A lot of predicted demographic time-bombs may not materialize because of this. The social security crisis may be a nonissue - if every retiree worked just 2-3 years more, social security remains solvent for the forseeable future, and many retirees plan to work more than 2-3 years into retirement age.
But certainly demographics have failed to predict the future in the past, and personally, I'm amazed at what's happened to my income in the past 5 years or so (I'm in my 40s and saving like mad - though all in cash right now).
The more interesting trend, as you mention, is what this is doing to the career opportunities of the next generation. Since boomers aren't retiring, the top jobs in many organizations aren't opening up. And so many people my age and slightly older (I'm a very early Millenial) believe there's no possibility for advancement on the corporate ladder. Hence the recent trend towards entrepreneurship among young Gen-Xers and Millenials.
Whether this results in a net inflow or outflow in the capital markets depends on the real economic growth of all these startups. If they really do open new markets, then the economy expands, more money flows into savings, and the stock market keeps going up. If they don't, then the non-retirement of boomers just means a transfer of savings rates from the young to the old. Boomers won't have trouble supporting themselves in old age, but they'll have to support their kids.
He did teach me that entrepreneurship is a lifelong pursuit.
I'm thinking there's actually a large pool of cash sitting on the sidelines, from people that didn't drink the Kool-Aid during the 04-07 boomlet. And once there's a signal that this has bottomed out - maybe it'll be Dow 10K, or S&P 1K, or the bankruptcy of the last of the big-5 investment banks - all that cash is going to come flooding back into the market, and they'll be a big pop in stock prices. I'm waiting a bit - I think there's still more bad news that hasn't been factored into the market. But it may be time to start buying soon.
If you do not believe you can time the market though, then being 100% cash is as bad strategy now as at any other time.
Top technology stocks that pay (eg IBM,MSFT) usually pay <1.5%. Even currently cashed up oil stocks tend to stay under 2%. So either way it seems to me if you were buying to own (isn't that theoretically what you're doing), you'd need to be expecting to earn the majority of your marbles on growth.
I freely admit, I don't understand financial markets. But it always seems like the emperor has no clothes.
Theoretically all those guys holding MSFT should not be willing to pay more then about $9 per share (price is about $25) unless they expect growth & no risk.
As you say, almost no company is issuing dividends that in themselves justify share prices so it's all just betting on growth. Does that mean that rational people are betting on the growth of virtually all (existing) companies?
Of course, the stock market's never before been faced with such a huge influx of stock-owning retirees, or plausible peaks in energy and some metals--without which growth as we know it can't exist--so you pay your money and you take your chances.
having said that, a lot of old school companies (at least here) pay good dividends still - so there is a class of "dividend" stock versus growth stock - although some growth is still expected.
you can say the same for dollar bills. what is a dollar's INTRINSIC value? zero. its just a piece of paper
But if the dragon's actions are controlled by a board and the board is elected by the shareholders, then the share is suddenly worth a lot more. Now it's theoretically possible for the shareholders, acting en masse, to redistribute the gold to themselves at some point in the future, and so the share combined with the voting right is worth real money, even if the distribution never happens.
PS. Apologies if I'm missing a reference to something with the gold-hoarding dragon and the defunct Buddhist temple construction company.
I have no evidence to show dividend-bearing stocks outperform their counterparts, but my point is that those counterparts are overvalued. If a company will never be bought, will never pay dividends, and will never wind down operations rather than face bankruptcy, the net present value of its stock is therefore 0.
so google is worthless? the point of owning a share is to make money from your ownership. if that comes through dividends or through sale value, who cares?
I have no evidence to show dividend-bearing stocks outperform their counterparts, but my point is that those counterparts are overvalued
do you know what fair value is? the price the equity is currently trading at. look at MSFT. a total dog but wheee...look, they cut me a check a few times a year and i take the wife to a movie. and why do dividends imply value? maybe microsoft could have taken the dividend cash and used it to buy out google. excess cash is often seen as a LIABILITY, as it shows the firm cannot use the money to effectively grow. MSFT is a classic example...losing market share even though they have a mountain of cash.
The stock price is, in theory, the net present value of the stream of earnings its bearer will receive. So if no company will ever pay significant monies when it winds down, that leaves dividends
no, stocks get delisted before they go under, and you get bupkus. how are your LEH dividends doing?
Now, baseball cards can be quite valuable. The price can fluctuate enormously, You can make money from investing in them. The price correlates with real world events such as batting average. But fundamentally, the value is based purely on fads, perception, herd behavior, and marketing. At any time, the floor can drop out. The price can plummet and never recover ( baseball cards were my first investing experience and I'm still scarred :-) )
A dividend paying stock has fundamental value. As long as the company's business remains strong, you will earn money from owning the stock, even if everybody else in the world believes it is worthless.
It's threads like this that cause economic meltdowns.
What wouldn't seem right would be if there were no bad bets. In something as risky as tech startups, most bets should be bad.
Other mature tech companies not paying dividends include Adobe, Autodesk, Apple, Cisco, EA, Activision, Intuit, Oracle, Symantec, Amazon, and Ebay. And the few that do pay dividends (IBM, HP, and Microsoft for instance) have a very low dividend yields. It seems to me that there has been a breakdown of corporate governance.
Adobe, for instance, is in the perfect position to pay dividends. It is a group of cash cows that might suddenly get destroyed by new market entrants. They're putting the money in a vault [1], but they're not paying dividends [2].
The problem, as I see it, is that companies refuse to admit they're dying. It's the weirdest thing.
[1] http://finance.google.com/finance?q=adbe [2] http://sec.edgar-online.com/2008/04/04/0001047469-08-004108/...
Let's see here. Google pays no dividends, is probably to large to be bought, won't be allowed to merge for antitrust reasons, and if it behaves like other Silicon Valley companies that came and went, will spend every last penny before acknowledging defeat (which granted, is a long way off).
Unless Google pays dividends at some point (which Silicon Valley companies usually do not do), then yes, it's stock is worthless. That's exactly what I'm saying. Its stock buys and sells at $441.41 as of my writing this, but is intrinsically worthless.
as worthless as any other paper currency. indeed google stock has performed well against the US dollar (you could redeem your GOOG into euros).
no fiat currency has intrinsic value. come to grips with this. paper currencies have come and gone, stocks are no different than dollars or euros...its just a piece of paper that people will either value high, low, or not at all
You need to look at this from a 'whole' perspective. You can make money from buying high selling low, but the market cannot.
The recent trend is that mature companies are not paying dividends. This trend is new enough that it probably hasn't shown up in performance statistics. But it is very worrisome on a fundamental level. A stock like Yahoo! or Alcatel has little room for its price to grow, thus you can only make a return via dividends. Without dividends, owning it is almost certain to be a losing proposition.
look up short selling, options. if a stock price is MOVING, you can profit
dividends are the only way to make money if the share price is static
It's well researched that the number of 45 year olds is a major important economic variable. They're at their peak earning, investing, and consuming stage.
Japan's baby boomer 45 year old peak came a bit over ten years before ours, which is passing now. Not a good sign considering what has happened in Japan.