Jay-Z or Gen Z: Who Do You Want to Rap with?

Trick question. The market decided for you, and it isn’t Jay-Z.

Right now, the US economy is transitioning between two generations with very different values: the Baby Boomers and Generation X. This is creating tension in the market and anomalies in the economy. For example, why is the stock market at record highs while Treasuries are at record lows?

And there’s no denying: interest rates are at historic lows. The only time rates have been lower than they are today was before Christmas and in the summer of 2012. Presently, the US government wants low rates and is doing what it can—through programs like QE 1, 2, and 3—to keep them low. This dilutes the cost of our national debt and allows the federal government to borrower more.

Further, this tells us that investment in low-risk, low-return vehicles, like Treasuries, is more appealing than higher-risk alternatives—a clear sign that confidence in the broader economy has not returned.

“But Jay,” you’re thinking, “why is the stock market at record highs if investors are parking their money in Treasuries? Isn’t that a sign that confidence in the market is back?”




Low Treasury yields and the current, higher stock market indices are both indicative of a cautious and pessimistic investing class. For one, the stock market, while at historic highs, is only now recovering ground lost in 2008. For another, stocks are attractive lately because most corporations are behaving with extreme caution. They are not investing, hiring, re-tooling factories, or making acquisitions; they’re stock-piling cash. They offer a relatively low-risk, low-return place to park money.

Sound familiar?

The incredible performance of the stock market from 1980 to 2008 was the result of the Baby Boomers growing up and entering the economy. They bought houses, cars, and any number of luxuries for their children, who became Generation X. While large, Generation X wasn’t as numerous as the Boomers.

As the Boomers mature, they are buying fewer homes, cars, and luxuries for their kids. And Generation X isn’t large enough to make up the difference. They are, in fact, the first generation in US history to be poorer than the generation preceding them.

This has made Generation X more price-conscious and practical than their parents. And they are passing these values on to their children, Generation Z.

Gen Z is the first generation in memory to be born into, and grow up in, fiscally austere homes. They have fewer telephone lines and cars. Their world is focused far more on practicality than luxury, using iPads instead of more-expensive laptops, sharing bedrooms with more of their siblings, and being raised in smaller homes than were their parents.

And since Gen Z is the generation expected to pay for the debt racked up by the Boomers and Generation X, their financial prospects aren’t likely to improve.


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