"Where did you find it good to name the rope in the house of the hanged?"
(original: "¿Dónde hallastes vos ser bueno el nombrar la soga en casa del ahorcado?" )
Don Quixote, the legendary novel by Miguel de Cervantes, is full of such quotes, denoting Spaniards long tradition of "transforming" long stories and life lessons into short quotes!
The above one, in chapter XXVIII, popped into my mind, once recently I read Credit Suisse’s latest global investment returns yearbook, according to which, Generation Z’s earnings from stocks and bonds will be significantly lower than those of previous generations.
( Image 1: Thomas Gottstein, Credit Suisse's CEO, trying to excuse, if possible, how his bank entered the big league of banking mishaps )
Perhaps this is not the best time for the Swiss Bank to publish predictions (the "rope") since it is already "hanged" in the Archegos Wall Street chaos with a reported loss of at least $5 Billion (yes, with a "B")!
How possible is it to predict the financial future of an entire generation if unable to predict your own losses?
Credit Suisse and some of the most "reputable" banks in the world, like Nomura, Goldman Sachs, Deutsche Bank (the usual suspect!) and Morgan Stanley, have been "instrumenting" an equity swap with gazillion leverage, from a guy named Bill Hwang, head of the family office Archegos Capital Management. This guy managed to lose everything in 2 days, late March 2021!
During the same month, the Swiss Bank released the Summary Edition Extract from the Credit Suisse Global Investment Returns Yearbook 2021.
On page 27, there is a depiction of the return experiences across generations, primarily on equities and bonds. It is predicted that "Generation Z (born 1997–2012) faces a different future", compared to the previous generations (Baby Boomers, Generation X, Millennials).
"Don't generalize"
Predicting the future is tricky. Requires information (not data) and "luck", aka probabilities analysis.
This is what we do in Graypes; predicting the next successful business, with a quantitative assessment process, through a set of algorithms and one core principle: "Don't generalize!"
The return experiences across generations, as presented in that report from Credit Suisse, is a generalization. Investment and investment strategy is a personal process and it varies per individual, not per generation!
"Talk for yourself"
The following graph is the evolution of the traded prices of Credit Suisse, the last 25 years! It's really impressing the value loss, especially after 2012.
And yes, for its own stock, Credit Suisse is right; Generation Z will not benefit!
( Image 2: Graph of the historical value of Credit Suisse NYSE: CS )
"It's the simple numbers, stupid!"
The economists have a long tradition as "pseudo-scientists", being unable e.g to predict the 2008 global financial meltdown. Their predictions are less reliable than the astrology prophecies.
Into that frame, it's really hard to seriously consider that recent report from Credit Suisse. It is not only because of the "unfortunate" predictions on their own investment but also because of simple and common reasoning.
( Image 3: S&P 500 at historical highs and raising spree for the last years )
Check out the previous image 3, with huge investment opportunities, as reflected on the S&P 500 index, especially the last 5 years. Previous generations experienced asthmatic gains, compared to the booming recent years!
The previous image 4, depicts the combined trade values of Apple, Microsoft and Amazon. During the last 5 years, they are really skyrocketing.
Each and every one of the above companies gave back more than 400% of gains!
If an 19 years old, Generation Z "investor", bought in late April of 2016, $1'000 worth of Apple stocks, today, late April 2021, would have a valuation of at least $5'850 !
New Generations can make a fortune! Is this a challenge?
The new generations and especially Generation Z, have a big advantage compared to all the previous; information and data.
Generation Z has access to free and powerful tools for online trading to global markets. Tools and data that provide to the "amateur" retail investors the same quality of analysis as hedge fund managers who "don't have an edge."
This is what the recent frenzy of trading stemming from Reddit's WallStreetBets demonstrates.
I would absolutely agree with billionaire investor Chamath Palihapitiya that sees a "pushback against the establishment" from retail investors, many of whom watched their parents lose money during the financial crisis while large institutions on Wall Street were bailed out.
On the other side, Generation Z and the generations to come have much more important and severely existential challenges.
Natural disasters of our planet, inequality on our communities, non-reversible consumption of earth resources, social unrest from the new technological revolution, are some of them.
Moreover, education, work, health, energy, and much more can be disrupted and re-invented.
Creating great visions and new opportunities.
For a better world.
Originating from this new generation that needs our support and encouragement!
(... and definitely not meaningless predictions about their investment, from failing banks...)
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