Is it time for the Millennial discount?

May 1: That and other big questions to mull over the month ahead, from sub-prime loans in Baltimore to the risks of buy-backs on the stock market

MORNING-PLAYBOOK-STORYIt’s Friday (and it’s May!) so time to shake off the week’s doldrums and look instead to the big questions you can mull over the weekend and the month ahead, from the history of subprime loans in Baltimore, to how men and women in high-stress jobs try to “pass” as ideal employees – and why they’re forced to do so.

Yesterday didn’t offer much to brighten markets: a massive day of quarterly earnings reports brought miss, after miss, after miss. Major oil companies, including Royal Dutch Shell, announced falling profits on months of fluctuating oil prices, and several tech companies saw their shares take the Twitter route, and slump. LinkedIn was the most notable, with shares dropping by 25 per cent, after the company revised down its expected earnings for the year. A common refrain, other than the oil price drop, was the impact of the strong U.S. dollar. Meanwhile, February’s GDP came in flat from January – a little better than expected, but not much of a doldrums-lifter. The TSX/S&P Composite lost 124 points, and the loonie closed the month just below 83 cents.

Other stories today include a $1-billion deal for the Lax Kw’alaams over a liquefied natural gas project, backed by the Malaysian state energy company, in B.C.’s Prince Rupert, big layoffs at the General Motors’ plant in Oshawa (and investments in U.S. plants), and plans by Tesla’s Elon Musk to make a battery for homes – not just electric cars. There are also auto sales numbers from Canada and the U.S. today, manufacturing numbers from China, as well as inflation numbers from Japan. Markets are closed in the eurozone today for the traditional labour holiday.

Is it time for the millennial discount? I’m 25, so I answer with my bias in full view: Yes!  Today, Maclean’s has a story about whether it’s time to give the axe to seniors’ discounts, which range from discounted movie tickets and bus passes to the recent announcement of a doubled schools rebate for seniors from the Manitoba government. About a third of Canadian seniors used to be considered poor, but reforms and demographic shifts have rendered that picture dated: now, seniors are less likely to be poor than any other demographic. According to a Bank of Montreal study, they have seen their wealth quadruple since the mid-’80s. This isn’t a new debate: take a look at Maclean’s cover story from this past autumn (which featured a cash-waving granny), but the question of inter-generational disparity is never so timely as when budgets and election promises are rolling out. This is hardly a uniquely Canadian question: if you think it’s hard for a thirtysomething to buy an affordable house in Toronto, try London – where, one week before the British general election, questions of immigration and the NHS loom large. Meanwhile, proposals for affordable housing – the one question anyone under 40 in London wants to talk about all the time (seriously, all the time) – are curiously minor. (Let’s not even get into the environment and climate change.) Meanwhile, things may look bad in Greece, but at least the government is struggling to find the cash to pay pensions. Meanwhile, unemployment for young people is around 50 per cent, and the best and brightest are leaving the country just to find work. Demographics are at work here, as the wealthy, active Baby Boomers age, but we also know that politicians are merely paying attention to who actually votes. Canadian seniors do (about three-quarters of them, anyways). Young people, to a rather large degree, do not.

Are buybacks a triumph of the short term? As the global economy appears to have slowed – even the U.S. had a slow first quarter – and as company after company (including tech bright stars and major oil companies) have grumpily missed low earnings expectations, it’s worth asking about an obvious mystery: global indexes just keep hitting record highs. How? Why? Jason Kirby at Maclean’s has this excellent column on one of the reasons: massive share buybacks, amid pressure from investors to show them the money. Apple was the latest high-profile case of this, pledging to return $200 billion over two years to investors, in the form of dividends and buybacks, when the company’s own shares are prodigiously high. It’s not just Apple: last year saw $915 billion such transfers from companies, many of them pushed by activist investors looking for quick returns. The defence here is that companies that can should share the benefits with their investors, and it’s right that they should face pressure to produce better returns from those same investors. But Kirby poses the big question here: if that money is going into buybacks, it’s not going into investing in company’s research, infrastructure, and saving for a rainy day. A triumph of the short term? You decide. But as province after province announces their budgets, we can look upon the case of Alberta, which saw a carriage turn into a pumpkin as the oil price fell, and sometime after midnight, it was time to unveil their budget. Other budgets, from the federal budget to Manitoba’s, have drawn heavily on such rainy-day funds.

Can you fake an 80-hour workweek? Harvard Business Review has this story about a Boston University researcher’s interviews with employees of a U.S. company that appears to prize the “ideal worker” image. This is where employees that embody – or fake – the ideal that nothing should come before work, ever. The study showed that this ideal made most people miserable, especially people with families, but the happiest of the men had figured out strategies to “pass” as devoted work-obssessives, using tricks including collusion, deception, and long-term, strategic sneakiness. The men who asked for formal accommodations, including paternity leave, were marginalized and mocked. Of course, the impact on women is also striking: women tended to take the formal accommodations that were available, and it tended to sideline their careers. Indeed, the most depressing bit (other than Dads trying to figure out how to manipulate their way to their son’s Cub Scout meeting), was the response of the company itself:  “(1) a response that “these men”—those who revealed their lack of desire to be always available for and primarily committed to their work—were not the sort of men they really wanted anyway,” Erin Reid writes, “and (2) a request to figure out how they might teach women to pass.” The idea that making parents deeply unhappy isn’t good for a company did not sink in. On the other end of the spectrum, the New York Times profiled a law firm run entirely by working mothers with young children, which mandates working from home, blocks of family time, and work flexibility. 

What do subprime loans and the Baltimore riots have in common? If you’ve been watching the situation in Baltimore after the death of Freddie Gray, you’ve no doubt seen a lot of stories on the level of impoverishment in Baltimore. A study from Johns Hopkins last year looked at young people’s experiences of poverty and opportunity in five cities (Baltimore, Johannesburg, New Delhi, Shanghai and Ibadan in Nigeria), and found that in many ways, Baltimore youths are doing and feeling worse than their counterparts. The questions behind this study, and many others, go far beyond just bad policing to include a long-running history of restricting black access to homes, neighbourhoods, and mortgages. Richard Rothstein, at the Economic Policy Institute, argues that over the decades this has enforced and solidified segregation, forcing black families into paying overpriced rents and overpriced mortgages, and cutting many families off from acquiring wealth through real estate, the way white families did. (If you haven’t read it, Ta-Nehisi Coates traced the impact of racist housing policy on black wealth in Chicago for The Atlantic, and the story won last year’s George Polk award.) Before the financial crisis, this meant that Wells Fargo Bank, for one, had a policy to specifically market subprime loans to black customers in Baltimore, even in cases where clients were eligible for proper loans. They eventually settled with the City of Baltimore. Countrywide Financial, a division of Bank of America, was also forced to settle with the Justice Department after revelations it systematically overcharged black and Hispanic clients – more than 200,000 of them – for mortgages, selling them subprime loans even when they were qualified to hold prime loans. So the answer for what subprime loans have in common with the cause of the Baltimore riots, and protests, is not poverty. It is racism. 

Need to know:
TSX: 15,223.14 (-124.20), Thursday
Loonie: 82.89 (-0.28), Thursday
Oil (WTI): $59.53, Friday (7 a.m.)