid.net/?country=India&year=1950
http://populationpyramid.net/?country=China&year=1980

2010
http://populationpyramid.net/?country=Australia&year=2010
http://populationpyramid.net/?country=Japan&year=2010
http://populationpyramid.net/?country=Europe&year=2010
http://populationpyramid.net/?country=United_States_of_America&year=2010
http://populationpyramid.net/?country=India&year=2010
http://populationpyramid.net/?country=China&year=2010

2050
http://populationpyramid.net/?country=Australia&year=2050
http://populationpyramid.net/?country=Japan&year=2050
http://populationpyramid.net/?country=Europe&year=2050
http://populationpyramid.net/?country=United_States_of_America&year=2050
http://populationpyramid.net/?country=India&year=2050
http://populationpyramid.net/?country=China&year=2050

Global
http://populationpyramid.net/?country=World&year=1950
http://populationpyramid.net/?country=World&year=2010
http://populationpyramid.net/?country=World&year=2050

Have fun?