The elephant in the waiting room

Read this today – Seems the Millennials are shunning the perverted corporations ruining the World and the economy – Hallelujah! sanity is poised upon the horizon like a lone cowboy on his horse, silhouetted against the rising sun.

The obvious point – well missed by the funds investor writing the piece, (after all, they are trying to sell this toxic nonsense to mugs) is who will buy the shares, property, Ferraris and art collections of the baby boomers? For Gen X, already under immense stress from so many quarters, it is plainly a guaranteed loss, but the prices are so high already that, when the proverbial hits the fan, they will be in the direct line of fire whilst the millennials sit smugly in their tiny houses, iPhone in one hand, MacBook Air in the other whilst the organic veggies simmer on the solar powered stove.

The property crash WILL happen, the baby boomers are cashing up, Gen X is getting lumbered with the debts already. Two outcomes – the boomers cash up and escape penury or they don’t and wear the disaster. Gen X will see capital values plummet and tax rates rise as they are caught in the banksters trap. Of course, the banksters have an issue too – who will buy declining assets and how to they collect on a Gen Z bankruptcy?

Millennials will sit on the fence and scoop up the deal of the century – Probably for cash too! After all, they have saved well by frugal living, learned the art of deferred gratification and hoarded cash under the day bed or buried it in the organic compost (Wise people!). No mortgages and gouging banks for they.

There was a moment this week, at question time following a presentation to a group of university students, when I felt a strong sense of déjà vu.

Over the years I have often been asked about the likely impact of baby boomers on financial and property markets. You know the story – all these boomers are going to retire at the same time and want to sell their houses, buy smaller ones and invest the proceeds in assets that will give them a retirement income.

Given that they have traditionally been keen share market investors, it was imagined boomers would sell en masse, pushing the share market down, and driving pockets of the property market up while leaving a swathe of large unwanted family homes.

I never really bought into this line of thinking since I am not a fan of sweeping generalisations; there is no evidence of any particular cadre acting in unison based on their age or other demographic factors. There has certainly not been any evidence of markets being moved by a swarm of investors acting together.

Well, except when investors get spooked and or greedy – but that’s a different topic.

What made this week’s Q&A session different was a younger person (under 25) asking about the baby boomer generation, as if his parents’ or grandparents’ actions were somehow going to affect him. While it was probably reflective of his passionate interest in all things investment, it did get me thinking about the generational differences in attitudes and the impact of date of birth on likely outcomes that investors might experience.

I didn’t spend much time wondering – there are countless studies on the savings and investment attitudes of different generations. There is a significant generational shift going on and, unlike the boomers’ expected behaviour, it looks likely to have lasting implications.

First, we should define the generations. Baby boomers are typically those born between 1946 and 1964. Generation X are currently aged 37 and 50. The Millennials, who seem to be the generation whose attitudes have the most profound implications, are aged 20-36, born between 1979 and 1995.

The Millennials have now entered the workforce and, while they were previously thought of as broke, spendthrift and narcissistic generation, it seems they have been underestimated. They have now been shown to be socially conscious, conservative and responsible in their thinking.

Millennials now outnumber baby boomers in the US and are often their children. They witnessed how their parents fared through the global financial crisis; they are determined to avoid having their property values decline, investment portfolios dwindle and retirement savings wiped out. A recent UBS study showed millennials believe working hard and living frugally will be a more successful strategy than long-term investing. They are the least trusting of any generation and have a focus on surviving rather than thriving.

A survey by MFS Investment Management suggested that nearly half of millennials “never feel comfortable investing in the share market”. It also showed that millennials keep more of their assets in cash and, despite their youth, have a short time horizon of less than five years for their investments.

If investors were concerned 10 or 20 years ago about baby boomers selling their shares and financial assets to fund their retirement, they should be more concerned about millennials not wanting to go near financial assets in the first place.

Millennials also care about where they put their money and want to align with brands and companies whose values align with their own. A majority have reported buying a product or service with social benefits; 84 per cent of millennials surveyed said they considered a company’s involvement in social causes before deciding whether to support it or not.