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Karen Gibbs
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Betting on boomers

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Don't look now but there's a shift in the nation's demographics that is having a huge economic and financial effect on the economy. Most companies tend to overlook people over 50, but maybe they'd better start paying attention.

Corporate America is youth obsessed, targeting those between 18 and 34 years of age. But that group is shrinking, while an average of 11,000 baby boomers will turn 50 each day for the next dozen years.

About 76 million Americans are 50 or older, and collectively they control $7 trillion, or 70 percent of all U.S. wealth. They bring in $2 trillion in annual income and account for 50 percent of all discretionary spending. Yet they are the target of only about 5 percent of advertising, according to Ken Dychtwald, president of a think tank called Age Wave. And that advertising is overwhelmingly aimed at the geriatric set facing failing bodies and brains.

But longer lifespans and sheer numbers put boomers in position to transform the way businesses, corporations and governments work. The issues that concern them will become the dominant social, political and marketplace themes of the day. According to Dychtwald, we've already seen some industry changes initiated by boomers: the snack restaurant and supermarket industries have adapted to their experiences, as have fashion, auto and health industries. Boomers have transformed the workplace, home and family, technology and the investment landscape, and will continue to produce many demographically motivated revolutions.

Boomernomics is the study of the impact baby boomers are having on this economy, and while it may appear to be a glacial, slow moving massive force, it has already transformed some key industries, and may create a mini-revolution in the consumer marketplace. Dychtwald sees five factors reshaping supply and demand:

  • Concern over the onset of chronic disease and the desire to postpone aging.
  • More discretionary dollars as a result of escalation in earning power, inheritances and return on investments.
  • Entry into new life stages, including empty nesting, care giving, retirement, grandparenthood and widowhood.
  • A shift from acquiring possessions to acquiring pleasurable and satisfying experiences.
  • Continued absence of "disposable time" due to complex lifestyles.

Companies need to keep track of those things, says Bill Sterling, chairman and chief investment officer of Trilogy Advisors. He identifies sectors that will benefit most from population trends. After looking at Bureau of Labor Statistics data to track consumer purchases of boomers, Stirling has concluded that health care is the only industry that grows during our entire lifetime. As we age we will need more prescription drugs, medical equipment, lab tests, hearing aids, bifocals and senior housing. We will also have more leisure time and money to spend on vacations and second homes. Recreational vehicles and resorts and cruises will also beckon boomers who want to travel in style and comfort.

Sterling says data suggests avoiding companies targeting the 30-somethings, as the late-20s-to-early-40s demographic group is expected to shrink over the next five years. He believes people should be wary of investments in:

  • Winter sports equipment, as we choose cruising over skiing
  • Beer and ale, as we switch to wine or spirits
  • Moving, storage and mortgage originators, all of whom will suffer as we settle down and enjoy all that we already have.

The next big wave will come when the children of boomers -- called echo boomers -- flex their spending muscle. Sterling believes it could be a good idea to buy companies that cater to that demographic. He suggests looking at college spending patterns and low end real estate for profit opportunities.

Both Dychtwald and Sterling will be my guest on the next broadcast of Wall $treet Week with FORTUNE. Don't miss it.

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