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How will Gen Ys and Millennials will cope in the BUST

Written on the 1 October 2016 by James Cagney

I cover these generations in general and even if you do not identify with what I say you will no doubt have friends who fit the stereo type.  Go on have a laugh at yourself or at the expense of your friends. As for you Baby Boomers and Gen X parents - you are not exempt.  I hope that some of what I share with you will be of assistance.

No matter which generation applies to you the coming BUST (2017/ 2018) will affect the lives of every person in Australia.  You do need to take note of the steps you should take during the BUST cycle, which is around the corner, or you will struggle. 

My wife and I have 6 Gen X children,  plus their husbands and wives,  and thirteen grandchildren.  I have also been very involved with the youth in our church for over forty years and seen the generations grow from children to teenagers and then in their adult years.   I do feel that I am reasonably qualified to talk about these generations.

Although I talk mostly about Gen Y's and Millenniums in this article - Gen X parents need to take responsibility for the way they think and act. After all "Children learn what they live and then live what they have learned". Once again do not take what I say personally as it may not pertain to you because you may be the 'perfect parent' or simply delusional (Ha... Ha...).

On the lighter side there is a quote from a well-known author, who is a family counsellor, who stated during one of his public appearances "If I have not insulted yet - please be patient" .

Gen Y

Since 1981 Australia has not had two consecutive quarters where the Gross Domestic Product (GDP) was in the negative. Therefore, in economic terms, most Gen X's and Gen Y's have never themselves lived through a formal recession or a depression.  Even during the Global Financial Crises (GFC) or the financial crisis following the 9/11 bombing of the Twin Towers in the USA, Australia did not have a formal recession.

I am not saying that some Australians did not do it tough during these two periods of austerity. Some people did lose their jobs or their businesses and money was very tight. However, the 'commodities boom' we had experienced from1981 to 2014 created prosperity for most Australians.  It would be opportune for you to have a read through an article I wrote entitled "Inflation the friend of the rich and the foe of the poor". This article shows what food, cars, houses etc. cost during the 1950's and describes the standard of living during that period.  Click >>> for this article as it will be well worth the time spent. If you lean nothing from the past you will never be able to predict the future.

There is no doubt that Australians have enjoyed a high standard of living off the back of what I call Australia's "Silent and Powerful" generation.  These were the Australians who were born between the period from1914 to 1944. Many in this generation were born during and after the 1st World War (a period of immense hardship).  There were no jobs in Europe many Europeans immigrated to Australia, Canada, South Africa and to the Americas.  Starting a new life in a foreign land was tough and for most there was the additional hardship of language barriers and these young people and their families suffered great hardship. They had no option but to buckle down and work extremely hard, often under unfavourable circumstances, also being considered as 'foreigners' and not being readily accepted into society. Fortunately for Australia we had the great sheep industry boom.  Australia exported lamb, mutton and wool to Europe and we lived off the backs of the sheep farmer for many decades and later also the cattle farmers.

The Great Depression of 1929 to 1933 saw the decline of the demand for wool.  Many Australians could not find work and were thrown onto the streets because they could not pay their rent.  Food was scarce and many families did it extremely tough.
The recovery was slow but through hard work and determination they survived and some even thrived. The outbreak of the 2nd World War then saw our young people sign up with the fire of patriotism and dreams of glory.  This also provided a living for these aimless young men, and for the women who began to take over the jobs left vacant by the departure of our young able men.

They fought for freedom against tyranny during the 2nd World War of 1940 to 1945. Many women were widowed during that period and had to bring up big families on their own.  After the war Australia experienced another influx of immigrants who once again had to start a new life which was not easy. These immigrants worked hard alongside Australians to build Australia into the Super Power that it is today.  We owe an enmormous debt of gratitude to those resilient generations.

