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May 6, 2005

News & Opinion: Will Boomers Blow Up The Stock Market?

By: Dylan Schleicher @ 10:58 PM – Filed under: Current Events & Public Affairs


On the front page of yesterday's Wall Street Journal was an outstanding article (sub. needed) on the future of the stock market.

Jeremy Siegel is a professor at Wharton and he has been a big supporter of stocks as a long-term investment. His book Stocks for the Long Run has sold 350,000 copies.

Siegel has a new book and he has changed his tune. In The Future for Investors, he says that the coming retirement of the baby boomers will cause the stock market to tank. On the supply side, boomers will be selling stocks and bonds to maintain their quality of life. On the demand side, there will not be enough investors to buy up all of these assets and prices will fall (the ratio of workers to retirees will drop from today's 4.9 to 1 to 2.6 to 1 over the next thirty years). The only savior, Siegel claims, could be the growing economies of India, China, and other developing nations.

What makes the article great is the counterpoint that Robin Brooks offers. Brooks is an economist from the IMF and he says Siegel is all wet. He talks about how 10% of individuals in the US hold 88% of stocks and how this segment will not need to sell large portions of their portfolios.

This sums up the article:
"Whether we will see some sort of crash or slow crumble over the next decade or so, I don't know," says Andrew Abel, another finance professor from Wharton School at the University of Pennsylvania. "But it is certainly likely enough that it has gotten to enter into people's planning."

About Dylan Schleicher


Dylan Schleicher has been a part of the 800-CEO-READ claque since 2003. Even though he's stayed on at the company, he has not stayed put. After beginning in shipping & receiving, he joined customer service and accounting before moving into his current, highly elliptical orbit of duties overseeing the ChangeThis and In the Books websites, the company's annual review of books and in-house design. He lives with his wife and two children in the Washington Heights neighborhood on Milwaukee's West Side.