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What Baby Wants, Baby Gets
The Baby Boomer Effect
By Kara Stefan
 We're
talking about the largest and most influential generation
since the beginning of mankind. If you were born between 1946
and 1964, you're it. You're a baby boomer. The first of your
bunch is turning 50 this year. And from now on, you and your
76 million other baby boom buddies are going to have such
an enormous impact on the American economy and stock market
that your children--let's call them baby boomlets--may never
forgive you.
And there's nothing you can do about it, except grow old.
Retire to a warm community. Sell your big house, cash in your
big retirement accounts, trade in your big company car for
something a little more practical, and start frequenting your
local pharmacy. That, right there, folks, is a list of the
industries that will be victims or beneficiaries of this aging
demographic.
Let's start with the industries that will suffer. The housing
market is the most obvious. For the next 15 years or so, housing
prices in affluent neighborhoods may still rise as younger
boomers move in, but after that-who's going to buy all those
homes? The financial prospects for the woefully labeled "Generation
X" are much bleaker than they were for baby boomers at that
age.
Of course, the housing market directly affects the public
school system. In the 1950s, suburbs were developed with new
houses and schools to accommodate the population surge. Soon,
as real estate prices fall, so will property taxes--resulting
in less money for the public school system, not to mention
other government-sponsored programs. And we thought handguns
were our toughest academic issue.
Luxury cars, already upstaged by the popularity of sports
utility vehicles, may become dinosaurs. Vacation property
at ski resorts should experience their own type of free fall.
Industries that require relative youth and vigor may enjoy
less popularity and therefore fewer sales and stunted growth.
These include sports such as water and snow skiing, attendance
at theme parks and national parklands, and extensive airline
travel.
However, where the economy closes the door, somewhere it
opens a window. Make that a large bay window. Healthcare,
drugs, and financial services are good place to park your
dollars for the next two or three decades. Entertainment and
restaurants should fare well. Now that baby boomlets are so
infatuated with computers and video games, the technology
arena is poised to soar as retirees learn to play Tekken 3
with their future grand-boomlets. And insurance companies
can expect a great ride for the next 30 years, with solid
product lines extending from variable annuities to long-term
care insurance. On a more entrepreneurial note, Bob Villa
and Martha Stewart should continue to do well.
The South may rise again, as boomers move primarily out of
the North seeking a milder climate and the prospect of less
demanding jobs to support their retirement lifestyle. And
remember, beaches are a finite resource; there won't be much
left when boomers begin to buy up properties and retire by
the shore. So if you think beachfront real estate is high
now…
Then, of course, there's the investment market. Largely responsible
for the long-running bull market of the last 14 years, baby
boomers triggered the market's ascent just as they were beginning
their own ascent up America's corporate ladders. Having poured
millions of dollars into company-funded pension, profit sharing,
and 401(k) plans, not to mention mutual funds and individual
securities, boomers have generation-handedly bloated stock
market assets and bolstered corporate profits.
There are plenty of baby boomers still in their 30s, so expect
them to continue pouring money into stocks for the next twenty
years or so. But soon, older boomers will begin redeeming
investments. And unless a vast majority of Generation Xers
start earning salaries to match Leonardo DiCaprio's, buyers
will be scant and stock prices will begin to fall. Bonds,
Treasuries, CDs and lower risk securities will resurge, as
retirees try to conserve the wealth they have accumulated.
Not to end on a dismal note, but all baby boomers will eventually
cash out and move on. How the stock market will weather the
exodus is anybody's guess.
From 1954 to 1964, 4 million babies were born in the U.S.
each year. Since then, every facet of the American economy
has bent over backwards to accommodate this oversized and
demanding demographic. The next 40 years will experience no
less impact, just a shift in the services and products in
demand--which will in turn affect the real estate market,
consumer industries, and corporate profit margins. When choosing
where to invest your money to make the most of this reverberating
steamroller engine--or should I say choo choo train remember:
Whatever baby wants, baby's going to get.
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