They’re so annoying. This entitled bunch of youngsters have no idea what it’s like to walk uphill both ways to school. The torture of dialing a rotary phone. Being served chicken that’s not free range. The horror of restaurant menus without a gluten free option. They sit in cafes ordering grande, iced, sugar-free, vanilla lattes with soy milk for $7. What’s wrong with Maxwell House coffee? You can brew a whole pot for 50 cents. Every generation has an obligation to complain about the younger generation. Our challenge is not to change this fine American tradition, but rather recognize that while Millennials may be annoying at times, they are also the major players in a dramatically shifting economy. Millennials are both developing and using technologies that are changing the world, the economy, and how we live. Today’s generation believes in sharing. Talk about annoying! While we always told our children to share, we didn’t mean their cars and houses! Uber, Zip Cars, Airbnb and others have dumped tremendous amounts of supply on the marketplace. More supply means less pricing power for traditional vendors. It’s no wonder hotel prices have been stagnant for years. Not only can you compare and find the lowest priced hotel by going onto Priceline or Trivago, Airbnb has effectively added tens of thousands of hotel rooms to each major city. When you need a ride to your Airbnb, you will likely you choose a clean Uber instead of a smelly cab that costs twice as much. We’ve mentioned many times why we believe the Fed’s fear of inflation, based on their traditional models, is wrong. Changing technologies are creating both supply and demand, but much more supply. Supply is lowering prices, creating more demand. This is a good thing for the overall economy and the consumer. However many traditional businesses are getting crushed. Earnings season is coming to a close, and we have been reading the transcripts of earnings calls closely. The headline numbers show a phenomenal earnings season, but a deeper look shows the Millennials are once again wreaking havoc. This time it’s the telecom sector getting turned upside down. It doesn’t seem like that long ago that getting cable T.V. in your house was a life changing experience. Probably because it actually wasn’t that long ago. Most of us switched over sometime during the second half of the 80’s when we demanded, “I want my MTV!” Trivia question: what was the first music video ever played on MTV? Hint – the title of the song was incredibly accurate. Going from 3 channels to 50 channels was incredible. Now that we have thousands of channels, the Millennials are “cutting the cord”.. What’s wrong with these kids? AT&T reported its DirecTV unit lost 188,000 satellite TV customers last quarter. Charter communications lost 122,000 cable customers last quarter, and Verizon Fios lost 22,000. Meanwhile Netflix (we recommend a Netflix original called The Ranch, it stars Ashton Kutcher, Sam Elliot, and Debra Winger), added 7.4 million streaming customers in Q1; Amazon Prime is now streaming to over 100 million customers, and this is not a joke but a channel on YouTube called PewDiePie now has 61.3 million subscribers. The trend is clear. Millennials, and even some of us older folks are spending far less time watching cable T.V. Instead we are opting for the fresh and original programming being offered by disruptive media companies. We can also bypass cable through live sports streaming. Most everyone can now watch their favorite team on their tablet or mobile phone. The cable and satellite stock index is down 19.5% ytd while Amazon, Netflix, and many other content providers continue to soar. Here’s the strange part. What’s been helping AT&T, Charter, and Verizon is they provide the internet access that allows customers to cancel their cable subscription. All of these companies are actually adding internet customers while losing cable customers. There will come a time in the not to distant future when broadband will be powerful and inexpensive enough to cut the internet cord too. That’s why we are seeing consolidation and the rush to wireless among these companies. Currently there are proposed mergers between T-Mobile and Sprint and AT&T and Time Warner to name just a few. The biggest complaint about millennials among retailers, realtors, and some economists are that millennials don’t buy “things,” they buy “experiences.” They don’t seem to be on board with the get married, buy a house, and have children plan. Perhaps as they get older this will change, but for now it’s creating some real changes in the economy.
We don’t judge here at GreenPort, we only observe. The winds of change have been and continue to blow strongly in the modern economy. The one thing that doesn’t change is that earnings are rewarded. If you're curious about what the future holds, follow where earnings are trending higher and where they are trending lower. That's likely where the economy is going. We look forward to seeing you on the Hyperloop soon. These Millennials have no idea what it was like to sit in traffic for hours every day. The GreenPort Team