CFA Institute

Boomernomics: The Future of Your Money in the Upcoming Generational Warfare by WilliamSterling; Stephen WaiteReview by: Martin S. FridsonFinancial Analysts Journal, Vol. 55, No. 1 (Jan. - Feb., 1999), p. 95Published by: CFA InstituteStable URL: http://www.jstor.org/stable/4480142 .

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Book Review

Boomers and the U.S. Econom

Martin S. Fridson, Editor

Boomernomics: The Future of Your Money in the Upcoming Generational Warfare. By Will- iam Sterling and Stephen Waite. Library of Contemporary Thought, The Ballantine Pub- lishing Group, 201 E. 50th Street, New York, NY 10022, 212-751-2600. 218 pages, $1 9.95.

"Demography is destiny," pro- claim the authors of Boomernomics: The Future of Your Money in the Upcoming Generational Warfare. "Should it have been surprising that the sexual revolution occurred in the 1960s, when tens of millions of teenage boomers were surging with hormones? Was it a coincidence that the nation focused on 'family values' or 'parenting' in the 1980s, when massive numbers of thirtysome- thing boomers were raising their own children?" (p. 4)

One wonders. No biological basis exists for supposing that the Baby Boomers' parents did not surge with hormones during their own teen years. Perhaps advances in contraception had something to do with the changing sexual mores. In a similar vein, is there any hard evidence that previous generations were not interested in "family values," whatever that amorphous phrase means? The

facts the authors cite lend equally strong support to an alternative hypothesis, namely, that the self- absorbed generation born between the late 1940s and early 1960s interprets socioeconomic trends in an exceptionally narcis- sistic manner.

William Sterling and Stephen Waite, who are both associated with Credit Suisse Asset Manage- ment and its U.S. affiliate, BEA Associates, write engagingly about a future shaped by demo- graphics. By 2010, they contend, the Baby Boomers' savings may drive the DJIA to 25,000; a "Japanese-style mania" could push the index as high as 35,000. After 2010, however, a "Big Chill" will set in as the Boomers enter old age. Sterling and Waite expect retirees to liquidate their securities and sell their homes in droves, with a potentially devastating price impact on those assets. Gen- erational warfare may break out as young workers are taxed oner- ously to sustain the oldsters in their twilight years. One of the few bright notes in Sterling and Waite's scenario is their rejection, as too dire, of journalist Craig Karpel's vision of ex-yuppies turning into "dumpies," forced to scavenge for food in garbage receptacles.

Before yielding to despair, readers should remember that countless Malthusian prognosti- cators have fared poorly over the years. Stanford biologist Paul Ehr- lich concluded in 1968 that the

battle against widespread starva- tion was already lost, yet famine has declined since then. In 1972, the Club of Rome warned that humankind would run out of cop- per, gold, lead, mercury, natural gas, oil, tin, and zinc by 1993, a prophecy that remains unful- filled. "With normal markets in command," writes Peter Huber of the Manhattan Institute, "scarcity always seems to be giving way to abundance" ("Reverend Malthus, Meet Doctor Faustus." Commen- tary [November 1998]:30-35).

Sterling and Waite acknowl- edge that long-range forecasting is hazardous and urge readers not to take their predictions too literally. For the short term, the authors rec- ommend equity investments in industries they deem likely to ben- efit from demographic trends. These include health care, leisure, entertainment, financial services, and technology.

Regardless of how Sterling and Waite's investment themes pan out, they have produced a stimulating book. Investors who believe that demographic trends determine the course of history will find abundant support for their thesis. For those who are less sure, Boomernomics makes the case in succinct and highly readable fashion. At a minimum, it is hard to dispute that today's huge middle-aged cohort will power- fully influence securities markets through its predictable phases of investment and divestment.

Martin S. Fridson, CFA, is chiefhigh- yield strategist at Merrill Lynch & Company in New York.

January/February 1999 95

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