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How to play the millennial spending boom

Millennials are about to come off the bench and buy into the housing market, and the chief executive of Smead Capital Management said Wednesday he's betting on their future spending trends.

Those trends will have knock-on effects throughout the economy, and investors should take note, Bill Smead said on CNBC's "Squawk Box." The CEO and CIO of Smead Capital is bullish on large cap housing, bank and media stocks, which will benefit from millennials changing habits as the generation settles down.

"While everyone's worried about Greece and oil and this and that, there's 86 million millennials in the United States that are revving up their lives, and I would not want to be these guys that are betting on these long bonds," Smead said.

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While conventional wisdom holds that millennials will continue to fuel high levels of renting, Smead believes that lifestyle will not hold. While young people are waiting longer to get hitched these days, he sees more people getting married this summer and having kids in the coming years than at any point in the last 15 years.

"As soon as you get a 2-year-old child, you're looking at a yard and fence for your child to play, and trust me, all of the theories about living in a condo in New York go right out the window when the 2-year-old toddler needs a window," he said.

The average household spends 15 percent of its gross income on a mortgage, he said, but the average renter spends 30 percent—and rent is not tax deductible.

Smead also pointed to Warren Buffett's recent comment that he would buy 200,000 single-family residences if he could. He ticked off a number of companies that expose the Oracle of Omaha to millennial home buying and mortgage lending: Clayton Homes, Shaw Carpets, Benjamin Moore, Wells Fargo and Bank of America.

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Smead Capital Management likes large, domestic American companies in housing and banking, as well as media companies like Disney and Gannett, Smead said. He said he sees more millennials hitting the couch rather than the club as they reach the average marrying age of 28.

"The way that people became more conservative and more boring happened in your 20s, now it's going to happen in your 30s," he said. "Your life changes dramatically when you get married and have kids, and that will happen regardless of whether you live in New York or St. Louis or Peoria and Poughkeepsie."