# 647 – 💸 Millennial money – The Average Joe
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    # 647 – 💸 Millennial money

    victorlei

    March 7, 2024

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    Good morning. Here’s a positive update: the number of people living past 100 is on the rise. Dr. Stacy L. Anderson from Boston University studies these centenarians and has some theories about how they stay mentally sharp for so long:

    • No surprise, they eat nutritious diets rich in fruits, veggies, legumes, and whole grains.

    • They try new things — whether it’s picking up a new language or learning to play a musical instrument.

    • Strong connections to friends and family are key (just maybe offline).

    But perhaps the true secret to their longevity? Really good genes and lots of money.


    ECONOMY

    Millennials Set To Inherit Over $90T In the Next Two Decades. What Will They Do With It?

    How many avocado toasts can $90T buy? The world is about to find out as American millennials are set to inherit as much as $90T over the next twenty years, transforming the fortunes of the generation born between 1981 and 1996. And even by the end of this decade, Coldwell Banker projected millennial wealth is about to grow over 5x from 2019 levels. Which begs the question… what will they do with it?

    The $90T question: According to Knight Frank’s new Wealth Report, the millennial wealth transfer will create “seismic changes in how wealth is put to use.” For starters, analysts say that younger generations are more proactive with money management, including how and who they invest with.

    • Younger clients are embracing values-driven investing strategies like investing in companies fighting inequality and reducing its climate impact.

    • According to Mike Pickett of Cazenove Capital, the younger generation will become more focused on private markets and alternatives, which are more accessible than ever.

    How will they spend their inheritance?

    Pickett also expects Gen Z to “be happier to rent property or lease assets such as cars, and to adopt subscription-led lifestyles.” And the companies that’ll benefit will be the ones that can deliver this “lifestyle.” Interest will likely also play a bigger role in their budget. A 2023 report from Credit Karma said that millennials hold an average debt balance of $49K including auto loans, mortgages, student debt, and credit cards. For the remainder of their cash, let’s turn to Frank Knight’s report:

    • Spending is getting more diverse as females now make up 11% of ultra-high-net-worth individuals — up from 8% less than a decade ago.

    • Younger clients are turning away from historically popular assets like real estate — which they see as “unlikely” to maintain its growth rate.

    Diminishing balances: While nearly half of Americans plan to leave an inheritance, heirs are waiting longer to receive it, according to a survey from Edward Jones. 68% of Americans expect that longer lifespans will affect how much wealth is ultimately inherited — creating a vast disconnect in how great the millennial wealth transfer ultimately turns out to be.


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    LARGECAP RECAP

    🌾 Investors can’t get enough US farmland, with Midwest prices soaring the most

    For years, farms were traditionally passed down through generations of American families… but with fewer heirs, more of these farms are ending up in the hands of Wall Street investors. In the last three years alone, investors have doubled their exposure to recession-resistant US farmland, seeing it as a reliable asset that could gain value as climate change affects arable land. The National Council of Real Estate Investment Fiduciaries (NCREIF) reported that investor groups held $16.6B worth of farmland by the end of 2023.

    • Institutional interest has driven up farmland prices by over 330% since 1997, reaching $5.5K per acre last year.

    • The USDA notes that farmland in the Midwest appreciated the fastest in the past three years, with Kansas, Nebraska, and South Dakota rising 65%, 57%, and 50%, respectively. 

    Betting the farm? Farm Futures points out that inventory is “relatively low right now, making it a seller’s market.” Given the current prices, it’s unlikely you’ll be able to win a bidding war against big money. This makes buying a publicly-traded Real Estate Investment Trust (REIT) like Farmland Partners ($FPI) or exchange-traded funds like the VanEck Agribusiness ETF ($MOO) a more accessible option.

    💳 FICO scores dip amid growing consumer weakness

    The average credit score in the US declined for the first time in ten years — dropping from 718 in July to 717 in October. FICO’s ($FICO) VP of analytics tells Bloomberg it’s not a “blinking red light, but it certainly is a yellow light.” While it may not be reason to panic, it suggests that consumers are facing challenges as they struggle to keep up with bills and accumulate more debt. 

    • As of Oct. 2023, 18% of Americans have credit card delinquencies exceeding 30 days. 

    • More Americans are relying on credit cards, with utilization increasing from 34% in Apr. 2023 to 35% in Oct. 2023 and balances growing by 5.9% in that time. 

    What it means: Americans with lower credit scores could face higher interest rates — which is tough to swallow when 7% mortgage rates are the “new normal.” Auto lenders are also tightening their loan approval standards, given that auto credit availability is at its lowest point since Aug. 2020. Moreover, credit card rates have reached record highs. Despite these challenges, analysts still expect the Fed to lower rates in June — a move that can’t come soon enough for many US consumers. 


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    Markets & Economy

    Private sector adds fewer jobs than expected: Private companies added 140K workers to their payrolls in February — up from 111K in January but missing estimates of 150K. Leisure and hospitality hired the most (41K), followed by construction (28K), and trade/transportation/utilities (24K). [Read]

    Nikki Haley suspends Presidential campaign: The stage is set for a Trump-Biden rematch as Trump’s last contender bowed out after a mixed showing on Super Tuesday. While she wished Trump well in her farewell speech, she held off on endorsing him. [Read]

    The Fed isn’t ready to cut rates just yet: Fed Chair Powell reiterated that rates will stay put until he and his colleagues are confident inflation is moving sustainably towards 2%. His Wednesday remarks echo those from Jan. 31 — so, nothing to see here. [Read]

    Business & Wealth

    BowFlex ($BFX) files for bankruptcy: Once a late-night infomercial staple, the fitness company is filing Chapter 11 due to a decline in demand for cardio equipment. The situation isn’t much better for its rival Peloton ($PTON), which has seen its stock fall near all-time lows. [Read]

    Dartmouth men’s basketball team votes to join a union: In a landmark move for college sports, the team’s decision could reshape the NCAA landscape — though the union’s fate remains uncertain as the college plans to appeal the ruling. [Read]

    How to conquer your fear of investing: Horror stories from investors who lost it all might make us hesitate, but diversifying your portfolio, doing your research, and thinking long-term can put you on a path to success. [Read]

    *Thanks to our sponsors for keeping the newsletter free.


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    DIGIT OF THE DAY

    Developers Build Over 2.9K New Mega-Apartments Across The US From 2021 to 2023

    America’s rental market is witnessing a surge in large-scale apartment complexes, reflecting the lengths (and heights) developers will go to meet robust rental demand. Faced with steep construction costs, lengthy planning reviews, and limited land availability, developers are opting for taller buildings to ensure profitability. The result? More units, more amenities, and more reasons to look up.

    • Between 2021 and 2023, developers completed over 2.9K new buildings with 200+ units, marking a 17% increase compared to the previous three-year period (2018 to 2020).

    • High-rises accounted for 2% of new apartment constructions in the ‘90s, but jumped to 14% in 2022 — surpassing the rate of smaller properties developments (WSJ).

    Relief for renters: According to Redfin's Chief Economist Daryl Fairweather, “The continued rise of home prices… is also pushing more people to keep renting rather than buy a home they can hardly afford.” This shift has fueled an “apartment-building boom,” prompting landlords to reduce rents to fill vacant units. Despite slower rent growth, the persistent demand for rental properties has kept new apartment construction appealing to developers.


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