Party Is Over
I am writing mostly to thank you for not including the seemingly obligatory slam on Gen X that most articles like this are compelled to include ["Picking Up The Pieces," May FA]. When boomers aren't busy ignoring us, they like to take the time to explain how they stopped a war (Vietnam), and deserve what they have because they work so much harder than we do. I don't know how old the authors are, but they managed to be fair.
I'm a card-carrying Gen X'er-think Brat Pack, Robert Downey Jr., MTV, Ronald Reagan. I'm also a benefits specialist, although not a financial planner (my office mate is a CFP and I stole his magazine.) I'm also a graduate of Boston University's School of Management, where I concentrated in finance. I mention all of this because of my other thought about "Picking Up the Pieces": It didn't come close to expressing how skeptical we Gen X'ers are of the market-especially equities.
And I say this as someone who has studied markets for years. It isn't that people can't form trusting relationships. It is that the underlying things being sold are fundamentally fictions. How can you build a platform of trust on objective, clear-eyed advice when the very objects being analyzed are fictions?
The fix is in, and the retail investor has no chance. It's all lies. It's a radical mistake to think that this generation will ever come back. The game is up. The party is over. We can't even get Elizabeth Warren confirmed so that she can clean up the worst messes and restore some level of credibility. Business is against it because the lies suit the insiders.
Sorry to be so dark, but I think your readers should be warned in much stronger terms that the ground they're standing on is actually a rotting bog.
Jeff Tyrakowski, GBA, partner
Evan Simonoff Responds:
Your suspicions are accurate. Both the article's lead writer, James Frederick, and myself are card-carrying boomers. A person's date of birth is an event over which they have zero control. Nonetheless, there are many who share your views, which the article tried to illustrate, and who need to be heard. It also is hypothesized that the sobering string of events that Generations X and Y have witnessed over the last decade might imbue them with more realistic expectations and prepare them for better careers, even if the latter prospect looks very distant at the present.
Compliments to Mr. Statman ("Herds And Bubbles," April FA) for detailing the relationship between the herding behavior and bubbles; importantly, the piece offers readers a timely reminder of the trouble inherent in collectivism. A type of fallacious reasoning, groupthink is increasingly relevant. The tendency to associate with likeminded folk is appealing in that it is comfortable and conservative. But symmetry of thought is an eminent problem for investment management. When investors and financial operators act in concert, risk and uncertainty are concentrated, and when things go bad, calamity concurrently impacts everyone (a la 2008-2009).
A byproduct of groupthink amongst both retail and institutional investors is an oversimplification of the asset allocation process into binary investment elections: equity and debt; public and private; active and passive; liquid and illiquid; long-only and long/short; local currency and foreign currency; U.S. and ex-U.S. domiciliation. Resultantly, the composition of portfolios is strikingly similar.
Investors would be well served to extricate themselves from the process of solely allocating to "traditional" asset class buckets. Instead, conventional asset allocation ought to be complimented with a process to identify unique risk-return-correlation profiles that will round out the investor's allocation and protect wealth during periods of market stress (beta expansion). Water, art, shipping, infrastructure, wine and factoring are unique "emerging asset classes," undiscovered by the masses and offering first-mover advantage to sharp investors.
Kendall D. Doble IV