Demographics & Lifestyle
China limits videogame usage to three hours per week for minors, no play Monday through Thursday
(31 Aug 2021) Our first thought was, "Imagine trying to implement such a law in the U.S." China, as part of its latest salvo against industries it deems harmful to the collective cause, has issued a rather remarkable decree: minors—we are assuming that means youth under the age of eighteen—are hereby forbidden from playing videogames Monday through Thursday, and will limit their play to a maximum of one hour per day on Fridays, weekends, and public holidays, between the hours of 8 p.m. and 9 p.m. The ruling communist party claims that the "youth videogame addiction" is distracting young people from their responsibilities to school and family. How on earth does the government plan on enforcing this new dictate? Since the government controls the tech companies which operate in China, and these companies can control users via login credentials, the task isn't as herculean as it may seem. Just how granular is the government willing to get with respect to controlling its population? A few years back, videogame players between the ages of 16 and 18 were told that they could not spend over 400 yuan (about $60) per month on the purchase of new games. At first blush, we imagine many Americans applaud such a move to restrict the brain-numbing play of videogames by a country's youth. However, a government which can and will control such a mundane aspect of life will never reach a level of satisfaction; lines in the sand will be just that, and they will be redrawn at the whim of the ruling members of the party. Personal freedoms will continue to wither away until an inevitable clash occurs between the masses being controlled and the elites who are imposing the draconian standards. China believes it can simultaneously control and feast off of the golden goose of economic prosperity. That faulty logic stems from the incredible level of arrogance and hubris which communism foments among its ruling class. The short-term pain we so often experience in a democracy is allowed to mushroom out of control within a closed society. Despite the lessons of the past, this is a condition lost on many within the financial media; journalists who eagerly regurgitate what the state-controlled media in China feeds them. As for the Chinese Internet companies which so many investors have been wantonly rushing into, many are now sitting 50% below their February highs on the heels of this latest government crackdown.
(31 Aug 2021) Our first thought was, "Imagine trying to implement such a law in the U.S." China, as part of its latest salvo against industries it deems harmful to the collective cause, has issued a rather remarkable decree: minors—we are assuming that means youth under the age of eighteen—are hereby forbidden from playing videogames Monday through Thursday, and will limit their play to a maximum of one hour per day on Fridays, weekends, and public holidays, between the hours of 8 p.m. and 9 p.m. The ruling communist party claims that the "youth videogame addiction" is distracting young people from their responsibilities to school and family. How on earth does the government plan on enforcing this new dictate? Since the government controls the tech companies which operate in China, and these companies can control users via login credentials, the task isn't as herculean as it may seem. Just how granular is the government willing to get with respect to controlling its population? A few years back, videogame players between the ages of 16 and 18 were told that they could not spend over 400 yuan (about $60) per month on the purchase of new games. At first blush, we imagine many Americans applaud such a move to restrict the brain-numbing play of videogames by a country's youth. However, a government which can and will control such a mundane aspect of life will never reach a level of satisfaction; lines in the sand will be just that, and they will be redrawn at the whim of the ruling members of the party. Personal freedoms will continue to wither away until an inevitable clash occurs between the masses being controlled and the elites who are imposing the draconian standards. China believes it can simultaneously control and feast off of the golden goose of economic prosperity. That faulty logic stems from the incredible level of arrogance and hubris which communism foments among its ruling class. The short-term pain we so often experience in a democracy is allowed to mushroom out of control within a closed society. Despite the lessons of the past, this is a condition lost on many within the financial media; journalists who eagerly regurgitate what the state-controlled media in China feeds them. As for the Chinese Internet companies which so many investors have been wantonly rushing into, many are now sitting 50% below their February highs on the heels of this latest government crackdown.
