Specifically millennials, aged 21 to 36, hold more than half of their assets across all accounts in cash, more than double the allocation of their elders, according to a survey by UBS released this year. (here)

Just 28 percent of their assets are in stocks, as against 46 percent for other adults (including retirees who often cut stock holdings for safety).

And lest you think this is just about being young and broke, even older millennials, aged 30 to 36, with more than $100,000 in assets were carrying a 42 percent allocation of cash.

While UBS attributes this conservatism to the market volatility and poor job security that younger people have become accustomed to, many must also have come to the conclusion that the investment industry is not a good place to get a fair shake.

Not only have we had (at least) two bubbles, but the news flow about financial services has been thick with stories about interest rate and foreign exchange rigging, self-dealing and outright fraud. The list is long, with Michael Lewis adding to it most recently when his investigation into high frequency trading led him to conclude the stock market itself is rigged.

While I share much, but not all, of this outrage over market and investment practices, the bottom line is that being 52 percent cash at a young age is like mailing yourself a very, very slow letter bomb.

Cash has its uses, to be sure. It provides optionality and it gives defense against overvalued markets. But over the long term - and when you are young the long term is your single greatest asset - cash is an almost sure loser, not just to other asset classes but often to inflation.

In the last 88 years, U.S. equities have returned 6.6 percent in real terms annually, as compared to 2.4 percent for government bonds, according to Barclays data. Cash has shown a real annual return of just 0.5 percent.

And while equities have done less well over the last decade, with a 5.5 percent annual real return, cash has shown a negative 0.8 percent annual return in the same period.

The bottom line is that millennials are making a terrible allocation decision at exactly the worst time, and have, to boot, largely missed out on the post-crisis rally.

LACK OF FAITH

While younger investors behave as if they are paralyzed by fear, the way they describe themselves is a bit more nuanced. The number who describe themselves as 'somewhat aggressive' or 'aggressive' is actually double that of baby boomers aged 49 to 67, but the number who are 'somewhat conservative' or 'conservative' is about half again more than their Generation X cohort a decade older.

Behind this perhaps is the fact that millennials are about half as likely to believe that long-term investing is a primary path to success.

The great irony is that there has never been a better time to be a small, independent investor, even a bloody-minded one determined not to unnecessarily line the pockets of intermediaries.

Brokerage costs have cascaded downward over the past 20 years, while the Internet has made researching and transacting easier than ever before.

Index investing, either through traditional mutual funds or ETFs, is also easier, mostly cheaper than ever and available for far more assets.

None of this is to say that there aren't huge issues for investors. The list is long, including abusively high 401k fees, over which investors have little control.

Central bank determination to use asset price inflation as a means to other ends is also concerning, and may end up imposing higher risk premia on financial assets than we've historically experienced. Demographics too may mean that long-term asset returns are lower than we've seen historically, as an aging population consumes their assets rather than investing in new ones.

It is almost impossible, though, to set up a scenario in which cash outperforms over the very long haul. It may for periods, even extended ones, but ultimately the value of cash - its optionality - is only realized when you use it by putting it to work elsewhere.

If this unwillingness to invest persists, it is going to be a huge problem, and not just for millennials. Both the industry and government stand to suffer; one by losing a generation of clients and the other by facing a generation with a huge structural savings shortfall.

(At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. You can email him at jamessaft@jamessaft.com and find more columns at blogs.reuters.com/james-saft)