They have the gold. They make the rules.
Aiden’s generation went from almost no participation in the stock market to overnight dominance of it. They have the gold. They make the rules.Millions of new brokerage accounts. Trillions in value transferred from taxpayers and the Federal Reserve into accounts at Robinhood and Coinbase.
By Capital Thinking • Issue #861 • View online
Jerry gets up and puts on a pot of coffee.
Squawk Box is on the television. They’re bantering about whatever happened on Twitter that morning. Jerry’s not on Twitter.
He’s tired of hearing about all the rhetorical twists and turns on the app that are constantly pushing his stocks around. Sports commentators and actors turned venture capitalists are causing gyrations in the value of his retirement portfolio with their online antics.
Your father’s stock market is never coming back
Remember when stocks traded on fundamentals? Or at least they traded based on people’s perceptions of the fundamentals.
What do they trade on today?
It was always a popularity contest. Now it’s a three-ring circus.
It makes no sense. Jerry is tired.
Upstairs there’s a burst of excitement, the sound of a young man cheering. It’s Jerry’s kid, Aiden. Aiden’s been out of school for years. He’s making as much as Jerry did 30 years ago.
That’s not enough to buy a house these days, but it’s plenty to sit in a room all day and speculate. Aiden’s trading as much as he’s working in his actual work-from-home job, and it sounds like he just scored again.
Jerry spent three decades saving and investing, prudently, and dutifully. He and Nancy have accumulated $1.2 million—for them it’s all the money in the world. Took them their entire lives.
Aiden made $800,000 in the past 12 months, starting with the $25,000 his grandfather left him. He did it from a phone, knowing virtually nothing about the instruments he traded.
Read a few posts on Seeking Alpha, saw a few tweets from Mark Cuban, and pressed the Buy button. Then again, and again. Then with leverage. Then with crypto. It worked, repeatedly.
Large gains led to larger trades, which led to even larger gains. “Why doesn’t everyone do this?”
Jerry’s role in the market is changing. He’s entering what financial planners euphemistically call “the decumulation phase,” as his consulting work slows down and his retirement income needs ramp up.
The popular rule-of-thumb retirement income strategy—withdrawing 4% per year—cannot be accomplished with bond yields alone, as in the olden days. If Jerry wants his 4%, he’ll have to get some of it from principal, which means being a seller of stocks for the next few decades.
As Jerry and his generation gradually exit from the market, they’re being replaced by Aiden’s cohort. And Aiden’s cohort isn’t sentimental.
The conventions from Jerry’s day hold no interest for Aiden or Jayden or Chelsea or Tyler or Madison. They don’t respect the traditions. The publications. The protocols. The norms.
There’s no advice you can give them that they will adhere to, just as the boomers defied their Depression-era parents with their own excesses.
There’s an old “Wizard of Id” cartoon Jerry remembers from his own youth in the ’60s. It said, “Remember the Golden Rule: Whoever has the gold makes the rules.”
Aiden’s generation went from almost no participation in the stock market to overnight dominance of it. They have the gold. They make the rules.
Millions of new brokerage accounts. Trillions in value transferred from taxpayers and the Federal Reserve into accounts at Robinhood and Coinbase. More money pouring in with every paycheck.
Leverage, too, because either this generation is truly fearless or (more likely) they haven’t had enough time to lose money yet.
Either way, they decide what’s important to pay attention to and what’s irrelevant. If they choose to react to a 10-word Elon Musk tweet rather than a three-hour Warren Buffett monologue, how will you stop them?
Yes, it all belongs to Aiden’s generation now, but Jerry still has to find a way to live with it—and to understand how the game is changing.
To become fluent in the discourse. To familiarize himself with the rappers and influencers signing fashion deals at Gap, launching cannabis startups, backing blockchain projects. To learn the memes and clapbacks shaping each day’s discussions and outcomes.
Jerry’s got his work cut out for him.
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