A shockingly high percentage of young adults in America are living at home
with their parents.
Now, this is an ongoing trend as we know, following the 2008 recession,
more and more young people had to stay living with their parents.
Because they couldn't make ends meet and
make enough money to afford rent, afford a mortgage.
And that trend unfortunately, has only been exacerbated in recent years.
Housing is incredibly unaffordable, and Morgan Stanley says,
this is actually a good development for luxury brands.
Their argument is, well, I mean, young adults are now living with their
parents because they can't pay rent, that means they're saving money on rent and
they're actually spending it on luxury items.
And I was like, no, they're not, that's not true, but they have a point.
So, let me give you the details.
US Census data shows that nearly half of all young adults
from ages 18 to 29 still live at home,
the highest level recorded since the end of the Great Depression in 1940.
Morgan Stanley attributes this growth to the rising cost of rental prices,
wow, great analysis, really took a genius to figure that one out, [LAUGH].
The greater enrollment in higher education and the delaying of marriage.
Now, according to the analysis led by Edward Aubin,
the structural trend has been overlooked in the context of
rising luxury spending over the past decade.
As older Gen Zs and younger millennials have their rent and food paid for
by their parents, their discretionary spending increases,
allowing them to buy up more designer handbags, watches and jewelry.
Okay, listen, if you're living at home with your parents,
for me personally, love you mom, I know you're watching,
you're the best, you're a great mother.
I'm very happy, I don't live with you,
okay, [LAUGH], mom was all up in my business.
Where you going?
When are you coming home?
Why aren't you wearing slippers?
Your feet are gonna get cold.
I can't do it, I can't, and
I'm pretty sure these young adults are feeling that pain too.
Put your money in a savings account with interest.
Okay, but I'm not judging, you want the watches, you want the luxury items,
do you booze?
But is it true, are they really like sparking this increase in luxury brands?
Yeah, it turns out it's true.
So first, I'm gonna give you the Morgan Stanley report.
They argue, when young adults free up their budget for daily necessities,
they simply have more disposable income to be allocated to discretionary spending,
that's true.
This is of course not the only reason luxury goods consumers
are getting younger in the west.
Social media playing also an important part, but
we see it as fundamentally positive for the industry.
So, what are the numbers, right, let's take a look at the luxury item market and
what percentage of young adults make up that market of consumers.
The average age of luxury shoppers also is dropping,
with half of all purchases by people in their mid-20s to early 40s,
while up-and-coming Gen Z now in their teens to mid-20s,
account for nearly 20% of luxury sales.
Gen Z, by the way, are expected to account for 40% of the global
personal luxury goods market by 2035, which by the way makes a lot of sense.
Because by 2035, which is quite a long time from now,
they're gonna be more established with their careers,
they're gonna have more money to spend on whatever they want,.
Assuming that things don't completely collapse.
And so, yeah, they probably will spend more money on luxury items and
that includes brands like, Dior, Tiffany Chanel, you guys get the point.
Okay, so it's true, the Morgan Stanley analysis ended up being true, and
I'm gonna try really hard to not sound judgmental,
because I'm not trying to judge anyone for how they're spending their money.
But I am concerned about people getting hoodwinked by these brands,
that are actually just kind of giving you this illusion of being better
than other brands.
Because I got news for you guys, most of the stuff that you buy is being
manufactured by the same people, and the same companies.
They're just giving you the illusion of choice, and
the illusion of different brands, right?
Sure, the brand is different, but the product, the actual item,
is pretty much the same, they just slap different labels on it.
And if you're wondering what I'm talking about,
if you think I'm crazy, get a load of Luxottica.
This story blew me away and I think it's indicative of what we're seeing
throughout our economy, not just with the luxury items industry, let's watch.
>> If two women walk down the street with these on.
>> Yes, they almost look the same.
>> Almost look the same.
>> Almost, it's not the same.
>> Not the same because of details on the frames,
like the little Chanel C's, polo ponies or Tiffany blue.
>> Luxottica wouldn't tell us their markup, but
glasses like these can sell for up to 20 times what they cost to make,
and all the glasses are designed by Luxottica.
>> So you design thousands of pairs of glasses.
>> That's what we do.
>> Down on the factory floor,
you can see the work that goes into differentiating the brands.
Plain plastic temples go through a painting machine and
come out Versace, stones are inserted one by one into the Dolce Gabbana,
and leather is carefully threaded for that Chanel bag look.
Smartmoney.com columnist, Bret Erns,
says the appearance of variety is an optical illusion.
>> Reality is, it's like pro wrestling competition,
it's actually fake competition.
>> That's right, it's fake competition.
So, if you're into buying brand name luxury goods, let's say you
want Chanel glasses, just understand that you're buying Chanel glasses for,
I mean, there are hundreds of dollars for the Chanel glasses.
But the Chanel glasses are the same as a cheaper brand because they're
literally made by the same people, in the same factory, and the same company.
So, you're needlessly spending money on something just because it has a brand on
it that you think is gonna impress others.
But I'm just being real with you, it's not going to impress others,
because others don't care.
Okay, ladies,
I know you wanna make other ladies jealous because you've got all the goods, right?
No one cares, but you should care about your life and your living conditions.
And what I would do right now,
instead of spending thousands of dollars on a designer bag.
Is I would take that a couple $1000 or however much you're planning on
spending on a designer bag, and I put in a savings account with a high interest rate.
Because right now, the other side of the Federal Reserve increasing interest rates,
the side that you probably haven't heard much about,
because all we hear about is the negativity, right?
Savings accounts have started applying higher interest rates to the money that
you deposit in the savings account, no risk, right?
It's not the stock market.
So the bank that I'm at,
I don't put my savings account in a big bank because they don't pay any interest.
But you can find online banks that are FDIC insured, and
they pay you an interest rate, in my case, it's 3.60%.
Nice, and look, you chip away little by little this isn't a conversation
about don't eat avocado toast, right?
It's not, but if you've got the disposable income and
if you have the privilege of being able to live with your parents rent free for
a while, you should be saving that money up for a home one day.
I'm just trying to give you guys some advice, you could totally discard it,
know that I'm not judging you in any way.
So if, what makes you happy is the designer bag, go for the designer bag.
I just don't want you to get hoodwinked by these companies and these brands,
that are getting rich off of you as you live at home with mommy and daddy.
Just keeping it real.