Yesterday Amlan Roy was in and enthusiastically he commented in very high pace every chart of his 70 page presentation.
The most popular chart probably is the expected development of the PE of the S&P500 according to the relative development of age cohorts. When you believe this our pessimistic Kondratieff chart ill be too optimistic (the decline will last longer).
The decline of the PE’s will be caused by retired baby-boomers selling ever more desperately their equities to the much smaller younger saving age cohorts.
Amlan Roy thinks just like me that the decline of the PE’s will be smaller because people will have to work to a higher age and will sell equities at a higher age than the Miller Modigliani Doctrine prescribes to get a less miserable income at their old day.
Siegel thinks it will not be that bad because foreigners will buy US equities at a very big scale. There is no choice for foreigners, they have to buy US assets as long as the current account is negative (by economic definition that is true). Foreigners until now choose overwhelmingly for fixed income with its very low interest rates, but the preference can go more into the direction of equities. At the moment you can buy equities that are maybe safer than government bonds with dividend yields of 3 to 4% like Exxon and McDonalds. That looks a lot more attractive than 10 year treasuries with their paltry yield of 2%.
By the way, the correlation between relative development from cohorts of relative dissavers versus savers is not so strong in Europe. That is because the elderly in Europe don’t possess as many equities as in the US, so their liquidating of equities will not hurt so much.