The 'Silent and Powerful' generation returned from the war, married and had children. Four to six children per household was the average at that time. This in itself brought a degree of austerity for families as the world began to recover from a devastating war.  Money was tight credit was not readily available.  Interest rates and consequently mortgage rates were higher than they are today.  Most Baby Boomers will remember that their parents could never afford new cars. Many a weekend for their parents was spent with dad tinkering under the bonnet of the old Austin, Morris Minor, Ford and Holden. Baby Boomers wore hand-me-downs from sibling to sibling and from family to family. People worked long hours and holidays and travel was rare and usually only undertaken for family occasions such as weddings and funerals. people stayed with their rellies as they could not afford to pay for hotels, motels etc.

Now there is a reason I have dared to give you a history lesson. It is that the Silent and Powerful generation which battled through hardship - something that most of our Gen X's, Gen Y's and Millenniums have not experienced during their lives.  The Baby Boomers who went without during their childhood gave their kids whatever they could possibly afford. Unfortunately - the result is that we now have the 'Entitlement' expectations of today's generation.

These Gen X's and some Gen Y's grew up seeing their parents struggle to pay off their mortgages, educate their children, feed their larger families and drive old cars. As a result most of these Gen X's and Gen Y's did not want to face the same struggles.  They decided to have fun before they got married and many young adults left in their droves to explore the world after they finished high school.  Off they went to the United Kingdom (which gave them access to Europe), Canada and a few other Western Nations with whom Australia had reciprocal agreements for 'working holiday visas' for single young adults.

This was a great experience for these young Gen X's & Ys' who were really only responsible to themselves. If they ran short of funds we would get a phone call and transfer money. Upon returning to Australia their parents welcomed them with open arms and they mostly moved back home.  Life was good they got jobs, mom cooked, washed their clothes, they had a great deal of disposable income. They had money to go clubbing - spending vast amounts of money on drugs, alcohol and cigarettes. They bought designer sunglasses, clothes, the latest phones, technological gadgets, computers and new cars. Unlike their parents who had had to battle to set up on their own paying cash for what they needed these young people used the 'credit card' and/or credit facilities which were so readily offered to them by banks and retail merchants.  The credit boom was in full swing and life was good.  "Living the Life" or "Living the Dream"

Unlike the parents of the Baby Boomers who booted their children out of home from 16 to 19 years of age (when they had completed High School) the Gen X's and Y's continued to live at home. Statistics revealed that in 2015 the average age of young adult Gen X's & Ys' leaving home was 27. Why would they have left home any sooner life was a breeze. 

Imagine life without modern communication. Imagine life without Twitter, Facebook, Instagram, Snapchat, WhatsApp, Texts, Smart Phones, etc.  Do you know that Facebook was only launched in 2004!  What would our Gen X's, Gen Y's and millenniums do without social media today? Imagine having every book, newspaper, library around the globe at your fingertips. We do have this - Google, Yahoo etc. Google was founded in 1998 and only listed on the stock exchange in 2004.

Unfortunately not many of the Gen Ys' who enjoyed life living at home had saved any money to put deposits down on their own homes. Therefore for the first time in over 30 years there are more 'renters' in Australia than mortgage holders in the 25 to 34 year old age group.  This is despite both Gen Y parents with children being out in the work force.  Inflation has finally caught up with them.

The problem that many of the Gen Ys have is the 'red tape' around child care. The laws brought in by successive governments have made child care extremely expensive and for most parents the income tax system is not overly sympathetic to the goal of these Gen Ys'  owning their own homes. The bad news is the Federal Government and State Governments are broke and therefore not in a position to help these families any more than they already have in place and don't expect more incentives in the future in this regard. 
Some Gen X's & Gen Y's believe that will inherit their parent's homes so "why worry about buying a home".   This is a pipedream because many parents will have to downsize their homes to provide for their retirement through 'reverse mortgaging'.  And here is the clanger - they will have to sell their homes to pay for their nursing home care.

Let me explain why:-

The Australian government penalizes those who do earn and have money - to give to people who do not have money.  If you have no money you apply for the dole.  If you are lazy you can apply for the dole. Unfortunately we have third generation dole bludgers and unwed mothers who have numerous children, often by different fathers, simply for the generous allowances they get in Australia. Married couples who work are penalized in Australia.

