Muppets on Parade
Behold the "trophy generation" who was told they were special and could never fail.
- By The Notorious CFP®
DISCLAIMER: Please note that whenever I refer to 'Millennials' and 'Zoomers,' I'm not just referencing Americans born between the years 1980 - 1996 and 1997 - 2020, respectively). I'm also referring to those that raised them as well as those who act like them. Behaving like a child (the most general and accurate theme of both generations, and now society) is a state of mind more than an actual immutable characteristic of people born between two specific dates. I know plenty of people on both sides of these guideposts who act like the other, just like you. However, it's more useful and entertaining to target the young because the majority are a.) functionally illiterate and therefore less likely to read my musings, and b.) disabled in most respects, through no fault of their own. It's also just funny as hell. If you disagree or take umbrage with this or any of my commentary; please start your own business, website and blog and I'd be thrilled to post your rebuttal. You know where to find me, at the office. - B.S.
Introduction
“Getting an unsophisticated client was the golden prize... The quickest way to make money on Wall Street is to take the most sophisticated product and try to sell it to the least sophisticated client... Whom we called 'Muppets.'" - Greg Smith, Why I am Leaving Goldman Sachs
I rip on young people A LOT, it's practically a sport. And I spend a lot of time attempting to connect their arrested development to the current problems facing modern American society. I can do that, because I haven't produced any of my own (that I am aware of), most of my clients are Baby Boomers who already agree with me, I live in a hick town devoid of many of the aggrieved, I'm not ranting (directly) on social media and I can't be cancelled because I work for myself. (And my clients are used to my incoherent ramblings.)
But what do America's newest investors have to do with our current market???
A lot, actually. Maybe everything.
In an earlier post, titled, A New Generation, I opined on why I believe a substantial amount of today's market turmoil can be directly linked to the enormous cohort of investors who have never been through a market correction, which is primarily a 7-10 year phenomenon where Wall Street swindles our youngest investors and separates them from their money. Here I expound upon those thoughts in order to leave no stone unturned and no ambiguity about where I stand.
"If they pay a penny or two pence more for the reddinesse of them... let them look to that, a fool and his money is soon parted." - Dr. John Bridges - Defense of the Government of the Church of England, 1587
Yes, the Fed has destroyed the world economy and markets, and yes this presents remarkable opportunity for profit for anyone that has the discipline and foresight to see behind the next quarter. But I can't let our youngest Americans off the hook entirely, because I'm the one meeting with them everyday, listening to a lot of 'misguided' nonsense about how they think the world, the economy and markets should work.
I'm the one that has to listen to them tell me about their ambitions about becoming a life coach in their 30s, and I'm the one that has to hear them tell me about the new paradigms of global finance- ESG, crypto, flipping homes, options trading, going back to college for a non-STEM graduate degree paid for by me, driving around with $700 car payments on a $80K salary, etc.
I'm fully aware that Millennials and Zoomers are now larger, more powerful and more critical consumers than any generation before them. I recognize they need their names on Coke cans and multiple colors of Tic-Tac's (I'm old enough to remember when orange, white and green were enough.) I fully appreciate that their permanent DINK (dual income, no kids) and permanently single status makes them and their massive disposable income a huge opportunity for clever marketing departments. I know that a quarter of them are on prescription drugs because it's easier on their landlords than being parents.
Definitely nothing to see here..
But I'm in the fortunate position of not having to bow to their woke, progressive, idiotic fiction. These kids don't save and while they all think they're going to be millionaires, they generally don't invest. And if they do, it's in "magic tokens" like crypto currency and meme stocks like GameStop and AMC. My primary beef with them is that as someone who volunteers in the public school system, my observation is that too many of them - through no fault of their own - are undiagnosed sociopaths. These are the same people that wanted me quarantined (or worse) in 2020, when it should have been the other way around...
Ohhhhh hell no
Until they represent more than 5% of my business, I'll still be here explaining to them how the cow ate the cabbage, and they can take it or leave it. (Besides, the vast majority of my younger clients were raised right and still have sensible, old-school values.) So for every parentally-disabled client born after Reagan was elected in 1980, I've got two more that have their heads screwed on straight. So I'm not complaining, that's a better ratio than most American families. Hear ye, hear ye, behold the "trophy generation" who was told they were special and could never fail. They were watched over, protected and bailed out their entire lives. As a result, they've never had the good fortune of having truly 'failed.'