A most excellent problem: credit card issuers concerned as Americans continue to pay down their debt
(12 May 2021) We've often wondered what the overall economic health of the typical American household would look like if revolving debt did not exist. After all, it wasn't until Bank of America (BAC $42) issued the first credit card with a "revolving credit" feature in 1958 that Americans began racking up debt not backed by any tangible property, such as a home or an auto. Before then, money borrowed on a card had to be paid off at the end of each month. And despite the near-zero Fed funds rate, many cardholders are still being charged confiscatory interest rates of 16.99% to 19.99% on their balances, or even higher. Now for the good news. Much to the chagrin of the card-issuing banks, which toughen their standards when people need the money the most and loosen them when they don't, borrowers are paying down their debt at impressive levels. During the company's most recent earnings call, card issuer Discover Financial Services (DFS $115) said that balances paid off recently have hit levels not seen since 2000. All of the top card issuers, in fact, have reported significant declines in the aggregate balance of revolving debt owed. While Americans put nearly $4 trillion on their cards in 2020, the total US credit card debt outstanding now sits at $819 billion--a significant decrease from pre-pandemic levels. It's hard to say whether this will turn into a healthy, long-term trend, but more and more people are becoming cognizant of just how much they owe, and what they have been paying for the "privilege" of buying on credit. Once Americans get their own fiscal house in order, perhaps they will look at the $28.3 trillion of outstanding debt their government has racked up and demand accountability. The current rationale for spending trillions more than what is brought in via taxation is the pandemic. But what's the excuse for the reckless and wanton spending before the crippling disaster hit?
(12 May 2021) We've often wondered what the overall economic health of the typical American household would look like if revolving debt did not exist. After all, it wasn't until Bank of America (BAC $42) issued the first credit card with a "revolving credit" feature in 1958 that Americans began racking up debt not backed by any tangible property, such as a home or an auto. Before then, money borrowed on a card had to be paid off at the end of each month. And despite the near-zero Fed funds rate, many cardholders are still being charged confiscatory interest rates of 16.99% to 19.99% on their balances, or even higher. Now for the good news. Much to the chagrin of the card-issuing banks, which toughen their standards when people need the money the most and loosen them when they don't, borrowers are paying down their debt at impressive levels. During the company's most recent earnings call, card issuer Discover Financial Services (DFS $115) said that balances paid off recently have hit levels not seen since 2000. All of the top card issuers, in fact, have reported significant declines in the aggregate balance of revolving debt owed. While Americans put nearly $4 trillion on their cards in 2020, the total US credit card debt outstanding now sits at $819 billion--a significant decrease from pre-pandemic levels. It's hard to say whether this will turn into a healthy, long-term trend, but more and more people are becoming cognizant of just how much they owe, and what they have been paying for the "privilege" of buying on credit. Once Americans get their own fiscal house in order, perhaps they will look at the $28.3 trillion of outstanding debt their government has racked up and demand accountability. The current rationale for spending trillions more than what is brought in via taxation is the pandemic. But what's the excuse for the reckless and wanton spending before the crippling disaster hit?
Americans' revolving credit debt drops below $1 trillion once again
(13 Jul 2020) In a perverse way to use the metric, economists often gauge the health of the US economy by how much Americans are spending—whether they have the discretionary income or not. Since consumption by Americans accounts for 70% of the US economy, they argue, increased spending means a healthier GDP. Our argument has always been this: Why don't we create a stronger and healthier economy by spending within our means and selling more of our goods and services to people living outside of the country? Alas, that is apparently archaic and low-brow thinking. There is one positive development with respect to household debt in the US, however: aggregate revolving debt outstanding has once again dropped below the $1 trillion mark. Revolving debt is mostly made up of credit card balances (bottom line in graph), but also includes personal lines of credit and home equity lines of credit. In May, this figure fell to $996 billion, but the drop is mostly a reflection of the pandemic and its accompanying "lockdown," which forced Americans to stay at home. While online sales ticked up, they were not enough to overcome the massive drop in discretionary spending which typically takes place at restaurants, malls, sporting events, and the like. The two largest components of total outstanding consumer credit debt in the US are student loans ($1.5 trillion) and auto loans ($1.35 trillion), but we're sure that credit card debt will re-join the trillion dollar club soon as the economy reopens. That is bad news for American households, but good news for the banks and financial services companies who issue the unsecured lines of credit.
