• Are You Bearish Enough? All Hedgeye Products → Up To 65% Off

    Don’t panic. Get your portfolio proactively prepared. This is a limited-time offer to the sharpest investing research money can buy.

NEWSWIRE: 12/18/17

  • Sales of recreational vehicles have hit historic highs—a trend fueled by increased travel, rising disposable income, and generational change. But investors take note: While hipster Millennials, nomadic Xers, and adventure-seeking Boomers may be buying RVs now, this procyclical industry is poised for a reckoning once the next economic downturn hits. (The Wall Street Journal)
    • NH: The explosion in RV sales started late in 2015--along with plunging gas prices and rising real medial family income. It has coincided, since 2016, with rising traffic miles driven (and fatalities) and the retirement of populous Boomer cohorts who are now free to "go solo." Also fueling the boom are younger Americans (especially late-wave Xers age 35-44) who can't wait to get "on the road." Boomers opt more for the pricier, plusher motorized RVs; younger consumers go more for the cheaper, towable campers. The prices of Thor (THO) and Winnebago (WGO) have been on a two-year rip, and sales continue to rise, contributing to the Trump-era surge in consumer-durable manufacturing. Still, the demographic outlook is iffy: Fewer late-wave Boomers can afford the higher-margin models; and most Millennials will roll their eyes at all the risk, space, and hassle of ownership. The economic outlook is even iffier: Historically, recessions, gas-price hikes, and consumer credit crunches push these firms off a cliff. That's a lot of potential peril for stocks trading at 18-20 ttm PEs--nearly three times higher than Big Auto. RV investors better hope that SV techies don't invent a "sharing" app for these babies (oh wait, they already have!).
  • Air France has launched an airline, Joon, geared exclusively toward Millennials that offers features such as VR entertainment and in-flight smoothie bars. While this over-the-top offering may seem like a ploy, it could help Air France win brand loyalty among young flyers who would otherwise simply pick the cheapest option on Expedia. (Bloomberg Business)
    • NH: This trial is a bald, undisguised exercise in generational pandering. And it just might work. Young Xers would have despised such a Madison-Avenue designed pitch (Joon comes from the French "jeune" or young). But we all know Millennials think they're special. And besides, they really do like free Wi-Fi and smoothies and recycled cups. The counter-argument is that Millennials thus far have shown very little brand loyalty when it comes to travel--and typically just pick the first thing that pops up on their OTA site. Marketers will be closely watching this Air France experiment.
  • Google is readying a new YouTube paid music service, slated for release in March 2018. With very little non-ad revenue to speak of, Google hopes that it can carve out a space in the paid music streaming business alongside Spotify and Apple Music. (Bloomberg Business)
  • In its latest style guide update, The Wall Street Journal admonishes itself for its snide treatment of Millennials. For a cultured publication whose audience includes many 20-something achievers, WSJ’s long-running “Millennial misstep” is inexcusable—and its mea culpa is warranted. (The Wall Street Journal)
    • NH: These "editorial guidelines," promulgated by the editorial staff, do not quarrel with the idea that generations like "Millennials" merit identifying and tagging--only with the pejorative and often just mindless way that most WSJ writers have been using the tag. See this spoof by Stephen Colbert.
  • Fully 25% of Gen Xers want to work for themselves in the next five to ten years—a higher share than any other generation. Xers’ freewheeling mentality and strong desire for work-life balance makes them a perfect fit for the home office. (World Options)
    • NH: Marketers often imply that the attractiveness of a gig-oriented, free-agent lifestyle is always inversely correlated to age, as though this were a fixed life cycle rule, valid across all decades. Not true. It changes by generation. Back in the late 1990s, the correlation was basically correct because Xers happened then to be young adults and the Silent happened then to be retiring. But today, young-adult Millennials no longer aspire to self-employment--"gig" and "perma-temp" is something they do because they have no other choice. Xers, on the other hand, now well into midlife, still aspire to lifestyle freedom through just the sort of freelance franchising that platforms like World Options promote. The guide is entitled, "Generation X: A Guide to Leaving the Rat Race behind and Working for Yourself." This company knows its customers. (Most Millennials, after looking around, figure that working for yourself is the rat race.)
