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The Baby Boomers Are About To Crash The Stock Market

|Includes: VHT, VIG, Vanguard S&P 500 ETF (VOO), VYM

The American economy is about to be completely disrupted by a tsunami I like to call "The Great Baby Boomer Sell Off."

The concept here is both simple and inevitable; people tend to sell stuff off as they get older. There are around 74.9 million Baby Boomers and they are definitely getting older.

The standard definition of a "Baby Boomer" is a person born in the 20 years after World War II; defined as either 1946 to 1964 or 1945 to 1965, depending on who you ask. That means the youngest boomers are 51 to 52 years of age, while the oldest are now 73.

How Boomers will Crash the Stock Market

The legions of aging boomers are in a position to quickly crash the stock market. This will occur because many of them will have choice but to sell investments to pay bills at some point.

A big reason why the S&P 500 has grown by 71.71% over the past five years is retirement investing, mostly by Boomers. The amount of money managed by Vanguard; the largest U.S. indexed fund provider, quadrupled over the last few years, rising from $1 trillion to $4.2 trillion, The New York Times reported. Most of that money is invested in stocks via indexed funds held in 401Ks and IRAs.

This investing extends far beyond America; Australians had $2.2 trillion invested in superannuation; or retirement funds, in December 2016. Since there are around five million Baby Boomers Down Under, it is obvious who controls most of that money.

The collapse will come when the Boomers start selling off all that stock to fund their retirement. That might begin sooner than you think; disturbingly one out of four boomers has already raided his or her retirement account to pay bills, The Washington Post reported. Up to 36% admitted they will have to pull money out for nonretirement expenses. Around 12% took out loans against their 401K or IRA money to pay bills.

How the Boomers will trigger a Bear Market

To make matters worse many of these people will have nothing but Social Security to live on after they quit working. Since the average Social Security payment is around $1,350 a month they will have to start selling assets to cover expenses pretty fast.

My prediction is that the current bull market will peak around 2020, and fall off during the 2020s as more and more Boomers sell off stock. Expect to see a major Bear Market in the late 2020s as large amounts of stock is dumped on the market by aging Boomers or their heirs.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.