(13 Jul 2020) In a perverse way to use the metric, economists often gauge the health of the US economy by how much Americans are spending—whether they have the discretionary income or not. Since consumption by Americans accounts for 70% of the US economy, they argue, increased spending means a healthier GDP. Our argument has always been this: Why don't we create a stronger and healthier economy by spending within our means and selling more of our goods and services to people living outside of the country? Alas, that is apparently archaic and low-brow thinking. There is one positive development with respect to household debt in the US, however: aggregate revolving debt outstanding has once again dropped below the $1 trillion mark. Revolving debt is mostly made up of credit card balances (bottom line in graph), but also includes personal lines of credit and home equity lines of credit. In May, this figure fell to $996 billion, but the drop is mostly a reflection of the pandemic and its accompanying "lockdown," which forced Americans to stay at home. While online sales ticked up, they were not enough to overcome the massive drop in discretionary spending which typically takes place at restaurants, malls, sporting events, and the like. The two largest components of total outstanding consumer credit debt in the US are student loans ($1.5 trillion) and auto loans ($1.35 trillion), but we're sure that credit card debt will re-join the trillion dollar club soon as the economy reopens. That is bad news for American households, but good news for the banks and financial services companies who issue the unsecured lines of credit.
The unthinkable: San Fran landlords are being forced to lower rents*
(06 Jul 2020) In the next issue of the Penn Wealth Report we track the remarkable events transpiring in San Francisco (well, at least one of the remarkable events): landlords are losing tenants at a record clip, and must lower monthly leases to keep occupancy rates from falling further. The median rent for a one-bedroom apartment in the city has fallen 12% year-over-year as many high-tech workers lose their jobs, and many others are suddenly free to work from home—which means they can flee the confiscatory expenses that come with living in the city and move to the suburbs. We believe the pandemic has ushered in an epoch transformation for the REIT sector, with clear winners and losers. We discuss this in further detail in the Report.
(06 Jul 2020) In the next issue of the Penn Wealth Report we track the remarkable events transpiring in San Francisco (well, at least one of the remarkable events): landlords are losing tenants at a record clip, and must lower monthly leases to keep occupancy rates from falling further. The median rent for a one-bedroom apartment in the city has fallen 12% year-over-year as many high-tech workers lose their jobs, and many others are suddenly free to work from home—which means they can flee the confiscatory expenses that come with living in the city and move to the suburbs. We believe the pandemic has ushered in an epoch transformation for the REIT sector, with clear winners and losers. We discuss this in further detail in the Report.
Move over millennials, Gen Z is rushing in, and they love to shop at the malls. (19 Dec 2019) When I was a kid growing up in the 80s, some of my favorite times were spent at the local mall. I worked there, shopped there, hung out with friends there. Over the past five years or so, however, many have tried to write the epitaph of the giant, enclosed, climate-controlled oasis. After all, they argued, millennials love shopping online (so do I, by the way), and foot traffic is perennially decreasing at the local brick-and-mortar stores. While online shopping will continue to gain ground, we never bought the thesis that it would mean the demise of the physical store. And now, new research seems to be supporting our argument. Backed by data from eMarketer, a professional market research company, real estate services firm CBRE has compiled some interesting statistics on Gen Z—kids, teens, and young adults roughly between the ages of seven and twenty. The group directly spends around $143 billion per year on discretionary goods, and influences another $450 billion or so in spending by others. And an overwhelming 76% of the members of this group say they prefer to do their shopping in nearby physical stores. Even though they often order clothing or other goods online, they want to pick up those goods at the local store ("click and collect")—meaning they are visiting the websites of brick-and-mortar companies like Nordstrom (JWN), Macy's (M), Victoria's Secret (LB), and Sephora (LVMUY), instead of Amazon (AMZN). In short, while they embrace technology, they want the social experience provided by a visit to the mall. And that fact is resonating with the likes of Simon Property Group (SPG) and Macerich (MAC), two higher-end (Class A) mall REITs which have been adding more experience-based components to their properties. In other words, Gen Z appears to be taking us back to the 80s, but with some cool new features added. We recently highlighted Macerich (MAC) as an interesting REIT play, but we also like Kimco (KIM), Simon (SPG), and Pennsylvania Real Estate (PEI) in the retail REIT space.
