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Today, he founds investment strategies on demographics, the most powerful tool for investing clients’ money over the long term. As a professional speaker and workshop facilitator, he simplifies how demographics affect personal investing and how it can be used to invest successfully.
DEMOGRAPHIC EXPERTS say our economy is about to collapse into the biggest DEPRESSION of the past 100 years….But first we will have history’s biggest economic boom, starting with a Housing Boom and then Commodities followed by Stocks.
DEMOGRAPHICS & THE ECONOMY
People spending are what drive the economy. A fancy name for this is DEMOGRAPHICS. For the past 20+ years, the spending patterns of Baby Boomers have caused extremes in our economy, and this will continue until approximately the year 2040.
THE SPENDING CYCLE AND 5 STAGES OF LIFE Through our life, our spending habits are predictable, even as we change.
STAGE 1 - 0 -15: CHILDHOOD Rely on parents for everything from toys to shelter, food and clothing. They spend no money as they have no money.
STAGE 2 - 15-34: YOUNG ADULT This is when you enter the job market and your skill levels are low. Therefore, your income will reflect this fact. You are trying to finish your education, dating, saving for a used vehicle or you may be buying your first home, if you are getting married. Therefore, any money you have left is very little. Not enough to spend on big ticket items that drive the economy like houses and new cars.
STAGE 3 - 35-59: THE FAMILY YEARS The age for spending peaks at age 46.5. The reason for this is Baby-boomers were married at an early age and had their children also at an early age. Now, the children have left home to go to college, etc. This was the family’s biggest expense. The mortgage, the next major expense has also been paid and now leaving you mortgage free. The final part that causes a spending frenzy is that you are no longer at the entry level of your job. You are now earning the big dollars your qualifications demands as a journey man, manager or even a self employed owner of a small business. Your Career is now stabilized, with more Disposable income.
If you’re a male this is when you experience the typical mid life crisis. The first thing you do is with all your new found money, typically, you go buy a Harley Davidson.
Have you ever looked around on a Sunday and seen all the old guys riding bikes. What happened to all the biker gangs with colours? They are Baby-boomers now. Buying the bikes they always wanted. That is why there is a 2 year waiting period for a new Harley. Just think if Harley Davidson paid attention to Demographics they would have built more factories so they would have the capacity to produce more bikes and of course increase the bottom line on their balance sheet.
If it’s not a Harley, then it’s a BMW, MERCEDES OR JAGUAR.
Not your typical North American car. But an EXOTIC OR OLD CLASSIC. That is why many North American Auto companies are having problems. They still produce the family cars, while the Baby Boomers want something different, something that sets them aside from others. So right here you have the Big ticket items being purchased that drive the economy but wait….what about the wife’s needs.
Yes, you guessed it she is no longer satisfied with the three bedroom home you bought her. She wants that Trophy Home or what she calls the Dream Home. What is worse she has already figured out that you can afford it, because interest rates had dropped to 4% from 8.5% .Meaning your monthly payments would be no different than what you were paying for before and with the large down payment you will get from selling the home you are in now, plus the increase. This is because Baby Boomers are buying new homes at a record pace will reduce the mortgage too.
Of course it does not stop there, she wants a nice bright new car in her new drive way because she does not want to have the old car in front of her new home. Then the new furniture and of course the man typically wants the big screen TV.
As you can see when you reach 46.5 years of age with all this new found money, it is not long before you find places to put it. When you have 83,000,000 people in the U.S. including immigrants all doing this at the same time you have one heck of a Boom. Just as they did in Japan in the late 80’s.
Remember also for every dollar going into housing, 60 cents of it comes back out as earnings for companies that supply the Housing Boom, from Natural resources to build it, and banking stocks that refinance all these big purchases. This is then followed by money going to the retail markets that supplies materials that go into these new big homes, for example, furniture. Then all the stock, on these shelves has to be restocked, which means manufacturing picks up and of course you need raw materials for this.
All this money goes to each company’s bottom line creating higher prices for these stocks as Baby-boomers are forced to save for retirement.
This all started with a Housing Boom and we just went through the biggest housing boom in history. Do you not think the stock market will not follow especially when the same Baby Boomers have only saved on average $100,000 for retirement?
This retirement situation will cause late market frenzy like we had for Y2K, except instead of everyone buying computers, the Baby Boomers will be buy Mutual funds.
STAGE 4 - 65-79: LIGHT RETIREMENT With light retirement comes less income. In fact, it’s now fixed as it is tied to pensions and RRSP payout programs. Not only this, the rates of return on your principle is reduced because you feel you cannot take any risks and therefore, you accept a lower rate.
Add the fact that this money is 100% taxable and also if you make too much, the Government will claw back benefits. Therefore, the spending you were doing before has stopped. This will affect the economy drastically because 83,000,000 U.S., including immigrants and 10,000,000 Canadians stop spending all at the same time.
All of a sudden taxes that were collected are substantially reduced forcing the Governments to increase taxes on the people who work or reduce existing benefits, including Health Benefits and they will reduce construction, for example fixing pot holes on the road. It also shows up on the bottom line for companies that thought this spending would continue and catching them off guard with huge debts to repay and little income coming in.
