If you or anyone you know is aged over, oh, about 40, 50 maybe, and you ask them about the state of the market right now, they will most likely say something along the lines of, “It’s crazy. I don’t understand it. There’s a global pandemic. But everything’s going up. And what ON EARTH is this DogeCoin nonsense? The world has changed. It’s all changed. It’s those crazy kids. It’s their fault”.
Every generation thinks the one that follows is crazy, reckless, foolish and not to be trusted. Every generation thinks the one that came before is too old-fashioned to understand that, you know, everything is different this time. Everyone old says, it’s never different this time; and everyone young says, it’s not your time any more, oldster.
This is a normal, natural and eternal. It’s how progress is made. The ambition of the young and the desire to outperform their elders. Normally it hits you in your sixties, maybe your seventies, that everything is indeed different and you don’t understand what these yahoos are doing with their lives nor why they are trying to ruin yours.
The Covid crisis though has accelerated this change. The K-shaped recovery you see talked of isn’t really K-shaped. It’s just two-tiered. There’s a tier with enough money to not have to risk going to work in the old way; and a tier without. For the last year or so, the moneyed tier, which by and large is an older tier, let’s say over 50ish, has stayed home, stayed much safer as a result, and lived & worked online. And that has led to a dawning realization among them that the digital realm can do so much more than emails and WhatsApp groups; and that is driving the accelerated digital shift in the enterprise. Because, after all, it’s this cohort that holds all the big corner offices and budgets. If in 2019 a bootcamp employee happened to become lost in the office complex and, traipsing through the C-suite were to be heard saying, don’t know why these guys are always on a plane or paying a whole team of IT staffers to work Webex, they should just meet over Zoom, they would have been told they didn’t understand how complex senior work was, how compliance was everything, how this low footprint easy-install stuff was just not sufficiently hardened for the enterprise, etc. And sent packing. Now? The C-suite be Zooming it in most days.
Research is starting to show up - see Bloomberg this past weekend - indicating that this moneyed, older tier has found lockdowns and other restrictions to be, if not outright enjoyable, then certainly an opportunity to look at life from the view askew. In between worrying about friends and family, and quite possibly mourning some of them, this cohort has decided that living to work, which is the toxic side effect of the American dream, really doesn’t appeal very much anymore. Unplanned, they have stepped off the hamster wheel and realized that the chest-beating machismo of 2am conference calls followed by 6am flights for the third time that week … really is dumb. And a great way to ruin your own health. Also, since for the most part they are compensated in some kind of deferred-gratification stock or retirement scheme or some other form of not-cash-now money, they have realized that dashing ever faster round the wheel doesn’t change life one bit today, it just helps you to persuade yourself that when you finally lay your hands on that big ol’ golden ball that is so close, man it is gonna be big. And oh the times you will have when you get that good money. Oops. Cardiac got in the way. Still, your kids won’t want for anything. It was all worth it.
Chatter among the chattering classes suggests that many are considering retiring early. They feel rich enough from recent brokerage account gains, feel no desire to get back to the watercooler to swap lies with Bob about last week’s client meetings, and have developed an interest in writing haiku. Or gardening. Or baking. Or some other kind of not-working-for-the-man pursuit.
So we are likely about to see a material reduction in the skilled, rich workforce of those over 50 or so. This is going to have a very serious impact on the shape of the economy and the character of securities markets in, we think, the following ways and more.
One, the gamification of securities is, we believe, here to stay. YOLO is simply the inverse of deferred gratification. And the Big Lie of deferred gratification is that the deferral is in pursuit of the gratification of the recipient rather than the source. Whichever way you look at it, tying up your money in your employer’s retirement fund, or tying it up in long term managed assets helps your employer and your investment advisor a lot more than it helps you. Those crazy kids know this. They know that the postwar settlement is a bust. If it was ever real, the destruction of fixed income returns by free money from central banks has finished it off. So, work every day at a soul-destroying job to collect a retirement check that probably isn’t coming? No thanks, says your youngster. I’ll try my luck with Dogecoin instead. But, says gramps, Dogecoin isn’t a thing. It’s ephemeral, a joke. Yes, says young ‘un. Just like the promised checks from your state retirement system.
Two, if you are in your 20s or early 30s, get ready for HUGE opportunities in the workplace if the 40s-and-50s cohort starts to retire. Want to know how Boomers got so rich? Ask Boomer-In-Chief Steve Schwarzman of Blackstone fame. In many interviews he refers to the vacuum above him in his early career, a result of the prior generation rendered much reduced by World War II. All the easier to progress absent aerodynamic resistance. If the hamster wheel be your thing, get running. Fast. And watch the money-tree shed its leaves your way.
Three, the genie isn’t going back in the bottle. The psychological changes inflicted on society as a group and individuals themselves following 12-15 months of enforced some-degree-of-isolation will become baked into DNA. We have all, whether we realize it or not, become just a little bit feral.
Now we aren’t smart enough to map it all out from here and say, oh, well, we’re buying RV stocks (a kind of Boomer YOLO play) or Space Doge Token (yes that is a thing). But we do think that the world has
changed and it is
different to a year back and we think that will show up in securities markets as well as IRL. We concluded some months back that this digital working thing - that’s only just gotten started. We think the 2020s will be the Cloud Decade
as the companies that enable remote work to happen faster, cheaper, better - we think they are going-up stocks. Yes, we know they’re already up a lot. Hey, we’ve been doing the cloud thing for twenty years now. But we think they can go up a lot further yet. We think that value investing isn’t coming back anytime soon, because the whole principle of value investing is based on that deferred-gratification Protestant Work Ethic vibe. And we don’t see much love for the Lutheran going on right now.
So, if you’re an old person like us here at Cestrian, no longer in your 20s or 30s, and you’re feeling very puzzled because the world wasn’t supposed to have changed this way this fast, you shouldn’t not understand it already this young, surely you have to be Gramps yourself to conclude that the lunatics have taken over the asylum - you’re wrong. It’s done. Everything you know is wrong. Get used to it, learn it, sit back, see how to take advantage of it. Just don’t expect it to go back to how it was.
We offer two ways to help navigate the new investing climate.
Want easy-to-consume, in-tune-with-the-zeitgest, snippet format? Sign up for Cestrian Elements
for daily investing and trading ideas and commentary. 7 day free trial, then $29/month.
Want detailed, real-time coverage of tech and space stocks, earnings previews, live blogged earnings calls, detailed financial models, all the charts you never knew you wanted, you know, Gramps’ idea of a great investment research service? Sign up for Cestrian Fundamentals
. 14 day free trial, then $199/month.
(We still only take dollars. Doge, maybe next year).
Cestrian Capital Research, Inc - 2 May 2021.