Landmark Links September 20th – Young Man’s Best Friend

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Lead Story… If you follow the news even casually, you probably know that Millennials are less likely to own cars and homes or be parents than prior generations.  However, there is one area where Millennials are out ahead: Pets.  The Washington Post published the results of a study of pet ownership among young people and the results were somewhat stunning (emphasis mine):

Three-fourths of Americans in their 30s have dogs, while 51 percent have cats, according to a survey released by research firm Mintel. That compares to 50 percent of the overall population with dogs, and 35 percent with cats.

The findings come at a time when millennials, roughly defined as the generation born between 1980 and 2000, are half as likely to be married or living with a partner than they were 50 years ago. They are also delaying parenthood and demanding flexible work arrangements — all of which, researchers say, has translated to higher rates of pet ownership.

“Pets are becoming a replacement for children,” said Jean Twenge, a psychology professor at San Diego State University and author of “Generation Me.” “They’re less expensive. You can get one even if you’re not ready to live with someone or get married, and they can still provide companionship.”

You read that correctly, 75% of American’s in their 30s have dogs!  That is a yuge percentage and makes this self-proclaimed crazy dog person quite happy.  As with most publications though, WAPO seems to be implying that Millennials’ penchant for animal companionship makes them somehow different from the rest of “us.”  Indeed, if Millennials were going to forego family life permanently in favor of living with only dogs or cats it would have dire demographic implications.  Instead, I would suggest the pet ownership trend fits nicely with my theory about Millennials: they aren’t any different from prior generations, they are just taking longer to hit certain milestones than previous generations did.  Human beings need companionship and pets fill that gap before young people are ready to start families.  The increase in pet ownership is a good thing.  There are a ton of healthy benefits to having a pet as a family member, not the least of which is reducing stress.

Why am I so certain that dramatically increasing pet ownership among young people isn’t a harbinger of demographic doom? Well, for one, I’ve lived it.  I was born in 1979 so I’m not technically a Millennial but I didn’t get married until later in life.  I rescued a Black Labrador named Shadow when I was 24 who was my best friend for 10 years.  Despite my attachment to my dog, I ended up getting married in my mid-30s and had kids soon after. Shadow passed away several years ago and Pepper, a 2 year old Golden Retriever is now an important member of our family.  Also, I can’t imagine a scenario under-which we wouldn’t have a dog.

All that being said, there was one segment of the article that really frightened me (emphasis mine):

Millenials were also twice as likely than Baby Boomers to buy clothing for their pets, a phenomenon Richter chalks up to the prevalence of social media.

“The clothing is, for them, an opportunity for performance — they put it on their dog or cat, take them for a walk, post a picture on Facebook,” Richter said. “It’s increasingly about getting a digital stamp of approval.”

On second thought, I take back everything that I just wrote.  Maybe Millennials are the hipster weirdos that the press makes them out to be after all.

Economy

Nada: The reason why the stimulus from low oil prices never boosted the economy – it was 100% offset by the reduction in energy investment.  Mea Culpa on this one.  I was dead wrong.

Crossroads: The Fed is basically in the dark when it comes to the relationship between “full employment” and inflation in today’s economy.  As we approach what was traditionally considered “full employment,” they have a decision to make.

Commercial

Out of the Shadows: Shadow lenders are stepping up to fund development deals as regulators force banks to pull back on commercial real estate exposure.

See Ya: Mall owners are totally over department stores and not sad to see them go as retail tenant mix remains in flux.  But See: Nervous bond investors are hedging their exposure to malls with mortgage derivatives.

Residential

Building Up or Building Out: Awesome time-lapse graphics from the Washington Post this past weekend on density in major urban areas over time and the conundrum that cities face when it comes to keeping housing affordable: do you build up or do you build out?  See Also: Some suburbs are trying to add urban-style development projects to attract young workers and the employers who covet them.

Profiles

Always Be Closing: How Wells Fargo’s high pressure sales culture spiraled out of control and led to a massive checking account scandal.

