How demographics are working against stocks

[finetrader]

Interesting perspective on P/E ratio and outflow from equity mutual fund

 

http://www.theglobeandmail.com/globe-investor/investment-ideas/how-demographics-are-working-against-stocks/article4486655/

[ragnarisapirate]

This is something that I have been thinking about for a while. If you think about it, the transfer of wealth that is about to gradually occur has the potential to be mind boggling on a whole lot of different levels. Not just with the baby boomers retirement accounts, but also with the cashing in of inter-governmental debt as social security funds gradually get depleted. I don't think that there are many out there that can figure out what is going to happen as there are a ton of unknown variables. I I know I can't.

 

While we have survived many bad things (referring to Buffett and his DOW analogy) we have not in the modern era had such a global expansion of debt so rapidly, for so long. I could be wrong, but I think this is uncharted territory. Especially when you consider that population growth is a lot different in the developed world than it used to be. I think it was Ken Fisher who once talked about an economy growing out of debt, but, it seems that a lot of the world is just not going to be able to do it. I won't be a bit surprised if there are some massive shifts of economic power.

 

Don't get me wrong though, I am not really a zero hedger yet, and don't mind getting good businesses at cheaper prices. :)

[Uccmal]

The article and premise are way too reductionist.  People aren't buying stocks because the retail investor is always last to the party.  They want to see gains in stock values first.  That is why value investors have such an edge. 

 

The worldwide debt has now shifted to the government level.  As economies improve, and tax revenues rebound the debt will stand still relative to inflation.  Effectively, governments will print their way out of debt on the backs of the same retail investors who will be stuck in their 1% after inflation corporates, or worse yet in treasuries.  Again the retail investor is last to the party, as are their large mutual funds.  People should really learn to Bogle, and ditch 99% of the mutual funds.