Amazon Reviews
32 of 34 people found the following review to be helpful:
Interesting theory, but not practical, June 1, 2001
By Will Schrafft
Mr. Parker's main premise is that, due to simple demographics, the demand for all of the boomers' stocks (when cashed in to fund their retirements) will be insufficient and the resulting prices will fall short of boomers' expectations. The reasoning behind the theory is valid. My problem with the book is that the author presents virtually nothing in the way of an alternative.
Perhaps we will, as Parker suggests, enter a period of disappointing stock prices when the boomers are retiring but at least we know that our capital markets system works. We know that we can get our money out by selling our assets on one of the established exchanges. The author touts a potential alternative strategy of investing our retirement dollars in tiny, productive neighborhood companies that would, in turn, benefit their local populations and economies and which would not contribute to the "phantom wealth" on which he feels the current system is so precariously based.
As altruistic as his "productive investments" sound, where are they currently being put into play? They aren't. How would we get our money out? No plausible answer is offered. The book is long on theory, great for a debate class, but is short on practical solutions/alternatives.
My take on the book is simply that the investment returns that most boomers are expecting, and basing their retirements on, may not be sustainable during the 2010-2027 period. Instead of hoping that a mechanism for "sustainable productive investments" will somehow materialize, perhaps we should simply take a more conservative approach to our retirement investing by saving more and lowering our projected return rates.
Overall, the book has a compelling premise but, economically speaking, this is about as left-wing as it gets...
26 of 27 people found the following review to be helpful:
Great point about the future of stocks, but where's the beef, October 17, 2002
By Greg R. Carroll
This book is very good in one way, but not so good in others. The author puts forth an important economic point that came to my mind several years ago - myself being a 52 year-old boomer who is concerned about what may happen to stock valuations. That is, what is going to happen to the stock market when baby boomers start to retire in large numbers and sell off their stocks to generate retirement income? When this huge block of buyers all of a sudden becomes a huge block of sellers the obvious result one would expect from a basic supply & demand scenerio would be a drop in the price of these stocks. Now, I don't know for a fact that this will happen, but Mr. Parker makes it sound like there is no doubt that equity prices will be devastated, putting many Boomers into the "surprised" category and driving them into economic despair. There is no doubt that this is a distinct possibility, but I don't think this is a certainty yet. There are just too many variables that we can't be certain of at this point in time.
While the author is very good at making this point - and it's a valid one - his mindset for possible remedies comes from a distinctive collectivist viewpoint. A strong free market proponent Mr. Parker is not. He talks of dismantling stock as we know it today which is bought & sold on a very liquid basis and replacing it with more of a "collaborative" (to use his word) system of ownership in which everyone in the company has an ownership stake and is designed in such a way as to make the sale of ownership positions somewhat difficult. It smacks closely of a socialistic/communistic system that has been proven a failure throughout human history.
It's obvious that the author has very little confidence in the ability of the free market to adjust and adapt over time to meet the needs of consumers (in this case, retirees). I'm not saying that the free market is always perfect, but it's a lot more perfect than anykind of socialist/controlled-economy scheme that has ever been devised. The author makes numerous statements of assumed fact in the book, but most of them would really be up for strong debate with a person who has a strong belief in the power of the free market. I really believe that a knowledgeable free market economist would be able to punch major holes in many of the author's assumptions of "fact".
So, over-all Thorton Parker starts out the book with a very valid concern about the future valuation of stocks, but then things kind of fall apart from there with a lot of assumptions and ideas that would likely be hotly debated by many. As far as "How to Build Real Security, Not Phantom Wealth", there is virtually no guidance at all on how to do this in the real world today. He gives you a few theoretical points to chew on, but they really are not all that practical. His best advice for boomers is to diminish their expectations for luxurious retirement years, and in fact, many of us should expect to work until we drop, literally. Surely, many boomers will end up doing this, either out of necessity or desire to be active. But I have more confidence than Mr. Parker that the free market will at least partially alleviate the problem of a possible, if not likely, declining stock market.
29 of 32 people found the following review to be helpful:
What If Stock Multiples Plummet When Baby Boomers Retire?, December 30, 2000
By Professor Donald Mitchell
I have read no better book concerning issues about retirement costs for Americans born between 1946 and 1964. Although too limited analytically in some areas, many valuable observations are made that will stimulate your thinking. This book should become the basis for a thoughtful national discussion, and much personal introspection.
This book points out a key limitation of many investing books. Those often assume that future stock-price growth will be like the past. A thoughtful exeption to that conventional wisdom is provided by Harry S. Dent, Jr. who projects two extended downturns as the average age in the United States increases, resulting in abrupt shifts in consumption and savings. Mr. Parker intelligently uses that forcast to considre its consequences, while Mr. Dent continues to focus on the likely bull market through 2008.
The key argument in this book (as documented by Mr. Dent's work and Mr. Parker's analysis) is that stocks are a dangerous way to fund your retirement unless you sell them all out long before 2008. Earnings growth of larger companies is probably going to slow in the subsequent decades and stock-price multiples will plunge.
The book also contains many thoughtful analyses about the focus on creating ever higher stock-price multiples that are encouraged by such ideas as EVA (tm). This creates "phantom" stock-price-based profits that cannot be used or spent by most people, and which will eventually evaporate in the scenario described here. Seeking higher cash flow returns is certainly not the only way to add value to a company, a community, and to a society.
