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- Manlobbi
Personal Finance Topics / Macroeconomic Trends and Risks
No. of Recommendations: 15
I have wondered for a long time where the money that is inflating the stock market is coming from.
One possible source: young people who are renting instead of buying a home.
https://www.wsj.com/personal-finance/where-have-al...
Where Have All the Young Home Buyers Gone? Check the Stock Market
The rent vs. buy debate has taken on new meaning for Gen Z thanks to soaring share prices and more investment options
By Carol Ryan, The Wall Street Journal, Oct. 12, 2025
A record stock market might have a link to the unaffordable housing market, based on how younger Americans are thinking about their finances.
Owning a home has traditionally been the way for U.S. households to build wealth. But today’s high property prices mean younger people either can’t afford to get on the property ladder or think they can earn a better return elsewhere.
Influencers on social media are weighing in. Their message: Don’t stretch to buy a house at today’s prices. Rent and invest your cash instead....
A JPMorgan Chase report found that 37% of 25-year-olds used investment accounts in 2024, up from 6% of the age group in 2015. A sixfold increase in the number of young people investing in the stock market over the past decade suggests a shift in the way they think about building wealth. ...
[Snip good financial analysis comparing aspects of renting vs. buying showing why renting might be the better choice for many]
...
There are reasons to buy a home that have nothing to do with financial returns, including the predictability of mortgage costs into the future, the freedom to do what you want with the property, and having it paid off by retirement so you don’t have to worry about making the rent in old age.... [end quote]
These were my reasons for buying a home many years ago. The other input came from my grandmother, who began investing in the 1920s. When I told her how much money I was making in the stock market she said, "Ah. But is it all on paper?" Having lived through the Roaring 20s bubble and bust, Grandma was aware that paper profits could vanish overnight, leaving the investor with nothing. My grandparents were on a cruise to Europe in October 1929 (with my infant father). After the crash, they met American expatriates in Paris who had been living on their stock market profits who literally could not raise enough cash to buy a ticket back home.
As a result, I bought my home and car. Whatever happened I was not going to lose the roof over my head or my transportation. The assets were fixed in place. Plus my home appreciated in value...although I never included this in my net worth. I counted it as "One House Unit" since I would always need a home and the prices all moved together.
But others could argue for renting. My older brother, Jeff, and intercst on TMF both rented for many decades while successfully investing in the stock market. Both increased their paper net worth quickly.
I believe that the stock market is in a classic bubble. By the way, Nobel Prize winner Paul Krugman just published a Substack article that says the same thing. Since so much of the economy and the stock market are driven by the gigantic capital investments in building AI capacity, anything that burst the bubble would cause a recession (at best) and also a stock market crash rivaling the other mania-driven crashes.
https://www.multpl.com/shiller-pe
Kingran (on TMF) informed me confidently that the Cyclically Adjusted P/E Ratio (CAPE Ratio) is no longer an appropriate way to value the S&P500 since our economy no longer has regular business cycles. Because of that, the appropriate metric for valuation should be Price to Forward Earnings.
I had to smile at that because I disagree on so many levels.
As the wise Yogi Berra said, "It's hard to make predictions, especially about the future."
The business cycle has been mitigated by an active Federal Reserve but it's hard to run a capitalist economy without business cycles.
Technology is constantly changing and is especially vulnerable to competitive advances. The Chinese are actively working on ways to do AI with cheaper chips. They are already succeeding and their efforts are just beginning. It may not be long before Nvidia is in the history books like Wang Computers. And the billions invested in AI may never generate even a fraction of the end-user spending compared with the investment.
The current AI bubble is similar to the technology-driven bubbles of the past, including railroads in the UK in the 1840s, the 1920s and the 2000s.
The Macroeconomic trend of today's youth is to delay (sometimes indefinitely) the "milestones of adulthood" that characterized the maturation of earlier generations. According to the Census Bureau, the share of young adults (ages 25-34) who have achieved all five of these milestones fell from approximately 26% in 2005 to about 17% in 2023.
https://www.census.gov/library/working-papers/2025...
It would certainly be tragic if these young people had invested their savings into the stock market (instead of a home) only to see the bubble deflate.
On the other hand, if this is truly a generational Macroeconomic trend the bubble may continue to inflate.
Meanwhile, billions of private equity dollars are evaporating as zombie companies go bankrupt.
https://www.nytimes.com/2025/10/10/business/first-...
