Blog : Bearish Boomers Bum Out On Confidence Game

by Ed Zwirn on August 10th, 2014

If this doesn't make the case for recreational marijuana, I don't know what will.

It seems that grouchy old geezers may be spoiling the national psyche and robbing our nation of its confidence.

A Wall Street Journal/NBC poll made brief headlines last week with the depressing news that a record 76% of Americans said they did not believe that "life for our children's children will be better than it has been for us," up from 60% in 2007 and 63% in 2012. But confidence can be a fuzzy concept, and subject as much to dominant political narratives and bug-a-boo fears as hard economic news. It is usually better to ignore the latest consumer confidence readings, as they generally prove nothing and predict even less.

That being said, the interesting (and useful from a marketing standpoint) aspect of this data relates to the demographics. Michael Santoli, for a Thursday Yahoo Finance piece, obtained access to the poll's raw data and reported persuasive evidence that generational effects trump other factors, including income, when looking at pessimism/optimism.

According to the data, overall pessimism concerning the American Dream is rising most quickly among aging Boomers in the 50 to 64 cohort. A whopping 82% of these people say they are pessimistic about the U.S. economy and their own family's prospects going forward, up from 64% two years earlier.

In contrast, the rise in negative sentiment was more restrained among other age brackets. Millenials, or those between 18 and 34, saw their negativity rise from 55% to 64% over the same two years, and the results were unchanged for people from 35 to 49.

Most interestingly, the age factor is even more defining than the class factor, with the poll showing no statistical difference in confidence levels across income levels.

In an interesting postscript to the Baby Boomer era, an era that was launched when the "pent-up demand" of millions of returning World War II combatants exploded with a vengeance, economists are increasingly seeing the current boomer paradigm as a drag on the economy, and one of the reasons that recessions are taking longer to reverse themselves these days.

The same generation that fueled everything from auto and record sales to Woodstock is now paradoxically putting a drag on growth, or so the argument goes. According the Conference Board, consumer confidence levels among everyone 55 and younger is currently way above December 2007, and it is only the older folks that drive down their headline number.

This ingratitude comes from a generation that has long been accustomed to being pitched to, catered to and courted because they represent a swell in the population. Sell to the Pepsi generation and you'll come alive.

This is continuing to this day. Visiting a friend's house and checking out her non-premium cable offerings, I found the numerous pharmaceutical ads (most of which contained side effects warnings more lengthy than the touted benefits) even more entertaining than the shows you get to watch without paying extra. All of these are aimed at a Grumpy Geezer cohort desperate to delay the inevitable. That and a healthy dose of life insurance ads.

Eventually the investment beneficiaries of this trend will shift from big pharma to hospice care and embalming chemical manufacturing. But in the meantime there is evidence suggesting that the Grumpy Geezers may be in the process of morphing from the wildest, most free-spending, generation yet to hit the American scene to a bunch of bearish misers. The most recently cited government figures show the unemployment rate for those 55 and older much lower than that of the general population at 4.5%. Other figures show this group with tremendous disposable income.

But the sharp upswing in bearishness by the (for now) largest generation, assuming it is a valid predictor of anything, would tend to indicate that these pessimists will cut back on risk, which is what pessimists do. I haven't yet seen a business school study on whether the high cash balances held by U.S. companies has a similar age bias, but I wouldn't be surprised.

The tendency of people to try to hold on to what cash they may have managed to stash away as they get older is of course nothing new. But increasing Geezer pessimism may have already put a damper on spending, and certainly isn't a good sign going forward. As pointed out most recently in this investment blog, a major reason driving economists to downwardly revise their 2014 growth predictions has been disappointment on the spending front.

It admittedly does me and my fellow Grumpy Geezers an injustice to imply that we need take the rap for sluggish growth. This much is obvious: There are more sinister forces at work, and tomorrow will be worse than today in any event. Or at least that's what I heard when I last got together with my grumpy old friends.