People Under 40 Have Very Little Wealth

Weak sales growth combined with high multiples and losses is a complete disaster. Many growth investors have no idea what is coming because they never cared about losses or valuations before. They even glorified holding stocks like this through massive crashes. It’s almost impossible to hold a stock through a 70% collapse. We don’t recommend doing that. On the other hand, firms with negative earnings and declining sales in 2020 have done well because investors know the reopening will bring them sales growth and maybe profitability. This is their time to shine. 2021 might even better than 2019 for many of these firms as consumers have a lot of savings that’s ready to be spent.

The chart below shows all the themes that worked in 2020 aren’t working in 2021.

The most shorted stocks, the IPOs, and the SPACs are now crashing. Unfortunately for SPACs much more pain is coming because more supply is coming. Just like investors in growth tech stocks that lose money, SPAC promoters and investors don’t realize that the party is already over. Speculators will keep buying the dip, but new highs are not likely to be made. When valuations don’t make sense, there isn’t a bottom until the system is cleansed of optimism.

Conclusion

Jobless claims fell, but that was because of two states. The data is very murky right now, but we think the labor market is improving. There will be well in excess of 500,000 jobs created in the March BLS report next Friday. People under 40 have a low percentage of the overall wealth in the US. Most millennials will be fine financially as they age, but they won’t have as many children as prior generations. It’s becoming increasingly rare for a couple to have more than two children (unaffordable for most). The money-losing stocks, SPACs, IPOS, and other software names are doing poorly. This is the first step in what will be a brutal bear market for this group. That means there will be a great buying opportunity in these names sometime in the future.

1 2 3
View single page >> |

Disclaimer: The content in this article is for general informational and entertainment purposes only and should not be construed as financial advice. You agree that any decision you make will be ...

more
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.