Is that really your business? WeWork tells employees it will only reimburse non-meat meals.
(13 Jul 2018) We love freedom. An employee's beliefs, habits, mannerisms, and lifestyle are really none of the employer's business, so long as those factors do not negatively impact the company or involve breaking the law. That is why we cringe when we hear stories like this.
Office space provider WeWork (think Regus to get an idea of what they do) has released a memo to employees stating that the company will no longer reimburse for meals while on business time if those meals contained any meats. The company also banned all meat products from being served at its dining facilities or its functions. In the memo, the company's co-founder, Miguel McKelvey, told employees that avoiding meat helps "reduce their environmental impact." "Even more than switching to a hybrid car," he tells his minions. What if this were a meat-packing plant, and the CEO released a memo stating that steak dinners would be reimbursed but don't bother turning in the receipt for that flounder you ordered.
Sure, the company doesn't blatantly come out and say that "meat eaters need not apply" for employment. That would be hard discrimination and an easy lawsuit. Instead, they prefer the soft discrimination of workplace intimidation, like telling you your carbon footprint is killing the planet. This is insane. WeWork is not a company at which the principal stakeholders simply hold certain beliefs; it is a company which says that YOU, if you wish to remain an employee, should also hold those beliefs, or you may not feel "comfortable" in the workplace. They are a political movement posing as a holier-than-thou business enterprise. Discrimination is a two-way street. We wonder what level of personal discrimination would be tolerated if an employee didn't share the views of management? Dirty looks? Sneers? Agitation until they leave the company?
How ironic that so many of the people who believe they are the "enlightened ones" are so willing to take us back to the Dark Ages. As for the comments in this article, they are—thank God—still protected under the First Amendment. Another "archaic" gem these "enlightened ones" would love to do away with.
(13 Jul 2018) We love freedom. An employee's beliefs, habits, mannerisms, and lifestyle are really none of the employer's business, so long as those factors do not negatively impact the company or involve breaking the law. That is why we cringe when we hear stories like this.
Office space provider WeWork (think Regus to get an idea of what they do) has released a memo to employees stating that the company will no longer reimburse for meals while on business time if those meals contained any meats. The company also banned all meat products from being served at its dining facilities or its functions. In the memo, the company's co-founder, Miguel McKelvey, told employees that avoiding meat helps "reduce their environmental impact." "Even more than switching to a hybrid car," he tells his minions. What if this were a meat-packing plant, and the CEO released a memo stating that steak dinners would be reimbursed but don't bother turning in the receipt for that flounder you ordered.
Sure, the company doesn't blatantly come out and say that "meat eaters need not apply" for employment. That would be hard discrimination and an easy lawsuit. Instead, they prefer the soft discrimination of workplace intimidation, like telling you your carbon footprint is killing the planet. This is insane. WeWork is not a company at which the principal stakeholders simply hold certain beliefs; it is a company which says that YOU, if you wish to remain an employee, should also hold those beliefs, or you may not feel "comfortable" in the workplace. They are a political movement posing as a holier-than-thou business enterprise. Discrimination is a two-way street. We wonder what level of personal discrimination would be tolerated if an employee didn't share the views of management? Dirty looks? Sneers? Agitation until they leave the company?
How ironic that so many of the people who believe they are the "enlightened ones" are so willing to take us back to the Dark Ages. As for the comments in this article, they are—thank God—still protected under the First Amendment. Another "archaic" gem these "enlightened ones" would love to do away with.
More young adults than ever living at home with their parents
When I turned 18, I couldn’t wait to get out of the house. That was a viewpoint shared by my father. I wanted to taste the true responsibility of being an adult—paying my own way in life, making my own rules, charting my own path. It is amazing how much the passage of a generation or two can shift the zeitgeist, and the demographics, of a country.
