Boomers Gone Wild
Chuck Ponzi April 27th, 2007
While much has been said about Boomers and their propensity to spend, it would seem that many of that cohort are quite wealthy (especially after the biggest asset bubble of all time), if nothing more than on paper.
It is, however noteworthy to examine some of the cultural and generational differences between Boomers and later generations, namely X’ers and Y’ers. I would suggest that in some ways, they are very much the same. A propensity to consume mixed with a lack of self-control (for the most part) has changed the landscape of America’s economy (roughly 70% of the economy is now consumer-driven. With a ever-more competitive global labor force stirred in with enabling technologies, we see much of the world now competing for lowest-cost solutions. Not only for manufacturing, but of the knowledge based economy as well.
Tanta on Calculated Risk today featured a piece on the generational differences between the soon-to-be retired, and the current consumers that the after generations represent. A good read by many accounts:
Simply put: As consumers become increasingly computer savvy, brokers are finding they are no longer in charge. Those brokers who don’t keep up are in danger of becoming, well, endangered. But it’s not just a matter of disseminating information; the medium is the message. . . .
“They are techno-literate and techno-fused,” says Dallas-based consultant John Ansbach. “Gen X grew up as computers grew up. Gen Y is techno-fused. They don’t know how to do anything without computers. The latch-key effect for both is a profound sense of: I can do it on my own, given the right tools. Gen X and Y-ers believe in their heart of hearts if they had enough coffee and access to the Internet, they could learn to fly the space shuttle.”
This is much like an entry I made some time ago, Boomers, Clueless and Wondering. Not that you would paint the entire generation with the same brush, but there are a number of funny things about many boomers when viewed outside of the little world they created. I once had the generational differences described to me in a management seminar (by a boomer no less) in terms related to the Myers-Briggs Type Indicator system. The instructor identified boomers as being more extroverted, sensing, or some such garbage. I honestly lost interest from that point on because it seemed fruitless to try to compartmentalize an entire generation, much less a single person. So, the irony of the situation was not lost on me. A boomer, describing to me, in boomer terms, how they were different from others. How pathogenically self-obsessed.
So, it was with a little internal chuckling that I read from MSN a recent story titled “Boomers Going Bankrupt“. It seems our favorite extroverts are going bankrupt faster than everyone else:
Americans over the age of 55 are filing for bankruptcy at a faster rate than the general population as growing mortgage debt and higher health care costs make them more vulnerable, a new study shows.
The trend of rising bankruptcies among older Americans is likely to continue for the foreseeable future, according to the study’s authors, John Golmant and Tom Ulrich, researchers at the Administrative Office of the U.S. Courts.
Which, I have to admit makes me sad to know that with all of the wealth that the generation accumulated through stocks and houses, they still can’t pay their bills. There was a great short skit from Saturday Night Live titled Don’t Buy Stuff You Cannot Afford that might just come in handy for that conversation.
All of which is interesting because it seems that the Gen-Y’ers are doing a little better with their own consumption than was previously imagined (Kudos to solvency):
The steepest increase in Chapter 7 filings occurred among people older than 55.
Golmant and Ulrich also found that the median age of those filing for bankruptcy rose to 41.4 in 2002, up from 37.7 in 1994.
The youngest Americans, meanwhile, had a drop in filings, with 4 percent of Americans under the age of 25 filing for protection from creditors in 2002. That fell from 11 percent in 1994.
Which makes me wonder if this entire financial system that the Boomers built (Debt, consumption, mortgaging the future) won’t just someday implode on America. This image reminds me of one of my favorite boomer-era movies endings:
I am in that birth dearth that was lumped in to gen X. I guess I am heading into the prime years for my career and econ is about to tank.
Since we are surrounded by larger population grouping I get marginalized all the time.
When I went through school they were yanking funding from colleges since boomers were laid off in mass.
Now, buinesses are going to tank and pensions are going to be a big mess. I predict they marginalize the value of working hard by higher and higher tax rates.
Born at a bad time.
The boomers… the sense of entitlement is over whelming. Its disgusting. Anyhow, they made decisions to marginalize the future and will try to use their volume of votes to force solutions. It will be UGLY.
As noted before… working is more and more of a marginal benifit.
For what its worth about us genx geny types. Learning is a function of motivation, effort and information. You can go out on line and do better investment research than you get from going on autopilot with a broker/fund player anytime. if you buy a good flight simulator you can learn a hell of a lot about flying a plane or the space shuttle. Simulators have just become pretty cheap. Its a low cost way of getting information out.
Hence usefuull and wonderfully informative blogs like this one.
Great article!
Buy now, pay later. What in the world could be wrong and un-American about that idea?
The U.S. dollar has never been weaker, so everyone who were dumb enough to loan our non-manufacturing,unproductive worker economy U.S. dollars years ago are really getting short-changed big time in 2007! And our response? Loan us more money (pretty please with sugar on it)!!!
What? You mean borrowing money won’t be so cheap forever?
Aw come on! That’s not fair! We’re entitled! Sausages! We want our sausages!
Sort of off topic regarding your last clip, but I just loved the way Charlton Heston would keep saying “Dr. Zayusss” all the time in the film.
That ending still sends chills down my spine. I was just a kid when that movie was first shown on TV; I grew up under the cloud of MAD and the Cold War.
I don’t know if anyone has heard of Ted Lui, and what he’s proposing, but I thought I’d post what I found on another board.
