Boomers Are Driving More Than BMWs

I am not a professional economist, but I have a theory about our unprecedented and, apparently, permanent bull market. It seems to me that the traditional criteria by which stock prices are determined --earnings, quality of management, etc.--have been superseded by simple supply and demand.

Twice each month, millions of baby boomers, having sated their appetites for homes, cars and espresso machines and facing for the first time the reality of eventual retirement, are stashing the maximum allowable into tax-deferred mutual funds. As retirement for them is still 15 to 20 years away, they are willing to tolerate the higher volatility of stock investments in order to reap greater returns.

As a result, every two weeks managers of equity mutual funds have to find ways to invest enormous sums of cash in the stock market. With the number of shares necessarily limited, the price of those shares is being bid up.

When will it end? When the boomers, nearing actual retirement, begin shifting their accumulated funds to more conservative investment vehicles and then withdrawing them to provide retirement income. That should begin in about 15 years.

MORRIS E. SCHORR

Woodland Hills