But now they are confronted with market losses for the first time in their adult lives, it all seems cosmically unfair (like elections, house prices, student loans, Supreme Court decisions, the Constitution, people exercising their first amendment right to say what they think- the horror!... etc.) As a result, they don't know how to process the experience, their emotions or how to respond appropriately. So they just throw adult conniption fits, like standing outside Supreme Court justice homes, marching for social equality, sometimes (and tragically) mishandling firearms and other privileges from the last 300 years, and now 'quiet quitting' when they aren't paid what they aren't worth.
"Man, I see in fight club the strongest and smartest men who've ever lived. I see all this potential, and I see squandering. God damn it, an entire generation pumping gas, waiting tables; slaves with white collars. Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don't need. We're the middle children of history, man. No purpose or place. We have no Great War. No Great Depression. Our Great War's a spiritual war... our Great Depression is our lives. We've all been raised on television to believe that one day we'd all be millionaires, and movie gods, and rock stars. But we won't. And we're slowly learning that fact. And we're very, very pissed off." - Tyler Durden, Fight Club
Some would argue that's a fairly harsh indictment of an entire generation of people, but I would respond these folks are oblivious to the reality that I'm showing more love than they are. These are the same people with pets suffering from obesity and Type 2 diabetes. For many coddled children walking around in adult bodies, their "lived experience" of market losses simply reinforces a perception that was programmed in their formative years within their homes and then the government daycares we now call public schools that the system is rigged and they are the victims. Yes, victims... in 2022 America...
They've made some poor decisions and 'investments' of their own volition, but now it's "society's fault' that they got fleeced by financial charlatans and the misguided voices in their head (and social media apps). This lack of accountability is detrimental to their development because it robs them of the critical agency to learn, grow and recover from failure.
Similar to the effect of welfare on the poor- which irrevocably severs the connection between work and self-respect / financial success like feeding a wild animal - pandering to the victimization cult only further hinders them from realizing the #1 rule of life: that after about age 30, your current situation is 99% the result of your own personal choices. This mentality also disables one of the most useful maxim in all of human existence.
In summary, I suspect that a collective lack of wisdom, experience, perspective and self-discipline from this demographic may now be contributing at least some amount to this most recent market dip, and pulling the rest of us all down with them.
"Social media made y'all way to comfortable with disrespecting people and not getting punched in the face for it." - Mike Tyson
Trust me, I understand the intoxication of playing the victim card, as it allows the following:
- It provides a permanent alibi for personal failures
- It attracts attention
- It generates sympathy
- It acts as a 'social currency' with like-minded people
- It disguises negative traits & actions as virtues
- It attracts clicks and eyeballs
The problem is that victimization is the mindset of losers. Literally by definition. Think of your top five heroes. How many of them became successful because they were victims of circumstance? Conversely, how many of them became successful largely because of their ability to consistently overcome challenging circumstances?
It's critical to point out that anyone who was not an active investor with substantial assets 13-14 years ago during the Great Financial Crisis (GFC) - which is almost everyone under age 40- is experiencing the first full stock market downturn of their adult lives. Every time the market has dropped since 2009, we have seen a relatively quick and dramatic bounce back towards new highs.
Quick, painless recoveries became so baked into modern investing that it even launched the stock market's most famous meme: Buy The F*ing Dip (BTFD). That roughly translates into a reliable trading strategy that whenever the market dropped, you should always buy. And it always worked. Until it didn't (this year.) Since literally January 1st, the market has dipped, only to rise a bit before falling further. This is not an accident nor coincidence. The financial markets are not following the script we've all been fed for the past few years. Yet it continues to pull in more Muppets buying the dip only to sell once it falls lower.
This phenomenon is not unlike the tragic preponderance of truly bad Marvel Universe franchise films, most of which are so bad it's painful and each worse than the ones before it. At this point, Marvel (including the Star Wars franchise) are only attracting the mentally disabled viewers who've already caught up on every season of The Bachelor. And that, ladies and gentlemen, is why the 2022 market has been so confusing and so painful for so many investors. We've been conditioned- just like children raised in the 1990's- to always expect to be bailed out.
But now it's not working.
