What if Millennials and Baby Boomers are One and the Same?

There’s lots of things that drive stock markets. Interest rates, wars, corporate profits, sentiment, valuations, etc, but there’s something we rarely talk about that exerts a far more powerful force:  demographics. 

I’ve always said that if someone talks about demographics you should pay attention because when it boils down to it, how many people there are, and what they produce/consume, is what drives an economy (and its stock market) over the long run. 

The title of this blog is a bit cheeky, clearly the two generations are not one and the same, but what if they are from a market perspective? Stick with me here. 

Allow me to define the “prime” of someone’s life as generally a decade between their mid-30s and mid-40s. Some have their prime earlier, some later, some people have longer time spans, but let’s just go with that for now. 

In your late 30s, early 40s, you are well into your career. You’ve likely started a family, you are buying cars, homes, and egg bites at Costco. You have wisdom about what works and what doesn’t in life, and you are saving/investing for the future. 

Baby Boomers encompass the years of 1946 to 1964. That generation, which was one of the largest in history, started to hit their primes in the mid-80s. The market and economy would go on to experience a boom as a gigantic generation worked, consumed, and invested. 

My generation, Gen X, encompass the years of 1965 to 1980. We are a relatively small generation and started to hit our primes in 2000. The next 13 years would see sideways markets and lower growth, basically a lost decade for investors. We just weren’t a big enough group to hold up the economy in our primes. Give us a break though, we brought you Nirvana and Pearl Jam. 

Millennials encompass the years of roughly 1980 to 1995. That generation, now the largest in history, is JUST coming into their prime years. In fact, the oldest millennial is only 41. They are a gigantic group (like Boomers) that will also work, consume, and invest. They will be buying homes, cars, and egg bites at Costco (they’re so good) for years and years to come. 

Here's the best part. When Boomers came into their prime, interest rates were high. In 1985 mortgage rates were near 12%. Today, interest rates are near zero, you can get a mortgage for 3%.  That quirk of fate should pour JET FUEL on their consumption.  

Now there will be people who disagree with this take, you literally can’t shake a stick without hitting an “expert of a different version of the world” who is calling for a catastrophic end to the market and the economy because of valuations or inflation or the Fed or whatever. They may be right, literally no one knows, but don’t sleep on the importance of this gigantic group. 

In fact, it’s entirely likely we are going through a period of exponential growth (biotech, spaceflight, crypto, mRNA) and people are just bad at recognizing what that looks like.  

When might this tailwind abate? The median Baby Boomer moved through their prime by the year 2000, that’s when Gen X took over and things slowed. 

That same year for Millennials is out in the 2030s and, by the way, the group following them, Gen Z, is also large (roughly 68mm). It’s not anytime soon.  

The demographics of the United States are good right now, with low interest rates and rapid technological innovation. Baby Boomers guided the economy for a decade plus, now Millennials will. 

We will have our ups and downs but our largest generation are all working age and that’s super important. 

24 Hours

I made a mistake at work today and now I feel awful.  My daughter just cracked her iPhone for the third time and I’m beyond incensed. The stock market fell 2% and clients are wondering if they should do something to their portfolios.     

They say the “days go slow but the years fly,” and as I sit here stewing in my worries, I can’t help but reflect on just how fast my life is going. 

My 20s were a blur. I met my wife and we got married.  As we entered our 30s, we knew we wanted to start a family.  After that period of time, it seems like someone pushed fast forward. 

If I could map my life from the moment my son was born to its end and compress it into one 24-hour period, it would probably look like this. 

It’s midnight, my son was just born.

The doctor hands him to me, He has a wry smile, but he’s not crying.  It seems weird because aren’t babies supposed to cry after they are born? He’s healthy, but my wife looks at me from the table wondering if he’s ok. He is beautiful. We take him home to our condo in Chicago and our life will never be the same. We are in our late 30s and nervous as any new parents would be. 

It’s 1 a.m. 

