Boom Time in Full Effect Pt. 1
by Bradley Voight on 08/29/18
I have gone on record on here several times over the past seven years saying that all the cards were lined up to produce an economic boom time. Nine years after the financial crisis and great recession we have been in an expansion that could become the longest in American history. Unemployment is sub 4%, with hiring signs in every window, employers still can't find enough workers.
ALL TOGETHER NOW.....INTEREST RATES ARE LOW DUE TO THE AGING DEMOGRAPHIC IN THE DEVELOPED WORLD, NOT BECAUSE OF THE FED!!!!!! The bond market wags the Fed, not the other way around. Bond rates are determined by supply and demand dynamics in a price discovery mechanism known as the US Treasury note auction. If more buyers show up to the auction, bond prices go up and inversely yields go down.....easy to figure out! Bond prices have been in a bull market since 1982 and amazingly 1982 was the year that the first of the Baby Boomers (Born 1946 to 1964) began to reach middle age. Fast forward to 2018 and you have 76 million people in 70% bonds, 30% stocks, thus the low rate environment. This is why I also said stocks were on a long march higher as the bond bubble deflates (slowly I might add) and the rotation of boomer retirement money ($59 TRILLION) gets left down to Generation X, who will spend a great deal of the money and invest the rest in stock heavy portfolios. The spending will drive corporate profits and the 70% stock portfolios will pinch the supply of shares floating. Stay tuned for part 2 coming soon in which I will explain how technology is driving the long expansion and will drive it longer than you could imagine. By the way, $59 trillion divided by 76 million people = $776,315 which is the average amount being left by dying baby boomers.