Key insights
- The author argues that a generational wealth divide, coupled with high stock and housing valuations and strained international relations, poses a significant risk to the US economy. They suggest that reduced purchasing power among younger generations and potential shifts in global alliances could trigger a market correction. The article expresses concern about the sustainability of current asset prices given these underlying economic and geopolitical factors.
Things can stay irrational longer than you can stay solvent.
Many believe they understand this. We’re in a K shaped Economy. Us stock investors feel untouchable. We’ve had a 4 year bullrun. But we foolishly claim”stocks are not the economy”
Here’s a reality check for Gen X and Boomers alike. Gen Z has 86percent less purchasing power than you do at the same age with higher levels of education and greater hours worked. Boomers and Gen X are retiring.
How can this impact you? Who is going to buy your house at these elevated prices if Millennials and Gen Z do not have Boomer or Gen X purchasing power? Think about that critically. Gen Z and Millennials have far more debt to make things worse. Meanwhile stocks are in their own universe having become far devoid of historical values, a desperate 2 generations who need the money and feel stocks are the only way up with boomers and Gen X retiring and profit takings to fund their retirement.
We will have a generational correction, who knows when but it’s coming. This is pure insanity if you zoom out and devoid of any sense whatsoever. Irrational longer than solvent is felt by both ends of this K Shaped Economy.
America itself is shakey, it’s backstabbed even its closest allies with tariffs. Those same countries hold USD reserves. We’re nothing but lucky those countries all didn’t tariff us back, or simply retaliate in a way that would hurt us. But it shows that America can’t be relied on. If Europe elects a European first mentality that’s going to be tuff. That’s unlikely right? No it’s not. I’ve never seen Canadians so angered and a felt feeling of betrayal. Europe feels this way, Japan and other allies feel this same way.
Pair what was said with 30 percent of stocks being held by foreigners, The K shaped generational divide and increasing resentment towards wealthy and you realize the US economy is in real danger.
Historically elevated stock prices,housing and now soaring energy prices have eaten what remand of the Middle class. Now medical bills,energy prices, gas,tariffs,increase credit taking are massive warning signs that desperate normal people/delusional wealthy complacent Americans are blissfully believing it’s sustainable.
Stocks are at record highs on most metrics to any period in time.
Retail has piled in a record rates
Consumer debt is soaring
Middle class is penny pinching
Cars are being bought in record high debt
Everyone who isn’t wealthy feels poor
Oil will further weaken and increase food and energy costs once fully absorbed when many people feel already squeezed. That means margins,profits, revenues could very likely decline and most people don’t see it.
TLDR is take money THAT you NEED off the table. Do not be 100percent invested only in stock market and have some powder on the side. People are unbelievably complacent at the moment let alone incredibly insecure about valuations/delusional in thinking this recent 5 percent pullback was a great buying opportunity.
I encourage many to study history, stocks can go through a lost decade after disproportionately high gains.
When the tide goes out, many will be left naked and exposed
Lastly I’d highly recommend Benjamin Graham approach to investing. Take some profits like the best investors do, put that powder in bonds and stocks you believe are reasonably priced. we’ll need you people the most when things break inevitably.