As I look at my neighborhood, the shopping malls, and other locations, I’m reminded about how many 30-somethings are all having babies. I thought, hmm, maybe it’s just because I’ve had two children in the last two years that I’m more aware, but no, the statistics show the U.S. has broken the baby-boom-barrier. A majority of the Baby Boomer’s kids have waited till they turned 30-something to have kids. This became more apparent to me this year when my wife told me there was a line of six people behind her and the store clerk ready to buy a toddler bed set at Jerome’s. When they delivered our daughter’s bed, the movers told me they were working 6am till midnight at times. So either there isn’t a recession, or there’s a grandbaby boom going on.
The 1990s was a slow decade for births, but that has since changed. 2007 marked the first year the U.S. had more births than in any single year during the baby boom years, from 1946 to 1964. In 1957, there were 4,300,000 births recorded at the peak. In 2007, the final data shows 4,315,000.
Source: National Center for Health Statistics
You may be asking, “So what does a high rate of births have to do with the markets or my portfolio?” Peter Lynch, the famed Fidelity Fund manager, is known for two concepts: “invest in what you know” and “local knowledge”.
Invest in what you know
If you’re a construction worker, you can see the real estate construction trends and styles long before Wall Street does. You’ve got a leg up investing in housing. If you’re a doctor, you don’t have to memorize biotech XYZ’s financial ratios to know that their drug is stronger, has an easier dosage, and has less side-effects to know sales are likely to skyrocket. You’re an engineer at a large power company, and the company just refinanced 70% of its long-term debt at 6%, down from 9%. That means less interest expense and more profits! Every American is an expert at something and will have a leg up over Wall Street in your area of expertise. Lynch says to invest in what you know.
Local Knowledge
The other concept Peter Lynch popularized is the use of local knowledge. Lynch found some of his best investing ideas by getting out of his office and going to the shopping mall. While walking to any mall in San Diego, you’ll notice that the Apple store is ALWAYS packed with shoppers no matter what time of day. Put two and two together and you may think there might be something to buying that Apple stock. In much the same way, when I see a baby stroller every 5 feet in the mall, or there’s a line of 6 people waiting to buy the same toddler bed at Jerome’s, there might be something there to invest in. Use your local knowledge to your advantage.
Now, I’m not going to do all of your homework here by spelling out all of the companies that would benefit from an increase in births; rather, I’ll get your thoughts flowing in the right direction. Here are some of the things we spend our money on for the new kids:
- Clothing (Gymboree Corp was just bought out by Bain Capital Partners for .8 billion)
- Entertainment
- Toys
- Cartoons
- Activities (mom and tot play dates)
- Food
- Furniture
- Strollers
- Social Websites (free) – where you can keep up on all your friend’s new-kid updates and pictures. Can’t see your grandkids grow up because you live five states away? Just log online to see their mom posted they got their first tooth or first haircut.
The latest thing I’ve started doing is setting up college funds. That’s right. Public tuition is about ,528/yr for out-of-state students and ,273/yr for private college on average for 2010 per the College Board’s Trends in College Pricing 2009 and Trends in Student Aid 2009. Due to budget cuts last year, public college tuitions increased 14.1% and 6% for private schools. By the time my kids hit 18 in 2026 and 2028, judging by the purchasing power loss of the U.S. dollar over the past 18 years and the rate of tuition increase from 1990 to 2000, it could cost 2,000 to put a kid through 4-year public college. I’m starting to save and invest now! I also plan to donate my left kidney to bridge any funding gap. Here’s a College Cost Calculator to whet your curiosity.
As Peter Lynch professed, invest in what you know and use your local knowledge to your advantage. When I look around at all of the strollers at my neighborhood, the shopping mall, and grocery store – and you realize that we’re all the offspring of our baby boomer parents – you do the math! We broke the baby-boom-barrier in 2007 and a larger pool of children will have some economic ramifications. Dig a little deeper and I think you’ll have some long-term investing ideas to add to the portfolio.
