August 25, 2016

Gen X is an "Underappreciated Influencer" According to Goldman Sachs

Although I live in New York City, I've never been a really big fan of Wall Street investment banks for many reasons.  For one thing, they aren't really big employers, its just that they pay the handful of people who work for them obscene amounts of money (in good years, at least).  But the typical employees remind me a lot of the character Patrick Bateman portrayed by Christian Bale in the 2000 movie "American Psycho" ... a pompous investment banker who rambles on about Whitney Houston's first album and pays high-price hookers to have sex in front of him before he murders them and many, many others.  The fact is that all banks, including investment banks, earn money by selling money for a higher price than they pay for it, and Goldman isn't unique in that regard.  But consumer lending is very tightly regulated, while the same is not true for investment banking, although competition does help regulate prices somewhat there.  Oh, yeah, and Wall Street made some big bets that failed and crashed the world economy in 2007-2008 and came to taxpayers for a bailout, which is why Goldman Sachs is becoming more "banklike" while others, including GE decided to get out of the banking business altogether.

As The New York Times reported (see :

"The years since the financial crisis have not been particularly kind to Goldman Sachs's moneymaking machine — not that anyone is weeping for the company or the people who work there — despite an improving economy and record numbers of corporate financings and mergers and acquisitions."

Goldman has basically acquired its way into the consumer banking business by buying GE Capital Bank (now known as GS Bank, see the news story about the acquisition from GE at for more).  But GE actually acquired that part of the consumer banking business from the insurance giant MetLife back in 2011 (see for the news), though GE made some improvements, among them offering much higher-than-average interest rates on savings and simplifying the online banking interface which resulted in the deposit base growing from $7.5 billion when GE bought the unit to $16 billion when it sold the business to Goldman Sachs five years later.  One competitor is now known as Synchrony Bank, which has both a consumer lending business as well as a deposit business that GE spun off a few years ago, mainly because the business was too big to find a lender that could both afford it, and that regulators would allow to buy the business.  So far, Goldman Sachs has kept the consumer deposit business going largely as GE did, although its not without competition in the online banking space, including companies like Synchrony, AllyAmerican ExpressCharles Schwab, State FarmDiscover, Mutual of OmahaNationwideTIAA and others.  Most offer a pretty good deal on deposits, certainly much better than your local bank is offering, although I think Goldman's offering is one of the better ones around.  The company will get into consumer lending a bit later this year with a business its calling Marcus (see also and for more), named after one of the company's founders.

Anyway, on August 13, 2016, Goldman Sachs' investment bank unit shared some interesting analysis about Gen X, claiming:

All eyes are on Millennials, Baby Boomers and increasingly Gen Z, but according to Goldman Sachs Research's Hugo Scott-Gall, Gen X is an underappreciated influencer when it comes to the economy. Already responsible for around 30% of U.S. spending, "Xers" are going through their peak consumption years, with different spending priorities than the Boomers that came before. Scott-Gall explains the implications for the auto industry, real estate, and more.

A video can be seen on the page noted above, or on their YouTube channel (or below):

Goldman Sachs says that they define Gen X as people born between the years of 1965 and 1980.  You can download the Adobe Acrobat version of their report HERE.

Really, these observations should be apparent to everyone, but evidently have escaped the notice of enough people that Goldman Sachs analysts think that its investors should beware of Gen X.

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