For the last two decades, the 'Fed put' meant that whenever the market dropped, the Fed had investor's back, with a fresh new round of money to inject into the financial markets. You thought our current crisis was due to the stimmy checks? LOL... no. This is far bigger than that, and started a lot earlier. This is 20th century chickens coming home to roost. The Fed has been printing money and keeping rates artificially low since 2009. Trump's PPP and Biden's childcare credits to infinity are a drop in the bucket compared to what Obama's Fed was doing for eight years. And he was following in the footsteps of many other leaders that preceded him. You probably never knew or cared about Quantitative Easing, and can't tell me what it is. Nor would you want to. And that's by design.
Don't worry, I'm here to help (in one million words or less...)
Lacking any formal, legitimate, real-world investing acumen- but with an inflated self-perception of mastery that completely belies this fact- many of our newest investors are doing exactly what you might expect them to do, which often involves engaging in the absolute worst decision-making possible: selling into a dropping market (or more accurately, rebalancing into cash) and then buying back during each bear market rally (short-term jump,) only to be fleeced again. Others are not buying in at all, they're done with the market, and perceive it to be a rigged game. Which is convenient because they're broke anyways.
Instead of just waiting a few months for cooler heads to prevail and yet another crisis to pass, a culture awash in instant gratification and dopamine addiction feels certain that their "lived truth' self-delusions perceptions of reality must be correct, everyone else is stupid and now must be the end of times because this has never happened before... because the world began when they were born. As a result, they must do something - anything - to protect our wealth. Not dissimilar to hoarding toilet paper or gasoline, as long as the credit card still works, doing something confirms that they are still in control.
And like running for President of the United States, it's all fundamentally based on deep narcissism and solipsism.
I suspect that a collective lack of wisdom, experience, perspective and self-discipline from [The Millennial / Zoomer] demographic may now be contributing at least some amount to this most recent market dip, and pulling the rest of us all down with them.
Investment strategies like moving to cash when markets go down not only succeeds in stopping the emotional pain but also the cognitive dissonance between one's own self-image of perfection and the reality that they have made bad decisions, thus resulting in unexpected and unwelcome outcomes (which we used to call 'life.') In their failure, TikTok stock market gurus, Reddit boards full of complete strangers and day trading apps like Robinhood all step into the (lucrative) breach to exploit and compound their ineptitude. When their magic pills don't work out the way they want them to, the spiral continues downward.
Since this the first stock market correction to integrate this new generation, the final chapter has yet to be written. We have yet to see real "capitulation" (i.e. carnage, real blood in the streets.) And we may not. But for those who sold their investments and turned their paper losses into reality over the past several months, this was a terrific opportunity to develop resilience, but for them that's now lost and will never teach the lesson it was meant to teach.
To date, stimmy-check meme-darling, AMC is down 80% from it's 2021 peak, and GameStop is down 63%. Apparently, r/WallStreetBets got bored with torturing hedge fund managers in 2021, or more likely just got distracted. Indeed, one of the weirdest aspects of modern culture is that the typical news cycle of even major stories lasts about two weeks. As a result, most people- especially younger- have the attention spans of goldfish. That's why the terms Occupy Wall Street, MeToo and Black Lives Matter have sadly already become punchlines, chapters in an as-yet unwritten book about today's lost generation of social justice warriors with $1,000 iPhones, $6 lattes and subsidized budgets.
It's not that the original premise of these movements was flawed (although all were, of course.... deeply) as much as the unfortunately reality that you just can't achieve social justice leveraging a demographic that still lives with their parents, hates at least one of their borderline personalities, sleeps in, lives online, traffics in outrage and trolling as their primary hobby, and exists only to cancel other people and destroy existing institutions without providing any alternatives.
The ranks of these so-called "protest movements" are basically adult temper-tantrums masquerading as social revolution and are filled with many who lack the intellectual firmware to focus on anything long enough to affect true, lasting (and in my opinion, necessary) social change. They think they are soldiers but they're really just slaves to their dopamine receptors, not to mention Big Tech, MSM and the Open Society Foundation, who know how to manipulate them.
