Asta Charles

Asta Charles
Location
Los Angeles, California, USA
Birthday
December 12
Title
Myth Maker
Bio
A foul-mouthed commentator on life, society, politics, pop culture, and economics. I spend a lot of time in bars. I wrote a manuscript about the perils of online dating and its ultimate cost to society. It's not published. Meh.

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MAY 11, 2010 11:17PM

The Misery of Chasing Bubbles

Rate: 8 Flag
2007_Lamborghini_Murcielago_on_fireSeveral months ago, I had a brief fit of wanting to write an expose' type blog about the coincidental side-by-side pacing of the housing boom and the popularity of television shows about rich fucktards like The OC, The Simple Life, and MTV Cribs. I had it all worked out. I had gathered price averages for the southwestern US charted next alongside the year in which each of these shows reared its Louis Vuitton emblazoned head.

 
Let me see if I can dig it up...
 
Ahh there it is, with all my other theories about how Canada will be the next superpower and the US will eventually adopt a national sales tax and Lewis Black should be president. It's crying itself to sleep at night.


Wealth Rejoicing Television Shows and their Emergence

2000 - MTV Cribs
2003 - The Simple Life, The  OC
2004 - Laguna Beach (which of course became tits-castle...I mean, The Hills)
2005 - Super Sweet 16, Flip that House
2006 - The Property Ladder

Las Vegas housing prices
2000 - $140k
2003 - $160k
2005 - $275k
2006 - $320k


LA housing prices
2000 - $200k
2003 - $290k
2005 - $410k
2006 - $510k


Here's the most important part:
Debt vs. income ratio (credit card debt per household growth) average US
2000 - 900%
2004 - 1050%
2006 - 1100%
2008 - 1205%
 
Really, I wasn't trying to be completely serious with this idea. It was kind of half-baked to the point of humor but not fully cooked to the point of reality. It was supposed to be that way. It was, and is, satire.
 
So I forgot about it, until today, when I read an article in Newsweek (which has awesome fucking articles, don't let the commenters on this page tell you otherwise) titled "Baby Boomers: It's All Your Fault". At first I thought, "blah, I've thought about this tons of times while sitting on the can, blaming my parents for being rich and I see no forseeable way for me to be rich as well, how could this be any different?"
 
It's different becuase my theory stopped before I got to the idea that some day, all these baby boomers will just stop spending their money. I also assumed it would negatively impact the rest of us by our having to pay for their medicare, social security, et al. As we millenials and Gen X'ers are far fewer in quantity than baby boomers.
 
The Newsweek article suggests that we will go into a very lengthy bear market as baby boomers age and stop spending all their money, earned at their jobs that they will eventually retire from. Much like Japan (see my blog on how we should follow Japan's every example). This is because, yes, baby boomers will eventually stop their massive spending spree and start utilizing their savings.
 
That's when I realized how wrong I was about my "Paris Hilton caused the recession" idea: it was the rich, free spending, gotta-have-it-all baby boomer parents, loading their kids up with cash, cars, and credit during their prime earning years. They were at the tail end of a fifty year stock growth spurt that had favored their 401ks and housing values greatly. They were also seeing the same benefit to their own parents' assets. They didn't have a god damned thing to worry about. Their kids reaped the benefits. Their kids, in the rich part of town, became the uber rich. They became the Seth and Marissa on The OC, they could look down on "backwater rednecks" as Paris Hilton and Nicole Richie did on the Simple Life. Why? Because this was their reality. In their reality, the sky was the fucking limit. Their reality was their baby boomer parents' reality - with fifty years of DJIA increases propelling them to financial freedom.
 
All of this is the same reason that tween stars like Justin Bieber and Miley Cyrus are popular: the parents of their demographic are in their prime earning years, they can afford all of their crap that they won't care about in two years.
 
If we are to follow the great trend of Japan, we will enter a long lasting bear market. As my generation ages, we will eventually get our baby boomer predecessors' upper management jobs, their houses, and their salaries. We will not, however, have their stock market increase or their real estate price increase that they depended on to create the heyday of spoiled brats. Demand will not increase for these things as they did int he last fifty years. Why? Because there just aren't as many buyers and they are already overvalued.


 Another symptom, beyond Miley Cyrus and Justin Bieber, of baby boomers' spending spree are bubbles. Gold bubbles, tech stock bubbles, and real estate bubbles. Baby boomers were and are the cohort that had the cash to spend on these things, trying to get rich quick.
I hope, deeply, that my generation does not do this. I don't want to spend my adult life chasing bubbles.


