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NEWSWIRE: 10/16/18

  • Public pensions are dumping PE funds that don’t consider the “human impact” of their investments. Whether this is a (positive) sign that public pensions are making a realistic and long-term appraisal of these funds' long-term performance or a (negative) sign that they are responding to pressure groups and trying to make public policy on their own is all in the eye of the beholder. (The New York Times)
    • NH: Free-market conservatives will be alarmed at this story, which confirms all of their suspicions about so-called "pension-fund socialism." It's not like the pension managers (especially the politically appointed ones) actually consult the workers whose assets are in these funds--or the voters who will have to fork up the difference if these assets underperform. No, they are free to follow whatever their conscience tells them to do. In decades past, this meant steering clear of cigarette or gun or fossil-fuel companies. Today, it means disinvesting in PE firms that lay off employees or that fail to support "inclusivity and diversity." It frequently means listening closely to union leaders and their progressive allies, who find it easier to persuade pension managers to change their investment choices than to persuade those who are accountable to voters--state and federal lawmakers--to change public policy directly.
    • Even more appalling, perhaps, is that such a large share of public pension assets are invested in PE funds at all. Back in the 1970s, an estimated 75% of public-fund assets were in safe fixed-income instruments. By 1990, it was about 50%. Today, it’s about 25%. Where is a lot of this money now going? Into risky PE funds (CALPERS is now starting its own PE business), thanks to criminally lenient public-pension accounting rules (thanks, GASB!) which basically allow managers to choose a discount rate equal to whatever they expect the ROR on their assets to be. Managers have thereby been allowed to pull down their discount rates by only 50 basis points since 1990 (8.0% to 7.5%) even as risk-free 10-year yields have fallen by 500 basis points (9.0% to 3.0%). Even so, many states show massive underfunding. Americans across the political spectrum should be scandalized by how we manage funds earmarked for public worker retirement.
  • A $15 minimum wage is the issue most likely to win a candidate the support of 18- to 21-year-old voters, followed closely by “Medicare for all” and higher taxes on corporations and the rich. Despite the media attention lavished on topics like gun control and immigration, economic inequality looms the largest for young adults who are looking more and more like budding democratic socialists. (Morning Consult)
    • NH: The three proposals showing the biggest favorability margins among late-wave Millennials are (1) raising the minimum wage to $15; (2) universal health care; and (3) raising taxes on the rich and corporations. In fact, the burgeoning ranks of Millennial Democrats aren't attracted so much to New Left radicalism (focusing on culture and identity politics). Rather, they want Old Left radicalism (focusing on socializing and equalizing the economy). They thus have more in common with their G.I. Generation grandparents than their Boom Generation parents. Lest we forget, this was the central message of Bernie Sanders' 2016 campaign, which was wildly popular among Millennials. It is also the gravamen of Jeremy Corbyn's unending socialist tirades against the U.K. Tory leadership. Corbyn, in turn, rallied U.K. Millennials with spectacular success in last year's general election.

