Consolidation and Shrinking in Financial Markets

Here is an article about the “shrinking” equity market.

The only point Michael Santoli is missing is the underlying reason that all of this is happening.  There are a lot of explanations out there. “Corportations are awash in cash,” there is a “Buyback binge,” etc. etc. but these just tell what is happening. They don’t dig into why it is happening.

As I have written so many times before – there is a much larger demographic phenomenon going on here. The top of the tech boom in 2000 was roughly when the baby boomers hit age 50 – which tends to be an age when families pump the most money into stocks.

Now the bond market has expanded. And, no surprise, it is coming at a time when the baby boomers are nearing their late 60’s. This is when you would expect them to pump more money into bonds.

My point is not to give market prognostications. I firmly believe long term stay-the-course strategies are the best. My point is to show that the investment environments we have been experiencing for the past 30 years is exactly what you would expect in a country with our demographic characteristics.