Blue Blanket Investor Profile
Every so often one reads a human interest article about an elderly retired schoolteacher, janitor, seamstress or government employee who worked for 40 plus years, lived extremely frugally, saved diligently and left a considerable amount to the family, an educational institution or charity. Their demographic confirms that they were Depression babies when extreme financial self-discipline was accomplished out of the necessity to survive.
This Marvel superhero is not instinct, rather they exist in far greater numbers (albeit still few) than you can imagine. Because of the severe economic meltdowns in this young century their numbers will grow in leaps & bounds. These are the Depression babies’ offspring who’ve discovered that their grandparents and parents had the right idea about financial management all along.
So who is this unique creature? I call them the Blue Blanket Investor (BBI). Why? Imagine the extreme ultra-conservative investor, a financial prepper, who believes in liquidity at all costs with immediate access and protected under the umbrella of the Federal Deposit Insurance Corporation (FDIC). The bolder elements of this group have investments in short-term government securities, precious commodities such as diamonds, gold and silver - the physical variety.
I compare this elite group to the Peanuts character Linus who uses his blue blanket as something psychologically tangible to help him successfully manage stress. This same blue blanket was used by the accountant Leo Bloom (played by Gene Wilder) in the iconic comedy The Producers (1967). Eventually in the movie his formerly lifelong free-spending partner Max Bialystock (played by Zero Mostel) asks for his blue blanket as their play becomes an unexpected “success.”
For the BBI cash is the only financial royalty. They blatantly forgo a higher interest rate on “riskier” investments and consider inflation merely the cost of insurance in order never lose principal. The BBI is the financial prepper who opts for strong boxes, safes and house vaults. For this reason they have a strong proclivity for liquidity and access to it at home to that cash – small bills. No one is willing to give change for a $100 bill, or even a $20 bill, in a crisis. The BBI would rather climb Bear Mountain than the Himalayas.
The BBI is multigenerational and comes from every racial, ethnic, religious and professional background. The only commonality that the BBI shares is their almost pathological fear that their non-cash investments will vaporize overnight. Their so-called paranoia has already been justified as they take “risk averse” to a new level because there have been no less than three economic meltdowns in this young century: Recessions of 2000 (dotcom) and 2008 (Great Recession) with the 9/11 terrorist attack squeezed in between and now the pandemic. How many senior citizens have you seen riding roller coasters? For the BBI market volatility is merely an academic exercise. It’s not just an investment strategy rather a financial lifestyle and mindset.
We know more about the shadow markets based on debt than the shadow market based on savings because the BBI is quiet and invisible. It’s impossible to determine how many BBIs, even anecdotally, because like all preppers, they’re secretive and will blatantly lie about their equity investments. Like prepper survivalists who never divulge where they’ve stored the food & water, they don’t want anyone to know about their financial liquidity inventory.
For this reason you won’t find them at financial seminars which peddle higher risk investments for fast growth. When the music stops they’ll have a chair and pour themselves a vodka martini while everyone else scrambles to the narrow exits.
The BBI’s mantra is that they’re “more interested in the return of money than the return on my money” and who will concur with corporate raider Gordon Gekko’s personal investment advice to Bud Fox in Wall Street (1987), “Stay liquid.”
The BBI Demographic
The following are the three generations of BBI:
1. The Elderly: Great Depression babies - although they’re dying off few regret piling their monies into cash and government securities after suffering horribly during the Great Depression. They hoard everything for the purposes of survival particularly when things can go sideways overnight.
2. Baby Boomers: Their retirement and other investments were badly damaged during the Great Recession and probably vaporized during the pandemic in their attempts through aggressive investing to make up for the former. Many may never return the markets ever again and risk wiping out their remaining meager savings. The resultant mass layoffs and emergence and probable dominance of teleconferencing will change everything as firms actively seek to reduce headcount and shed high-priced employees. Forced into early retirement this group’s career is dead in the water and any economic recovery will occur just as they enter a nursing home.
3. Millennials: Millennials are considered the “cursed” generation with the Shakespearean misfortune of compiling huge college debt, limited career mobility, unaffordable housing while suffering the one-two blows of the Great Recession and now the pandemic.
