The Skip Bureau

Here's a scary thought. Economic analysis often misses out on major demographic shifts. The latest thing to get me thinking is the unlocking of all the money stored in the various bubbles referred to as investment securities in this country that will occur when the baby boomers retire.

To unwind that sentence, consider that the stock market is near an all-time high valuation. Real estate is setting all-time highs. We have a secular bull in almost all commodities. To a student of classical analysis, there is only one real conclusion, and that is that there is massive structural inflation in the market. In other words, the investment dollar once invested is getting discounted and that is what is causing the increase in price measured in dollars, which are now cheaper. So there is a lot of money locked up subjected to structural inflation but not yet causing price inflation in the broader market.

At some point, the baby boomers will sell their stock. Of course, this will cause a reduction in the price of the stock market, and, with the derivitive mess currently around, it might trigger a banking collapse, but that's another problem for another day. What is more interesting is that all those dollars currently locked up in the stock market will float free to buy things on the open market. This is when the sea change may happen.

The idea remains ill-formed in the inner working committees of the Skip Bureau. As a better understanding of this change is fleshed out, expect updates here. Also, at some point in the future a current analysis report on the state of China will be forthcoming, and I think you might be shocked at the conclusion.