"Crypto Winter" Is Getting Colder. NewsWire

NEWSWIRE: 12/4/18

• “Crypto winter” is getting colder: Bitcoin slid below $3,500 last weekend, more than 80% down from its 2017 peak. The numbers are sobering: Since we made our bearish call on Bitcoin last winter, the plunge in cryptocurrency prices has vaporized nearly $700 billion in global market cap. (CNBC)
• NH: I got lots of hostile feedback when we made our very bearish call on Bitcoin exactly one year ago. (See: "Bitcoin: Don't Look Down!") That was about two weeks before Bitcoin reached its all-time peak. We did not deny that blockchain technology has some valuable applications. But we did claim that Bitcoin did not--and could not--effectively fill any of the conventional definitions of money (unit of account, store of value, and means of transaction). We also claimed, more generally, that the "crypto" part of any cryptocurrency made it a nonstarter from a legal or public policy perspective: Not only could government not tolerate a truly workable cryptocurrency--government could not survive such a cryptocurrency. Hence Bitcoin would never be allowed to flourish even if, technologically, it was capable of flourishing. All of this has come to pass.
• And it's not just Bitcoin that's falling. In fact, the other cryptocurrencies are falling even faster. Adding together the market cap of all 2,073 coins tracked by CoinMarketCap, the total decline since peaking on January 7 of this year has been 75%. But the market cap of all coins other than Bitcoin is down 88%. And the decline specifically in Ethereum--most touted for its "smart-contract" capabilities--is 92%.
• More NHL teams are opting to go without a captain, instead relying upon a number of “alternate” captains to share the leadership duties. With a growing number of Millennials stepping into prominent roles on their teams, the storied “captain’s ‘C’” is being eschewed in favor of a more democratic leadership structure. (The Washington Post)
• NH: What's happening? Millennials, who have always prioritized followership (team cohesion) over leadership (worshiping the alpha dog), are taking over the veteran ranks on pro sports teams. Follow the generational diagonal on this one. Go back fifteen years and look at high school juniors and seniors (first-wave Millennials, born around 1985-86). Some high schools, for the first time, began abandoning the practice of naming single valedictorians. This turned out to be the beginning of a big trend: Today, most high schools nationwide name groups or teams (not individuals) as valedictorians. In 2004, there appeared the hit teen flick "Mean Girls," in the last scene of which Lindsay Lohan takes her homecoming queen tiara, breaks it into pieces, and hands them out to the other girls. And yes, at just about the same time, high school teams began to experiment with a rotating or group captaincy. That practice has also spread.
• Today, those 17- and 18-year-olds are reaching their mid-30s. Increasingly, they constitute the older and experienced core of pro sports teams. Not surprisingly, we're seeing the spread of group (or no) captaincy in the NBA and in the NFL. The shift in hockey is especially significant because the NHL, unlike other sports leagues, confers special duties on the man who wears the "C" (the captain alone "shall have the privilege of discussing with the referee any questions relating to interpretation of rules which may arise during the progress of a game"). So does that now mean that no player can speak to the ref? Maybe. But then again, when was the last time that conversation made a ref change his decision? 
• Traditionally associated with students, gap years are becoming increasingly common among Boomers. True to form, they aren’t spending them cruise-hopping or relaxing at resorts; many Boomers treat these trips as test drives for the various passion projects that they want to pursue in retirement. (BBC)
• NH: Boomers are changing the idea of "vacation" just like they are changing the idea of "retirement." First off, they are avoiding the word. What self-respecting Boomer, full of Neopuritan zeal for one cause or another, wants to tell friends he or she is merely having fun when they could rather tell them they are engaging in a heartfelt, punishing, dangerous, laborious, educational, principled, or even messianic experience? So they're engaging in eco-tourism, "voluntourism," "Road Scholarships," local-culture immersion, and self-test challenges. Don't say you're travelling to get drunk. Say rather that you're enrolling in a rigorous "wine trip for oenophiles" (now packaged by Princess Cruises). Get the idea? (See: "The New Senior Traveler.")
• A new study gauges the massive human impact of student-loan debt. Among the survey’s most damning statistics: Fully 80% of borrowers say their debt burden prevents them from saving for retirement, while 56% say their debt keeps them from buying a home. (MarketWatch)
• NH: See the underlying study here. We're talking about 44 million Americans paying $1.5 trillion in student loans--an amount, concentrated mostly among young adults, roughly one-sixth the size of America's total household mortgage debt. Only here, instead of owning a real asset to balance the loan, the borrower may or may not own a paper certificate of dubious value. The three biggest takeaway numbers for me were the following. First, 65% reported having a student-loan bill higher than their monthly food budget. Second, 30% reported having a student-loan bill higher than their rent or mortgage bill. And third, 18% reported being in default on at least one of their student loans. This totally broken system not only constitutes a serious life roadblock for Millennials (helping to explain why they aren't getting married and buying homes). It also presents an opportunity to political leaders looking for a platform that will rally today's rising generation of voters.
