 Good day fellow investors. Now if you follow the market long enough, let's say more than 15 years, you know that in the 2000s a very occurring team was that baby boomers retiring will crash the market so that when they retire they will have to sell their stocks which they have accumulated in the past 50 years of working and that that will crash the market starting from 2012 when the first baby boomer retired. Now since 2012 the stock market went nothing but up so that silenced those rumors and those fears. Nevertheless, I find looking at demographic trends extremely important for stock market investments, economy, macroeconomics and whatever happens. So it's good time now that nobody is talking about to look at what's going on with baby boomers retiring and how will that impact the stock market especially in the next 15 years because baby boomers will keep retiring in the next 15 years. So let's first look at what happened since baby boomers came into their prime working age. In the last 40 years since baby boomers have been retiring and investing in their 401k's and other similar vehicles the stock market has increased let's say 20 fold in 35 years. 20 fold increase in 35 years is a huge huge achievement. So if you look at you could say yes baby boomers were working the economy was doing well and the stock market went up. What happens when the trend reverts? What happens when the baby boomers retire and start selling their assets? Well nothing would happen if there would be more birds if there would be more children and a growing demographic outlook. However you can see here in this chart that the number of babies born per 1000 people in the U.S. has been constantly declining in the last 100 years. Okay now we can look at those charts but I have found some academic scientific research from the Federal Bank of San Francisco and those researchers from Federal banks, academics, universities, institutions are usually spread out for free. So a lot of people working with the best data with the best knowledge and then they come out with the model and tell the story. Such researches usually go under the radar because it's very complicated complicated models and it's something that might happen or might not happen but nevertheless if you read such things you can create a very very nice model about the future for practically free. And on top of it there are great researchers, I read them and they're just downloaded 100 times which is crazy. Well if somebody puts I don't know a cat photo is downloaded a zillion times. So really I will be sharing here my findings in the economic world because it's very very interesting. Let's see what Spiegel and Liu from the Federal Bank of San Francisco have found and created the model about it. So what Liu and Spiegel found is that there is a very high correlation between price earnings ratios and the ratios of the middle age to old age cohort. So the ratio of people between 40 and 49 middle age and older people retiring from 60 to 69. When there is more people in 40 49 years they are at their maximum profitability, maximum efficiency and they make money and invest that money. So there is demand for stocks. When there is more people 60 69 they sell their stocks to pay for their living expenses. And if we take a deep look at their model and what they have found we can see that the price earnings ratio on the left scale is really correlated with the middle age old age ratio. So as long as there is a positive middle age old age ratio then stock prices are inflated and price earnings ratios are higher. When that reverts when there is more older people then they have to sell stocks. Applying what they have found into a model and see how will that impact stocks doesn't need to a nice result. This is probably why this research went under the radar. Nobody likes to listen to bad news. So they expect that as baby boomers retire the fundamental price earnings ratio should be much much lower and they expect it to go to 10 in 2025. More precisely they see a market PE ratio of around 8.4 in 2025 and 9 in 2030. You can imagine what would happen to the market if there is really a price earnings ratio of 9. However according to their model when baby boomers actually start retiring they will put so much pressure on the stock market that it will go down. We'll see. Nevertheless if we attach a price earnings ratio of 8.4 or 9 in 2040 and we expect SAP 500 earnings to grow at the same rate as the economy in the next 10 years thus 2%. In 2025 SAP 500 earnings should be around 110. If we attach a price earnings ratio of 8.4 I get to a SAP 500 value of 920 points and that hurts. That's terrible. That will be a disaster. So I'm not saying that this is what will happen. I'm saying that this is one force that will impact the stock market in the next 10 years. Baby boomers selling stocks. Now this is not yet happening. The first baby boomer retired in 2012 and the stock market is just going up so they might be selling something else or still waiting to sell on their stocks because the stocks are still going up. Secondly off the baby boomers retiring 10% of them own 90% of the stocks and again you have to look at the inequalities in the data to understand what's going on. So those who own 90% of stocks those 10% of richer people might never sell their stocks as they probably have other sources of income. So there are a lot of question marks what will happen nevertheless this is one negative trend that has to be kept in mind especially if a beer market comes around everything is good while people see their retirement nest egg grow grow grow but when it inflects people might panic and induce a lot of selling. I'm not saying that the SAP 500 should be at PE at 9 at 2025 but it's a strong forces and we have to keep them in mind when assessing the market and creating risk reward models. Thank you for watching. I hope you enjoyed different perspectives. There are many things that we will share on this channel different perspectives in order to get an objective view of the market. This is not my view of the market but this is just something I collect and want to share with you. If you like the content click like please subscribe for more market insights for more stock analysis as that's what we do on this channel in order to provide you low risk high reward investments. I'll see you in the next video.