Boomers likely to stay in market Retirement plans keep stocks strong

Investing

November 24, 1997|By George Gunset | George Gunset,CHICAGO TRIBUNE

The First Couple and the rest of the 1946-1964 generation are hitting age 50 at the rate of seven a minute, a pace that will continue for 10 years.

So the baby boomers, who have changed everything else they've touched for the past half-century, are seriously coming to grips with retirement planning and fund investment. What are the chances they'll hew to the conservative path of Mom and Dad?

Day after day, month after month, and year after year, the voices of caution are accorded a respectful hearing, even though their track record for investment advice in the 1990s could charitably be called "spotty."

The error-prone make the mistake of believing that the future will unfold just like the past.

There are others, however, who have eyes to see the dust in the distance and noses to smell the money to be made.

One of those is Bob Froehlich, chief investment strategist of Chicago-based Kemper Funds. At a retirement seminar recently, he presented a cogent argument for continued growth of the stock market based on investment patterns of the boomers.

"Some investment events hit like a blizzard -- a Hong Kong market collapse, an Alan Greenspan speech -- you don't see it coming and it impacts within a day or in seconds," Froehlich told the seminar. "Others are like icebergs: You can see them forming for 10, 20, even 25 years."

The boomers -- 76 million strong, more than half again as many as the 49 million born in the 1929-45 era of depression and war -- have affected all sectors of life and the economy: education, consumption, savings, housing, government policy.

You can make your own list, but Froehlich's "boomernomics," by decades, looks like this:

1950s -- Surprise, a booming diaper industry.

1960s -- Fast food and junk food popular among teen-agers. The big era of growth for McDonald's and its kind in this country.

1970s -- Marriage, home buying. ("I'm asked when the boom times will come back in real estate," Froehlich said. "The answer is never. We won't again have 76 million people who want to buy a new house. Even the market in West Virginia went up.")

1980s -- Time to get ahead in business. Subscriptions boom for the Wall Street Journal and Forbes and Fortune magazines.

1990s -- Retirement planning, health care, leisure time and investment, investment, investment.

"That is the story of the 1990s," said Froehlich. "They are putting their money in the markets. The Dow Jones industrial average has risen from 3,000 in 1991 to 8,000 in 1997."

The boomers have just begun to have an impact on the market, he said, because people really start to focus on retirement planning when they reach 50, and nearly one-third of the population is from that generation.

Even aside from the boomers, Froehlich argued, there are plenty of other reasons to anticipate a rising market.

Some $658 billion is still socked away in money market accounts, "held by people who remember 1929 and wouldn't put a dime in the stock market," he said. "But they are dying, and guess where the money is being transferred? When new money comes into the market, prices tend to go up."

An even bigger shift, which is continuing, is the retirement fund move by corporations away from defined benefits to defined contributions, putting individuals in charge of their own investment decisions.

For most individuals, Froehlich said, attitudes have changed from "I don't care about the stock market" to "I am a stock market junkie." Once in, he said, most people lose their fear of daily market fluctuations.

Another push, he predicted, will come from Social Security, which he expects will be privatized within five years.

And there are reasons outside this country to anticipate growth; about a billion of them are in Asia.

"That's how many young people there are in the Asian Roller Blade generation, ages 10 to 24," he said. "They represent a consumption bubble. They want Coke, not tea; McDonald's, not rice; Nike shoes, not sandals. And they want it now."

Pub Date: 11/24/97

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.