Is there a manual for raising a newborn? Was there a class I missed that told me what to do when he cries late at night? We’ll figure it out, We have to, because there’s no going back now. One night he can’t stop coughing and every breath is a wheeze. What the heck is croup? 

It’s 2 a.m. 

He’s walking!  His grandparents are so proud, as are we.  I can’t believe how fast he is growing, not only is he eating solid food but he starting to talk.  We read him the same book every night.  He’s precocious, he knows who we are and he loves Max and Ruby.  Having a son is awesome. 

It’s 3 a.m. 

My daughter was just born. We tried for so long to have our first child but our second child showed up quickly. I had a dream we would have a girl, seriously. Now that she’s here I can’t believe how beautiful she is. I started a new job at a financial services firm named Baird in Milwaukee. I had heard of it but didn’t know how awesome it was.  There are so many nice people and this place is special. 

It’s 4 a.m. 

The children are growing like weeds! We took them to Disney World for the first time and it’s a trip we’ll never forget. My son thinks Mickey is real and my daughter hugged Ariel. My wife and I fight over how many stuffies we should buy. Do parents always fight at Disney?  I think so because you can see them in every corner of the park trying to keep it together.  We didn’t know it at the time, but this would become our family’s happy place. 

It’s 5 a.m. 

My son is in sixth grade and my daughter is in fourth grade.  It turns out they are really good swimmers. We tried football, baseball, volleyball, and soccer, most of the sports parents think their kids will be good at, but ours ended with swimming. Do you know what sucks about this sport? Sitting in a pool for four hours only to watch your kid swim for a few minutes.  Oh well, at least we aren’t baseball parents, they seem like they’re crazy. 

It’s 11 a.m. 

Wait, where did the time go? Did the clock just speed up? Yep, it sure did. The summers die one by one, how soon they fly on and on. 

It’s noon.

My son is now 15 and my daughter is 13. My wife and I are a little bigger than when this all started but we are much wiser about being parents. My children now look at their phone nonstop, but they can cook their own food.  They’ve figured out how to use Apple Pay and pretty soon my son will be driving. We are teachers now more than anything. They don’t need us hovering over them but they do need our wisdom. 

At 1 p.m. my son will leave us for college, at 2 p.m. my daughter will also depart, and the nest will be empty. 

Over the next 10 hours we will live the rest of our lives watching them grow, seeing how well we did as parents. Hopefully, they will have children and we will get the best job ever -- being grandparents.  

I wish I could stop the clock for even one moment. I see parents with small kids who are frustrated that they are crying, won’t go to sleep, or just won’t behave and I would almost trade places with them. 

There was a night I carried my son to bed for the last time but I don’t remember it. I’m sure he was tired since he fell asleep on the couch. I lifted him up, placed him in his bed and kissed him goodnight. I would pay any amount of money to relive it - literally any amount. 

That dream I mentioned of having a girl?  It’s now a fading memory and I wish I had a video of it. She’s just as perfect as she was in that dream. 

Even if you never have kids or a family, your life is what’s happening around you every day.  Embrace all the little things like a walk, a good dinner with friends, or a trip to someplace new. If someone says “hey, let’s go out,” never turn that down, because an unexpected adventure may lie ahead of you. 

Rose Kennedy once said, “Life isn’t a matter of milestones, but of moments.” 

Each moment is special. The clock may be ticking but your life is lived by the second, don’t waste any of them. 

It’s 11:59 p.m. 

What a journey, I live in them now.

What Is the United States Net Worth?

“We’re bankrupt, we just print money out of thin air” 

“Our National Debt is so big we’ll never pay it off, we are insolvent” 

“If I operated my family finances like this we’d be in bankruptcy court” 

These are things you hear on Twitter, in certain media outlets, blogs, maybe even from your friend at the club. We have huge debts, owe a ton of money to things like Social Security and Medicare therefore the United States must be in dire financial straits. 

Are we though? Is our nation bankrupt? Let’s do a thought experiment: what might the Balance Sheet of the United States look like? 

Liabilities: We’ll start with the ugly part, what are our liabilities? 

