Investor Behavior, Baby Boomers, and the Supply of Equities ( Capital Flow Analysis )
Investor Behavior and Baby Boomers
The Baby-Boomers
Since 1980, there have been remarkable changes in the U.S. capital market, as shown in the following table:
(Note: net stock buybacks by corporations and net sales of equities by investors are shown in red. )
Corporations, rather than relying on the stock market to raise funds for domestic enterprise, carried out a massive reduction of 1.1 trillion dollars in company capital stocks.
Stock buybacks were driven by executives' need to drive up prices to enrich their options.
Stock buybacks, (discussed in Lesson 15), significantly reduced the supply of domestic equities.
Corporate buybacks were driven primarily by the selfish need of hired executives to drive up stock prices and enrich their options.
This goal matched the desire of fund managers to boost stock prices to earn higher fees, even if the long-term interest of investors were not served.
While domestic companies were reducing capital, foreign issuers sold shares in the U.S. market in a net amount of $617 billion.
Non-patriotic Capitalism
It was remarkable that America's leaders felt no inclination to ensure that capital funds were preserved to build a better future for their countrymen.
Instead, capital was sent to abroad build factories overseas, even though this took jobs away from American workers.
Leaders seemed unconcerned that asset-lite practices would make the nation less competitive.
America's leaders seemed unconcerned that asset-lite practices and short-term goals set in terms of stock prices, would make the nation less competitive.
Among corporate executives, there was little patriotic or altruistic concern for the well-being of fellow citizens.
The sense of duty, patriotism, and desire to contribute to national progress that had been an American characteristic for generations, even in the time of the 'robber barons', was dissipated in the last two decades of the 20th century.
Children Take Over Society
The radical change in the American capital market from 1980 to 2000 was not the result of a business cycle.
The cause was cultural transformation and demographic upheaval.
The mighty force that molded American society over the last fifty years has been the population bulge resulting from a procreative splurge in the years following World War II – what is known as the Baby Boom.
This demographic 'pig in a python' has distorted American society as an out-sized population cohort has come to adulthood and taken center stage.
As Robert H. Bork noted, in his book, "Slouching Towards Gomorrah",
"Every new generation constitutes a wave of savages who must be civilized by their families, schools, and churches.
An exceptionally large generation can swamp the institutions responsible for teaching traditions and standards."
Baby Boomers were born into an America where most people were employees, where secular universities were stamping out MBAs with relativistic ethics to become leaders of public companies, and where Big Government with an anti-entrepreneurial bias was an established fact.
Baby Boomers were the first generation to be raised on television and propaganda of the liberal media.
The Baby Boomers were the first generation to be raised on a mind-numbing diet of television and the all-encompassing secular propaganda of the liberal media.
The Baby Boomers grew up in a world of rapid population growth, good times, national hubris, anti-religious sentiment, a media that was intolerant of old-time ethics, and weakening moral authority of universities and churches.
Their parents and teachers were overcome by their numbers.
The Baby Boomers went forth into the world without the sense of duty, patriotism, and ethics of their forefathers.
Before proceeding, check your progress:
Self-Test
The Baby Boomers began to move into important management positions:
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On balance, during the 1980s and 1990s, with reference to the U.S. market:
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Robert Bork said that that the Baby Boomer generation rejected established morals and standards because this generation:
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Baby Boomers : continued >