“TED LUI (CA assemblyman) and others on the California banking and finance committee passed a proposal Monday to use money from the Affordable Housing Bond to bail out homeowners who were “victims” of “predatory” financing and can’t make their mortgage payments. CALL Ted Lui’s office, talk to Tiffany or Mark, 916-319-2053, and call every assemblyman on the appropriations committee (that’s where it goes to a vote next), and call your local state assemblyman, tell them you don’t want your hard-earned tax dollars going to bail out buyers who overpaid and didn’t read their loan documents, tell them the affordable housing bond money was to be used for affordable housing not for bailouts, call or don’t complain when it happens!”
Here’s a response that one poster received after calling Mark…
“I gave Mark every completely rational argument I could give, not screaming or yelling, just speaking in a controlled, professional voice, against this bailout idea…all he could counter was “that’s your opinion”, “I’m sorry you feel that way”, “we’ll just have to agree to disagree so there’s no point discussing this”, and he just kept going on and on about how many people were “victims” of “predatory” lending and that was what this was trying to correct. No explanation as to how such lending was predatory, why the ADULTS who signed the loan documents were not responsible for their actions, why it is my problem as a taxpayer, nor why we should reward those alleged predators by making payments that didn’t pencil for the borrowers to begin with. I hope every one on this board calls him and every other assemblyman you have time to harrass, I mean contact.”
Sounds like a prick, but I’m going to call him tomorrow. Might not help, but it certainly won’t hurt to give this idiot a call.
This should be a main story on SoCal Bubble (Chuck P) — I’m going to call Mr. Lui’s office, thanks for the heads up!
Would you please provide a link to the proposal to use the CA affordable housing bond to bail out the so-called “victims”? I have failed to find it.
Oh, bill AB1538. Got it.
I was born in 1975, so I am smack dab in the middle of Generation X. What I have learned is boomers are trying to out do each other. My father fell into the same trap. He is (suprise, suprise!) a Real Estate broker of 20 years. He has always been on the brink of bankruptcy and itfinally caved in on him when his two Jaguars (both leased) were repo’d. Credit cards maxed for years. Always buying new crap. Barely makes his mortgage payment. Yet, makes $150K a year. Filed for BK last year.
Just like a bunch of his other RE cohorts.
I literally have a higher net worth than him. I save, py my taxes and buy stuff that I can afford with my flawless credit history all the way back to age 18. How others get in so deep, I have no clue.
All I can say is the Boomers look awfully stupid and foolish to Gen X and Y’s. We are much more financially savvy and have access to endless info about finances. I still love the survey that notes Gen X’s don’t want the McMansions and see no need to excess space. What is gonna happen when the Boomers die off? Wooohooo!! Cheap castles!!
I really feel like there is some kind of over materialistic sickness to the boomers. The McMansions are a big symptom.
I was born in 1973, a Gen X’R and proud of it. I also have 0 debt, three IRA’s, own my car, save for important purchases and have an 815 credit score. I think that is definitely something to be proud of. I won’t spend $12.00 for a beer at Dodger Stadium, and I refuse to pay 700k for a teardown in a shitty neighborhood! Simple logic. No bail-outs!
LA Renter: you got that right! They won’t stay 700K for long.
Now many of these baby booomers will be looking to downsize their homes especially if they no longer have kids in their place. Most will not upgrade to a McMansion so this also brings up the question of what will they do with their family homes? Many, I would assume have a large equity position, and wouldn’t mind cutting prices to unload in a declining market. If anything, they will still make out like bandits. This would accelerate the trend toward the downside.
In addition, demographics are shifting. No longer are we having 3 or 4 kids. Most twenty and thirty somethings are planning on having one or at most two kids. When this occurs, the turnover rate in housing should be 1 to 1. When Social Security started, the rate was roughly one percent per worker. Now we are up to 7.65% with Social Security and Medicare…money many of us will never see in our life.
Is there a generational gap? Absolutely.
Dr. Housing Bubble
http://www.doctorhousingbubble.com
Boomer married to a boomer, no kids. We’re living in a 24′ Silver Streak, so I hope you don’t expect us to downsize
So yes, I would say that you have generalized a bit. (The young folks I know in our area usually have three or more kids by the time they hit their mid-20s. Life is different in the country.)
I wanted to comment on the bankruptcy issue. And I’m not talking about the classic boomers with the Mcmansions you mention above. I’m talking about the average folks in their 50s. They file for bankruptcy because they are finding either low paying jobs or no jobs. Companies prefer to hire folks under 40. If you do not believe this is so, then I think you will be in for a big shock when you hit your mid 40s. For the generation before the boomers, it was not usual to start a job at high school and retire for it. I suspect that many boomers expected to do the same.
Reread this portion of my blog:
It is pointless to try to compartmentalize an entire generation, there are too many exceptions. However, it is at least interesting that boomers, not having grown up in a “PC” required environment have learned that one important distinction… generalizations are well, generalizations.
I am sure that lots of X’ers and Y’ers have lots of expectations about life, but that doesn’t necessarily mean that they’re going to cry, whine, or even go bankrupt trying to achieve consumer nirvana (even though they probably will). The comments are better suited to a commentary on human nature more than a specific generation.
It is sad that more older people are going bankrupt faster than younger people (both in numbers, and percentages) especially since their age group should be at both peak earning and wealth years. So much for self-control.
Chuck
As a final note, it sounds like you have escaped the propensity to consume more than the average American. You should be applauded for that. Not being a drain on society is a good thing.
Interesting read