TIPS’ Lost Decade
“From an investor's viewpoint, in 2009 or 2010, it was logical to assume that inflation would continue higher than 2.1%. It was as high as 4.1% in 2007, and averaged 2.5% from 1999 to 2008. But, in reality, inflation averaged only 1.8% from 2009 to 2019. That is unexpectedly low inflation, and it means that typical TIPS investments underperformed nominal Treasurys over that period.” (Tipswatch)
“We are living in an increasingly digital world and these technologies aren't going anywhere... in the future individuals are likely to have an increasing number of choices which they can use to pay for things - and we're seeing that happen now already." (Jonathan Liss interviews Hans Hauge, SA Podcast)
Gen Xers Struggle With Spending
“A man took to Reddit this week to lay out a big problem: He makes more than $100,000, and so does his wife. They live in an area that has a low cost of living. And still, they spend their entire incomes every single month. ‘Please don’t laugh,’ the guy wrote. ‘We don’t eat caviar, no new Teslas in the garage, we don’t eat out every day, no special expenses that I can think of.’” (MarketWatch)
Thought For The Day
A new survey from Down Under defends maligned millennials against stereotypes about their supposed unastute financial management. The study (HT: robbo1802) is behind a paywall, but I can summarize as follows: On the basis of a database of 140,000 users of a financial app mainly used by millennials, combined with other sources of information, the research team explains millennial spending behavior as a rational response to the unique circumstances of the generation. For example, the smaller proportion of millennials purchasing homes compared to their predecessors is a response to higher relative home prices. The researchers are inclined to characterize millennial choices as a readjustment of spending priorities based on contemporary reality rather than as an expression of irresponsibility that prioritizes avocado toast breakfasts at restaurants on the way to work.
It could well be that misunderstood millennials are less undisciplined than my own Gen X cohort. At the same time as the Aussie study came out, MarketWatch published a story about a young Xer couple, both making six-figure salaries (“high 100s”) and living in a low-cost area, yet somehow spending $9,000 a month above and beyond fixed costs such as their mortgage, car payments, utilities and insurance. The poor fellow with the spending problem, and a wife who he says would quickly divorce him were they to have a daily money talk, turned in desperation to the online personal finance community on reddit to help him solve this problem.
Readers responded with suggestions, some of them helpful. But while there may be merit in the Aussie defense of millennials’ unique spending pressures and the reddit readers’ practical tips for the stressed Xers, what is missing is the big-picture view of the problem, which is a long-term perspective on life. That entails progressing from avocado toast to merchandise that a business owner may sell at a mark-up to secure assets such as property and a portfolio of stable businesses. This is how people have always attained wealth, until faced with today’s consumer culture, which constantly addles people to buy things they don’t need.
I happened to see a great antidote to this in my Twitter feed this week. I don’t remember who said it and thus regret I can’t give proper credit, but the tweeter essentially said (I paraphrase): “Every time I see someone grab an avocado toast breakfast, I feel an uncontrollable urge to add to my retirement savings.”
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