Show Me the Money! Baby boomers have discretionary income that vastly exceeds that of any other cohort of customers, explaining the popularity of Forty Licks and other classic rock bands and tours, including the Eagles and Chicago. Marketers have followed the baby boomers and their money for decades-from their turbulent teens and twenties, in which they were dubbed hippies, to their thirties and forties, in which they settled into good paying careers and had families. At this juncture they were considered yuppies-young urban professionals-and they bought homes (and everything for them), clothing, food, and cars at record levels, and spurred cultural changes reflected in everything from television programming (remember thirtysomething?) to fashion and beauty products. Today, those baby boomers have become muppies- middle aged urban professionals-whose changing needs today and over the next several decades will create dramatic effects on the sales and profit levels of the brands they’ve supported in the past. As they move through different stages in their lives, they will continue to support the brands with which they have an emotional connection, and their sheer volume will be a moving driver of consumer product sales.

Baby boomers delayed getting married and having children longer than any previous generation, but eventually they entered the trap and brought with them a permanent propensity to consume. They earned a lot of income during the 1980s and 1990s but they spent more than they made, buying products that past generations considered luxuries, such as consumer electronics, cable TV, cellular phones, second homes, and household services. They drove the minivan market in the 1980s and the SUV market in the 1990s, and they will drive the resurrection of the sporty convertible in the 2000s. They will also drive overall spending rates. Understanding the spending trends of boomers helps explain which sponsorships make sense for concert tours-such as E*Trade and VISA’s alliance with Elton John in the 1990s.

338 The Intelligent InvestorCOMMENTARY ON CHAPTER In the Air Force we have a rule: check six. A guy is flying along, looking in all directions, and feeling very safe. Another guy flies up behind him (at “6 o’clock”-”12 o’clock” is directly in front) and shoots. Most airplanes are shot down that way. Thinking that you’re safe is very dangerous! Somewhere, there’s a weakness you’ve got to find. You must always check six o’clock.

-U.S. Air Force Gen. Donald Kutyna E BUSINESS As Graham did, let’s compare and contrast four stocks, using their reported numbers as of December 31, 1999-a time that will enable us to view some of the most drastic extremes of valuation ever recorded in the stock market.

Emerson Electric Co. (ticker symbol: EMR) was founded in and is the only surviving member of Graham’s original quartet; it makes a wide array of products, including power tools, airconditioning equipment, and electrical motors.

EMC Corp. (ticker symbol: EMC) dates back to 1979 and enables companies to automate the storage of electronic information over computer networks.

Expeditors International of Washington, Inc. (ticker symbol: EXPD), founded in Seattle in 1979, helps shippers organize and track the movement of goods around the world.