That’s just over half America’s invested wealth… And it’s held by about 70 million people – the baby boomer generation.
Those are the folks born between 1946 and 1964.
And over the next 20 years, they’ll transfer most of their $70 trillion to their kids and grandkids.
But the next generations of investors won’t invest like their parents and grandparents.
They’re turning away from stocks and bonds… And putting large chunks of their wealth into alternative assets such as collectibles and cryptocurrencies.
You hear the talking heads on TV talk about it. And as usual, they’re more focused on the markets’ short-term price moves.
But if you pull back and look at the big picture, you’ll see we’re on the brink of a great wealth transfer.
You could ignore this trend as trillions of dollars pours out of the stock market and into these alternative assets… Or you can get in front of this transfer and position yourself alongside the wealth builders of the future.
They’ve invested $18 trillion directly in stocks.
And they have another $16 trillion in stocks and bonds through pension and managed retirement funds.
All told, the average boomer has about half his net worth locked away in these traditional asset classes.
The midpoint of this generation turned 30 in 1985. Not coincidentally, that was the start of one of the greatest stock market rallies in history.
Since then, the S&P 500 returned an average 11% a year after reinvesting dividends. That’s enough to turn a $1,000 stake into $57,500.
Bonds did great, too.
The Bloomberg U.S. Aggregate Bond Index tracks medium- and long-term corporate and government bonds.
Over the same time, it delivered an average annual gain of 7%.
So it’s no wonder boomers love stocks and bonds. These two assets have been powering their growing wealth for decades.
That’s because of the biggest demographic group in America – the millennials…
They’re born in the 1980s and early 1990s. There are 72 million of them.
And they don’t have the same faith in these traditional assets.
The average millennial has just 23% of his net worth in stocks or bonds.
And it’s no surprise…
The average millennial was 20 during the 2008 financial crisis and stock market crash. That shook their faith in the traditional financial system to the core.
So instead of plunging money into stocks and bonds like their parents, they’re looking to alternative assets like collectibles and crypto to grow their nest egg.
Colleague and former hedge fund manager Teeka Tiwari’s calls this group of alternative assets “Maverick” investments.
He took the name from the Top Gun movies. As he explained it to his readers…
A maverick is an unorthodox, independent-minded person. The first person who comes to mind is Tom Cruise’s character from Top Gun, Lieutenant Pete “Maverick” Mitchell. He goes his own way. He’s free-thinking. He doesn’t follow the crowd. Because of that, he’s successful.
That’s the mindset you need to survive this inflationary market. But you won’t find maverick ideas on Wall Street. Maverick investments exist outside the standard portfolio model, which focuses on stocks and bonds.
Longtime Cut readers will know all about these alternatives. But for newer readers, Maverick investments are outside of the traditional financial system. And they have three traits that make them great for outpacing inflation. They’re…
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Real – The harder it is to “print” an asset, the more real an asset is.
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Rare – These are assets with low supply.
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Enduringly desirable – They have a history of high demand from wealthy people.
I’m talking about bitcoin (BTC).
Let’s look at the granddaddy of crypto based on these three traits.
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Real – Central banks can’t print more bitcoin. “Mining” new bitcoin is an expensive business that requires banks of high-powered computers consuming large amounts of power.
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Rare – The supply of bitcoin is capped at 21 million coins.
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Enduringly desirable – Since its creation in 2009, adoption has swelled from a handful of programmers to over 180 million people today… as well as publicly listed corporations and Wall Street institutions.
(Among its buyers are superstar fund managers Paul Tudor Jones, Bill Miller, Ray Dalio, Stanley Druckenmiller.)
That’s what cements bitcoin’s place as the “gold standard” for younger generations raised in a tech-focused world.
About one in four people under the age of 50 have invested in or used a cryptocurrency. The wealthiest millennials allocate about 15% of their portfolio to cryptos.
Meanwhile, only about 7% of investors older than 50 have used a cryptocurrency. And investment rates for that demographic are about 2% of the average investor’s net worth.
As Teeka has been chronicling for his readers, we’re seeing major asset management firms adding crypto services.
Last week, the Bank of New York Mellon (BNY Mellon) announced it was launching a new service to store clients’ cryptos.
Alexander Hamilton started BNY Mellon in 1784. That makes it the oldest bank in the U.S.
It’s also the world’s largest custodial bank by assets.
And according to its CEO, Robbie Vince, it’s doing making the move because clients “want institutional-grade solutions in the [crypto] space.”
Teeka had this to say about the news…
BNY Mellon sees growth in crypto. It sees the future.
The bank has sat on the sidelines for years as tiny offshore firms made billions of dollars providing crypto trading and custody services to their clients.
You think the folks at BNY Mellon don’t want a piece of that? I promise you they do.
Crypto is the asset of the future. BNY Mellon has lasted more than two centuries by recognizing, and positioning itself for, high-growth opportunities.
And BNY isn’t alone. Wall Street giants BlackRock, JPMorgan Chase, and Goldman Sachs have all added crypto services over the past year.
These big players are preparing for trillions of dollars in wealth to transfer from stocks and bonds to crypto as the boomers pass on their wealth to their kids and grandkids.
Since its all-time high last November of $67,600, bitcoin has plunged 72%.
But unlike most mainstream investors who are dumping their bitcoin, he recommends his readers avail of today’s discounted prices to buy more. Back to Teeka…
Right now, the biggest mistake crypto investors are making is confusing short-term market weakness with a long-term erosion of bitcoin’s value.
Rather than grasping this is a temporary ailment that will repair itself… they’re dumping their bitcoin. It’s like amputating a limb because of a scratch.
You should view this pullback as a buying opportunity. I know I sound like a broken record. But buying world-class assets at discounts is how you profit from volatility.
Don’t plonk a big amount into bitcoin all at once. Teeka is long-term bullish on bitcoin. But he sees plenty of volatility over the short term.
That means prices could go even lower from here before they start trending upward again.
Instead, Teeka recommends you use something called dollar-cost averaging to build your position.
Set aside a fixed dollar amount each month. It can be as low as $50 or $100. And use it to buy some bitcoin, no matter what the market’s doing.
If you do that consistently… and hold for the long term… you’ll come out of this sell-off richer than you were when you entered it.
Regards,
Chris Lowe
Editor, The Daily Cut