Fleeced: Back in 1999 former recalled CA governor Gray Davis gave away the farm to public employee unions that had supported his election bid in the form of increased pension benefits based on the bullshit assumption that  CalPERS’ annual returns would average 8.5% forever. Davis sold benefits increase to taxpayers by claiming it would cost them nothing since all of the increase would be borne by CalPERS’ return on investment.  Needless to say, things didn’t go as planned.  Today the unfunded liabilities total $241 billion.

Battle of the Buzz: How the alcohol and pharmaceutical industries are bankrolling the fight against marijuana legalization.  See Also: There is a land rush going on in some of California’s worst real estate markets and commercial pot is the reason.

Chart of the Day

Europeans are not as happy with big-city living as commonly believed.

WTF

Florida Grudge Match: Nothing says Florida quite like an octogenarian brawl on the shuffleboard courts. (h/t Steve Sims)

Buy Gold: A notorious runaway Russian robot that has escaped it’s lab twice has been was arrested by police at a political rally.  And so it begins…

Somebody Walks in LA: Meet LA’s first “People Walker,” a bearded hipster and wannabe actor who will go on a walk with you for $7/mile. (h/t Ingrid Vallon)

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links September 20th – Young Man’s Best Friend

Landmark Links September 9th – Misunderstood

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Lead Story… I doubt that any generation has ever been hyper-analyzed the way that Millennials have.  You can’t turn on the TV, read a news website site or open a newspaper (yes, some people still read them) without coming across an opinion piece purporting to know everything about Millennials: how to make them happy at work, where they want to live, how they want to shop, etc.  Much of it reads as if the people born between 1980 and 2000 are some type of exotic beings that are to be observed in their natural setting to understand how their species live.  Spare me.  I’ve long suspected that most of this is BS and that Millennials aren’t really that different from previous generations.  Most of the actual survey data that I’ve seen confirms this to a large extent.  This past weekend a collegue sent me the link to a study done by CBRE appropriately titled: Millennial Myth Buster: Young Americans Do Like the Suburbs (h/t Tom Reimers)  In this report, CBRE’s research group dug into actual migration and census data to show where Millennials are actually moving as opposed to where conventional wisdom says that they are moving (emphasis mine):

The most recent available annual data (2014) show that 2.8 million people moved from the suburbs to cities that year; however, 4.6 million did the opposite.1 Since this runs contrary to the prevailing narrative about urbanization, it’s worth digging into the data to see what’s behind these numbers.

There are many ways to look at domestic migration——age, education and profession are all useful in breaking it down. In recent years, media stories have frequently focused on the role of millennials——those born between 1980 and 1995, roughly——in driving the resurgence of downtown areas. The focus on this generation was not unwarranted; millennials are now the largest age group in the country and make up the largest segment of the U.S. workforce. It is fair to say, however, that census data disagree with the media on where millennials actually live and where they have been moving to.

Approximately 30% of millennials live within urban areas. The other 70% do not appear to be rushing to move downtown: In 2014, 529,000 people between the ages of 25 and 29 moved from cities to the suburbs, while only 426,000 moved in the opposite direction. For younger millennials aged between 20 and 24, the flow’s direction was even more pronounced, with 721,000 moving out of cities for the suburbs and 554,000 leaving the suburbs to pursue life in the city. It’s true that some of those moving to the suburbs were returning to childhood rooms or basements in their parents’ homes, but the migration trend still holds: not every millennial can or wants to live downtown.

Ok, so that’s just one year but the data has actually been remarkably consistent over time. This is one case where the facts are 180 degrees away from the narrative.  The US is getting more suburban, not more urban.  CBRE’s conclusion was particularly interesting as it pointed out that younger people often want urban amenities but still a suburban setting (emphasis mine):

The remarkable discrepancy between population data and the prevailing narrative raises questions about the preferences of young people in the U.S. What do they want? Simply put: space and an urban feel. One recent survey showed that 81% of young people (defined as millennials and those born in the late 70s) want three bedrooms or more in their residence. Their responses regarding geography reflected this preference: two-thirds of respondents stated a desire to live in the suburbs, while only one in ten wanted to live in a city center. Such findings are corroborated by the results of another survey, in which nearly two-thirds of millennial-aged respondents self-identified as suburbanites or rural people.