A comfortable retirement is an oxymoron for most Americans has shown in the following chart entitled A Quarter of American Have No Retirement Savings, provided by the Federal Reserve and presented by Statista, an online statistical firm.
Benefits of Being a BBI
· Low stress: deposit and forget. Principal guaranteed. Inflation is merely de facto insurance or management fee.
· Market vicissitudes are nothing more than an academic exercise.
· Becoming a monetary monk as a behavior modification in a world of excess spending and debt by maximizing minimalism.
· No need to hire a financial planner because management of cash is not required.
· High liquidity especially with cash-on-hand preferably at your immediate disposal in a home safe in case of unexpected bank holidays, power grid outage or other high risk street chaos which eliminates the risk of going to a bank during civil unrest or banks/ATM which will be surveilled closely by criminals.
The Emerging New Members to the BBI
Mirroring climate change, the 21st century featured more frequent and intense economic storms like the dotcom bust in 2000, financial meltdown with the Great Recession in 2008 and the present-day pandemic all within 20 years.
With respect to the wealthy during the March market meltdown major financial institutions made frantic calls to their wealthy clients for margin calls, requiring considerably more money to cover their investment positions. The wealthy liquidated everything except their primary house such as equities and corporate bonds which exacerbated the market plunge. This seismic event has given them an insight to a new world and new possibilities into the benefits of investment simplicity and psychological serenity.
After mass layoffs and indefinite furloughs the lower and middle classes after depleting their meager savings, they’re tapping their IRA and 401K accounts and maxing their credit cards and credit lines for purposes of survival.
Government Betrayal Facilitating Corporate Lies
The impetus to new BBI membership is the increasing crumbling governmental and corporate credibility. Since 2000 the skyrocketing macro-economic figures have overwhelming benefited the wealthy while the lower and middle class have barely benefited. A multitude of metrics, notably the Gini-index, have quantitatively documented this increasing and accelerated economic inequality.
Regardless of the political party there’s a lack of trust in government to curtail the excesses and abuses by big corporations. Conspiratorially this two-headed hydra work in tandem and engage in openly unethical practices such as when municipalities give corporations obscene tax breaks and facilitate land grabs through eminent domain. Government has failed to protect the people who elected them and instead favor the corporations who bought them through campaign donations and lobbyists, both of whom are protected by a phalanx of white shoe lawyers.
For many years the BBI have been disillusioned which has enabled their ranks to quietly swell since The Great Recession. They’ve realized the capitalistic iron circle created by big corporations with government as their enabler and partner that tout that the consumer can’t live without their products and services while laying off thousands of employees which in turn raise their share price for their wealthy shareholders, legally evading taxes with offshore accounts, while probing and piercing privacy laws to keep track of every customer and potential customer to sell them even more products and services. Let’s not forget how they sully the environment and directly or indirectly gentrify neighborhoods or the enable those that do in the. It’s where governmental betrayal facilitates corporate lies.
This powerful sentiment was captured by the brilliant by Sean Connery as an ex-con about to being released from prison in the movie The Anderson Tapes (1971) who rants about the social inequities of the market, matrimony and the justice system. His poignant diatribe almost 40 years ago is just as powerful as it was then.
Finally the justified loss of faith in the system and subsequent nationwide protests emerged through government’s preposterously incompetent handling of the pandemic. The militarized law enforcement was already well-equipped to handle the social chaos but the medical community had to scrap and beg to obtain the required equipment to handle to viral chaos. The brutal reality is that the cavalry is not coming to rescue the little guy.
The Updated BBI Investor Paradigm
Aside from the penny-pinching minimalist lifestyle, future financial planning will focus evermore on the legal perspective to protect those savings such as various classes of insurances, living wills, health proxies, living trusts, and estate planning.
Because of the continuing high market volatility and uncertainty of economic stability, offshore banking will be considered by the BBI for the purposes of jurisdictional diversification in case of an extreme scenario in which the US government imposed capital controls or declaring a bank holiday.
Indeed the BBI is a silent yet growing extreme minority but their tenet is their only salvation.
[Originally published 19 June 2020]
Copyright 2020 Cerulean Council LLC
The Cerulean Council is a NYC-based think-tank that provides prescient, beyond-the-horizon, contrarian perspectives and risk assessments on geopolitical dynamics and global urban security.