According to the National Debt Clock we owe just north of $28T dollars. Man, that seems like a lot, I owed $525 on my last Amex bill and I couldn’t sleep at night.   

We also have unfunded liabilities like Medicare and Social Security. There’s no exact answer for this but let’s say, conservatively, that it’s $200 Trillion (I’m including federal and veteran benefits here). 

Let’s also use a catch all category of “other” and say that’s $5T. We owe things to people and places and we’ve guaranteed things and this is my guess for all of that. 

Total Liabilities: $233 Trillion. 

Assets: What are the assets of the United States? Every balance sheet has both liabilities and asset so what are ours? 

The United States Government owns physical and financial assets. Let’s do physical first. 

The BEA has calculated that the land we own is worth roughly $1.8T and the natural resources on and offshore at around $125T (water, timber, silver, copper, oil, etc). We also own about $450B in Gold and $1.4B in properties and inventories. 

I’m also going to use a “other” category here because I guess we could sell aircraft carriers or planes or military equipment we own.  Let’s call that $10T. 

Now how about financial? 

The US holds close to $1.5T in Federally backed student loans and about $2.2T in cash and other investments (data from US Treasury). 

Total so far is about $142.3T, still below what our liabilities are. 

Now let’s get into two things that aren’t as concrete but incredibly important to our nation’s balance sheet. 

What is the value of all the human capital in our education system? All the students some of which might be the next Steve Jobs or Jeff Bezos who go on to create the next Apple or Amazon. What about all the inventions sure to occur in the future or all the discoveries like mRNA vaccines? This is hard to calculate but for the purposes of my blog I’m going with $100T. 

What is the value of the ability to tax the most productive private sector the World has ever known? Our government can not only tax the people in its nation but the companies operating inside of it. What is that worth? This is super, super hard but I’m going with $300T. It’s probably way more but let’s just go with that. 

Total Assets: a little over $542 Trillion. 

Final US Net Worth:  +309 Trillion

Yes, we owe money. Yes, people like to use “debt” to scare you. Yes, my last two assets are hard to value, but I promise you that our nation is not bankrupt. 

We are likely one of the wealthiest nations in the history of the World (if not THE) and our economy and its workers are incredibly productive. 

Can you tell me how many people you know that have gotten rich betting against the United States of America? I don’t know any. 

Our economic might, our rule of law, our innovations, our workers drive the stock market regardless of our level of debt. Don’t lose sight of the long-term prosperity we’ve all benefitted from because it’s going to exist far into the future. 

You Do You

I’m going to come right out and say this: pineapple on pizza is good. You know what else is good? Cholula on eggs, jalapenos in Margaritas, peanut butter on hamburgers, and dipping fries in ranch. 

You might think those are gross, in fact even mentioning pineapple on pizza is bound to land someone in a 30 minute argument with a pizza purist. But you know what? I don’t care, I like it, and that’s all that matters. I’m doing my thing here with food because it suits who I am, just like my investments. 

I have a diversified portfolio of bonds and equity funds that I’m using to reach my goals. I also own a handful of single names because I believe they are good companies, with great leaders, growing their business over time and I want to participate in that.   

These investments are going to be held for DECADES, I am using them to help pay for college, retirement, and future medical costs. Why do I care what happens to the price of Apple or Disney or the S&P500 today, tomorrow, next month, or next year? I am playing my game and my game only. 

The biggest trap investors fall into is looking at someone else’s game and saying “what’s going on over there, should I be on their playing field?”   

“This person on TV said Apple is overpriced”. Ok, great, is it overpriced for a day, a week, a month, a year, 10 years? Time frame matters to this statement. Do you think the people on financial television know what strategy you are employing to reach your goals? 

Day traders care what happens to the price of Apple today or tomorrow. Other traders might care what happens to the price this week or next. Portfolio Managers might care what happens to it over the next few quarters or a year. All of these people are looking at the price of a stock or an index and attaching their strategy to it. 

