The haves and the don'ts

There are terms to describe the babies born in different range of years like generation X, generation Y and Z. The generation X, following the baby boomer, which was roughly born between 1965 and 1979 while generation Y is between 1980-1994. Generation Z is 1995-2010. The range of years for different generations are not strictly defined though but more or less like an icon of their key straits reflecting that particular era.

Depending on where the babies were born, generation X in the developed countries like the U.S., Japan and Western Europe should be the luckiest group because they enjoyed the sweet from the rapid economic growth after the WWII. While generation Y in the Asian countries like Hong Kong,  Singapore, Taiwan and Korea also shared the enormous growth in the region during their generation period. These four places have once named the four little dragons in Asia. But when it comes to the generation Z it seems the whole generation across the world has lost in somewhere particularly for those whom are approaching towards their adulthood now and they are facing many constraints which were not experienced by their elder generations.

It seems there is a line dividing between the good times and the bad and the line seems to rest in 2008 and this is when the last few batches of generation Z was born. To any economic animals year 2008 is definitely a year not to be forgotten. This was when the U.S. subprime mortgage boom bust and the world finance since then has entered into the uncharted area of QE era. QE literally changed the whole landscape in the financial world which was flooded with hot money. To be more precise, hot money did not flood the real economy but the financial market only therefore inflation on necessities remains low while the prices of financial assets skyrocketed.

One of the phenomenon of financial assets boom is the surge on property price. Hong Kong residential property price shot up more than 2 folds as measured by the Centa-City Leading Index since 2008 and in fact Hong Kong is not alone. Property price in major cities in Canada, Australia, UK have gone up significantly despite of the recent correction. It was the same even for the eye of the storm of subprime mortgage, the U.S., its property price rose again since 2012. The bouyant property price brings huge financial pressure to the home buyers.

On the other hand, stock market across the board has shot up since 2008 when low cost money flooded the markets. One thing remains stagnant though, ie., the salary level, especially among the fresh grads. The phenomenon is attributed to the universal of education which pumped out too many U-grads that scarcity was the word of the past. Governed by the law of supply and demand, the salary growth rate for these U-grads in the past decade was minimal across the board except for a few most sought after sectors like fintech. Despite the overall inflation was not high in the past decade but since the starting salary for U-grads was already not high as comparing to their seniors, compounded with the slow pay rise, generation Z experienced a very difficult time on capital accumulation. Let alone the enjoy first thinking is quite popular among this generation so the habit of regular savings is something they rarely think of. What's worse is that some were already in debts because of student loan on tuition fee even before they could make money.

As depicted by the idea of four quadrants that put forward by Robert Kiyosaki, the author of the series of Rich Dad Poor Dad, wage-earners are the most miserable category. In nowadays's view, generation Z wage-earners undoubtedly can claim the top of the list. Naturally being able to be financial free is the dream of many wage-earners so influenced by Kiyosaki's advocate, many wage-earners resort to investing. The crucial elements in investing are capital and time, supplemented by growth rate. That is also Buffet's idea on value investing that finding a stock with good growth and put in capital then let the compound effect to maximize the benefit.

The point is that investment starts with capital first which is what generation Z is lack of.  However, low cost money jacks up the price of almost all financial assets, stock, property, bonds. Making the entry level of investing high enough that generation Z is dwarfed. On the other hand, as generation Z is approaching to their stage of marriage or parenthood, the need of a dwelling is imminent. When investing can be seen as a luxury but a dwelling for a couple is something of necessity. However, the property price or the corresponding rental level are something they are shy of. They are desperate to invest trying to getting out of the vicious cycle of wage slave but are handicapped by the limited capital and the unaffordable entry level. On the other hand, those existing investors, mostly older than the generation Z, are just riding on the tide of assets buoyant.

Some may argue that this is the best time for start-ups as Internet just revolutionized the landscape of running a business and gaping the distance between entrepreneurs and investors. It is true that starting a business has never been easier than ever. However, entrepreneurship is not something unique in this era. People did that since thousand of years ago and for those who will then they naturally will but for those less adventurous they will just not to. After all, running a business is not the cup of tea for all people nor all young people are capable to. Meanwhile, for those who are not tech savvy, it seems start-up is just something unrelated. The fact is that even nowadays the majority of the young people are still in the employment market.

The low interest rate era just torn the world into two, ie., the haves and the don't haves. The haves will continue to enjoy the assets appreciation and growing wealth while the don't haves just keep suffering from the consequences of soaring assets price. This is the scenario particularly the generation Z, the don't haves, is facing.

This is a miserable generation.


**(Matthew 25:29,  For whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them.)