Michael Douglas might be a little too old to be considered a baby boomer but that doesn’t change the fact that he could very well represent the biggest generation of investors the world has ever seen.
Baby boomers grew up with Douglas as a silver screen hero with Hollywood longevity like few others. Perhaps one of Douglas’ most famous roles was financier Gordon Gekko; a role he reprises in the coming sequel to “Wall Street.” In real life, however, Douglas is no Gekko. He recently told Esquire magazine he lost nearly half his net worth during the stock market crash of 2008. As a result he’s sworn off stocks for good.
I can’t help but think that there are many boomers out there feeling just like Douglas. After the internet bubble implosion, the real estate crash of the past few years and the financial crisis, baby boomers must have developed a real aversion to financial securities and investing in general.
Supporting this thesis is the recent mutual fund flow data. Despite the epic stock market rally of the past year or so, fixed income funds have seen the greatest inflows. Still, according to Dave Rosenberg, households have only allocated a bit more than 6% of their investments to fixed income. 25% remains in stocks and fully 30% is still allocated to real estate investments.
However, if even Gordon Gekko has sworn of speculating in risk assets after being burned by three big busts, then I have to believe that there is a large segment of the population that feels the same. And the trend towards fixed income may be only just beginning.
Disclosure: long TLT