The Pessimists’ Club and the Coming Economic Crisis: ADC, Part 19

You’ve read the news. Those awful Baby Boomers are causing trouble. Again.

First it was their music: hip-swiveling, hand-waving, head-wagging, “jitter-bugging” across the floor.

Then it was their hair – well, the boys’ hair.

And that was followed by the psychedelic, paisley pattern, Haight-Ashbury mess.

Bad though it seemed, there is more.

In fact, this like going to a meeting of the Pessimists’ Club. You know what that’s like, right?

At the Pessimists’ Club, the first speaker gets up and says: “Everything is awful!”

The second Club speaker strides to the podium and asserts: “It’s worse than that!”

For the economy, the bad news is that the Boomers, after a lifetime of saving and investing, are pulling their money out. From the banks. And, worse: out of mutual and money market funds.

Imagine the selfishness. Taking their own money. Of all ideas!

The drain in the mutual fund market is worse than at the bank. As mutual funds are drawn from the market, the share price of mutual funds is certain to fall. Simple economics: lowering demand drives down prices.

And, just when you thought it couldn’t get worse…It does.

Whether Accumulator or Collector or Decorator, all their stuff is going to end up…for sale.

An adult’s lifetime worth of antiques, art, collectibles. All coming on the market within the same narrow window of time. The stuff we’ve accumulated, decorated with, and collected.

Simple economics: overabundance of supply drives down prices.

Back when Newsweek was still a printed periodical, December 17, 2012, Blake Gopnik wrote about “The Art World’s Spending Spree.” The subhead noted “the rich keep spending millions and driving up prices.” And then asked: “But what happens when the bubble bursts?”

It won’t be the first time, that’s for sure.

Gopnik cites examples by established artists and such art as “The Scream” selling for $120 million (May, 2011) and Cezanne’s “The Card Players” doubling that price (also 2011). And cautions: “But when prices go nuts for artists whose reputations are still in play, trouble is sure to be looming.”

One reader of the Wildenhain Blog recommends Don Thompson’s “The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art” as a valuable primer on understanding the art market.

But market manipulation is less a current concern than is market glut.

What happens to the owners of “trophy purchases” when they decide to sell is not our worry here. (And who cares about the trophies, anyway?)

Short of leaving your “stuff” to your beneficiaries (which means they have to deal with it), what should Boomers do? And if the stuff ends up on the market, at depressed (relative to the purchase) prices due to overabundance, what should the rest of us do?

Sounds like a buying opportunity.

Long live accumulating, decorating, and collecting.

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