If you have a little or no Superannuation (Super) the government will give you the full pension. If you have worked and contributed to a Super Fund the government only gives you a part pension. If you do not own property the government will give you a nursing home bed at no cost to you in the public system.
Alternatively, if you want a comfortable standard of living and you own a home the government expects you to:

1.  "Reverse Mortgage" your home. The banks willingly made an agreement with the government because banks will make more money.

2. Live off your savings and investments

3. Sell your home to pay for your nursing home bed. If your children have to put you into specialised care they will have to pay a huge bond and fees to a private nursing home to take care of you. These bonds are hundreds of thousands of dollars and the children of these parents often have to sell their parent's home to pay these bonds and exorbitant fees. 

This is a totally 'unfair' system. Didn't we pay taxes all our working lives so that the government could look after us in our old age?  Get used to it!  "Life is not fair".  It is a game called "Robin Hood"- robbing the rich to give to the poor. Incidentally, no economy has ever prospered by doing this. You only have to look at the counties within the former Soviet Union to know that socialism simply cannot work.  It takes away the motivation of ordinary people to become extraordinary.

Even though there is a lot of media coverage about the coming BUST -  the Gen X's & Ys' will be unprepared for the BOOM-BUBBLE-BUST Cycle.  The fact is that we only see what we want to see and sometimes we often choose to ignore bad news because it is too hard to imagine the outcome.  So we watch the Footy, the Grand Finals' and pretend that austerity in Australia will never happen again. Wrong!

I gave the Gen Xs advice on how to protect themselves and how take advantage of the opportunities in the coming BUST (predicted by the experts to occur sometime between 2017 and 2018).  You can access this advice by clicking >>> PROTECT.  This information is applicable to Gen Xs and Gen Ys so get a reality check now before it is too late.

The Millenniums

This is the generation which will be most affected during the coming BUST. The BUST is only expected to be of a limited duration of around four years because of the emergence of India as the new Super Power. If you want to find out more about the emergence of India and how this will affect Australians' then you must read the article entitled "How will Australia survive the BUST in the BOOM-BUBBLE-BUST" Cycle. Find out how to take advantage of the opportunities that will arise from the beginning of this Super Power's reign by clicking >>> SUPER POWER. It is worth noting that more millionaires were created during the great depression than any other time in history.

However, if the BUST starts sometime in 2017 or 2018 as predicted - the job opportunities for the Millenniums will be scarce, especially for tradespeople and unskilled labourers. We already have graduates struggling to find full time skilled positions in the current job market and can only expect this situation to worsen. Gen X's will have to accept lower paid jobs to survive. Employers will not be able to afford taking on apprentices or more qualified people. 

The Millenniums who are more academic will either have to attend vocational colleges, TAFE or University or sit at home. Unfortunately children today are more interested in playing on their computers, iPads and other gadgets.  Having Millennium grandchildren myself I know that many of these youngsters will only be too happy to continue to live at home, hanging out with their mates and playing computer games all day long.  They are happy to sit at their computers, continuously raiding the fridge rather than playing a game of cricket in the back yard.  Parents be prepared

Worse still is the lack of direction many Gen Ys' and Millenniums have today and the abundance of spare time these youngsters have make them easy prey for drug dealers. The most popular being 'pot', Ice & Heroin which are sold cheaply - until they become 'hooked'. These drugs are destroying our young peoples' minds and lives. I have spoken to young adults who have 'come off' these habit forming drugs and they found this to be one of the most traumatic experiences of their lives.

They have shared with me the long term damaging affect it has had on them.  Some of them who do stop taking these drugs go back to their addictions, especially after a significant bad experience or trauma they experience with devastating consequences. An example of this happened to a close family member of ours. This person came off heroin after many years of addiction. She and her partner had a bad argument and she went off and took heroin and because she had not taken the drug for over two years, overdosed and died. The family has not recovered from this tragic event. Another big problem is alcohol addiction which also destroys families.

