|Andrew Gordon Reporting: Baltimore, MD. Tuesday October 27, 2009|
The Baby Boomers' $10 Trillion Riptide
When my kids Nick and Rachie were growing up, my wife used to joke with them: "Okay, which one of you will take us in when we're old and grey?" "I will." "No, I will." Both wanted to be their parents' keeper ... God bless them.
But the last thing we want is to have to move in with our children. And when I say that, I think I can speak for all of my fellow boomers too.
Boomers who have not yet secured their financial future don't have much time left. Many have retired or will be retiring soon. But they do have one remaining weapon: a $10 trillion riptide that will be coursing through the U.S. financial system.
It's going to catch a lot of investors by surprise. But those who know what it is and know it's coming can make a lot of money from it.
For the last 50 years, boomers have been pouring cash into their favorite products and causes. In fact, they've been the dominant commercial force in the U.S. since 1946.
The flow of cash began with the parents of boomers. They spent liberally on their children – on everything from Gerber foods to hula-hoops – before the boomers themselves took over. The boomers then helped themselves to ever-bigger houses, cars, and TVs. They grew addicted to the convenience of fast food, cellphones, and indoor malls. And they cemented the reputations of iconic brands – from Coke to Jack, T-Bird to Cadillac, and Kleenex to Clorox.
With boomer patronage, businesses grew into giant global companies, and their share prices grew accordingly.Companies favored by boomers like Coke, Clorox, McDonald's, and Brown-Forman (maker of Jack Daniels) have all gone up around 2,000 percent in just the past 25 years.
Making the Money Last
Now, boomers are scared that they'll outlive their nest eggs. A research report from BlackRock indicates that 70 percent of their retirement-age clients would be willing to move their accounts to another firm, if that firm could help them avoid running out of money.
Boomers can't afford any more losses. They have no choice but to play it safe. That's why I expect that riptide – at least $10 trillion of boomer money – to flood into conservative investments like bonds and the big companies the boomers helped build. Investments in those "boring" companies would give the boomers some much-needed cash income and stretch out their savings.
Playing It Safe With the Best of the Big Global Companies
The best of the boring big companies are in my "Elite 88." These companies hate to disappoint their shareholders. And they've been raising their dividends year in and year out, doubling those payments every 5-10 years. Four percent becomes 8 percent, 8 percent becomes 16 percent, and so on. It adds up to astonishing sums. In just two decades, these companies gave enormous profits to shareholders ...
For more than half a century, businesses and individuals have been making money by tapping into boomer trends and lifestyle choices. Boomers have one last trend in them. And that gives you one last chance to climb aboard the boomer bandwagon.
If you're interested in the "Elite 88," you can find out more about them in the Sound Profts investment service. Just click here.
Gold Stocks' Next Big Breakout
I don't know anybody who knows more about gold and gold stocks than Rusty McDougal, who runs IDE's The Resource Speculator.
He says gold stocks are going up. No doubt about it.
And when they do, he expects them to rise between 20 percent and 30 percent over a 3-4 day period. Some will double.
That doesn't give you much time to take action.
You can learn more about the explosive opportunities in the gold market and Rusty's service here.
The Banks' $3 Trillion Payback
Home sales in the Hamptons are rising. They surged 32 percent in the third quarter. Detroit's sales are dropping like a lead balloon. Anything surprising here?
The industrial powerhouse that once was America is no more. Say good-bye to "What's good for GM is good for the country." Say hello to "What's good for Wall Street is good for the country." The government gave out hundreds of billions of dollars to save our big banks. And now bankers are making big bonuses again ... and again buying mansions in the Hamptons.
The eventual bill to American taxpayers will climb into the trillions, according to the Peterson Institute for International Economics. They say: "The amount of working capital you'd expect the government to take into this would be around $3 trillion to $4 trillion."
The government took over GM and dismissed its CEO. It gave strict orders to Detroit's "Big 3" to shrink. So far, GM has let go over 21,000 workers.
Meanwhile, central bank money is almost free. Big banks are helping themselves to dollops. They're doing more trading than lending with it. And their profits have surged. Can't argue with the bottom line, can we?
U.S. carmakers got a one-month buying surge in August from the clunker program. Sales in September were horrible.
The Obama government has already decided not to limit the size of banks. And at the first sign of trouble, the government will have their backs. But remember what happened when two of the big three auto companies got into trouble? They were allowed to go into Chapter 11.
Getting the picture?
The big banks own Washington lock, stock, and barrel. Coddled and protected by the government, they have all the juice. And the auto industry is getting squeezed.
IDE's Ted Peroulakis thinks it stinks. But that didn't prevent him from betting on the financial sector at the beginning of earnings season. And he made a cool 100 percent profit for subscribers of Options Power Trader. For how you can participate in Ted's other options plays, click here.