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Retirement Strategy for Millennials: Should Savings go to Stock Market, Cryptocurrency or Real Estate?

Cash in safety deposit boxes vs the Stock Market

An investment retirement guru is convinced that millennials don’t know how to invest and are missing the opportunity of a lifetime to invest their money in a stock market.1 which has never been more overpriced (ridiculous multiples) since 1929.

I have been stunned recently by some of the discussions I have had with some of my own children’s friends and relatives about finances and investing towards a more secure financial future….in talking to my own son, he states that his friends (ages 25-40) are afraid of the markets…. Some are even putting cash in a safety deposit box! If there is ONE thing I can never mention enough is that if you want to have a secure financial future, YOU need to save as much as you can, as soon as you can for as long as you can. Along with that, is to spend LESS than you have coming in, forever. Even if you do not invest a dime in the markets, you will do better than nearly 70% of our population!

I can agree with the Dickensian final sentence.

Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

While the stock market beats keep your money in cash in safety deposit boxes, I would not agree that the stock market is the way to secure your retirement. Strategic real estate investment would be a more prudent strategy.2

Investing in Real Estate instead

The retirement guru’s suggestion about compound interest suffers from poor data. Assuming 8% returns is wildly optimistic. The United States has just come back from a huge real estate scare in 2008 where prices dropped by as much as half. Otherwise alternative retirement advice to the young would be to buy a first property in which to live as soon as possible. When you’ve paid off most of that, buy an investment property. When you’ve paid off that it will be time to upgrade your principal residence and later time to buy another investment property.

You would hit retirement with between three and ten properties, an income and the ability to trade down your principal residence. And your money will never have been in the hands of someone else.

Millennials’ Hatred of Wealth

In the ensuing discussion, a woman called Qfactor blames the inability of millennials to save on their hatred for wealth. An economic version of “they hate us for our freedoms”.

Sadly, there is a cultural component to the Millennial generation that makes them think having money is a bad thing. If you’re rich, you’re evil. Corporations are evil, conservative politicians are evil, etc. Happily, these kids will probably inherit more from their parents than any previous generation, and once they find themselves rolling in wealth, they’ll realize that they want to preserve it for their own children. At least that’s what I hope for my daughter’s sake…
No toys for me, but my partner bought a plane last year. I do love to travel, but I have an annual budget for that already and it’s built into my retirement income projection. I’m just stunned sometimes at my daughter and her friends, though. They seem to think that there is moral superiority to being a burden on society because at least you’re not a horrible rich person hoarding money from others. It’s a complete misunderstanding of the American principle of independence and self-sustaining income.

Qfactor’s comments are exceptionally amusing and unintentionally self-mocking. Qfactor’s daughter has a vision of a better world where wealth is distributed more equally and power is taken from corporations. According to Qfactor, this is wrong. Qfactor is a modest woman. Her modest love is travel. She owns a private plane but it’s okay as it belongs to her partner. Based on Qfactor’s capacity for self-delusion, it looks like America has finally reached the end of the line.

Roman Empire and America

The tales from Rome were accurate. Rome had entered into a cycle of opulence, decadence and corruption, from which it would never recover. Something like the United States now. The good news for Americans is that it took hundreds of years to bring about the fall of Rome. The bad news for Americans is that human development is travelling about eight times faster in the last fifty years so the last forty years count as 320 years.

Qfactor’s daughter is largely right. North America consumes more than a quarter of the physical energy and the wealth generated by the world just to continue to exist. The United States has the least efficient health care system among first world nations. The United States has both the most prisoners in the world in sheer numbers and leads even by percentage of the population incarcerated (ahead of Russia, China, Indonesia, Iraq, Afghanistan, Cuba – what does that say about human rights). The ocean is literally drowning in plastic and slowly being poisoned. The ocean!

Qfactor loves her travel, buys airplanes and blames her daughter (she shouldn’t take it personally, Qfactor is the symptom and not the cause – just the concrete example). It’s not the millennials who are at fault – it’s those of us who knew better and chose not to do it or fight for it. The previous generation get a partial pass as they were fighting Hitler and did much to even the social system after the second world war – giving most of our parents the chance to do succeed. Success that we are busying trying to restrict again to only the children of the privileged.