Frankly the authorities and the very weak legal system we have in Australia have allowed bikie gangs and others to openly sell these drugs to our youngsters.  It is disgusting that these dope peddlers with no conscience are permitted to continue to destroy lives and get away with it. 
Parents are also partly to blame for this. You have abdicated responsibility of steering your kids in the right direction. The fact is the drug dealers and peer groups have done a better selling job to your kids than most parents.

The bad news for parents is that we can expect the government to tighten the criteria for HELP (formally known as HECS and Vetassist) by the end of 2017. In the newspaper this week the government has announced huge cut backs in Vocational Training assistance to students.  Unfortunately some of the educational colleges have been abusing the system for years and parents and students are going to pay for this. The government will see savings of some $25 billion through these cut backs.  

Parents are going to have to pay more for this tertiary education needed by their children.  If the Gen Ys' stayed at home until they were 27 years old we can expect the Millenniums to stay home into their 30's before they become self-sufficient. These Millenniums will expect parents to take care of them until they are in their thirties and parents do not expect any appreciation for your ongoing support. They believe it is your duty as a parent - we created these Entitlement children.

Enough bad news! Here is the good news

India's emergence as a Super Power will not follow China's scenario of rapid growth.  Australia's 'commodities' boom resulted from China's rapid surge as an economic power.  This boosted our economy and government coffers significantly following in quick succession to China's growth. This will not happen in the economic boom coming to India.  Market forces will fund India's growth - not their central government - which created and still controls China's boom. We can expect India's boom to only start having a significant effect on Australia's economy in the early 2020's. That means the recession which will begin in 2017/2018 will only last for about four years but we, in Australia, are still not prepared for this.

Be prepared - more and more of these Millenniums who start their families in their early to mid thirties may have to live with their parents for a number of years because they simply will not able to afford their own homes.  With the lack of full time jobs available both young people will have to take what part time and casual jobs they can get. The benefit for them is that grandparents become cheap child care assistants and with the lower income potential for the Millenniums they won't be able to afford outside child care.  So grandparents - gone are the days when you have the grandkids for a few hours and hand them back. Looking after your grandchildren will become a full time job. Gone are those dreams of holidays and travel we have for our retirement. Our dreams and ambitions will not matter to the Entitlement generation.

The Coming  BUST 2017 / 2018

The question on all our minds is "what is a safe investment for all of us in the coming BUST".  The answer is to spread your risk because some asset classes are going to be hit harder than others.

The share market will be hit the hardest. Gold and other precious metals are next on the hit list. Forex and futures will follow.  I feel sorry for the Baby Boomers who are retired because the BUST will devastate their Superannuation funds. Many are going to have to work harder and some will have to try and go back to work. This will not be easy for our aging Baby Boomers and if they do they will most likely only earn minimum wages.

This is what I believe:

"Companies will close, people will lose their jobs, share prices will plummet, some shares will cease to trade, some people will go bankrupt BUT property is forever".  Property is the most stable asset class and many investors will flock to property whist the other asset classes are smashed.
In the 'Finance & Property Update" published on the Friday 14th October I shared with you what experts say, what research has been done, and tried and tested facts regarding economic and demographic trends. Be prepared for the Bust due in 2017 to 2018. Keep your eyes and mind open for this important email. 

To gain futher insight into the above and what to and how to invest please call James Cagney on + 61 416 137 645 or click >>> HERE.  


This is not financial advice. You should not act solely on the basis of the material contained in this Property Update for your investment strategies. Changes in government and legislation occur frequently and without prior notice and financial markets are unpredictable.
Please note that the information herein is of a general nature only and is not intended as specific advice for any particular person or entity.

This information was written and compiled by James Cagney.  The opinions expressed herein do not necessarily represent the views and opinions of his associates including
Asset Finance Pty Ltd.

Author: James Cagney
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