Have you been seeing a lot of stories lately about millennials? The plot line is that they are reshaping our economy and the stock market. But this story doesn’t have much credibility in reality. Stories like those are the reason few individual investors can get their mind around the markets.
Part of the Wall Street strategy is to keep you constantly insecure about what trend you’re following and what trend you need to avoid.
The first thing that comes to mind for me is that there was a similar obsession with the Gen Xers, just a generation before. Every aspect of popular culture was shifting to what Gen X bought, what they watched, what they did for fun.
Now it’s the millennials turn in the spotlight.
But with both these generations, the fact is, they are the consumers with the least means available with which to consume. They are just getting the jobs that may take them somewhere, are getting out of their parents’ basements and buying things that aren’t at thrift stores.
They’re buying is just as immature as they are.
So it doesn’t pay anyone but Wall Street to trumpet them as a shift in how fundamental aspects of our economy are consumed.
Granted, some shifts have become universal. Online shopping for example may have been adopted quickly by Gen Xers and is just assumed with millennials, but it wasn’t until the established baby boomers started buying online that the real shift occurred.
Older consumers — the people that buy houses and cars, send kids to college, go on vacations and save for retirement are the main drivers of the U.S. economy. It’s not people that just got their first real job and are lucky if they’re not eating ramen noodles for dinner every night.
This kind of “grass is always greener with some other generation” mentality also plays out in more subtle ways. The Federal Reserve announced it wasn’t going to touch interest rates in November but was leaning towards a rate hike in December.
What happened in the markets? Stocks that are interest rate sensitive or hold a lot of debt went down and stocks that win when rates rise went up.
This was a shot in the arm to those poor financial institutions that hold massive amounts of Treasuries and corporate bonds rather than lending that money out to grow the economy.
The Fed is giving the banks more free money and sticking it to the average citizen once again, including the people who should be saving right from the start: millennials. But as I mentioned recently, the banks have a vested interest (no pun intended) in everyone thinking debt is wealth. Young people have no incentive to save because they are punished for it. Everyone is pushed into the stock market if they want a return. That means that markets are constantly finding something new to sell you every day.
Look for long-term trends and keep your money in safe, liquid investments that cannot be confiscated as money markets now can.
Have you heard of the SEC’s 2a-7 reform rule?
It took effect last month. And it means banks can already take your money market funds and hold them for whatever reason. It doesn’t have to be fear a run of some kind… they can stop you from withdrawing your funds.
Investments in real assets are your best bet. You can profit from defense stocks right now, and you can feel fairly good about select utilities and large consumer discretionary companies.
Outside of those stocks, gold and silver will not let you down. Bitcoin is another option if you’re so inclined. And even gold and silver ETFs that hold physical metals — not based off of metals derivatives — are worth it.
Now is not the time to take on new debt, especially anything with variable interest rates. Debt is not wealth, no matter what Wall Street wants you and all the millennials to think.
— GS Early