Home > News & Commentary > Consequences of the Generational Earnings Gap: Baby Boomers to Boomlet Bust

Consequences of the Generational Earnings Gap: Baby Boomers to Boomlet Bust

I’m sure that everyone has heard the rumblings lately about how youths today under the age of 30 will be first generation that is likely to not continue the American dream of living a more successful life than their parents. I don’t usually give this much more thought other than “globalization is a bitch, huh?” but I realized that this will affect fundamental levels of supply and demand for equities in over the next 20 years as baby boomers begin to draw down their retirement savings (liquidating them).

In the past, the growth in the standard of living of successive generations has been sufficient to maintain the upward movement of stock prices because each generation has been bigger and made more money on average. Both of those supportive factors are now acting as headwinds we face slowing population growth, decreasing average income and lower lifetime earnings potential for the younger generation that is beginning their careers in the midst of the worst economic crisis since the Great Depression.

Put simply, the children of the baby boomers cannot afford to buy out their parents at current prices.

Disclosure: Net Long the market

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