“You want me to wake up at four in the mornrning to call you in sick tomorrow?”
“Well, yeah. I’ve got to skip school so I can judge at the Crisco pie-making contest in Orlando. It’s FREE pie, dad!”
I was having this conversation with my 18-year-old son in April. I was in Mexico, speaking at the Sovereign Society’s Total Wealth Symposium and my son needed my help.
So, what did I do?
Before I answer, let me build my defense here. The Rational Man Theory that mainstream economists advocate says that people, when faced with a choice, will do what’s right for themselves. In other words, each consumer will make a rational decision when faced with a tradeoff about their situation.
I beg to differ.
Take money market accounts for example. They are a great idea, right? I imagine most everybody reading this has money in a money market account.
And you’re getting slaughtered, aren’t you?
Your money market accounts earnrn nothing. In fact, it earnrns a good 2.5% less than inflation.
Now, the Rational Man Theory says you should take all your money out of your money market accounts and go buy stuff. But you’re not doing that, are you?
Because, the reality is, we’re really an irrational species. We do stupid things all the time. Like keeping our cash in our underperforming money market accounts… or rushing into the markets at the peak of a boom… or waking up at 4 a.m. in a Mexican hotel to call a Tampa school principal (yes, I did it)…
A Better Way to Understand the Economy
There is definitely a better way to understand the economy and what happens. It’s simple. Understand what drives people.
What motivates you to take out your credit card or cash and actually do something with it? What motivates you to buy a bigger house, take out a bigger mortgage and leverage yourself to your eyeballs? What motivates you to make irrational decisions?
Thanks to our 20 years of research into demographic trends and consumer spending, we have the answer to those questions.
It is children.
Children make us do stupid things. They push us to make irrational decisions. Occasionally those decisions are rational, but mostly not. These irrational decisions influence how we spend our money.
And because, generationally speaking, we follow predictable spending patternrns as we age, this knowledge becomes useful to us. For example, when a generation reaches the age and stage of life where they have children, you’ll notice a boom in baby furnrniture. When those kids go off to school, you’ll see a boom in stationary supplies. When they’re about 14 years old, you’ll see a boom in the potato chip industry. That’s us, as parents, buying tons of chips for our ravenous kids.
This tells us something about the years ahead…
The biggest generation in America – the Baby Boomers – is now solidly in the empty-nester stage of life. They’re past the time in life where their children are driving them to make irrational decisions. At this point, their children are still out hunting for a partner with which to repeat the whole cycle for themselves.
Instead, the parents are on to the next financial stage, which is saving every last nickel for retirement, hence the reason no one is busy pulling money out of money market accounts, no matter how little they pay!
As for the next huge spending push for the Boomers that lies ahead, it will be heavily concentrated in healthcare and services as this generation ages.
Also, the generations coming up behind the Baby Boomers are not as large… and they’re young. The leading edge of the Echo Boomers is only now starting to have children. Even though they will ultimately create booms in more typical consumer products, it won’t be today… or tomorrow.
Ahead of the Curve with Adam O’Dell
Healthcare Making New Highs
The healthcare sector still looks strong. Investors have begun digesting the consequences of the Affordable Care Act that the Supreme Court just upheld.
The consequences of this act won’t be fully understood for some time but two things are clear…