This will cause layoffs in the manufacturing field from brick layers to welders. Normally, the manufacturing here will be re-routed to China and India where there are no unions and of course the costs are lower. Remember the shoe industry we had? It disappeared when all those jobs went south to Mexico at the beginning of free trade. In addition to this, the typical company earns 80% of its income from the top 20% of its employees. These are the highly skilled people with extensive experience. These are the same people retiring now. What happens to these companies that can not replace these skilled workers? They will be added to the slow down in the economy by closing doors.
At the same time this is all going on, we are faced with the fact that we are aging and our bodies are changing. Diseases we thought were a long way off are now happening to our friends and we also see it coming.
Baby Boomers that have money invested in RRSP funds and Mutual Funds, stocks, etc., are now forced with the fact they have to liquidate these investments in the millions as Baby-boomers start coming down with Cancer, Heart Disease, and Strokes, etc. This liquidation will help fuel the stock markets melt down, as in the States the health programs are lagging ours.
This is the theme of Robert Kiyosaki’s famous book, ”The Prophecy“, where he backs it up the stock market crash with the 401k’s being cashed out at the same time to create the worst stock market crash of our time.
In 1980 the average health costs per person was $1,000. In 1990 it shot up to $2,270 per person. It is expected that we will see by the year 2010, it will be a staggering $10,000 per person.
Now you are starting to see that as a whole we are collectively doing the same thing even though we think we are different as individuals.
STAGE 5 - 80+: LIFE’S FINAL STAGE Of course we are not spending money here, but the affect of people leaving behind their assets to their loved ones, still has an affect on the markets and a huge impact for the governments that collect all those capital gains taxes and taxes resulting from cashing in RRSP funds that had not been used up.
Studies show people spend the most amount of money in their mid to late 40’s. The more people that are reaching the peak spending years between 40 and 50 years, the more the economy expands. When they stop we have bear markets, which is a down-turn in the stock market. Since this is the last wave of Baby Boomers it will be 15 years or the year 2025 before both the housing markets and stock markets start to recover. Even then the stock markets will not come close to their peaks until 2040 or 30 years from now. Are you prepared for this?
We now have bar codes and computers and it is very easy to gather information with product consumptions. For example, the number of diapers at the beginning of the Baby Boom to the number of potato chips consumed at a specific age, to Harley Davidson’s when the mid life crisis hits and to burial plots for when you die. This is not rocket science.
If we know what and when people are buying and you add the numbers of Baby Boomers spending, which is 83,000,000 in the U.S, including immigrants and 10,000,000 people here in Canada, you know when the stock markets are Bull markets and Bear markets.
THE BOOM BEFORE THE BUST
Look around and you can see our current economy is booming no matter what they tell you on the news. This is because the 3rd wave of Baby Boomers between 40 and 50 are entering the peak spending years. They are upgrading to large homes, which need to be furnished. They buy cars for their driveways to go with these trophy homes and update their televisions to large screen and surround sound. They purchase DVDs for their libraries and upgrade computers so they can download both music and movies. This all drives the economy.
Baby Boomers were born between 1945 and 1966 in three waves.
The first waves spending habits created the 80’s housing and stock market booms until Black Monday October 19th 1987. The 1990’s were driven by the first wave and were joined by a second wave of Baby Boomers that again drove the housing market and stock markets until the 2000 tech crash. Now we see the third wave has joined the other two to create the biggest housing boom ever. The hot money then started leaving here and followed commodities, such as oil and gold. Oil and gold have now peaked, leaving the hot money only one place to go for the next four years; the stock market. This stock market boom will be just as strong as the housing boom was. Invest now before you miss it. The next market boom after this will be after the Depression in the year 2025.
THE BUST The economy will boom until around 2010, that is when the first wave of Baby Boomers starts to retire. Today 54% of the populations are boomers between 41 and 60 years of age. They are all working and have a healthy disposable income. Once the aging boomers retire, they will have less disposable income. Unfortunately, their health will deteriorate. As they retire, many businesses will close down. I once saw a journalist walking down Bloor near Yonge Street here in Toronto, saying ”when the boomers retire, half of these stores will close down“. Many high fashion stores will also close. Many companies will close their doors because of the brain drain and the challenges of drawing good talent from the shrinking workforce.
57% of the U.S. economy comes from small business.
60 million people in the U.S. own their Business.
80% of these have no set succession plan, placing many loyal employees without a job when owners retire. When business owners retire, they will simply close shop. A lot of people will lose their jobs. This year alone here in Canada we have lost 400,000 manufacturing jobs. Many of these jobs are showing up in countries that are the new leading economies, for example, China and India where labour costs are lower and there are no unions forcing health benefits, etc. these on companies for their employees.
Fewer workers mean less tax collected to pay for medical, infrastructure and other social services including unemployment benefits. In the resulting long and deep depression we will see:
The depression will last from the year 2010 / 2011 until the year 2023 / 2025, when the ECHO, (children of the boomers) reach their peak spending age between 40 to 50 years and boost the economy once more.
This web site has been set up to help you become a savvy investor and able to capitalize in any market. It explains the predictable indicators that drive the boom and the bust cycles of our economy.
I want you to become as passionate about investing as I have and have the courage to do what is necessary to not only survive the coming depression … but to THRIVE.
By, Dan E. Tiffin
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Daniel E Tiffin, President of Tiffin Financial Corp, is a demographics expert. A financial Consultant for more than 24 years, he enhanced a Money Movement Strategy that netted his clients an average 24% return over a documented period between 1990 to 1999.