I ended up as an activist in a very different place from where I started. I thought that if we just redistributed resources, then we could solve every problem. I now know that’s not true. There’s a funny moment when you realize that as an activist: The off-ramp out of extreme poverty is, ugh, commerce, it’s entrepreneurial capitalism. - Bono, New York Times, October 24, 2022
When the 'happy chemicals' and their Adderall wear off, they're quickly on to something else. If there is nothing to protest, these petulant children without strong fathers (which I estimate at about 75%) will always find something to complain about, or it will be provided to them through mass manipulation by the MSM. If it's not the environment, it will be animals, guns, or one of the many 'ism's" conjured up in their heads. Most of the ones claiming to be anti-capitalist just hate their jobs, but are too overpaid to do anything substantial about it.
They need villains to hate as much as they need a social cause to love because they no longer have careers and families to fill their disposable time. They have too much time and money. And their smart phones can consistently feed them a constant supply of injustice and outrage to spike their exhausted and gradually numbing dopamine receptors. Again, it's all rooted in narcissism, which is the fundamental theme of our culture today.
Well, technically it's 1.) turning away from God. But if that triggers you and you would prefer to remain secular, we can jump to 2.) bad parenting, producing 3.) lack of discipline, producing 4.) a cultural of children. Which all leads to 5.) narcissism. Or techno-narcissism to be specific.
But who am I to be specific.
This is a big reason that's so many Americans appear borderline sociopathic by the time they reach adulthood. They've been exposed to so much sex, violence, drugs and trauma through their screens, that they're ability to feel true empathy and true emotion is fried. They can no longer distinguish reality from the fiction they consume for most of their waking hours, and the pharmaceuticals are only so effective.
Perhaps you have a young person in your life that behaves like this, completely aimless and a slave to their emotions. Maybe they go to rallies, or protest marches wearing colorful hats. They make signs. They change the social media avatars to support the cause du jour. Now - just for a moment- imagine them setting up an online trading account and investing in this stock market, and you're on your way to understanding the stock market in first three quarters of 2022.
You might dismiss this anecdote as too simplistic, or this demographic as too young and too small to matter to a global market. But recognize that their oldest members were born in the early 80s, are now in the early forties, and are hardly an insignificant influence on our society nor the markets. They play a leading role in the chaos we're all witnessing in both areas in 2022. And it's liable to get worse.
Recognize that these people vote and procreate
Of course, I can't pin all of this on young day-traders investing their 3-4 rounds of stimulus checks and childcare credits - as much as I'd love to. That's admittedly an overly-simplistic and inaccurate generalization and there is always enough blame to go around to all age demographics in every economic and market swoon.
As I've mentioned repeatedly, some of my smartest and most resilient clients are under age 40. But my offices are in Kerrville and Fredericksburg and my younger clients are certainly NOT representative of the greater population nor that generation. That urban demographic was raised in an coddled city environment or the safe suburbs and 'don't need no advisor' because they've watched a lot of YouTube, know it all and trade accordingly. They think I'm a dinosaur, which I admit is kinda cool. When I used to knock on doors looking for clients, people used to tell me to come back when I could drink alcohol and looked like the guys in the wire house brokerage commercials, with white hair and smart haircuts. (Now I have one out of two and it's awesome.)
As a result of their fragile investment strategies, each month this year- and right on schedule- Wall Street has stood by, ready and more than willing to accept those unwanted, dropping and discarded stock shares in exchange for some of that free fiat currency of rapidly decreasing value from the Federal Reserve. Our newest market participants are prodded by investment banks analysis reports, planted stories in the media and internet investment fear-mongering that the sky is falling and it's going to get worse.
"Herd stupidity is a problem, but it’s also an opportunity. When you realise that its ok to question, disagree, argue and counter the propositions of the consensus (which is often built around luck and stupidity), then markets start to get interesting again! Understand why others are wrong, and you are halfway to grasping why you might be right." - Bill Blain, Morning Porridge
When I see this content, I always ask myself, "If you were an investment bank with compromised ethics and an enormous (think billions) incentive to buy stock anonymously for much less than today's prices, would you push your analysts to publish market analysis that the economy, market and/or a company stock is going up or down?
If it was me, I would claim it's all going down. Way down. And never coming back. And that crypto is the new paradigm and the better bet for the new markets. My report might be titled something ambiguous like... I don't know... Recession Risk is Very Very High.
Here's another little secret: when the big banks are providing free market analysis to the public, they're not looking for accolades. They're planting snares and looking for marks. When financial websites do it, they're not looking for validation, they're looking for (greed/fear) clicks. Like social media, never forget the maxim that when the service is free, you're the product.