4 ms·

Peter Zeihan makes an interesting observation: the 2010-2020 decade was the peak of baby boomer employment. Boomers are now entering retirement en masse. Witho

by spaceman_2020 4y ago

Peter Zeihan makes an interesting observation: the 2010-2020 decade was the peak of baby boomer employment. Boomers are now entering retirement en masse. Without a source of income, these retirees - the wealthiest generation in America and much of the world - will shift their investments to less risky assets. This, along with higher interest rates, will starve the world of cheap capital. Wonder how much of an impact this has had. The risk profile of a 60 year old senior exec at a Fortune 500 company looks different from the risk profile of a 65 year old retiree.

throwaway0a5e 4y ago
Regardless of the source, the loose money floating around for a decade made a lot of terrible people wealthy enough to, in aggregate, do bad things to the economy and nation. I'm not gonna lose any sleep over the money chasing safer returns. God forbid some questionable business ideas at the margin don't get funded.
- spaceman_2020 4y ago
  Here in India at least, it feels that the venture capital class has completely forgotten about the bottom 95% of the population. Almost all capital is chasing the lucrative top 5% with products specifically designed for them (like a credit card bill payment app - only 5% of the population even owns credit cards). Feels like a misallocation of capital if I'm honest that will just create more unequal and unhealthy societies.
  - jp57 4y ago
    I guess when the wealthiest 5% has the same population as all of France, it's hard to resist.
  - kwertyoowiyop 4y ago
    It’s easier to design a product whose target market is “people who spend a lot of money.”
  - thr0wawayf00 4y ago
    The situation is largely the same in the US, especially around gig economy companies. They provide a service that a large percentage of the population can't afford to use (many who can't afford the service wind up as the workers), and in some cases even issue debt as a carrot to get workers in the door. Uber is a perfect example of this. Not only did they create a market that they controlled all the levers to in order extract the value, they started partnering with auto lenders to get drivers into nicer cars with the promise of earning extra through their premium service. So they effectively became the lender and the employer, which is frankly unconscionable in a modern and free society. The suicide rate of rideshare drivers is a severely under-reported crisis in the US. But to your point, the big money doesn't care about that.
  - lotsofpulp 4y ago
    > Feels like a misallocation of capital if I'm honest that will just create more unequal and unhealthy societies. I think you have the causation backwards. Rising income/wealth inequality is what leads to capital chasing the lucrative top x%. I would say automation and technology and their resulting economies of scale inevitably lead to income/wealth inequality, and wealth redistribution is a political problem with political solutions. There is nothing a VC fund is going to be able to do about it.
jp57 4y ago
The oldest boomers turned 65 in 2011 though. More than half of Boomers are over 65 already today.
- ghaff 4y ago
  And consider that even prior to retirement a lot of people start shifting at least some investments into lower risk assets.
gen220 4y ago
The implication that retirement implies less risky investment isn’t true for the truly rich, who control most of the wealth in truly risky asset classes (VC, etc). For example, consider a 60 year old retiree with a 529 plan. Their daughter got into an expensive college but received a merit scholarship, so they only need to use 1/2 of the plan’s balance. The 529 is inheritable by the beneficiary, who will have children going to college in 25 years. The time horizon of the investments in this portfolio just went from near-term/conservative to long-term/risky. Similarly, there are many boomers who have more money saved up than they could reasonably hope to spend in retirement. They are no longer investing for their future selves, but for their children or grandchildren, who have long time horizons. Also, most of the LPs in big venture funds are institutional capital (endowments, family offices, etc), not personal capital. The argument that appetite for more risky investments will dry up (say, decline by 50%) is flawed if it hinges primarily on demographics and interest rates, IMO. These asset classes are far removed from the retirement strategies of everyday people.
- FunnyBadger 4y ago
  Most Boomers are anything but wealthy - and the few that are are only wealthy on paper. OP is correct on this.
  - gen220 4y ago
    Right, but the median Boomer is not invested even indirectly in risky asset classes that influence early stage company funding, which is why the predicate (median retirees diversifying into more conservative investments) does not imply the conclusion.
- commandlinefan 4y ago
  > got into an expensive college but received a merit scholarship I know you're just throwing out an example and I'm going off on a tangent, but as somebody who just went through the college admissions process, this scenario is about as realistic as the retiree's daughter visiting an alien civilization on her flying unicorn. Merit scholarships for expensive (i.e. "prestigious") colleges barely exist - you might get $1000 (of the $70K annual tuition).
deleted 4y ago
[deleted]
francisofascii 4y ago
> will shift their investments to less risky assets Which assets are less risky, exactly? Bond prices are tanking. Cash is inflating. Real estate is probably next. I would argue it is best to stay diversified to be risk averse.
- throw8383833jj 4y ago
  absolutely. i'm the most risk adverse person I know and I wouldn't touch cash or bonds with a ten foot pole. I'm staying as diversivied as i can: real estate, gold, equities and bitcoin. as well as much and as many alternatives as possible: electric car, solar panels, electricifcation of all applicances, etc. cash and bonds are far far too risky at this point. Its interesting that institutional investors have sold off assets for cash. that's not a defensive position. that's a highly offensive one because everyone knows you can't stay in cash. it's a hot potato: you need to get rid of it before inflation eats you alive. i can't wait to see where they dump all that cash. but you know it'll be some combiantion of equities, gold, real estate and bitcoin.

