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The Optimism Gap in America: A Perspective


Boomers are now and have always been consumers, with little regard to the future. Of course they're bummed. They haven't invested or saved.


Editor's Note: Yesterday Minyanville released the results of an exclusive Active Consumer Confidence Survey, Boomers Are Bummed and Millennials Are Not: The Optimism Gap in America. The feedback was immediate. One of the most common themes was the idea that boomers brought their problems on themselves. This view is captured in the following note from a subscriber.

I saw the article posted regarding boomers vs. Millennials and I had to pitch in my two cents. I've been noticing the general media and market malaise over the past couple years, and I can see how the boomers are driving our collective opinion and mood. Sorry to be so curmudgeonly, but this is something that has been on my radar for awhile and I think it's important to try and understand why boomers think the way they do and why it infects what we see, read, and have to endure -- and why politicians across the globe continue to seem self-serving and irrational -- now more so than ever.

To put my perspective in context, I would be considered Generation X and spent 16+ years on the "retail" / sell side of the financial services business prior to founding my current firm, Palmetto Wealth Management. All in all, I was inside three different firms, in five or six different offices across the US, as a producer at different levels of management.

I can tell you that baby boomers do not save money, regardless of the past decade, which they basically caused and drove. Boomers were the engine for most economic and cultural programs since the late 1960s and mid 1970s until today.

Of course, my sample is not a statistically normalized one, but it's pretty broad. It wasn't simply those I advised; it was the census across the offices. Most clients concerned with saving money were on either side of the boomer generation. The pre-boomers are for the most part already retired Depression or WWII-era babies. The post-boomers are under 48 years old and have little hope of any retirement help other than their own savings (e.g., Gen X).

Some boomers, while they seem to have larger 401( k) rollovers from changing jobs, have little or no savings on the "taxable" side. Boomers are now and have always been consumers, with little regard to the future. They have always had many things provided for them by their parents, without much of the struggle normally required. Remember, they were the "Me generation" of the 1980s. The largest group was born between 1958 and 1961 and it grew from there.

Many of them (although I expect most don't admit it at this point) had some hope of an inheritance from their parents. Do you remember all the financial articles of the late 1990s about the trillions of dollars of wealth that would change hands in the next couple of decades? I know I do. And guess what? With improved health care, it isn't happening; regardless of the market performance, the older folks are living longer and spending their savings, putting another nail in the boomer retirement "plans."

The majority of elected positions in the US are populated by representatives of the consumer generation with the largest wealth deficit and little experience grinding for achievement, this group of politicians has the most say in our future. (The past three as well both 2012 presidential candidates are boomers; the old lions in Congress who did seem to understand how to work together are moving on.) Boomer politicians as a group exhibit ideas are wildly bifurcated; they have no idea how to compromise because they have never had to.

I completely agree that the Millennials have the proper attitude and size -- our Gen-X is too small. I just hope they have the proper aptitude (hopefully derived from their "Greatest Generation" grandparents, in spite of their baby boomer parents).

I also understand that I am generalizing and stereotyping like crazy here, but isn't that what we do in the investment biz – look for patterns?

At this point, I don't know that the leading edge of the boomers can do anything to mitigate their situation. The enemy (age) is at the gates. We are witnessing their painful deleveraging now and many are hanging onto jobs they otherwise would have retired from, if they had saved for retirement. This phenomenon is partially affecting employment since boomers are hanging around and working longer, rather than clearing out for the next group.

It has not looked like they misallocated their funds; it's that they ignored the age-old investment advice (loved and practiced by Warren Buffett) of "time -- not timing" and never really began to save until they could see their desired retirement date staring them in the face.

There's a book on my shelf written 20 years ago called Grow Rich Slowly, which is about earning a good income and not spending it all during your working life. This lesson has clearly been ignored.

The members of the older generation that I've had contact with throughout my career so far (the pre-boomers) have never seemed to stray from the general principals of personal asset allocation and investing -- and, probably more importantly, living within your means. We did receive calls from folks in their fifties and sixties back during the late 1990s tech boom, but that was a rarity -- or they were only interested in putting up a very small portion of their portfolios (the "fun money").

The boomers who did want to "invest" were always looking for leverage, options, all-in, do-it-quick strategies, which is more like gambling for a quick hit, and not really a long-term vision.

Then, when the Internet bubble went bust, they didn't skip a beat and moved right into real estate. I lived in the Southeast at the time, and it was interesting to watch the attitude seamlessly shift and start to hear condos discussed with the same enthusiasm and verbiage previously reserved for dot-coms.

Speaking with some boomers now, they just seem beaten and angry. That is what is reflected in the media and certainly in our politics. The younger folks (Gen X and Gen Y; it's not a Millennial concern yet since the Millennials don't have any money yet as a group) all seem interested in saving their own money for retirement.

I remember seeing or hearing about a survey a few years ago that stated that more Gen Xers believed in UFOs than believed they will ever see a Social Security check. We (Gen X) have also grown up in the age of the 401( k), so we have always been programmed to save. In comparison, boomers have always been programmed to consume, and have, until these past few years, always had the economic winds at their back to do just that.

The baby boomers clearly aren't entirely at fault, but they are the largest demographic in our country and have been in their "peak earning years" for over a decade, yet haven't much to show for it.

I hope I'm completely wrong on this one. We shall see…
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