A recent study by the nonpartisan Pew Research Center uncovered some interesting facts about young Americans, aged 18-34. For the first time in a century, the plurality of individuals in this age group are still living at home with their parents. The next largest wedge of the pie are those either married or cohabitating with a partner in their own digs. The remaining groups consist of those living alone or in a larger pack—soldiers, on-campus students, the incarcerated, etc.
The most reasonable explanation for the growth in homebound young adults is the recent Great Recession. After all, if you cannot find a job and choose not to serve in the military, what viable option do you have but to stay in your comfortable room? But with the recession seven years in the rear view mirror and the unemployment rate hovering at a respectable 5%, why does the stay-at-home adult population continue to grow? Why the delay in taking responsibility for one’s life?
In 1960, 62% of young adults (to age 34) lived as the head of their own household, while just 20% lived under their parents’ roof. The major reason for the seismic shift over the past two generations revolves around the level of responsibility (or lack thereof) we place on our young. With the comfort level most millennials have been born into (compared with the existence of most around the world), real challenges and the need for dynamic problem solving have been assuaged, replaced by the freedom to hold a controller and become engrossed in Grand Theft Auto and Call of Duty.
To be sure, millions of millennials live responsible lives as students and young professionals, but there is also a growing group of “entitled” youth who walk around waiting to be served. When they don’t get their way they lash out, typically at the parents who have enabled them, but also at society in general. They have been coddled, and they don’t know how to cope. And this condition isn’t limited to millennials—I have a number of clients who raise their children’s children, awaiting the day when 50-something year-old Junior gets on his feet.
The unfettered passage of time truly can cause a profound shift in the landscape. Ready or not, we feel the winds of change headed our way. Most will adapt. Others will simply point fingers at their enablers.
(Reprinted from this coming Sunday’s Penn Wealth Report, Vol. 4, Issue 22. For subscription information, click here.)
(OK, got it. Take me back to the Penn Wealth Hub!)
A recent study by the nonpartisan Pew Research Center uncovered some interesting facts about young Americans, aged 18-34. For the first time in a century, the plurality of individuals in this age group are still living at home with their parents. The next largest wedge of the pie are those either married or cohabitating with a partner in their own digs. The remaining groups consist of those living alone or in a larger pack—soldiers, on-campus students, the incarcerated, etc.
The most reasonable explanation for the growth in homebound young adults is the recent Great Recession. After all, if you cannot find a job and choose not to serve in the military, what viable option do you have but to stay in your comfortable room? But with the recession seven years in the rear view mirror and the unemployment rate hovering at a respectable 5%, why does the stay-at-home adult population continue to grow? Why the delay in taking responsibility for one’s life?
In 1960, 62% of young adults (to age 34) lived as the head of their own household, while just 20% lived under their parents’ roof. The major reason for the seismic shift over the past two generations revolves around the level of responsibility (or lack thereof) we place on our young. With the comfort level most millennials have been born into (compared with the existence of most around the world), real challenges and the need for dynamic problem solving have been assuaged, replaced by the freedom to hold a controller and become engrossed in Grand Theft Auto and Call of Duty.
To be sure, millions of millennials live responsible lives as students and young professionals, but there is also a growing group of “entitled” youth who walk around waiting to be served. When they don’t get their way they lash out, typically at the parents who have enabled them, but also at society in general. They have been coddled, and they don’t know how to cope. And this condition isn’t limited to millennials—I have a number of clients who raise their children’s children, awaiting the day when 50-something year-old Junior gets on his feet.
The unfettered passage of time truly can cause a profound shift in the landscape. Ready or not, we feel the winds of change headed our way. Most will adapt. Others will simply point fingers at their enablers.
(Reprinted from this coming Sunday’s Penn Wealth Report, Vol. 4, Issue 22. For subscription information, click here.)
(OK, got it. Take me back to the Penn Wealth Hub!)