Billions of Dollars ‘Vanished’: Low-Profile Bankruptcy Rings Alarms on Wall Street
The unraveling of First Brands, a midsize auto-parts maker, is exposing hidden losses at international banks and “private credit” lenders.
By Rob Copeland, The New York Times, Oct. 10, 2025
First Brands, an auto-parts maker, filed for bankruptcy late last month...But now, the company is at the center of swirling milieu on Wall Street and beyond over the private equity loans that fueled its rise and the questionable accounting, some of its creditors say, that preceded the fall....
Unlike traditional banks, private credit lenders say, they have the ability to lend quickly because they understand complicated, risky businesses and do not need to worry about repaying ordinary depositors or reporting public earnings.
Trillions of dollars have been plowed into private credit over the past decade, principally from pension funds, endowments and other groups that rely on such investments to fulfill obligations to retirees and the like.
The Trump administration made moves this summer to allow 401(k) plans to invest savings into the private equity funds that extend private credit to companies, raising the stakes even further.... [end quote]
Private equity loans are often illiquid and often not marked to market. These dangers have been explained in detail by Jason Zweig in articles in the Wall Street Journal.
The loans are inappropriate for small investors. But even for the big boys, private equity is opaque and illiquid. Given the huge stakes, lack of regulation and unpublished interconnections of loans a key bankruptcy could be a "Black Swan" trigger for a financial crisis.
Meanwhile, China has played a strong card by cutting off exports of critical rare earth elements. President Trump countered with another tariff imposition and possible canceling of his scheduled meeting with President Xi.
https://www.wsj.com/finance/stocks/rekindling-of-t...
Wall Street Has ‘White Knuckle Moment’ After Tariff Threat Sends Markets Reeling
Friday’s market slide rattled some investors who thought the 2025 market advance was immune to trade-war tensions
By Jack Pitcher, The Wall Street Journal, Oct. 11, 2025
...
Friday’s market slide — fueled by President Trump’s new threat of “massive” tariffs on goods from China — wasn’t huge by historical standards. But its breadth and its focus on red-hot tech shares and smaller banks rattled some analysts and portfolio managers, who had come to believe that the 2025 market advance had grown immune to trade-war tensions....
Chips are on the front line of the trade war, but hardly the only vulnerable sector. Regional banks also slumped...Trump’s threat also hit shares of all kinds of trade-sensitive companies, such as automakers, clothing manufacturers and even health and beauty firms....Investors now are paying more than ever for each dollar of revenue the S&P 500’s members produce. ... [end quote]
Investors responded with a classic fear response. Stocks dropped and VIX spiked (though not to a crisis level).
The entire Treasury yield curve dropped as investors moved into safe Treasuries. Junk bond prices dropped along with stocks since a recession would drive many zombies into bankruptcy. Copper, oil, natgas and bitcoin plunged.
The Fear & Greed Index was in Fear. The trade was strongly risk-off. But USD and gold held steady -- the money was moved into safe, interest-yielding Treasuries.
The Chicago Fed’s National Financial Conditions Index (NFCI), which provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems, was very loose and became even looser.
The chart makes it clear how margin is driving the stock market bubble as it has in the past. The S&P500 divided by money in circulation, which closely correlates with SPX, is the highest since the 2000 dot-com bubble burst. Anyone who can read a chart will be concerned about the chart below.
https://en.macromicro.me/charts/89294/sp500-finra
It's impossible to say what will happen next week since the situation is morphing rapidly and Trump is unpredictable.
The METAR for next week is stormy. Like the nor'easter heading for the mid-Atlantic it will be rough but probably not hurricane force.
Wendy
https://stockcharts.com/freecharts/candleglance.ht...
https://stockcharts.com/freecharts/candleglance.ht...
https://stockcharts.com/freecharts/candleglance.ht...
https://stockcharts.com/freecharts/yieldcurve.php
https://www.cnn.com/markets/fear-and-greed
https://www.chicagofed.org/research/data/nfci/curr...
https://en.macromicro.me/charts/89294/sp500-finra
No. of Recommendations: 2
I'm not so sure.
I would suspect that most of the money inflating the stock market, is coming from the people who have most of the money, ie, not Proles.
I would suspect that fewer Proles would be buying houses now, due to the housing industry "going upmarket", which seems to be a trend across USian industries, combined with 5 figure student loans that we boomers didn't have because higher education was better funded 50 years ago.
