The Baby Boomers Are About to Flip


The breakdown of the transfer mechanism of welfare is due to demographics. The state replaced the family welfare structure years ago. But that meant people didn’t have to have a lot of children to be cared for in retirement. So they didn’t.

The welfare promises boomed as the baby boomers boomed. Pensions, superannuation and tax incentives. They could be paid for at the time because the boomers were doing the paying. Now the Battle of the Bulge is on. Baby boomers, which show up as a bulge on demographic pyramids, are looking over their collective shoulder and realising the promises have to be paid for by productive people. But there don’t seem to be many of them coming up the pyramid.

Just how much the productive numbers will fall by is something we’ve been obsessed with all year. And we found something called ‘The Big Flip’, which tells you just when the lack of buyers will pull the rug out from under the Australian stock and property market.  

Here’s a quick excerpt:

As things lie today, stock and property owners are in for a rude shock when nobody turns up to their auction and young share buyers don’t go ‘on the bid’.

I’m not, by any means, the only analyst who foresees problems from the coming demographic shift.

The mass-retirement of the boomer generation — Australians born between 1946 and 1965 and making up about a quarter of our population — is expected to have a huge bearing on Australian economy in the years to come.

But few realise how profoundly it’s going to alter the investment landscape. And how quick and violent the change might be…

As MacroBusiness reports:

Over the past 40 years, Australia enjoyed a demographic dividend from the large baby boomer cohort entering the workforce. This process generated a population structure optimal for economic growth, whereby the largest segments of Australia’s population were neither young nor old, but in the middle (i.e. working age).

But now a legion of baby boomers are about to ‘flip’…from earning income, paying tax, and buying stocks and property…to NOT earning an income, paying far less tax, and SELLING stocks and property.

There is a profound ignorance (or denial) among the public and the investment establishment as to how this will fundamentally change the investment markets.


Nick Hubble+
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Nick Hubble
Nick Hubble is a feature editor of The Daily Reckoning and editor of The Money for Life Letter. Having gained degrees in Finance, Economics and Law from the prestigious Bond University, Nick completed an internship at probably the most famous investment bank in the world, where he discovered what the financial world was really like. He then brought his youthful enthusiasm and energy to Port Phillip Publishing, where, instead of telling everyone about The Daily Reckoning, he started writing for it. To follow Nick's financial world view more closely you can you can subscribe to The Daily Reckoning for free here. If you’re already a Daily Reckoning subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Daily Reckoning emails.

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2 years 5 months ago

According to a report by the Brookings Institute titled ‘China: the Looming Crisis’ it appears that China, whom the Australian economy depends on, has already reached the tipping point where the number of working age people has begun to shrink…and the number of young comming up the demographic pyramid is getting smaller.

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