Special Letter: November 2011
A Once In a Generation X Opportunity
Every so often there is what is often referred to years later as a "once in a generation" opportunity. When we hear that phrase, we are usually hearing about how somebody should have done something or bought something years ago. Wouldn't it be nice if we knew then that "once in a generation" opportunity was at the time, rather than look back at it years later? Of course it would.
Look Back to Look Ahead
Let's engage in a little exercise. Let's pretend it is 2026. Fifteen years from now you are looking back at the early part of this decade. What would you wish you had done, or begun, or invested in looking back? Would you wish you had started your own business? Would you wish you had bought real estate? Would you wish you had bought stock in companies with alternative energy assets? What stopped you from doing those things? Fear? Inertia? Somebody who never accomplished much talking you down?
I have a message to the person (remember, it's 2026 now) who wanted to start their own business but didn't do it because they did not want to give up the certainty of the paycheck they had at the time from the company they don't work for anymore. You made a mistake. That certainty you thought you had, well, who do you work for now in 2026? Not the same company is it. What certainty did you really have back then?
To the person who did not buy real estate because they were afraid prices might go a little lower, yeah, you screwed up too. Real estate is going up in value again in the 2020s and interest rates are higher to boot. Don't you wish that you had that land in northern Wisconsin, or the home on the five acre lot, or the commercial building near a good intersection. Too bad. You missed your chance to buy on the cheap when you decided to buy a few more toys and a new car rather than save a down payment.
And to those who did not invest in companies engaged in alternative energy when the industry was consolidating and while large companies were investing in alternative energy assets, seriously, what were you thinking? "Oh, solar is years away and wind isn't as cheap as coal." Well, in 2026, wind is cheaper than natural gas fired power plants because natural gas has doubled in price from the lows of the last decade. And solar is as cheap as coal, which never became clean. Incidentally, as sludge dumps started flooding towns and sliding into the Great Lakes, coal became more expensive when people decided that coal fired utilities ought to clean up their messes. How could you not see that alternative energy was coming in a big way when General Electric, Total, BP, Google, Walmart, Kohl's, NRG and other big companies, and China, started committing hundreds of billions of dollars to alternative energy? Wow.
If you had only known then what you know now in 2026.
Well, fortunately, it is not 2026 yet and you still have a chance.
Now I realize that if you are already retired, some of this doesn't affect you much. But if you haven't retired yet, it does. Even if you are 55 or 60, you need to realize you are probably going to live another 30 years or more and will need your investments to help you for a long time, not just the next 15 years. And if you are a Generation Xer, well, you have some opportunities that you will never see again.
The Generation X Paths to Riches
First off, if you are a Gen Xer and have thought about starting a business, do it. Stop wasting money on buying toys and cars. The baby boomers are retiring and that is opening up a lot of opportunities. Take their spot in the market. The generation behind you is large. Lay down in front of them and you will get rich.
I remember a piece of advice my grandpa Frank gave me when I was in college, he said, "Kirk, whatever you do, lay down in front of the baby boomers. Do something they need. They'll take care of you." Well I have, and they have. The same demographic story is playing out again. The Echo Boom or Millennials, whatever you want to call the teens and twenty somethings is a big generation. At some point they spend a lot of money. They might as well spend it with you.
If you plan to manufacture or refurbish something, remember, there are a lot of Chinese and Indians who might drive a market for you as well. The opportunities today are not just local.
So, go clear out some room in your basement, or your garage, and start your business. If you don't have enough space, talk to a friend or relative who can rent you some space on the cheap. If you need store frontage, it's cheap, go get it. Or, sublet some space with a complimentary business, they're slow, they need the rent. Probably you don't quit your other job (if you are lucky enough to have one) for awhile. And maybe that means 65 hour weeks for a few years, but you're still young, you have the energy (and hopefully a supportive spouse if you are married), do it while you can. Dreams only come true if you wake up and act.
I realize not everybody wants to own a business. Some folks are just better off being skilled or professional and working for a company. That's fine. That doesn't mean there aren't opportunities for you though. If you are making a good income, you should probably look at owning more than one piece of real estate. Maybe buy a duplex or four family rental building if you are handy. Maybe buy a second home on the edge of an expanding tourist area. Maybe buy farm land and share crop it or start a hobby farm. There are a lot of real estate opportunities out there right now. Some sellers are so desperate, you can make a deal with only a pittance down and land contract- make sure you have a good attorney if you go that route. Regardless, if you do your homework there is real estate worth buying for the next few years.
In your securities portfolios, you know, those the things you keep hearing are supposed to be long term investments, you should add some alternative energy assets (click linked text to read my recent Market Watch article). Right now, some of the biggest companies in the world are investing in alternative energy assets. The pure play alternative energy company stocks are dirt cheap as the young industry goes through a consolidation on the path to maturity. GE is expanding its alternative energy operations. There is a nice exchange traded fund that can give you broad exposure to the sector as well.
Look, we all know that fossil fuels are finite and getting more expensive as we have to dig and drill deeper. What a lot of people do not realize is how efficient solar is becoming or how in certain areas wind is highly adaptable. As you read, next generation battery technology is being worked on right here in Wisconsin with big company Johnson Controls. There is a reason why.
The Big Picture
I was talking to local entrepreneur Jason Vance who also works with other business owners in making their enterprises more efficient and he had an interesting take on diversifying one's personal portfolio. His take is that a portfolio isn't just a 401k account. It is everything you earn from and get use from. It is your home, your job(s) and all of your investments, including, non-security assets, like rental properties or a second home. He's right.
So, Generation Xers, you have a decision to make. Do you stick with the status quo and bob along whichever way the waves take you, or do you add an engine and rudder in order to take control of your journey? Remember, in fifteen years you will be looking back. What do you want to see?
Your Generation X Advisor
P.S. Tom says Happy Thanksgiving.
This letter contains forward looking statements that may not come true. Past performance does not guarantee future results. This letter is intended for informational purposes only, and reflects only my thoughts and opinions in general, and do not constitute individual advice. Opinions expressed may change without prior notice.