Voting, democracy and Millennials

Last month’s we discussed the poor financial conditions of millennials. According to the Federal Reserve Bank of New York wages for the typical recent college graduate working full time have risen just 1.6 percent over the last 25 years, after adjusting for inflation. At the same time, student debt burdens for the typical bachelor’s degree recipient who borrowed for college have increased about 163.8 percent. The Huffington Post explained that, “In 1990, the typical college student graduated with debt equivalent to 28.6 percent of her annual earnings. By 2015, that number had shot up to 74.3 percent. Stagnant wages and the jump in student debt levels has prompted growing concern among government policymakers and financial industry executives that student debt risks slowing U.S. economic growth as households reduce their spending to make their student loan payments.

Furthermore, since 2004, homeownership rate for people under 35 have dropped by 21 percent, easily outpacing the 15 percent fall among those 35 to 44 old.

Various studies show that homeowners tend to vote more than renters. Under the title, Have millennials given up on democracy? The Guardian discussed the issue of millennials being less interested in democracy than their parents or older age groups: “Chief among the accusations levelled at millennials is that of political apathy. But the real problem could be even worse than disengagement: it seems many members of Generation Y could be ready to back a despot. A large-scale survey of political attitudes conducted by the Lowy Institute for International Policy in Sydney found that just 42% of Australian 18- to 29-year-olds thought democracy was “the most preferable form of government”, compared with 65% of those aged 30 or above…. Millennials themselves, asked why they do not back democracy, mostly say it “only serves the interests of a few” (40%) and that there is “no real difference between the policies of the major parties” (32%). A similar malaise is expressed across western democracies.

Unsurprisingly, the millennial generation is the least entrepreneurial of all. According to Cowen, millennials are “most committed ideological carriers” of the new spirit of complacency.

Finally, concerning the millennials apathy towards democracies remember that as Alice Walker observed, “The most common way people give up their power is by thinking they don't have any.”

I would buy European stocks

The US markets is completely out of range with other markets in the world, such as European markets, Emerging markets. So I think there will be a closing of this diverging performance with Europe outperforming the US or both going down or with the US going down more.

Investors should understand that markets can also go down and it would not surprise me to see the inflated asset markets especially the financial markets being down 20 to 40 percent at some point. The typical stock in America is already down 9 percent from a 52 week time and in the last three days wouldn’t you think that this is maybe a little bit funny? Every day there were more new lows on the New York Stock Exchange than new highs and this 1.6 percent below the all-time high in the market, that should tell you something. 

Asia and China could do well in 2017

Well I think that emerging Asia - China looks quite attractive, for how long? who knows. But for the next 3 months money can flow into China. The economy has surprisingly has begun to do quite well. We see that in retail in Hong Kong, we see that in the Hotel industry and we see that in the demand for Commodities. 

What has done relatively well is selected commodities. Last year Zinc and Iron Ore were the best performing asset. This year Copper has been very strong, Gold last year was up 9 percent, this year is again up 9 percent. So I think investors should again be investing in Resource Stocks. Because when you really look at Trump and his Administration, I think further money printing down the line is inevitable. Maybe they increase rates a little bit here in March, that is possible. But the bond markets will have already discounted it. 

So bonds are relatively undervalued compared to Equities. And Emerging Markets are relatively undervalued, Resource stocks are undervalued, and I think Consumer Staples are also reasonably priced as well as REITS. I have a large exposure to REITS in Singapore and Hong Kong.