Generational Demographics: Can Young Adults Save the Markets?

New report out from Tobias Levkovich at Citi arguing that the "Net Generation" [ugh] of Americans is entering its peak savings period over next 3-4 years. All else being equal, he argues, their savings are likely to exceed withdrawals from retiring baby boomers.

The trouble is, of course, all else isn't equal, and boomers' savings has been whacked in a major way. Meanwhile, Net Generation sorts have been scarred for life about capital markets.

Nevertheless, it is a demographic point worth considering.

Comments

[MJJP:]

Don't expect the younger generation to solve this problem. The older generation mainly from the conservative viewpoint have made sure that wages stagnated to the point of the majority have no savings. I don't know how many times I've listened to the fat man on radio encourage the caller who called in explaining how he lost his good paying union job with benefits and is now working three jobs to make ends meet be congratulated and to top it off the caller is ecstatic to talk to this idiot. If you accept the conservative mindset that think it is nothing to just raise yourself up by your bootstraps and get a job that will pay the rent or mortgage, pay your own healthcare, put enough aside to put the kids in college and still have enough left over to save for your own retirement.
The only thing that will get us out of this mess is to get the wages up . That also included China. China should not expect the US to dig into their pockets to buy their junk so they can prosper. China has enough population and low wages that they should enact a minimum wage and force the emplolyers to put more money into the hands of its citizens. Let the citizens of China do what they want the US to do. They should pull themselves up by their bootstraps as well .

Mar 20 10:02 AM

[Carlos Lam:]

In the report, did Tobias consider the fact that the Baby Boomers are going to be drawing Social Security payments that will cost the federal government dearly? The feds will either have to cut benefits (thereby angering retirees) or increase payroll taxes (thereby decreasing the net receipts of younger workers). If the feds raise payroll taxes, the young will have less money to save, which could render his projections incorrect.

Mar 20 10:14 AM

[Carlos Lam:]

On Mar 20 10:02 AM MJJP wrote:

> The only thing that will get us out of this mess is to get the wages
> up . That also included China. China should not expect the US to
> dig into their pockets to buy their junk so they can prosper.

No, the only way to get us out of this mess is to (1) let the zombie banks and companies fail and (2) encourage savings. The first step may be painful, but using taxpayer money to bail out insolvent companies like AIG and GM is offensive. After their failure, true entrepreneurs will be able to use their assets (employees, capital) in a more productive fashion. The second step requires a currency that is not losing purchasing power each year. While a true gold standard may not be politically practical at this point, the least we should ask for is a central bank that doesn't monetize our debt!

Mar 20 10:18 AM

[mac.barron:]

Unless you are a grifter working in the financial sector chances are substantial that your wages have not been going up much over the past ten or so years. That is flat wage picture will be even more true of the 'net generation' as the first commenter alluded to. It is pretty clear that a generation that is barely paid enough to cover basic living expenses, school loans and (increasingly) elder care burdens will not be pumping big money into the equities markets.

Mar 20 10:22 AM

[Lightway:]

Great comment. The current financial crisis has all the well known and publicized causes, but flatlining (or even decreasing in many cases) wage growth has been going on for FAR longer and has been going on for much much longer.

Blue collar middle class jobs have been disappearing overseas, with no replacement in sight. Microsoft has $20 billion in cash and just laid off 5% of their workforce. Like the radio commentator example that was mentioned, we are being fed the line that we are supposed to cheer this kind of news? Even though it's not even remotely in our best interest? This type of thinking needs to be put in check.

This model cannot sustain itself, when you are basically gutting the middle class, which is the lifeblood of every successful and stable economy.




On Mar 20 10:02 AM MJJP wrote:

> Don't expect the younger generation to solve this problem. The older
> generation mainly from the conservative viewpoint have made sure
> that wages stagnated to the point of the majority have no savings.
> I don't know how many times I've listened to the fat man on radio
> encourage the caller who called in explaining how he lost his good
> paying union job with benefits and is now working three jobs to make
> ends meet be congratulated and to top it off the caller is ecstatic
> to talk to this idiot. If you accept the conservative mindset that
> think it is nothing to just raise yourself up by your bootstraps
> and get a job that will pay the rent or mortgage, pay your own healthcare,
> put enough aside to put the kids in college and still have enough
> left over to save for your own retirement.
> The only thing that will get us out of this mess is to get the wages
> up . That also included China. China should not expect the US to
> dig into their pockets to buy their junk so they can prosper. China
> has enough population and low wages that they should enact a minimum
> wage and force the emplolyers to put more money into the hands of
> its citizens. Let the citizens of China do what they want the US
> to do. They should pull themselves up by their bootstraps as well
> .

Mar 20 12:42 PM

[GEN X:]

I can assure you there is not enough money in the sea of young adults' savings to float the oversized yachts of their elders. Sorry to burst your bubbles, but have you looked at average debt to income ratios of 20 and 30 somethings?? Scary stuff.

Mar 20 01:09 PM

[Jason Rines...:]

I agree Clam75. I am part of that Net Generation, being 38. I have not lost faith in the capital markets, American government framework. I have lost faith in the people now running the ship. Why? The obvious corruption. But more because of inept leadership. Government still operating on Efficient Market while the citizenship wants Save and Invest. Americans tell the political leadership a loud, fat NO to spending trillions when we can't see the details of forecast returns. When our political leadership doesn't read the stimulus bills. Nor does this government provide adequate time for citizens to read and debate the bill. 1,200 pages for example is the size of the bible! Give me thirty days to at least skim it and another 30 days to make suggestions.


On Mar 20 10:18 AM clam75 wrote:

> On Mar 20 10:02 AM MJJP wrote:

Mar 20 01:40 PM

[Steve in Gr...:]

These are generalizations, but they are true in general.

