Millennials are the first generation to earn less than their
parents. This will affect everything from buying their first house, getting
their first car, all the way to deciding whether to have 1 or 2 kids, or no
kids at all. All of these decisions (or actually non-decisions) impact the
economy in a negative way and might create a “lost generation”.
Baby boomers are still leaving the job market in droves,
going on their well-deserved retirement. This shift can be clearly seen in the
all-time lows in unemployment rates, which is a good thing for millennials. The
bad thing is that the labor force participation rate has also gone down, from
67% in 2002, to 63% now. This means that less workers have to pay welfare and
pensions for more citizens.
The companies that these millennials work for have amassed
record amounts of debt, which has not resulted in higher wages. It has only
benefited shareholders; corporate profits distributed to shareholders went from
33% in the 70`s, to more than 70% in the past decade. It pays to be a
shareholder!
The downside however is that all this corporate debt eventually has to be paid
back, and although the past years have shown record low interest rates, the
future rates will be reverting to the mean, which will result in mass defaults.
If you`re a mine operator, chances are that you`re already
close to defaulting; most mines are currently operating at a loss, due to the
declining commodity prices. This sector has been going through an extremely
rough period, despite all the claims from “experts” that populations and
incomes are growing, and that commodity prices will rise along with them.
I see a long bottoming process taking place, especially in
metals, and expect the prices to rise again soon. Technology has assisted us in
finding new resources, and ingenuity has assisted us in removing the need for
certain commodities, but eventually the supply of all these commodities is
finite, and demand will certainly catch up.
The U.S. stock markets have been on a tear over the past
decade, and all signals point to a slowdown in the future. You can already see
the dividend yields dipping below the 3-month Treasury bills, which is a strong
indication that investors will likely take a step back soon. When looking at
the global stock market capitalization compared to world GDP, it becomes clear
that not only the U.S. is in bubbly territory, but all the largest stock
markets in the world.
Stock markets are a reflection of a nation`s economic
health, and this is greatly visible in countries like Turkey, where both the
currency and stock market have taken a plunge. Turkey`s debt is mostly
denominated in U.S. Dollars, which becomes a problem now that the U.S. Federal
Reserve is tightening their balance sheet and lowering the supply of U.S.
Dollars, consequently increasing the price of it.
Thank you for reading, and don`t forget to stay positive!
The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in this publication is that of the publisher and is subject to change without notice. The information in this publication may become outdated and there is no obligation to update any such information.