Generation Screwed Part II

I've written in the past how I think  my generation is getting screwed in a lot of respects.   Seems like I'm not the only one who thinks so.  I found this article on MSN money about why Generation Y might never retire.   The article explores a behavior and attitude that seems to make my generation risk averse.  Given all the things I have written about in the past about the challenges facing my age group, is it any wonder that we are a little bit risk averse.

It seems that a lot of 20 and 30 somethings are stashing their money in banks accounts rather than in the stock market.  The article attributes the behavior to a fear that my generation has after seeing two major bear markets in the last decade.  You throw in scandals like Enron and Madoff and you have a generation that does not have a lot of faith in the financial system.

I have actually seen this first hand.  Clearly it is not true for someone like myself.  I've been pretty risk-loving when it comes to my investment decisions as of late.  That being said, I myself have been somewhat guilty of this.  For the longest time, I've been very heavy in my cash holdings.  Most of this is because in my investing lifetime I have not been comfortable with where the markets have been.  I only started investing in the last four or five years and it was pretty clear to me back then the market was too high.  Everything was built on the house of cards that was housing and it didn't make any sense to me how expensive things were. 

Then, the market crashed.  It presents a great buying opportunity so long as you are comfortable with risk.  But imagine you have not been as prudent as I have been and your assets were tied up in your house and in the market.  You have just seen your net worth decrease by 50% in a matter of a few months.  Maybe worse than that if you are now underwater in your house.  Given these beatings, who can blame my generation for wanting to protect the little that we have left?

 I definitely do not agree with all parts of the article.  The second half explains why long term my generation should not be afraid of the market.  It uses the old mantra that the stock market, in the long run, is always a good investment.  While true in the 20th century I am not so sure you can continue to use the past to predict the future.  "Long term" investors in the last decade have gone nowhere. 

So I'm not so sure what my generation really should even do right here.  At these levels, I don't think stocks are a bad buy but I hesitate to say they are a good buy either.  I could easily see us stay flat from here for the next decade as we work through the excesses we have enjoyed over the last five years.  If we really do stay flat from here, that will make twenty years of no growth right in the prime earning years of my generation.  How is that for screwed?