The baby boomers have made their money and have it parked out of harm's way -- out of the government's way.

The echo boomers haven't made their money yet. And now they won't be able to. But they voted Obama in.

Karma can be harsh.

Mar 20 06:39 PM

[mathgeek:]

Don't know what Tobias Levkovich was smoking... but peak savings period is late 40s.... not late 20s....

Mar 20 11:33 PM

[morph366:]

I agree with MacBarron

"It is pretty clear that a generation that is barely paid enough to cover basic living expenses, school loans and (increasingly) elder care burdens will not be pumping big money into the equities markets."

Until and unless the typical US wage starts to show real growth again the only dynamo for nominal GDP growth (i.e. the measure we mistakenly use for economic growth) will have to come from more bubbles and financial scams.

Mar 21 11:03 AM

[Tom B:]

With McSame, there'd have been NO stimulus except tax cuts for rich fossils like himself. We'd be in a Depression instead of a slowly stabilizing recession.


On Mar 20 06:39 PM Steve in Greensboro wrote:

> These are generalizations, but they are true in general.
>
> The baby boomers have made their money and have it parked out of
> harm's way -- out of the government's way.
>
> The echo boomers haven't made their money yet. And now they won't
> be able to. But they voted Obama in.
>
> Karma can be harsh.

Mar 21 09:30 PM

[Tom B:]

China simply doesn't play fair. They ignore intellectual property rules; environmental standards; and they pay way less for comparable work than in the US. We are mad to allow them to export goods to our shores without appropriate tariffs to compensate for their irresponsible behavior.


On Mar 20 10:02 AM MJJP wrote:

> Don't expect the younger generation to solve this problem. The older
> generation mainly from the conservative viewpoint have made sure
> that wages stagnated to the point of the majority have no savings.
> I don't know how many times I've listened to the fat man on radio
> encourage the caller who called in explaining how he lost his good
> paying union job with benefits and is now working three jobs to make
> ends meet be congratulated and to top it off the caller is ecstatic
> to talk to this idiot. If you accept the conservative mindset that
> think it is nothing to just raise yourself up by your bootstraps
> and get a job that will pay the rent or mortgage, pay your own healthcare,
> put enough aside to put the kids in college and still have enough
> left over to save for your own retirement.
> The only thing that will get us out of this mess is to get the wages
> up . That also included China. China should not expect the US to
> dig into their pockets to buy their junk so they can prosper. China
> has enough population and low wages that they should enact a minimum
> wage and force the emplolyers to put more money into the hands of
> its citizens. Let the citizens of China do what they want the US
> to do. They should pull themselves up by their bootstraps as well
> .

Mar 21 09:38 PM

[Old Trader:]

They will be..maybe sooner than you think.


On Mar 20 10:02 AM MJJP wrote:

> Don't expect the younger generation to solve this problem. The older
> generation mainly from the conservative viewpoint have made sure
> that wages stagnated to the point of the majority have no savings.
> I don't know how many times I've listened to the fat man on radio
> encourage the caller who called in explaining how he lost his good
> paying union job with benefits and is now working three jobs to make
> ends meet be congratulated and to top it off the caller is ecstatic
> to talk to this idiot. If you accept the conservative mindset that
> think it is nothing to just raise yourself up by your bootstraps
> and get a job that will pay the rent or mortgage, pay your own healthcare,
> put enough aside to put the kids in college and still have enough
> left over to save for your own retirement.
> The only thing that will get us out of this mess is to get the wages
> up . That also included China. China should not expect the US to
> dig into their pockets to buy their junk so they can prosper. China
> has enough population and low wages that they should enact a minimum
> wage and force the emplolyers to put more money into the hands of
> its citizens. Let the citizens of China do what they want the US
> to do. They should pull themselves up by their bootstraps as well
> .

Mar 22 01:23 AM

[User 386449:]

I hate to break it to you buddy, but wages were stagnating long, long before this year. I and many others could see this coming back in the 80s, but we were not a majority. The boomers were. Most of the ones I knew never had any real convictions to begin with, and flocked to Reagan's fantasies as soon as reality reared its ugly head. These weekend-hippies decided that since "greed is good," they would completely ignore history and put their futures in the hands of wealthy sociopaths. After all, the government was the source of all evil and market the source of all good - so said Saints Rand and Friedman. Thus, a quack philosopher and a quack economist, whose "free market" theories never really worked anywhere and were only ever tried in their purest form in the bleakest of dictatorships, have led the lemmings over the cliff. Of course, the theories never worked here either which is why the REAL history of the last 20 years is one of repeated market breakdowns and repeated government bailouts of businesses "too big to fail" (because deregulation and lax enforcement allowed them to grow that big), along with the majority getting poorer while a tiny non-working minority has more wealth than anyone knows what to do with.

So now the rightie boomers have "theirs" and they have crapped all over their own children, but lots of this loot turned out to be hot air, and what remains will not last them through their golden years. Thanks to their philosophy of selfishness, their own children cannot afford to care for them. Thankfully, the foolish and unrealistic actions of these folks have removed all credibility from their foolish and unrealistic economic philosophy as well. And their children have noticed, which is why we have a president who is doing something OTHER than JUST bailing out the rich, which is what a Reagan or a Bush would do.


On Mar 20 06:39 PM Steve in Greensboro wrote:

> These are generalizations, but they are true in general.
>
> The baby boomers have made their money and have it parked out of
> harm's way -- out of the government's way.
>
> The echo boomers haven't made their money yet. And now they won't
> be able to. But they voted Obama in.
>
> Karma can be harsh.

Mar 31 02:53 PM