A Closer Look at the Baby Boom Generation

Harry Dent |

baby boomer stocks, baby boomer spending habits, consumer spending habits, investing in demographic shifts, baby boomer economic impact

Baby boomers were being born in mass in the late 1950s and early 1960s, when Gerber baby food became a brand leader in a major growth segment. And as teenagers in the 1970s, music and Levi jeans dominated.

Now, in the decade ahead, as baby boomers increasingly deal with travel, retirement and age-related health issues, these will become the growth industries to watch and invest in.

Everything we do — from cradle to grave — is as predictable as when we’ll die.

Life insurance actuaries predict our deaths down to the decimal point — but they can only do that for the average person, not for individuals. But that simple science allows them to price life insurance policies many decades in advance.

What if we could predict such things in our own professions and business sectors?

That’s what we do at Dent Research, thanks to decades spent digging deep into the Bureau of Labor Statistics’ annual Consumer Expenditures Survey, which covers more than 600 consumer-spending categories, down to potato chip purchases!

What we learned is that food purchases predictably shift from baby food to fast food to more upscale restaurants as we age.

I gave a speech to the Las Vegas Chamber of Commerce back in the mid-1990s.

I said, “You’ll see a major transition to more upscale hotels and restaurants as the massive baby boom ages.”

Since then, the boomers have moved away from the likes of Circus-Circus (MGM) in Las Vegas to places like Bellagio and Wynn (WYNN) . Boomers have snubbed the bland buffet in favor of “real cuisine.”

The housing market saw starter homes boom through the 1970s and 1980s and then saw the savings and loan (S&L) bust, after developers and lenders over-invested and over-lent into that trend.

Then the sector enjoyed the trade-up-home and vacation-home boom into 2005 and the first major real-estate bust since the 1930s. And I called it. I predicted the U.S. housing bubble was about to peak in September of 2005.

People thought I was nuts. But there’s more…

We know from our research that car demand goes from low-end vehicles to light trucks to mini-vans and SUVs to heavy pick-ups to luxury and sports cars, as people age from their early 20s into their early 50s. Spending in autos peaks at age 53 and then declines sharply. That means a major downturn after this year in 2015. Autos will drop off as fast as housing did after 2005 in the years ahead.

Guess what comes next?

Recreational vehicles (RVs): the Homer Simpson retirement dream that peaks around age 60 and surges dramatically from age 53!

Cars are the last major, durable, debt-financed item we buy in our lifetimes. Even though overall spending peaks at age 46, on average, it continues to plateau more into age 53 and then falls steeply into retirement.

We also know that travel changes from regional trips to national ones, then global ones (between the ages of 54 and 60), and then on to cruise ships (between 60 and 70 years old).

As we age, we predictably want to forget the long travel, jet lag and customs.

And there's something else...

We tend to borrow the most when we’re between the ages of 27 and 41 because that’s when we’re buying our homes and borrowing the most we will in our lifetimes.

As we get older, we borrow less and save more — which means baby boomers are almost done with borrowing. They'll pay down debt more than they'll accumulate it in the decades to come. That’s not good for the economy, although it is good for such households.

Knowing this kind of information is very empowering!

With all of that said, here are the top 10 sectors to be in as the baby boomers move into the next phase of their spending cycle:

1) Discretionary health care and wellness
2) Nursing homes and assisted living facilities
3) Travel and Leisure
4) Financial planning, including life and health insurance
5) Home maintenance services, security and landscaping
6) Convenience and drug stores
7) Pharmaceuticals and vitamins
8) Urban townhouses and condos
9) Active retirement communities and vacation homes
10) Recreational Vehicles (RVs)

We have a publication called Spending Waves: The Scientific Key to Predicting Market Behavior for the Next 20 Years. Businesses, marketers and investors alike can use this resource to see what’s going to boom next out of hundreds of consumer spending.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


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