Still, millennials have a reputation for appreciating the perks of urban life, such as easy access to public transportation, shops, restaurants and offices. This does not necessarily translate into demand for downtown real estate, however. Suburbs too, can develop in ways that appeal to younger demographics, by incorporating elements of urban life in suburban areas. This is occurring in metros across the country. New terms have even been coined to describe quasi-urban areas in the suburbs——among them, ‘‘hipsturbia’’ and ‘‘urban burbs.’’

I highly suggest reading the entire piece.  IMO, the reason that the media gets this wrong is that urbanization is primarily happening in the areas where they tend to be based: NY, LA, SF, DC, etc.  Influencers live in these places, witness urbanization occurring and assume that it’s happening everywhere else as well.  These large, wealthy, mostly coastal cities do not look like the rest of the US from a demographic standpoint and their demographic trends shouldn’t be extrapolated to everyone else.  I hate to break it to many of you but the average Millennial isn’t a mustachioed hipster wearing skinny jeans and drinking organic kombucha in a Brooklyn organic juice co-op.  He or she actually looks a whole lot more like you and I than we’ve all been led to believe.

Economy

Changing Tune: Barry Ritholtz of Ritholtz Wealth Management, The Big Picture Blog and Bloomberg View was a critic of banks as a risk to the US economy long before the crash in 2008.  Now that the crisis has been over for several years, he’s finally giving the all-clear as banks have finally deleveraged a bit and refilled the FDIC’s deposit insurance fund.  See Also: A longtime proponent of financial industry regulation thinks that regulators may have taken things too far in the wake of the Great Recession, leading to mountains of red tape and rising compliance costs.

Full Turn: Inequality in the US used to be most evident in the South.  Today, it’s most pronounced along the coasts.

Eating Well: How foodie culture defied expectations and not only survived but thrived post-recession.

Commercial

Slip Sliding Away: Walmart killed off rural downtowns when they started offering goods for cheaper prices.  Walmart’s position has been steadily eroded in recent years by big box stores like Costco and e-commerce, primarily Amazon.  Two interesting related stories this week:

  1. Costco is struggling as online bulk shopping provides strong competition. (h/t Mike Nash)
  2. Amazon, which is a primary culprit in the decline of Walmart, big box stores and malls is now starting it’s own delivery fleet, which could pose an existential threat to UPS and FedEx.

Residential

If Headlines Were Honest: Alternative headline from Bloomberg early this week: Housing Boom to Keep Going Even if Rates Rise Says CEO of Highly Levered Public Home Building Company.

Staying Away: Beazer made a tender offer to buy back $300MM in debt due in 2018 in yet another example of public builders spending money on pretty much anything except for land.

Profiles

Explains a Lot: Florida resident Dave Barry recently wrote a book about his freak-show of a state, a portion of which was excerpted by the Wall Street Journal last week in a well-titled article called – Florida: The Punchline State.  I recommend that you read the whole thing if you consider yourself a connoisseur of weird Florida news.  My favorite excerpt (emphasis mine):

The point is that, yes, Florida, because of its unique shape and warm climate, does have an unusually high percentage of low-IQ people doing stupid things, frequently naked. But most of these people came here from other states, the very same states that are laughing at Florida. Those of us who live here have to contend with not just our native-born stupid, but your stupid, too. We are like Ellis Island, except instead of taking the huddled masses yearning to breathe free, we take people who yearn to pleasure themselves into a stuffed animal at Wal-Mart.

House of Cards: Some Great investigative reporting from Nick Bilton of Vanity Fair on the downfall of Theranos and founder Elizabeth Holmes.

Can You Hear Me Now: New study finds that your dog knows exactly what the hell you are talking about.

Chart of the Day

Myth Busters – Urban Migration Edition

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WTF

Swedish Meatballs: A guy got his testicle stuck in an ill-designed Ikea chair and took to Facebook to complain about it (h/t Mandy McDonnell)

Inside Joke: North Korea just banned sarcasm. Seriously.

Bad Selfie: A battery suspect was apprehended after he used the police department’s “wanted” poster as his new Facebook profile picture, because Florida.

Misdirected Anger: A woman who was angry with her ex set the wrong car on fire,  because, once again, Florida.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links September 9th – Misunderstood