Trendspotting: Public Pensions Invest for a Cause - Millennial poll

  • The Simpsons recently celebrated its 30th anniversary, a major milestone for Gen Xers. Op-ed contributor Christian Whiton, himself an Xer, observes that, “Perhaps better than any other facet of popular culture, The Simpsons—with its irreverence and nonchalance—has captured the spirit of [my] generation.” (Fox News)
    • NH: Irreverent. Nonchalant. Insouciant. It's revealing how Gen X is so often defined by what they are not. And, in particular, by how little they care. Of course, most of them do care, but just not in the blustery, bloviating, lemming-like way that other generations pretend to care. Xers raised on The Simpsons do not respond well to political correctness (see NewsWire item below), suggesting that even those Xers who dislike President Trump's policies may harbor a grudging respect for his unplugged and unaffected conversational style.
  • A new report suggests that the recent decline in U.S. fertility may be long term. The report’s authors pinpoint four structural fertility headwinds that will be tough to overcome: a falling birthrate among Hispanics; rising female educational attainment; a falling birthrate among the religiously unaffiliated; and a narrowing gender pay gap. (Center for Retirement Research at Boston College)
    • NH: You heard it here first. See: "Investing Webcast: Annual Demographics Outlook," wherein we review these dynamics. The sharp decline in Hispanic fertility is a genuine "independent" driver. But most of the rest--rising female educational attainment, declining religious affiliation, and a narrowing gender pay gap--are all closely correlated with a deeper shift in the Millennial worldview. It's a movement toward a more secular, urban, sheltered, and meritocratic lifestyle in which early risks are minimized and early commitments are put on hold. The biggest single driver of declining fertility is the huge reduction in births under age 25 and (especially) under age 20.
  • New research shows that, from 2002 to 2014, the share of 15-year-olds in Britain who drink alcohol regularly tumbled from 46% to 10%. This stat from the World Health Organization adds to the growing pile of evidence documenting the decline of youth drinking culture, which isn’t being replaced by harder drugs but rather healthier hobbies. (The New York Times)
    • NH: The recent decline in youth drinking throughout Europe is impressive. But the decline in the U.K., where rates of youth drinking were once so high, is truly spectacular. According to a separate survey, in 2001, only 12% of English 16- and 17-year-olds considered themselves non-drinkers; in 2016, that was up to 35%. Binge drinking, nightclubbing (see: "The Next Big Thing: Where the Wild Things Aren't"), and cigarette smoking are also generally declining among European Millennials, as they are among U.S. Millennials.
  • When it comes to buying a car, Boomers and Gen Xers are the most likely to care about its country of origin. Comparable shares of the 55+ (63%) and 35- to 54-year-olds (58%) consider this at least somewhat important, but only 41% of 18- to 34-year-olds do; revealingly, Millennials are also more likely to name non-U.S. countries (e.g., Japan and Germany) when asked who makes the most reliable cars. (YouGov)
  • With the 2018 midterms fast approaching, Mashable reporter Heather Dockray looks back at the first batch of Rock the Vote ads targeting Gen Xers in 1990. Featuring scruffy celebrities like Lenny Kravitz and Ozzy Osbourne, the ads tried to make voting seem sexy and nonconformist: “Speak your mind and vote. It ain’t illegal…yet.” (Mashable)
    • NH: IMO, most Millennials would not know what to make of these early-90s ads. Some would surely find them unfriendly or even menacing. (See this Rock the Vote ad by Anthony Kiedis or this one by Ozzy Osbourne.) They're all about self-expression, defying censorship, and "rocking" the establishment. Nowadays, Millennials tend to favor group expression, censoring hate speech, and trying to stabilize the establishment.
  • WSJ contributor Matthew Kitchen discusses ways to escape our always-on work culture. The tech world is just now devising solutions for the problem it created (in the form of apps like Slack and settings like Google Calendar’s “Working Hours”)—but the fact is that none of these innovations will matter without a top-down embrace of work-life balance. (The Wall Street Journal)
  • A new report on political polarization, Hidden Tribes, finds that most Americans (80%) consider political correctness “a problem in our country.” The strongest predictors for support of political correctness are not youth or race, but income and education; those who are affluent and highly educated (a group that’s largely white) are the least likely to reject P.C. culture. (The Atlantic)
    • NH: Great article by Harvard poli sci professor Yascha Mounk, reporting on an extensive new attitude survey. This dislike of political correctness extends across nearly all incomes, ages, ethnicities, and parties. Interestingly, Asians (82%), Hispanics (87%), and American Indians (88%) all dislike political correctness even more than whites (79%). And 75% of African-Americans dislike it. By age? Fully 79% of Americans under age 25 dislike it. So who supports it? The authors find one particular political tribe they call "progressive activists," representing about 8% of all Americans, who likely think political correctness is no problem. How do you find them? Look mostly for white Democrats under age 65 who are affluent professionals, are religiously unaffiliated, and hold advanced degrees. Yes, Americans also dislike "hate speech" (by 82%). But apparently the consensus opposed to political correctness is nearly as powerful. No doubt this explains some of the hidden energy behind the president's support.

Trendspotting: Public Pensions Invest for a Cause - PCMounk

  • Fully 72% of Millennials consider owning a home a “top priority,” greater than the share who say the same about getting married (50%) or having children (44%). This doesn’t mean Millennials have abandoned the idea of ever starting a family—just that they want to secure a long-term residence first. (Bank of America)

                  DID YOU KNOW?

                  Mini-Influencers Make a Mega Impact. We’ve discussed before how brands have turned to social influencers to help them move merchandise. As it turns out, there’s no such thing as “too young” to be an influencer. Meet Gianna, a 9-year-old fashionista with 22,800 Instagram followers who regularly collaborates with the likes of Nike and Vogue. Gianna is just one of many “mini-influencers” reshaping the world of advertising—particularly in fashion, which is always looking for its next “it” girl. Earlier this year, Nike enlisted eight young influencers to help design children’s versions of classic Nike kicks. But it doesn’t end with fashion. According to Meredith Hirt, senior insights writer at Cassandra, “We’ve noticed a rise in carmakers targeting parents through their kids.” Quite simply, Hirt says, the rise of technology and social media means that “[c]hildren don’t have to wait until they grow up to be influential… which is causing brands across all industries to take notice.”