Hedonistic youngsters are messing up capitalism

Young people are spending less money on things and more money on experiences. It seems to be happening all over the rich world.

I’m friends on Facebook with about 400 twenty and thirty somethings. And my god, do they like to travel.

When I logged on this morning first thing I saw was a line of donkeys traipsing across a beach somewhere in Mexico. Then it was the old town in Warsaw. Then the Maldives. New York in the snowstorm. Cairo. It doesn’t stop!

I have a theory: my generation is fixated on fun. Fun decides where we work, what we spend our money on, what city we live in, when we get married.

Young people in the UK are moving to buzzy cities like London and Manchester. More of them are working on “fulfilling” jobs in creative industries. And they’re spending their cash on tickets instead of things.

Now, I know you didn’t sign up to Risk and Reward for cultural navel gazing. So let’s move this onto more familiar ground: charts, stocks, money.

Tickets not things

It comes down to this: young people are spending less money on things and more money on experiences. So they’d rather spend money in a pub, restaurant or on holiday than save up for a fancy car.

It seems to be happening all over the rich world. Take the US – here’s a chart from Bloomberg showing the ratio of big leisure stocks to big retail stocks over there (a higher number indicates that leisure stocks are rising relative to retail stocks).

RAR1

Here’s something similar for Europe, also taken from Bloomberg. This one shows the performance of leisure stocks and retail stocks over the last four years (leisure stocks in white).

RAR2

I saw those charts and I thought “Aha! I knew it!”

Beyond the smartphone, most young people I know don’t seem particularly keen on collecting lots of stuff. They don’t buy showy cars, furniture, music collections and the rest. Most of them rent their homes well into their thirties. And they’re in no rush to start a family.

This report from Goldman Sachs shows that buying a car, house and TV is a top priority for only a small few millennials – around 10% for each. It also shows that the average marriage age is now 30, up from 23 in the 1970s, and that only 23% of 18-31 year olds are married and living on their own.

Throw Amazon into the mix and it’s not looking great for the retail industry. And maybe not great for capitalism? The whole system is built on Say’s Law, which basically says that people’s limitless greed keeps the system going forever.

More on the end of civilisation and the prospects for Debenhams (LON: DEB) next week.

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