Should you care that I like pineapple on my pizza? No. Should you care what a day trader thinks the value of Apple should be tomorrow when you are invested in it for different reasons?   

How many times a week do we think Warren Buffet opens a web browser and frets over the price of his holdings? Zero or Zero? He built a strategy that was inside his circle of competence and sticks to it for the long run.   

Does he add and subtract along the way? Absolutely, in fact when the market crashes he rushes in to find deals while everyone else runs out of the store. But he is thoughtful about executing HIS plan and filtering out what other investors are doing. 

I’m not saying there’s never a reason to be worried about a stock or an investment, I’m saying that you need to be focusing on your game and not someone else’s. If your reasons for owning something change then fine, at least you aren’t looking at what other people are doing and assuming they are right. 

Literally no one knows what the future holds, especially in the stock market. Why? Because it’s a complex adaptive system where tiny changes cascade through the system altering its course instantly.  Subtle changes in expectations happen nonstop so it’s literally impossible to know what future prices will do.   

Imagine a room of forty 3-year-olds stuffed with toys and candy and obstacles and juice boxes, do you think you could predict what they will all do? Each one of them is changing their behavior every few minutes, bouncing from thing to thing, going right and then going left. It’s the same with stocks. 

Since that’s the case the best you can do is have a plan that is true to who you are and stick to it.   

Stop looking at what other people are doing and focus on yourself. You do you.  

The Story Comes Alive

Take a look at this picture and tell me what you see. 

You probably see rocks and sand colored with a red hue.  You might also notice a tiny speck that looks like a fly in the air.  Let’s zoom in on it.

Is it a fly?  Looks like one right.   Let’s try one more picture:

That right there is Ingenuity, a helicopter NASA sent to Mars alongside the Perseverance rover. The picture at the start of this blog was the 4th flight of Ingenuity, 188.47 million miles from Earth.

Humanity has achieved flight on another planet.

On December 17, 1903, two brothers from Dayton OH made four brief flights at Kitty Hawk NC and no one noticed. I’m serious, literally no one cared at all. It took the better part of 5 years for anyone to register what they had accomplished. Everyday people were going about their lives as mankind finally left the confines of Earth to soar among the birds.

Onboard Ingenuity is a small swatch of fabric from the first plane the Wright Brothers flew. Imagine what they would say knowing a tiny piece of their plane would fly on a red dot in the night sky only 118 years later.

It’s been a difficult start to the decade, we’ve lost over 3 million people Worldwide to a disease that swamped our economies and stock markets. For many, 2020 will be thought of as one of the worst years ever, and even now COVID still rampages across the globe.

But as darkness threatened to envelop us, humanity answered the call. We created new mRNA-based vaccines faster than anyone could’ve imagined because that’s what we do, rise to meet challenges. We create new technologies, new ways of thinking, new ways to treat the sick, and quite literally change the future. Vaccinations will spread, hard fought immunity will be achieved, and this chapter will close.

Think of all the everyday things WW2 spawned, another gut-wrenching moment in our history: penicillin, jet engines, synthetic rubber, the microwave oven, computers, just to name a few. It is only when things are the hardest that we take our biggest steps forward.

You might not care that we have a helicopter on Mars, and you might not think it’s a big deal that we’re driving an expensive toy over some rocks millions of miles away. You have bills to pay, the World seems as divided as ever, someone told you inflation could rise, and the stock market might crash.

While the tempest rages on Earth, a group of scientists are taking huge leaps forward on behalf of humanity. It might be hard to see why a helicopter on Mars matters but it’s always been that way. We can’t predict what will happen in the future any more than the people in 1908 could predict how Wilbur and Orville’s invention would change the World.  

I implore you, for just this one moment, stop worrying about money or politics or a disease we will BEAT, and let optimism about the future wash over you. Put aside your earthly cares and dream like you used to as a child about all we can accomplish when we put our minds to it.

A piece of the Wright brother’s flyer took to the skies of Mars. It’s enough to make my spirit soar alongside it.

The story comes alive.