Roman Slaves vs the H-1B and Service Jobs

Mick challenged my characterisation of the modern United States with Ancient Rome:

You are repeating a myth, promoted by conservative Roman thinkers, such as Cicero, or Augustus, for their own political purposes (purposes which are too complex to explain here shortly). Later on this same myth was kept alive by Christian thinkers in an attempt to justify their own anti-pagan campaigns.

It seems to me his characterisation of the Roman situation applies just as well to the United States of today as to Ancient Rome:

What is true in the myth is that because Romans imported so much slaves, many free farmers went bankrupt and this created a class of unemployed people who flocked into the capital, living dependent of donations from the rich people and the state.
What created this unemployed mass in the capital was ever increasing wealth disparity and the institution of slavery, not some mythical moral failure. The people who had money, bought slaves, and since the slaves worked for free, the free farmers could not compete against their work and went out of work. Then their lands were bought by the rich who sent slaves to farm them. The rich got richer, the poor got poorer. (A nice predecessor for automation, btw).”

Mick notes the process is similar to automation. It’s also similar to outsourcing and to the H-1B exemption visas (which undercut American born programmers and devalue the not inconsiderable expense of a first rate technical education). Effectively Rome’s free farmers are today’s small businessmen and the “deplorables” living in flyover country. The same problems with Senate, Congress and the Presidency exist. Since unlimited corporate donation was permitted in 2014, effectively the United States live in a plutocracy of the multinational.

Anyone working a low-end service job today is effectively a slave. If the parents (or a rich aunt) have money, they can buy a modern slave out of slavery by giving him or her an education and opening some doors. Slaves were occasionally freed in Ancient Rome as well.

Noblesse Oblige or Revolution

What the elite of the United States seems to have forgotten (or never to have understood) is the concept of noblesse oblige. Those of us who are fortunate are ethically obliged to try to improve the lot of those less fortunate. That’s the core social contract of a healthy society.

Fairness can be implemented through either private (Henry Ford, the fair wage) or public means (European socialism) – the important element is the attempt to equal the playing field and the understanding of the rich that when they take too much they cripple society and cultivate revolution. Disparity is just too damn expensive in both material terms (crime, prisons, court systems) and quality of life (violent crime, no-go zones, police state).

The really rich think they are exempt from these quality of life issues thanks to high fences and private security. Ask John Paul Getty, sr, jr and III how that turned out. They would give you an earful. Or Roman Polanski when his pregnant wife Sharon Tate was taken from him. There are no fences high enough or security tight enough to ensure quality of life in a society wracked by disparity.

Retirement: we’re worried about our retirement (and for good reason), while other (working) people cannot feed their families tonight. It remains that land/property title will be the last of the investment categories to fail (apart from physical gold, although good luck with safe storage on that one). Hence even if you are a pessimist about the direction of modern society, rather than owning a large stock portfolio, it would be more prudent to slowly amass real estate through your working life.

None of this rules out speculative investment (bitcoin) or strategic investment (big medium term investments in sectors you know well for professional reasons).

Really Long Term Investment

Millennials like Qfactor’s daughter who believes that the current plutocratic and corrupt political structure needs reform and that we must de-fetishise consumption are the only ones fighting the good fight. Until we rebuilt our economic system on ecologically sound principles we are fighting each other over a shrinking prize. The amount of potable fresh water accessible to the cities of the world has fallen by about 30% in my lifetime, thanks to industry, transport and in North America, most of all fracking.

United States politicians are falling over each other to defang and destaff the EPA (it started long before Trump). Apparently Americans don’t need clean water. The US solution for the looming pension shortfall: kill everyone over fifty with cancer via water mains or via pesticides in your food. Killing and disposing of tens of millions of near retirement citizens is an enormous logistical challenge. What better way to do so than via the water mains and grocery shelves.

The millennials better come up with a better economic system than plutocratic war capitalism or the world they hand on to their children will be unrecognisable.


  1. Article is behind SeekingAlpha.com registration wall if you want to see comments. In case article become inaccessible here is a png version. ↩︎

  2. Bitcoin: counting on bitcoin and other speculative assets is insanity not an investment strategy. Those who jumped on bitcoin at right time and got out of bitcoin at the right time (and for most, right now is a second right time) are very fortunate. Right place at the right time. Sometimes luck looks like wisdom in retrospect. ↩︎

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