Investors can target aging baby boomers


The poor American Association of Retired Persons.

Its political enemies are its future members. The AARP created the richest retirees in history by putting baby boomers and Gen-Xers in deep hock. Now the lobbying group is starting to realize which side of the aisle its next dose of Geritol is coming from.

"We must remember our obligations to future generations" when deciding how to spend the federal budget surplus, says John Rother, AARP's chief lobbyist. "American families are expected to save and spend wisely. The nation should be as prudent."

AARP's new concern for fiscal rectitude and future generations, comparable to a sudden regard for pulmonary hygiene by the Tobacco Institute, is a bow before a demographic avalanche.

Yes, this is another article about baby boomers. Sorry. But "The Economy" promises not to celebrate their culture or act as if they were the first people to get gray hair. Instead, it will tell how to make money off them.

The oldest boomers are over 50, eligible for AARP membership and continuing to wreak the same economic disturbances that made Benjamin Spock a best-selling author in 1947. By the 1970s, people started to realize that boomers were so numerous, so wealthy, so acquisitive, so dominant that their trampling through the economy could be plotted and predicted.

The boomer-aware investor would have bought stock in diaper companies in the 1950s, Levi Straus in the 1960s, the Gap in the 1980s. She would have sold Seagram and London Fog. She would have bought Anheuser-Busch and Nike.

Seventy-six million strong, people who entered the world from 1945 to 1965 number almost a fifth more than the group born since 1978. They swamp the "Baby Bust," or Gen-Xers, in between.

Such demographic imbalance is a force for rapidly changing demand and its side effects: scarcity, glut and seesaw prices.

For example, the value of U.S. homes dawdled for two decades after World War II, then blasted off in the 1970s as boomers left school and settled down. Household formation peaked in 1980, decelerated until 1989 and then fell off the table. With boomers comfortably sheltered, U.S. home prices have mainly settled down.

But the narcissistic ones found a new place for their money.

Having paid off living room sets and Craftsman drills, they trained sights on the stock market, joining retirement plans and saving for kids' college. Stocks, of course, went up tenfold in two decades.

Deutsche Morgan Grenfell economist Ed Yardeni even credits boomers with strongly influencing inflation, interest rates and unemployment. It's no accident, he says, that inflation peaked during boomers' prime consumption years and that unemployment topped out as the last boomers were trying to squeeze into an already bulging work force.

Boomernomists are trying to divine the next target of the boomer-dollar fire hose. They want to get there ahead, with a bucket.

"Older workers tend to earn more than younger ones, presumably because they are more experienced, productive and committed to their jobs," Yardeni says.

The stock market still looks like a good boomer investment play, according to many analysts. Other possibilities: vacation homes, Winnebago Industries, "adventure travel" companies, boomer memorabilia. Shuffleboard manufacturers, perhaps.

Don't become a real estate agent. Don't buy Allied Van Lines. Older folks move less.

Do buy health care stocks.

In 1989, U.S. consumers started spending more on medical care than food. The gap has widened since then, and it looks to stay wide as boomers sag, break and grow insensate.

Or you could get a job at AARP. Their marketing department has some work to do.

Pub Date: 6/07/98

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