• Generation Xers (30%) are more likely than Millennials (24%) or Boomers (27%) to say they “still carry scars” from the Great Recession. Though Millennials are typically labeled the financially strapped generation, the beating Xers took during the recession—combined with their phase of life—means they’re in a bigger bind trying to make up the difference before retirement. (Wells Fargo)
• NH: The share of workers who say they have "unmanageable debt" is 26% among Millennials and 24% among Xers. Since the share of adult Millennials who own homes at all is not much higher than 26%, we can assume that a big part of this story is student loans. As for Xers, sure their number is a bit smaller, but their incomes are larger, their prospects for future income growth are dimmer, and their time until retirement is shorter (indeed, dwindling fast for first-wave Xers). Xers are thus much more likely than any other generation (by at least 9 percentage points) to rank "paying off debt" as their number one financial priority.
• A new book, Generation Priced Out, frames the dearth of affordable urban housing as a war between Boomers and Millennials. According to author Randy Shaw, what’s finally getting older homeowners to stop resisting new development isn’t so much the arguments for social justice or the environment, but just seeing that “their children and grandchildren can’t afford to live near them.” (CityLab)
• NH: Even blue-zone progressives are now admitting that development restrictions have warped regional real-estate markets and have resulted in a colossal and regressive wealth transfer--to affluent elder property owners in coastal cities and from younger professionals who stretch their budgets to try to live and work there. In California, incoming governor Gavin Newsom has a supermajority in both houses--which gives the Democrats the power to do something about it. But don't hold your breath. Even modest reforms in Prop 13 will be tough. Meanwhile, real-estate price hikes may be peaking, not only nationwide but especially in the priciest cities. Once it's clear that the bubble is over, I suspect, reform will be deferred. I've always believed that big policy changes happen during "windows of necessity" far more often than they happen during "windows of opportunity."
• Older generations are much more likely than Millennials to show their support for charities with monetary or in-kind donations. Young adults prefer attending charitable events, volunteering, fundraising, and contributing to donor-advised funds—an approach no doubt shaped by their financial situation, but one they say will continue as they age. (Give.org)
• Soon-to-be-released research shows that moving back in with your parents may have unforeseen mental-health consequences. This “boomerang effect” may help explain why Millennials are exhibiting high stress levels and rates of mental illness. (MarketWatch)
• NH: This "moving back in" study was done on German young adults. It may not apply to Americans. And, in particular, it probably does not apply to young adults who are living at home but never moved out to begin with. Recall that the concern with "boomerang kids" back in the early 1990s focused on Gen Xers who, for the most part, did try to live on their own before moving back in with their parents--as if in defeat and disgrace. Yes, this probably was highly correlated with emotional problems stemming from self-perceived failure. But U.S. Millennials who live at home are much less likely to have left and returned or, if they did, are less likely to associate this return to parents as shameful. One in three Millennials would not be embarrassed at all to be living with their parents in their 30s.
• The official figures are in: U.S. life expectancy at birth dropped to 78.6 years in 2017, while age-adjusted mortality rose YoY for the second time in three years. As we predicted, the increase was driven by a boom in “deaths of despair,” from fatal drug overdoses to suicides. (Centers for Disease Control and Prevention)
• NH: You heard it here first. And if the early data results for Q1 are sustained, we'll see similar results for calendar year 2018. 
• Victoria’s Secret is in turmoil: CEO Jan Singer is leaving the company amid slowing sales growth. Victoria’s Secret joins a long list of brands that have been caught off guard by the new wants and needs of Millennial consumers; this generation’s modesty and inclusivity places a company built on selling sex in a tough spot. (The Wall Street Journal)
• NH: It turns out that VS is going down the same road as A&F, and for many of the same reasons. They were selling a brand heavy on exclusivity, brand names, showbiz glitz, and Playboy-era sex appeal. That spells no sale in the Millennial era, especially after #MeToo. To see what works with Millennials, compare the VS "Pink" website (thumbs down) with the gallery for American Eagle's "Aerie" fashions (thumbs up).

DID YOU KNOW?

Peering into the Millennial Economy. How is the Millennial Generation faring economically? That’s the big question at the heart of a new, wide-ranging Ernst & Young report. The main theme running throughout: Millennials are stressed out about their finances and remain cautious despite a lasting economic recovery. Most Millennials (54 percent) describe the state of the U.S. economy as “fair” or “poor.” This generation simply hasn’t experienced the recovery firsthand: More than half (53 percent) say they’re either making “just enough” or “not enough” to get by. When Millennials were asked about their top personal worries, economic and financial concerns topped the list. Fully three-quarters of Millennials worry “a lot” that Social Security will have run dry by the time they retire (75 percent); other top concerns include America’s debt and deficit levels (71 percent) and their future job prospects (70 percent). This pessimism has darkened Millennials’ traditionally rosy view of U.S. institutions: The military and higher education are now the only two institutions in which a plurality of Millennials say they have “a great deal” of confidence (51 percent and 49 percent, respectively). The federal government comes in at a dismal 22 percent.