Millions of traders have lost trillions of dollars to baby boomer con artists over the last 20 years.
The baby boomer idea traces back to at least 1980 and the idea is a simple one. If a greater number of buyers than sellers is what drives a market higher, then the expanding number of baby boomers reaching their prime investment and buying years (ages 45 to 48) is a huge force that will drive stock prices higher for a long time.
Enough years have passed now that we know the baby boomer theory was wrong.
The problem with this theory is that it ignored the percentage of the population turning 45. The percentage of the population turning 45 is more important than the actual number. For example, 1 million people turning 45 with a population of 300 million is only 0.3%.
As the population gets larger, a larger number of people are needed to produce a comparable economic impact.
The baby boomer wave exists, but it’s much smaller and less important than many people think.
Scammers realized they could use the baby boomer idea to move low liquidity penny stocks.
The scam goes like this.
Artificially inflate the number of baby boomers, say to 80 million or even 100 million. Who can really argue with you anyways? Most people are too lazy to verify facts or just don’t know how to.
Next, tell stock traders that they can make money as the baby boomer generation retires.
Back this claim up with some really official sounding stats: “America’s 78 million baby boomers are richer than any group in history; the group controls 50% of all U.S. discretionary income and accounts for 75% of drug spending. As an investor you cannot afford to ignore this demographic in the coming years and where they will be spending their retirement money.”
Now tie baby boomers to whatever stock you want to pump: “As more boomers approach retirement, forecasters expect a huge bump up in certain kinds of expenditures. Two that should see the biggest jump are Health care and Travel/Leisure stocks.”
The baby boomer theory was wrong when it was applied to the broader stock market back in the 1980s, and its even more wrong when applied to individual penny stocks today.
Whenever you hear you should buy something because of the baby boomer generation, you should turn around and run as fast as you can.