by Archie M. Richards, Jr.
November 6, 2006

Roberto writes, "Many people are saying that baby boomers will pull money out of stocks for their retirements, drawing stock prices down. What's your opinion?"

That's nonsense, Roberto! In the long run, stock prices don't change because of such reasons. They fluctuate because of the ability of corporations to create wealth.

At age 65, baby boomers born from 1946 to 1964 would retire from 2011 to 2029. Corporations will create less wealth during those years if tax rates are raised significantly and governments makes it more difficult for people to be productive. But I don't see those things happening to any great extent. All over the world, including in America, government economic policies are improving, not worsening.

Here are additional thoughts:

• The baby boom generation is enormous. If the oldest members begin retiring in 2011, the youngest, at 47, will just be entering their most productive years. Boomers as a whole will continue producing big time for a long time.

• Supposedly learned analysts have warned for years that big-spending boomers haven't saved enough to support their retirements. Really? This implies that when the poor little boomers reach retirement, they won't have three cents to pull out of stocks. The analysts can't have it both ways. If baby boomers haven't saved enough, they won't have many stocks to sell, will they?

• Besides, boomers who haven't accumulated enough savings won't retire at 65. They'll continue working, generating wealth that causes stock prices to rise.

• Because U.S. economic policies have been better than those of other nations, people are clamoring to come to America. This means that if and when boomers retire, their places will be filled by first and second generation Americans who want to work here. This, too, generates wealth.

Time and time again, unfavorable investment projections that worry a lot of people don't turn out to be serious problems. Stock prices will fall if government economic policies worsen. But baby boomer retirements will make no difference.

Ellen writes, "You implied in one of your columns that if I become disabled, I would not have access to my funds. Please explain. Why would a living trust give me that access, and why is a living trust preferable to granting a power of attorney."

When I say disabled, Ellen, I mean legally incompetent, meaning that your signature is not recognized under the law. You can't drive or sign checks, and financial institutions won't accept your verbal orders.

The person to whom you give a power of attorney can do these things on your behalf. But some institutions won't accept orders from such an attorney unless the power was granted within six months of your becoming incompetent. Since you can't anticipate when, or if, any disability will occur, you must keep renewing the power of attorney over and over. Most people find that bothersome.

This problem doesn't apply to a living trust. Upon your disability, the person or the institution you named as successor trustee immediately takes over. The empowerment is universally accepted no matter when the trust was signed.

In several previous columns, I've stated that most of the world's oil and gas comes from methane that was part of the earth when the earth was formed. This was the view of Dr. Thomas Gold, former Professor at Cornell University (now deceased).

Dr. William White, Professor of Geologic Sciences at Cornell, has persuaded me that Dr. Gold's views and my columns were wrong. For one thing, the chemical composition of the carbon found in fossil fuels is the same, due to photosynthesis, as that found in living organisms. This chemical composition is altogether different from that of carbon found abundantly in non-organic material.

Virtually all of the world's oil and gas does indeed come from ancient vegetation. But have no fear; there's still a lot of it left.