Can I be crotchety for minute? Who on earth thought making ANOTHER Jurassic Park movie was a good idea? At this point, could we please just call them, Jurassic Park: Then Dinosaurs Win…or do they. And why does it cost nearly $100 bucks for a family to go to the movies and when did the Junior Mints box become so small…is there an Not-So-Junior Mints box? Like the rest of my compadres in the ADD millennial generation I digress.
Speaking of millennials, millennials are like every transportation system in each of the Jurassic Park movies. They work, sort of, up until the point you really need them and then they seemingly make the entire system crash. And, on point (sort of), they present the greatest risk to today’s economy…inflation.
There’s a lot of noise about inflation. Yes, it’s killing everyone economically. However, the baby boomer generation, in many ways, will simply cut back. I’m not advocating this is fair, or just, it’s just fact. Yet, millennials pose the biggest problem. When do people spend more? Simple, when they feel good, or confident, about their financial future.
Today, millennials are the LARGEST living generation and they’re either in or entering their PEAK spending years. Whereas, boomers, our second largest living (they were largest by birth) generation is now entering into the period of life of spending decline[1]. What does this mean, long term, for our economy?
Before I answer that, let’s talk about inflation and interest rates. First, interest rates. Millennials, on average, have never seen a 5% 30-year fixed rate mortgage. If inflation continues to rampage the countryside like a T-Rex through a Steven Spielberg money grabber that rhymes with Purassic Jark (see what I did there), then the Fed will continue to raise rates. As rates increase, borrowing (credit) costs increase. How will millennials react to a 7% 30-year mortgage rate, when they think 4.5% is high? Will they become more confident? Will less confidence lead to less spending?
Now back to inflation. How did a starter home become $250k, a new car $50k+, a trip to the grocery store requires more cash than most should have on them at any one time. Will spending the equivalent of a car payment to fill up the family gas guzzling SUV make millennials more confident?
Importantly, remember millennials do care about others. They care about society. They care how others perceive them. That’s why they’ve bought into EV’s, universal healthcare, and “free” college because we were taught it’s best to look at the big picture. And as a millennial, we’ve been accused of being free loading, selfish, trophy grabbers for decades. This is why millennials buy into these causes. The problem is… it’s all fun and games until someone gets poked in the eye.
Even if millennials never have to face the burden of inflation causing starvation, they will have to confront the declination of confidence caused by economic uncertainty. This will squelch their spending and consumption habits at the very time America needs them to open their wallets.
I’m oversimplifying here, but think about it, our fictitiously spending fueled economy dates back to WWII. For all the right reasons, the US enters the war and our manufacturing plants, companies, and workers are thrown into full throttle. Next, in the 1980’s we have a shift in retirement plans from pensions to 401k’s. For the first time in American history, the average worker, now has money in the market (401k). They are rewarded for the market gains. Gains in the markets make them feel more WEALTHY, and with this new “wealth” comes more confidence.
As previously promised, more confidence leads to more consumption (spending). Then we have the transition from lay-away (pain before pleasure) to easy credit (pleasure before pain). Couple this with a twenty-year trend of decreasing interest rates, lower rates feel better than higher rates, which leads to more confidence, and you get the same troubling environment as John Hammond’s Jurassic Park.
Boom. The water in the glass starts to ripple, and instead of seeing a T-Rex in our rear-view mirror we get the tech-bubble burst of the late 90’s. Lower interest rates even further (or bio-genetically engineer bigger, badder, dinos) and you then get the housing bubble. Pour trillions fo dollars into the markets, and then to people (Great Recession and Covid) and you see our economic gains are spurred through spending of money we don’t have.
Can the government continue to print money? Probably. How long? That’s the better question. As the famous economist Herbert Stein put it, “things that can’t go on forever, don’t.”
In conclusion, we’ve built your plan for this outcome and for shifts in economic trends. We didn’t focus on growth, we focused on income. To beat the dead bludgeoned horse one more time, it’d be like Jurassic Park focusing on creating once-in-a-lifetime experience rather than a breeding man, I mean people, eating monsters or as we millennials like to call them, large care bears with teeth.
Yours Truly,
Michael Jay Markey, Jr.
Hopefully this message alleviated any concerns you had about these uncertain times. If not, please feel free to schedule a call with myself or Dale.
[1] This doesn’t mean boomers are necessarily spending less, rather according to the Bureau of Labor statistics (2019) those 65-74 are spending, on average, nearly 20% less than those ages 45-54, and those 75+ are spending nearly 38% less.
Michael Jay Markey Jr., MRFC, BFA
Financial Speaker, Author, and Show Host
Investment Advisor Representative & Insurance Representative
MDRT Top of the Table Member
RADIO: Fireproof Your Finances
Heard Weekly on 102.9FM, 97.5FM, 98.7FM, 1034 AM, and 1570AM
Click here for past episodes
AUTHOR: Fireproof Your Retirement, 2014,; and “Seriously Ramsey” The Register
Click here to read Fireproof Your Retirement online edition
Legacy Financial Network/LFN Advisors Inc.
700 Terrace Point Dr., Ste 325
Muskegon, MI 49440
PH: 616-589-4004
FX: 888-900-9135
www.legacyfinancialnetwork.com
Advisory services offered through LFN Advisors, Inc. Insurance services offered through Legacy Financial Network. The aforementioned are affiliated companies.
LFN Advisors, Inc. outgoing and incoming e-mails are electronically archived and subject to review and/or disclosure to someone other than the recipient. We cannot accept requests for securities transactions or other similar instructions through e-mail. We cannot ensure the security of information e-mailed over the Internet, so you should be careful when transmitting confidential information such as account numbers and security holdings. If the reader of this message is not the intended recipient, or an employee or agent responsible for delivering this message to the intended recipient, you are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please notify us immediately by replying to this message and deleting it from your computer. Legacy Financial Network, 700 Terrace Point Dr, Suite 4A, Muskegon, MI 49440 United States
