Comments on: Generation X Has Taken a One-Two Punch in These Economic Times

By: TB

TB — Sun, 05 Apr 2009 16:56:03 +0000

Great post, making me glad I didnt graduate any sooner, although I think the 80s would have been a great time. My ultimate concern about people saying stocks are cheap right now is they are acting as if long run growth will be the same as it always was. This may be true globally (hence why the S&P500 could be a good investment), but the US and Europe are going to have significantly lower growth than in the last century.

By: Kristy @ Master Your Card

Kristy @ Master Your Card — Wed, 18 Mar 2009 08:31:15 +0000

Excellent post! I’m glad there’s still some positive Gen Xers out there. All of the ones I’ve been speaking to lately are cashing in their investments and sitting them in the bank. Trying to talk to them about it is like talking to a brick wall – they’re not trying to hear it. They been battered and they don’t want to take anymore. But, I still say that staying the course is the wisest option. Investing in the market is a long-term choice (unless you’re day trading and that’s a whole other animal) and it’s not meant to be looked at from the short-term perspective. This is why you should be adjusting your risk tolerance to what you can really tolerate…so that in the event something like this happens, you’re not panicking and wanting to pull out. The market will get better, it always does.

By: Jeremy

Jeremy — Tue, 17 Mar 2009 21:37:23 +0000

Those are good points, thanks for sharing. I know I’m not alone, but we saw an elimination of raises and such this year as well. Not to mention fewer opportunities to move up.

It is making an already difficult time even worse as we do enter our peak earning years without as many possibilities for increased income or advancement.

By: Asa

Asa — Tue, 17 Mar 2009 19:22:56 +0000

There is a problem economically speaking that the Boomers are going to be putting a lot of downward pressure on the market with them retiring.
But also now I am in a company that is not expanding but the Boomers are also NOT retiring…Meaning that X’ers are not getting the money and promotions they deserve and also as Froogirl pointed out the incomes are not keeping any sort of pace with respect to experience, inflation or cost of living.

By: Froogirl

Froogirl — Tue, 17 Mar 2009 15:17:50 +0000

Also, don’t forget that many of us started our careers during a recession. I graduated college in ’93. It took me a few months to find a job. My brother graduated four years later with an equivalent degree. Prior to graduation, he had multiple job offers for close to what I was making after four years in the workforce.

I’m not so worried about retirement. We’ve been squirreling away money since the mid-90s, and I don’t expect to touch that money for three decades. Presumably, the markets will recover by then.

What I do worry about is that now that we’re hitting our peak earning years, we’re entering what is sure to be a prolonged recession (at best) with stagnant wages and limited opportunities. This severely impacts our ability to save for non-retirement-related things — mainly college and other general quality of life improvements.

I feel like we’ve gotten screwed all around.

By: Matt @ StupidCents

Matt @ StupidCents — Fri, 13 Mar 2009 17:36:10 +0000

This is a great opportunity for 20-somethings to start planning for retirement while the markets are being slammed. I know it’s hard to look at account balances and seeing red, but that is for the short term. We have 30 years working for us!

Same thing goes for home ownership. It is becoming an attractive time to be a first time home owner with low rates and ample supply (not to mention the credit).

Call me an optimist.

Stupidly Yours,

Matt

By: Chris

Chris — Thu, 12 Mar 2009 19:15:35 +0000

I can’t believe I am a financial advisor with my attitude. Thankfully MBA classes start in May!

Thanks for the response, I really enjoy your blog!

By: Jeremy

Jeremy — Thu, 12 Mar 2009 19:01:33 +0000

@ObliviousInvestor – You’re exactly right. A sideways market early in your investing career is wonderful in the long-term. And those that recognize this will pay off in the decades that follow. Even if the stock market doesn’t return to its touted 9-11% annual return average, those who were able to, and could stomach 10-15 years of volatility to accumulate investments will eventually see the rewards.

The problem is that most people won’t look at it this way and they read the headlines showing a negative 10-year average return on stocks, and may find that they would rather bail and do something “safer” since everything they were taught appears to be wrong.

@Chris – You followed up with exactly some other concerns. First, you need buyers in the market. Now, there will always be buyers, but like you mentioned there is a shift moving towards those who will need to begin selling in order to generate income, and put additional strain on the markets.

In a perfect world that would be offset by the younger generation buying because they are investing for the long-term. But when you have a whole generation who have spent the last 10-15 years seemingly earning nothing on their investments, if you start to see a large scale shift away from that it could pose a problem, although I’m no economist so I may be completely off base.

And you’re right about a lot of X-ers feeling burned after the last market downturn and now this one. I have met with a lot of 30-somethings in the past year who have basically thrown their hands in the air and have given up on the market. I can’t even begin to tell you how many sit down and are in disbelief. In 2007 most were saying “thank god, I’m finally starting to get back to where I was 7 years ago”, and now they are back to those levels again and it’s just too much so they move into money markets or bonds.

So I do think that is a real concern where this generation has been burned twice, and in some cases badly very early on in their careers, so there is some cynicism going forward that it’s a lost cause and will abandon the idea of investing.

By: Chris

Chris — Thu, 12 Mar 2009 18:47:20 +0000

Great post and very true!

I just worry that there won’t be enough money chasing stocks to make the market “rise”. The problem is a stock only goes up on the secondary market if there is another guy willing to buy it for more, right? My concern is that the baby boomers with the vast majority of the wealth are going to be net sellers in the equity market. Could they possibly take the chance in exposing their retirement to stocks AGAIN after being burned twice in their peak earning years? My guess is no.

As far as my fellow generation X-ers, I worry that many of them getting burned twice so early in their formative investing years will also be very reluctant to enter the stock market again. It happened with depression era folks and I could see it happening again.

The Fed is effectively putting a gun to our collective heads saying “you WILL buy stocks” by keeping interest rates so absurdly low, so it is possible that we’ll all just plug our noses and jump back into equities since there are few alternatives. I just fear the gig may be up and people are going to take their ball (money) and go home (bank, mattress, coffee can).

Just something to chew on..

By: ObliviousInvestor

ObliviousInvestor — Thu, 12 Mar 2009 18:19:59 +0000

Hi Jeremy.

I agree with your statements about Gen X having taken it in the chin twice in terms of jobs due to the two recessions.

But I’d argue that Gen X has been exceptionally fortunate in terms of investing. During your highest earning years (ie, those years that you’re buying investments), the market has gone nowhere.

Correct me if I’m wrong, but isn’t exactly what you want as a buyer?

Compare this to the Baby Boomers who had a huge run up while they were buying, and now that they’re starting to retire and getting ready to sell, the market tanks. Yikes!

Is there something I’m missing here?

-Mike (a Generation Y investor who’s happy to be buying at low prices)