The book argues for refocusing economic activity on providing more employment, more sustainable profits, greater social and community benefits, and services that seniors will need. The book argues that savings be funneled into smaller, newer companies that will not receive standard venture capital funding. The author opposes having any of Social Security funds be invested in publicly- traded stocks.
The primary scenario considered is one whereby the next generation cannot and will not pay more than a certain amount to fund retirement for seniors. The ratio of employed-to-retired is now about 3.4 and will drop to about 2.1 around 2030 (when Social Security payments to the government will no longer cover expected pension payouts).
Some seniors will have to get by on smaller pensions, and many will see their savings either be too small or shrink in value as stock price multiples decline. There will be a lot of unemployed and needy seniors, as a result. How will they survive?
Mr. Parker thinks about society in systems terms (see The Fifth Discipline by Peter Senge). The greying of America has many more consequences than just for Social Security. But most of the discussion to date has focused on that area. Where, for example, will we get enough nurses and other health care workers? I suspect that we are about to enter a period when it will make a great deal of sense to open the doors much wider for immigration by well-educated people in areas where we have and will have major shortages of talent.
I think that Mr. Parker misses some important points that could improve the situation. For example, we currently have a booming economy that is short of skilled workers. Seniors are being recruited back into employment by many companies, and more could be done. When Social Security was established in the 1930s, few workers lived beyond 65. The program was designed to just take care of the few who did. If the current program were like the original program, the initial age to draw a pension would be well into the 70s. By 2030, it might be into the 80s. Obviously, for those who are ill or unable to work, benefits should be available sooner.
Second, population growth is still very rapid outside of the developed world. So there will be plenty of people to buy goods and services, and sustain stock-price growth in those economies. You may have to buy your stocks for companies in Latin America or in the Far East, but you can count on booming generationally-driven growth well past 2030, as detailed by Mr. Dent. As a resuslt, I think that it makes good sense to have Social Security funds put into indexed worldwide funds that are overweighted towards the up-and-coming successful countries with younger populations.
Third, the best companies grow to larger sizes and in less time than every before. Management practices and technology are improving at an unprecedented rate. For such well-managed companies, stock prices will grow rapidly even if multiples are depressed. Retirement investments will be attractive in such companies.
Fourth, fast moneytary growth created a lot of the higher multiples. The Federal Reserve is fixing that problem now. When multiples go down with tighter money growth, the problems described here will mostly go away.
Despite my quibbles, our companies and government should be reformed to make more productive use of our human and financial resources. I like the concept of a virtuous company, one that increases the quantity and quality of satisfactions received by everyone who comes into contact with the company. A good modern example of this is EMC Corporation, a maker of computer storage devices that encourage faster and cheaper knowledge sharing that accelerate economic and social progress.
I suggest that you answer the excellent questions in the book's appendix. Also, rethink your retirement plans, and those of your parents and children. Spend some serious time together becoming better prepared, in case Mr. Parker's interesting scenario turns out to be correct.
Live long . . . and prosper!
10 of 11 people found the following review to be helpful:
good anaysis, poor or missing advice., December 28, 2002
By Jennifer Sims
As noted, the author's analysis of the problem is a very good one. Unfortunately, he uses it as a springboard for grinding his prefered political axes, rather than offering realisic advice for the boomers who find themselves in this quandry.
His advice takes three primary forms:
1. get out of debt before you leave your job -- a no-brainer.
2. "pursue active aging" -- ie, don't plan on being able to retire.
3. pursue "productive investments" -- although he doesn't tell you that these investments are at least as risky as established stocks, because they're by definition coming from companies gambling that the new production capabilities they're building will pay off.
Indeed, often such opportunities arise from new endeavors, which may take off spectacularly with enourmous returns.... or may crumble to dust inside a year. You have to be much more financially saavy to properly evaluate these opportunities -- a fact that Mr. Parker doesn't address -- further, you may be prevented by law from making some such investments due to the SEC's "qualified investor" laws.
Finally, Mr. Parker makes a few policy statements that are dubious at best... as mentioned above, largely taking a "State Planning" approach that have proved disasterous across the globe. They are not the largest part of the book by far, but some of his policy suggestions work against his credibility -- a fact he is aware of, and mentions in at least one point in his book.
In short... although its analysis is good, this book does NOT deliver what it promises, namely "How to Build Real Security, Not Phantom Wealth."
14 of 17 people found the following review to be helpful:
A naive viewpoint, May 19, 2001
By John C. Caton
Although I agree with the author's basic premise, that there will be too few prospective stock buyers when the boomers get ready to sell, no valid alternatives are offered. The author suggests that political and financial authorities should tell the truth so that remedies may be sought. But there are none! Obviously if any great number of investors stopped investing in the stock market or began drastic asset reallocation, the market would either crash or stagnate right away, and whatever value now exists would dissappear. There is no way to predict what the ultiimate level will be, so why precipitate it now? His suggestion of "productive investment" misses the requirement of liquidity. If the stock in a corporation is not traded, it is a very poor vehicle for retirement purposes unless it pays large dividends. He sounds like an ultraliberal greenie.
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