reluctantQuant

The Second Reason Consumers Aren't Spending

Author Rick is right-on with this morning-after narrative.
"It was a great party, but I've got a nasty hang-over, don't really want to drink anymore, and kinda wondering why anyone thought that grenadine and goldschlager was... well.. "

The savings rate will change drastically, because significantly fewer investors will expect capital gains to fund retirement liabilties. Mike Goldstein and his team at Empircal Research highlight an interesting recent article from NBER (Malmendier & Nagel,2009) suggesting that younger generations are likely to shun equity participation based on their "investment life experiences," which has, frankly, been pretty crappy. And 3/4 of equities are held by households headed by someone age 45 or older (wow). So who will take ownership of the "roll-off" portfolio holdings, and with what kind of return expectations? "Trust in equities" has taken a serious credit-downgrade that will not recover for years.

Younger generations will probably just text a confirm to the Fed to add some more TIPS to their account. Vanguard who? Are they on iTunes?

New regime, folks...

--rq