How People Act With Money

Mike Williams | 14th January 2019
Categories
Letter from America

As 2019 unfolds, the media and market chatter will be spread across a number of assumed risks, including:

  • The endless number of ways Trump will do wrong by us

  • The impact of the US Government shutdown

  • The myriad of economic impediments in our way

  • Trade war fears

  • The endless reasons for why we collectively fall short of expectations because of "what experts tell us...."

The list is significant and there always seems to be one more issue lurking behind the last one.

Folks, I can tell you that the most substantial layers of opportunity for investors will not come from their grasp of the latest headlines about environmental risks, Ebola or other pandemics, the political shenanigan's here or abroad, cultural clashes between the haves and have not's, or suggestions about how society is once again breaking down and killing the shrinking middle class.

Nope.

The most substantial likelihood of succeeding in the next 2-3 decades will come from a clear and concise understanding of just one thing: US Demographics.

America has the best growth demographics of any of the developed economies on Earth.

There’s nothing wrong with our society. There’s neither a shrinking middle class nor any force out to get them. The reality is far simpler and significantly less diabolical.

The middle-age and middle-class represent the same group. It just so happens that middle-age (those in Generation X) currently represent the smallest generation of the last 100 years.

That’s why it seems smaller, because unto itself and in relation to the Baby Boomers and Generation Y’s Millennials, it actually is!

The latest consensus warned that birth rates were shrinking. And indeed they have been. It’s the tail-end of Gen X having kids; the smallest generation of the last 100 years would be expected to produce a smaller number of births, right?

Meanwhile Generation Y - the most significant generation to ever impact our economy - is just getting its sea legs.  They took longer, they stayed home longer, got better educated and they got far more efficient than any work-force we have ever witnessed.

What will they do next?  

Well, let’s see:

  • Finish graduating

  • Flood the market

  • Fill more jobs

  • Get more done

And then they will:

  • Get better jobs

  • Start having kids

  • Buy more houses

  • Build lives.

Think about it, folks. Where do you think the new 300,000 people showed up from in last week's blazing employment report?  

Graduates!

And there are millions more coming. And that’s a good thing given that job openings remain at record levels.

And how do we know all this beyond the market facts we’re seeing? Well, we can start by looking back to the 1980s and 1990s. It’s happening all over again now, but this time on steroids. The pace will be hard to keep up with, and the value of our patience in investment terms will multiply ten-fold.

Oh, And About this Market Correction…

The fear out there runs deep and the media hype helps it to further embed.

That’s a good thing: The longer the fear lasts the further this bull run could be extended.

And my hunch is that terrified investors won't even sniff at stocks again until the Dow Jones reaches into the 32,000 to 33,000 range.

Markets are like brain waves on a screen. You can tell how everyone feels when you look at market action. It’s really just human nature.

Investing is not about finance. It's about how people act with money. Now, the stage has been set for some more chop - but after that, and it may very well last for a far shorter period than you might expect - the trek up the mountain (as above) will continue.