Quick answer this question: What happens to the price of something if there are more sellers than buyers?
I know that was a simple question, but I wanted to have that as a foundation for this post.
Several years ago I read the book; Rich Dad’s Prophecy by Robert Kiyosaki. In that book he tells of his Rich Dad taking him aside and predicting a stock market crash in 2016-2017. His prophecy was not because Rich Dad had some spiritual experience, it was simply based on a law passed by the US Congress and my starting question. That law, which not many people know about, is a requirement for people turning 70 and 1/2 years old MUST start making withdrawals from their IRAs and 401(k)s. Guess what? The largest generation in U.S. history has to start pulling its retirement money this year (2017), kicking off a mandatory movement of cash that could total hundreds of billions in the coming decades. The Wall Street Journal had an article about this issue this morning as if it is big news.
What affect could this have on the price of equities? Hmmm, answer the starting question and you will know.
I am not predicting any end of world type scenario, I am simply saying there are powerful forces at play.
A few questions to consider:
- How will this massive movement of money affect me personally.
- Will my retirement be affected if I do not retire for 15 more years?
- Is there a way to protect myself from any adverse affect of the large numbers of baby boomers selling versus the smaller number of millennials buying?
- Is there a way to profit from Rich Dad’s prophecy?