throwaway0a5e 4y ago

Regardless of the source, the loose money floating around for a decade made a lot of terrible people wealthy enough to, in aggregate, do bad things to the economy and nation. I'm not gonna lose any sleep over the money chasing safer returns. God forbid some questionable business ideas at the margin don't get funded.

spaceman_2020 4y ago
Here in India at least, it feels that the venture capital class has completely forgotten about the bottom 95% of the population. Almost all capital is chasing the lucrative top 5% with products specifically designed for them (like a credit card bill payment app - only 5% of the population even owns credit cards). Feels like a misallocation of capital if I'm honest that will just create more unequal and unhealthy societies.
- jp57 4y ago
  I guess when the wealthiest 5% has the same population as all of France, it's hard to resist.
- kwertyoowiyop 4y ago
  It’s easier to design a product whose target market is “people who spend a lot of money.”
- thr0wawayf00 4y ago
  The situation is largely the same in the US, especially around gig economy companies. They provide a service that a large percentage of the population can't afford to use (many who can't afford the service wind up as the workers), and in some cases even issue debt as a carrot to get workers in the door. Uber is a perfect example of this. Not only did they create a market that they controlled all the levers to in order extract the value, they started partnering with auto lenders to get drivers into nicer cars with the promise of earning extra through their premium service. So they effectively became the lender and the employer, which is frankly unconscionable in a modern and free society. The suicide rate of rideshare drivers is a severely under-reported crisis in the US. But to your point, the big money doesn't care about that.
- lotsofpulp 4y ago
  > Feels like a misallocation of capital if I'm honest that will just create more unequal and unhealthy societies. I think you have the causation backwards. Rising income/wealth inequality is what leads to capital chasing the lucrative top x%. I would say automation and technology and their resulting economies of scale inevitably lead to income/wealth inequality, and wealth redistribution is a political problem with political solutions. There is nothing a VC fund is going to be able to do about it.

jp57 4y ago

The oldest boomers turned 65 in 2011 though. More than half of Boomers are over 65 already today.

ghaff 4y ago
And consider that even prior to retirement a lot of people start shifting at least some investments into lower risk assets.

gen220 4y ago

The implication that retirement implies less risky investment isn’t true for the truly rich, who control most of the wealth in truly risky asset classes (VC, etc). For example, consider a 60 year old retiree with a 529 plan. Their daughter got into an expensive college but received a merit scholarship, so they only need to use 1/2 of the plan’s balance. The 529 is inheritable by the beneficiary, who will have children going to college in 25 years. The time horizon of the investments in this portfolio just went from near-term/conservative to long-term/risky. Similarly, there are many boomers who have more money saved up than they could reasonably hope to spend in retirement. They are no longer investing for their future selves, but for their children or grandchildren, who have long time horizons. Also, most of the LPs in big venture funds are institutional capital (endowments, family offices, etc), not personal capital. The argument that appetite for more risky investments will dry up (say, decline by 50%) is flawed if it hinges primarily on demographics and interest rates, IMO. These asset classes are far removed from the retirement strategies of everyday people.

FunnyBadger 4y ago
Most Boomers are anything but wealthy - and the few that are are only wealthy on paper. OP is correct on this.
- gen220 4y ago
  Right, but the median Boomer is not invested even indirectly in risky asset classes that influence early stage company funding, which is why the predicate (median retirees diversifying into more conservative investments) does not imply the conclusion.
commandlinefan 4y ago
> got into an expensive college but received a merit scholarship I know you're just throwing out an example and I'm going off on a tangent, but as somebody who just went through the college admissions process, this scenario is about as realistic as the retiree's daughter visiting an alien civilization on her flying unicorn. Merit scholarships for expensive (i.e. "prestigious") colleges barely exist - you might get $1000 (of the $70K annual tuition).

deleted 4y ago

[deleted]

francisofascii 4y ago

> will shift their investments to less risky assets Which assets are less risky, exactly? Bond prices are tanking. Cash is inflating. Real estate is probably next. I would argue it is best to stay diversified to be risk averse.

throw8383833jj 4y ago
absolutely. i'm the most risk adverse person I know and I wouldn't touch cash or bonds with a ten foot pole. I'm staying as diversivied as i can: real estate, gold, equities and bitcoin. as well as much and as many alternatives as possible: electric car, solar panels, electricifcation of all applicances, etc. cash and bonds are far far too risky at this point. Its interesting that institutional investors have sold off assets for cash. that's not a defensive position. that's a highly offensive one because everyone knows you can't stay in cash. it's a hot potato: you need to get rid of it before inflation eats you alive. i can't wait to see where they dump all that cash. but you know it'll be some combiantion of equities, gold, real estate and bitcoin.