To the point about the increase in exposure to investment accounts, would that be due to years of Fed rate suppression that makes it impossible to keep up, using bank deposits? Or would that be the impact of "automatic 401k enrollment" being made explicitly legal, and new hires too intimidated by their boss to say "no"?
So a lower rate of home buying by lower income people could be a combination of their income already tapped for student loan payments, their income already tapped for 401k "contributions", and no-one wanting to build a house that they could have afforded, even if their income was not being depleted by student loan and forced retirement fund payments.
Steve
No. of Recommendations: 1
"Where Have All the Young Home Buyers Gone? Check the Stock Market
The rent vs. buy debate has taken on new meaning for Gen Z thanks to soaring share prices and more investment options"
I am truly flabbergasted at the price of housing in my area. And Michigan is considered
a lower cost of living State ( I think ). I do live in a very popular area, so totally
get prices rising. But housing prices seem totally disconnected from what people
are earning. This is not Silicon Valley, nor the NE Coastal area such as NYC or Boston.
A quick google search shows that the that the median income here is just under $50K.
The median home value is just under $450K, so nearly 10 times the median income.
Anything on water is very quickly becoming $1M and up. I don't think that many locals
are making waterfront purchases. But somebody is buying them.
So it sounds like Gen-Z is making a very rational decision in avoiding purchases
at these prices. Rent is not cheap either, but it most certainly is cheaper
than stretching to buy.
No. of Recommendations: 2
I do live in a very popular area, so totally
get prices rising.
Anything on water is very quickly becoming $1M and up.
Ayup. A number of years ago, I was looking at prices of properties with a water view. Saw one forum where a guy started out asking where there was something affordable, on a lake. After several responses, he lowered the bar to "best mud-hole". And Michigan is absolutely crowded with lakes.
In 2007, my aunt sold her house, built in the mid 80s, on a small lake outside of Kalamazoo. $450,000, and the buyer immediately tore the house down, because it wasn't big and fancy enough for him. My grandfather, a mechanic at a truck line, had paid $225 for that lot, in 1940.
My aunt wanted me to take over that house, to keep the property in the family. I was years away from retirement, so I couldn't. I did suggest she offer it as a rental. Then, when I retired, I could boot the renters out, but she didn't want to do that.
Of course, Traverse is a special sort of crazy. Maybe not Torch Lake scale crazy, but crazy.
From the Google net sifter.
Property on Torch Lake is generally more valuable, with median prices around $989,500 and high-end estates reaching into the millions. Grand Traverse Bay's property values vary significantly, but overall, Torch Lake is considered one of Michigan's priciest lake markets, with a high concentration of luxury waterfront homes.
Torch Lake
Median List Price: Around $989,500
Range: Waterfront properties typically range from approximately $950,000 to over $10 million.
High-End Market: Many "showpiece" estates are listed between $2 million and $5 million.
Market Value: Torch Lake is a major luxury lake market in Michigan
For the folks living elsewhere, Torch Lake and Traverse City are in the northern forests of the lower peninsula. If you want to go to a fancy show, get in your plane and fly several hours to Chicago or Detroit.
Trivia note: the nutters who were planning on kidnapping and killing the Gov, were going to attack at her place on Torch Lake.
Steve
No. of Recommendations: 1
"My aunt wanted me to take over that house, to keep the property in the family. I was years away from retirement, so I couldn't. I did suggest she offer it as a rental."
My opinion is a lot of investors are buying up the housing stock in the area.
They are buying properties that they can AirBNB and VRBO. That has been a solid
investment, so far, I imagine. But I can see and feel a backlash building against
STR's. And LTR's are not nearly as profitable as STR's. So for the prices being
paid, the investors better hope that STR's don't get regulated out of profitability.
"Property on Torch Lake is generally more valuable, with median prices around $989,500 and high-end estates reaching into the millions."
Torch Lake is beautiful, no doubt. I got out on it once this year, on a friend's
pontoon. Huge lake, with huge houses ( mansions ) populating much of the
shoreline. But I can find lake, Bay, or river water spots that are every bit
as nice as, to recreate in. And throw in the every-day-is-Mardi-Gras-in-the-summer
attitude by all of the out of the area visitors, and they can have Torch Lake.
Lot of more relaxing spots to visit in the area.
ps: I thought Whitmer's kidnapping-plotters were holed up near Elk Lake, in Elk Rapids.
could be wrong about that, and Elk Lake is directly connected to Torch Lake,
have boated from 1 to the other, so it's the same general area.
