Today, we’re going to talk about one of my favorite topics; demographics.
We’re going to talk about boomers. Yes, those boomers. We will also talk about millennials and I will show you why the next ten years will usher the greatest investment opportunities of our lifetime.
This is an important subject. You don’t want to miss this.
Let’s get started.
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Boomers Are Special
Why? Because they exist.
After WWII, most countries experienced a demographic collapse. With Europe in ruins, there were not a lot of reasons or opportunities for couples to settle down and start families. Most of Europe was in debt (mostly to the United States), and couples don’t have babies when the future is uncertain.
These problems didn’t exist in America.
The war was never fought in American cities, so our infrastructure was completely in tact. More importantly, our factories were never destroyed meaning the post WWII economy was thriving due to the American manufacturing machine.
The middle class was forming. The soldiers came home from war and started families. As such, the baby boomers entered the world and have been carrying the United States economy ever since.
There are simply so many baby boomers in America, but only in America.
Now, let’s talk about the opportunities.
Boomers Are Selling Their Businesses
Boomers turned out to be prolific entrepreneurs. They started more traditional brick and mortar businesses, and built the driving force of the American Dream, which is the American Small Business. These businesses come in many forms, but typically, they are …
- mechanic shops
- window installation
- accounting firms
- plumbing businesses
- manufacturing plants
- local retail companies
What’s amazing about these small businesses is that they are cash flow positive and profitable. Venture capital didn’t exist in the way it does now, so most of these small businesses were given local grants, government loans, or bank loans to fund the upstart costs. However, most of these debts have been paid off.
If you follow my work, you know that my entire investing philosophy is based off of cash flow. And these small businesses are generating billions of dollars in profitable cash clow.
So what’s happening?
Boomers are selling their businesses. Boomers are healthy and active and they have 40 years of money invested into 401k’s and retirement funds. They are ready to spend time with their grandchildren, go on cruises, and get out from behind the counter.
This will create the greatest transfer of wealth in this history of humanity.
There will be so much money transferring from the boomers to the gen Xers and millennials over the next ten years, it’s hard to even fathom.
But, it’s not what it seems. What’s most fascinating about this transfer of wealth is that many millennials can’t or won’t acquire these companies.
Younger American’s want to be YouTube stars and Instagram influencers. They want to be tech entrepreneurs or own Etsy stores.
Additionally, many millennials fell into the trap of higher education, which means they are still paying off student loans. Most millennials simply can not, or will not, absorb the assets and opportunity that lays in front of them.
The demand for these businesses will be low and the supply will be high, which means you can buy profitable companies for cheap.
Here are some fascinating numbers …
Codie is right.
This opportunity is massive.
Now, Let’s Talk About Millennials
Millennials are also special. Why? You guessed it, because they exist.
Almost every western country in the world is seeing a collapse in demographics. It’s simple math. If the previous generation didn’t have families, then the subsequent generation doesn’t exist.
We see this happening all over the world, but especially in the western world.
- The United Kingdom
None of these countries have the demographics to keep the consumption numbers high enough to maintain liquidity in the economy. Young people do most of the daily consumption, so it’s difficult for these countries to maintain small businesses because no one is there to buy the products.
Except for America. America has the millennials.
We have a next generation of entrepreneurs and consumers to buy homes, cars, coffee, furniture, gadgets, lawn care services, lamps, carpets, kitchen appliances, and every other product you can think of.
Most importantly, America has a next generation to absorb all the wealth that the boomers are handing down.
In addition, the circumstances of the millennials upbringing has given them a set of character traits that are unique and well suited for the world.
What does this mean?
The reasons millennials are the way they are is a matter of experience. Millennials don’t trust institutions, and why would they? The typical millennial has seen …
- bankers collapse the world economy in the great financial crisis and do so with zero accountability.
- a higher education system that preys on them for student loans, continues to increase price in relation to wages, and provides a sub par service.
- a government that spent trillions on a war that generated nothing in return.
- a housing market that has priced them out of the ability to buy a home.
- a family dynamic that has seen divorce rates at the highest levels in history, which made millennials skeptical about the typical American family dynamic which meant they got married later in life.
Sure, millennials are jaded and non traditional. However, millennials are confident in themselves. They see entrepreneurship as being less risky than getting jobs. They have less to lose, because they never materialized assets, and they are more mobile because they are the first generation to embrace technology.
Millennials are extra special. They are smart, confident, independent, and educated. They also excel in social skills and are highly competent.
Millennials are in the perfect position to buy businesses, acquire assets, create multiple streams of income, and become the wealthiest generation in the history of the world.
It’s not ego, it’s just numbers.
But wait, there’s more …
The Real Estate Bubble
Many of the concepts we are talking about is even more true for real estate.
I read a fascinating article last week about America’s housing market. You can click here to read the article. Here are the bullet points.
- Home prices are at record highs.
- Rates are at record highs.
- Home prices are the highest percentage of income on record.
- Since most home owners bought their mortgages at such low rates, no one is going to sell.
- Even if the rates came down, all that would do is increase demand and decrease supply, which would increase prices.
On the surface, it would appear that millennials are in trouble, because they simply can’t afford to buy a home. We touched on this briefly in the section above. However, there is light on the horizon for millennials.
The housing market is complicated and there are many factors that has created the sticky home prices, even in the face of increasing interest rates. But there is one huge factor that can’t be ignored. What do you think is the main driving force that is keeping home prices so high?
You guessed it, boomers.
Two things are happening ..
1. Boomers aren’t selling their houses. Boomers mostly own their homes and they have no incentive to sell. If a boomer wants to downsize, they still have to buy a new house and due to high interest rates, doing so is not financially feasible.
2. Boomers are buying houses for their children, the millennials. Again, because home prices are so high, most millennials cant afford the down payment for a single family home, so boomers are using their cash to help out. In addition, they are buying houses as investment properties because they are the generation that has the most liquidity and assets to be able to afford the loans. In fact, the average age for new home buyers is now 47 years old.
This trend can’t last forever.
As we know, life waits for no-one, and eventually, the boomer generation will pass on their wealth to the next generation. When this happens, the markets will be absolutely flooded with real estate, in the same way that markets will be flooded with small businesses.
The high demand will lower the prices. This means, there will be deals to be had.
We will see an absolute influx of single family homes that can be bought for cheap and converted into rental properties, flipped, or simply owned and lived in.
The same is true with small businesses, annuities, trust funds, high end art, classic cars, and any other financial asset you can imagine.
So, to my millennial brothers and sisters, hear you me. I know it feels all doom and gloom right now, but there are brighter days on the horizon. In the end, markets are fair (in the same way that The Joker is fair) and the anarchy of markets will continue to tell the truth.
We are entering the greatest investment opportunity in the history of the world.
All you have to do is be humble enough to recognize the opportunity, and daring enough to take advantage of an unsexy cash printing machine.
I would rather be rich than be cool. This is your opportunity.
In the meantime, I suggest you hug your parents and call your grandma. Because when these moments come to pass, the last thing you’ll be thinking about is home prices.