You hear that statement all the time, market support. This means anything that increases the value of equities, i.e. the stock market. But how these markets are supports is key to understanding how things are going to work out in the financial markets for the future.
Below, I am going to share some resources that I found very informative. Now, not everything should be taking as a whole or any particular person should be considered as the absolute authority on anything and everything. Rather, I found something super interesting in each one.
In this video https://www.youtube.com/watch?v=5OFaZcC0lRU Raoul Pal show how the stock market have traditionally been supported. How the retirement accounts and pension plans gave substantial “support” to the markets in the 70s. that is when people were being convinced not to “worry” and let the “professionals” handle their money. Then came the credit boom, to allow those who did not have money to spend to dip deeper into their “wealth” and spend.
Baby boomers started to leave the work force in 2000. And from now till 2027 the number of retirees will be rising. That means they will be down sizing and spending less. Raoul, like probably Harry Dent, focuses on the demographics and how they drive economies. He also visit the idea of the “labor force” and compare that to unemployment numbers. And one of the most ideas that I thought he brought up is the correlation between the FEDs balance sheet and the labor participation rate. The idea that the FEDs are providing liquidity that compensate for the lack of “money supply” or M2. This idea, if true, is extremely scary because it means that there will be no option for central banks around the world but to monetize debts and for governments, through their central banks, to be owners of equities.
Couple of investments ideas emerge from this. One, is for senior citizens not to sell their homes when they are ready to get rid of them, but rather do an owner finance sale with escalating payments to compensate for inflation. Second to have the younger generation support the older generation in return to some wealth transfer. So, maybe a living in aide for return of room and board. This eliminates even the need to go through the “income” channel. Third is the idea of having non-conventional options for living, from tiny houses to RV living.