This article was originally printed in the March 2009 Issue of our Premium Newsletter.
We may have to wait a while to see bargain valuations in the stock market. However, the market should rise quickly when the next party gets underway because the Boomers are now in a classic position to chase the pot.
“Chasing the pot” is a gambling phenomenon which occurs when a player has lost a significant portion of money and needs to bet stronger if they want a chance at recouping losses. For example, if you lose 50% of your money, you must double the remaining half to return to even. In order to double your money, you surely can’t stuff your cash in mattress-like Treasuries yielding 2-4%. Instead, you are forced to take on large risks for the possibility of earning large rewards.
Unfortunately, most Boomers and older retirees have lost a bowel-movement inducing amount of their wealth. Visions of retirements spent at Cheesecake Factory and on Princess Cruises currently seem more like ideas from past lives. But have no fear, the always-get-what-they-want Boomers are here! In my opinion, this generational trait will be the key target of sales pitches from future Wall Street hucksters (and other salespersons).
Thus, once the dust settles and the Prom venue is ready for the next bull party, Boomers will feel as though they have no choice but to bet on stocks. Want to double your money this year and get back everything you lost in 2008-09? Alternative energy and health tech stocks are your time machine ticket back to the glory days.
Now that Boomers are dizzy at the table waiting to chase the pot, we can nearly guarantee that the next bull run will once again reach bubblicious proportions. Just think: Boomers shrugged off the dotcom collapse to pile into the housing and stock markets despite “cross my heart hope to die” promises to never chase another bubble or stay too long in a hot market. Regardless of these worthy intentions and pinky swears with spouses, greed always wins because “this time” is never different. The dealer is shuffling the deck. Stay tuned for when to ante up.