Assuming again that we're headed for stagnation (and I think we are), it suggests there will be a lack of industry bubbles in the future.  My generation isn't very keen on this. We've seen what a bust does. We won't likely want to play that game - nor will we have the available cash to do so until our parents croak. My "adult life" has really been in existence since 2000 to present. All I've ever known is bubbles and the inherent luck necessary to catch them. Fuck luck. I can't wait to live a life without chasing bubbles.
 
 
 
 
 
 
 
 

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Comments

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An interesting thesis. I don't get the credit card debt/household -- what exactly is that?

Anyway, I would never bet against American's spending. As far as boomers --- most of em are 1/2 broke. People have been talking about a boomer based crash in financial assets for a long time, and I don't believe it. If for no other reason than they won't be spending down. They will still be accumulating for a long time.

Nice theory, though. Plus, I appreciate some data to back it up.
nice, but maybe two @#%& expensive wars has something to do with it... ya think? stiglitz [world class economist] does, but nobody's listening. its the mass blind spot....
re paris hilton causing the recession, maybe you could include a link on that one .... of course she seemed more of a symptom than a cause, eh?
@Bonnie Russell: Thanks for your comment. I'm still amazed that shows like Property Ladder perpetuate in the present stasis. It seems as though they'd die out like the dinosaurs, there's no environment for them to live in. However, they can exist in pipedreams.
@Nick Carraway:
Debt to income ratio is explained pretty well here - http://www.answers.com/topic/debt-to-income-ratio

Debt is all the stuff you owe money on, which is unfortunately much more than what people make on average.

I hate to say this as its extremely caustic: but the boomers will die. They may work until they are 70 or 75 to make up for lost cash in the big'ol'bust, but they will eventually be spending no longer. That's when this will really come to fruition (if my crystal ball is right).

I realized I didn't link to the Newsweek article. I've fixed that.

Thank you.
@vzn:
I absolutely think wars had something to do with it, but I also think that Americans' uncanny ability to believe they can have their cake and eat it too (constantly) was an equal, if not more powerful player. It's a player that's been getting stronger for years and years and years. It may now have just been shut down.

I need to read Stiglitz.
@vzn:
And regarding Paris...
I have no data on that because it's just a wacky theory I have. Her popularity is very likely a symptom of all of this hubbub.
I guess I was wondering how the debt to income level gets to 900%.

When the boomers die, their remaining wealth will be distributed to x'ers and later generations who will spend it like drunken sailors.

It will all be their fault then.
@Nick Carraway:
Well, if you make $60,000 per year, but have $5.4mil in debt, including a home and some cars, then you're in a 900% debt to income ratio. I can't fathom such a thing, but I'm sure it happens.

What if all the boomers are out of money when they die? And there is nothing left to pass on?
Interesting idea. I remember another show that might also make your point. The show "This Old House" started out featuring remodels of regular houses. They ended up remodeling mansions, places that were utterly unaffordable for ordinary people.
Little math correction

60K income : 540K debt = 900%

It's still ridiculous, but more realistic.
great article. and the photo. but now I need to massage my temples. too many bubbles is right...
@c2h5ohic:
Thank you. I'm not very good at math unless it involves dubloons.
I think that you need to do a little more research. Back when I was in college -- about ten years before you, from what it looks like -- there was a show on TV called Lifestyles of the Rich and Famous, with Robin Leach. Did Leach's show help cause the first housing bubble that imploded in the early 1990s?
this is by far one of the best economics pieces I have read here on OS. I read the same newsweek article and was left wondering, when the boomers die off who will live in all of their vacant condos or will we just tear them down and start a new.
@Tony Wang:
Thanks for your comment, but I think you need to reach my piece again.
Particularly this paragraph:
"Really, I wasn't trying to be completely serious with this idea. It was kind of half-baked to the point of humor but not fully cooked to the point of reality. It was supposed to be that way. It was, and is, satire."
@sueinaz:
Thank you very much. I appreciate you having a read! I reckon some boomers will pass on their assets, but many will not have assets by the time they die. Thanks medical technology + high cost of living.
Asta,

Did you delete my comment?

I came back to copy it. I know it was in between two spam comments, but why did you delete mine?
Asta, I'm sorry that you took my comment too seriously. I was being facetious as well. That's the hard part of writing. You don't get the non-verbal cues that I'm playing because I just can't make them show up on the screen!
@Jay Busse:
I just wrote you a message in case you miss this. Yes, I think I accidentally deleted your comment in the midst of all the spam. I'm very sorry.
@Tony Wang:
Thanks for your reply. I gotcha now. :) I have a theory that the majority of breakups start on the internet or text message due to missed non-verbal cues. Watch the divorce rate soar...