  • Over 7,500 people attended Intel’s Neural Information Processing Systems conference this year, up 40% from last year. The surge can be attributed to the rapid advance of AI, which has driven up the demand for star computing talent. (Bloomberg Business)
    • NH: Nothing is hotter than AI today among newly minted left-brained college grads. Universities can't even run departments in this field anymore. All the talent is being hoovered up by Cupertino, California. With reason: The creation of an "ambient intelligent" world over the next two or three decades promises to transform our lives.
  • Economist Andrew Duguay writes that, in order to overcome lagging sales, the auto industry should focus on Boomers. He’s correct in his assessment: In addition to their high levels of disposable income, Boomers (unlike Millennials) view their ride as the ultimate status symbol. (Forbes)
    • NH: Good call. To use the old Boston Consulting matrix, there is little hope of moving an auto company into the "Star" quadrant. Just keep it in Cash Cow territory and prevent it from becoming a Dog. And that means adding all the features you need to max out profit margins on Boomers and first-wave Xers (car culture really fades out after the 1970 birthyear) while you can still sell to them.
  • New research shows that, even in a “zero-migration” scenario, Europe’s Muslim population is projected to rise from 4.9% of the total population today to 7.4% by 2050. This expected growth is due to the younger age and higher fertility of Muslims already in Europe, as well as the impending decline of the non-Muslim population. (Pew Research Center)
    • NH: Of course no one expects immigration to go to zero tomorrow. Using another "medium" scenario, assuming that immigration proceeds as it did before the Syrian refugee crisis, the Muslim population reaches 11.2% of Europe (17% of France, 11% of Germany, and 21% of Sweden) by 2050. And using a "high" scenario, assuming further immigration at the level of the last few years, it reaches 14% of Europe (18% of France, 20% of Germany, and 31% of Sweden). I did similar projections in The Graying of the Great Powers (2008). If anything, Pew's projections strike me as a bit on the low end.
  • Nike’s SNKRS app, which enables shoppers to buy limited-edition shoes, is winning rave reviews for its gamified appeal. Through its use of hidden “Easter eggs,” scavenger-hunt-like task lists, and exclusive promos, Nike is bringing some much-needed fun and excitement back into retail. (The Wall Street Journal)
  • Academics and scientists are debunking the notion of the entitled, dependent Millennial. Millennial-bashers rarely mention the positive personality traits that this cooperative generation brings to the table—or that Millennials’ “delayed adulthood” has been caused more by tough economic conditions and changing gender roles than by sheer laziness. (Harvard Political Review)
    • NH: Another illuminating summary of social science findings that undermine the pitch of Millennial-haters like Jean Twenge. (See: "Trendspotting: 11/27/17.") To quote the article: "Clark University psychologist Jeffrey Jensen Arnett, who spearheads the Clark University Poll, found that not only is Twenge's data on narcissism unsound, but claims that millennials are unmotivated, entitled, and self-centered are also false. On the contrary, according to research by Arnett and others, millennials are more tolerant and altruistic than their elders. They have lofty aspirations, but not over-sized egos and unreachable goals."

      DID YOU KNOW?

      Meet Me at the Pool. As team-oriented fitness enthusiasts, Millennials have driven up the demand for activities like SoulCycle and Zumba that allow them to get in shape with a group of friends. Now, a host of startups is taking that mentality to the water. Enter SwimTeam, a Los Angeles-based outfit that specializes in 45-minute pool cardio sessions. Attendees are given special headphones that allow them to simultaneously hear the instructor along with high-energy workout music. Similarly, Strox Fitness is readying a New York water aerobics class that will combine interval and circuit training for a high-intensity, full-body workout. These offerings aren’t just designed for improving the body, but also for calming the mind. MindTravel—which specializes in land-based social experiences such as “silent concerts”—is making waves with MindTravel Underwater, where attendees simply float around as music is played through underwater speakers. MindTravel’s website promises an otherworldly experience that “transports you back to the womb.”