When you think about Florida what comes to mind?
For me it's sunshine... golf courses... Lincolns, Buicks and Cadillacs...
big-box "senior living" centers... and, of course, ubiquitous
retirees.
We may make fun of Florida as one big old folks' home. But by 2030
the average American will be older than the average Floridian is today.
That observation comes from Stan Druckenmiller, one of the most successful
money managers of all time.
Now retired -- and worth billions -- Druckenmiller made a name for himself
running George Soros' Quantum Fund, as well as his own Duquesne Capital fund.
It was Druckenmiller, not Soros, who architected the famous sterling short
that "broke the bank of England" in 1992. (Soros was the one who
insisted on betting big on the trade and as the senior manager in the fund
got the media credit.)
Druckenmiller's long-term track record is astounding. He made average
returns of over 30% over more than 30 years. If you had given
Druckenmiller $10,000 at the start of his career, it would have compounded to
more than $26 million.
To deliver that kind of performance, Druckenmiller had to be skilled at
discerning future trends. And his latest prediction is not a pretty one.
Druckenmiller sees a generational storm coming. In his own words (via a
Bloomberg TV interview):
The seniors have a very, very powerful lobby. They keep getting more
and more transfer payments from the youth. But the demographics storm is just
starting now...
What's going to happen is we now have a working population -- this is
the way entitlements work -- where the current workforce is paying for the
benefits of the seniors. Since 2000 we've had about 4.5 to 4.8 workers for
every retiree. By 2050 that number will drop to 2.4 workers per retiree...
Supporting retirees without enough workers is like scraping butter over
too much bread. Soon enough you run out of butter.
The problem is that today's seniors are using their political clout to
take more than that which can be reasonably given in the form of
"transfer payments."
The final result? Disaster. Think of those bankrupt California cities on a
nationwide scale.
Druckenmiller doesn't mince words...
And let me just say one thing. I am not against seniors, okay. I love
seniors. Unfortunately I'm going to be one in the not-too-distant future.
What I am against is current seniors... stealing from future seniors.
Many of today's retirees will cry foul at this accusation. They will point
to their long history of faithfully paying into the system. They will say
it's not their fault that the cupboard is bare. They will say what is owed is
owed.
But regardless of what's fair and what's not, Druckenmiller is right. A
generational storm is coming. As tens of millions of baby boomers hit
retirement age, the system will run out of funds with which to pay them what
is contractually owed.
Retirees and retiring baby boomers will then cry havoc at the ballot box.
Demagogue politicians will respond. And all hell will break loose.
You need to prepare for this coming generational storm. It will impact
every American, regardless of age, opinion or financial
status.
Not all investment assets will withstand this storm when it hits full
force. Some areas will warrant avoiding at all costs. Others will do extremely
well.
One asset you definitely won't want to be caught in, once the storm hits
full force, is U.S. Treasury bonds. When the realization sinks in how
aggressively politicians will be promising the world to boomer seniors --
without being able to pay for it -- bonds could transition from
"attractive" to "radioactive."
If you are heavily invested to the Treasury market, I strongly recommend
you reduce your exposure before the coming storm hits.
Carpe Divitiae,
Justice
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