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Bear Market To Last Until 2018?


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From Sunday December 1, 2002 NY Times......


16-Year Slump? If So, Blame It on the Boomers




A new study of American demographic patterns and the stock market predicts that while the market may rally periodically, its overall direction will be downward until around 2018.


This bearish forecast is based on a model devised by three finance professors ? John Geanakoplos of Yale, Michael J. P. Magill of the University of Southern California and Martine Quinzii of the University of California at Davis. In a study titled "Demography and the Long-Run Predictability of the Stock Market", they report that their model has done a good job of explaining the bull and bear markets of the last century.....


The professors' approach is complex, but it depends on a simple indicator: the ratio of the number of middle-aged people to the number of young adults in the population. When this ratio rises, the overall market's price-to-earnings ratio will rise, too, the professors predict. When the age ratio declines, as it is likely to do until about 2018, the market's P/E will also decline.....


....... according to the model, which predicts that the market has entered a long decline caused by baby boomers selling stocks as they approach retirement. The sales will be only partially offset by the purchases of the smaller group entering middle age.


The model predicts that this long-term trend will not turn positive again until after 2018......Full Article Free Registration with the NY Times may be required.

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Based on CURRENT conditions -- baloney. Boomers have learned the "new paradigm" and have bought into (literally) the Wall Street propaganda that the only way they'll have a secure retirement is to buy and hold, not matter what.


On the other hand, if there is a catastrophic crash, the psychology indeed could change to stock avoidance. In which case the bear market lasting till 2018 may be optimistic.

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