Month: January 2017

Nobody may care, but there’s been a lot floating around my mind over these last few months and even years on the direction we’re headed as a world economy, and how we need to best prepare ourselves for an inevitable bubble burst.

I’m not an economist. I’m not a philosopher, or a professor. I’m not a politician. I am indeed the product of my doomsday-focused father; I don’t always expect the worst but I’m not exactly a Pollyanna.

I also think if you’re open to the signs, it’s clear the path we’re on economically cannot last. And this new administration is going to rush the explosion.

First, here are my predictions.

• Our healthcare situation is going to revert to the way it was back in the early 2000’s, and continue to get worse from there. Baby Boomers are at the greatest risk for an implosion of the system as we see those in poverty and old age unable to afford private healthcare, and going to hospitals for expensive treatments they have no coverage for (we already saw this happening pre-ACA; not that ACA is the be-all-end-all of solutions, but its intention was to help quell that). Those costs will inherently be transitioned, as they were and have been, to those paying premiums on their own healthcare coverage. Put simply, the ant is bearing the burden of the grasshopper. Costs will continue to balloon. Boomers and lower classes will drain the middle class in both healthcare and social security. To me, the way out of that is to create policies that benefit everybody so costs aren’t hidden in their transition to the middle class but more evenly distributed between the supremely rich and the poor. That’s a big reason I’m a Democrat in spite of it seemingly being outside of my personal favor as an upper-middle class white person. It’s proven economic logic.
•  Job losses will continue. I don’t say this because we’ve got Republicans in office (although that won’t especially help); I say this because the world is changing much in the same way we saw with the Industrial Revolution. Forcing companies to “keep jobs in America” (which is a ridiculous approach to begin with) is going to result in those companies automating the jobs they’re outsourcing – not paying premium prices to workers in the States. These companies will pay for robots. Machines. Code. The same kind of code Brandon implements that saved his company multiple jobs last year. You can look at that as cruel, heartless, callous. Companies will look at that as Capitalism. Cheaper labor than anything they’d get overseas. I’m sorry, America. Your jobs aren’t coming back, no matter who promises you the moon and stars.
• We’re in a bubble. Like, a friggin’ huge bubble. Stocks are rising. Venture capital is outrageously pricing tech, to unfathomable and unsustainable degrees. Real estate has bubbled to nearly pre-recession levels, and brokers are giving the same kinds of crappy loans they always have, and calling them new names. Americans are over-extending themselves with the false security of a healthy economy. Banks are going basically unrestricted and our country’s debt, meanwhile, is high beyond the point of reasonable recovery due to the bailouts that saved us from our mini heart attack in 2007.

These shifts are, short-term (over the next decade), going to create a massive amount of unrest, joblessness, poverty, and class division like we’ve never seen in our lifetimes. Call me Chicken Little, but when this bubble blows, I anticipate a worse situation than the Depression. We’ll have the largest generation in history (Boomers) draining the resources of all those younger than them, coupled with crippling joblessness and national debt.

Long-term, this is actually a good thing. It will mean that by the time the Boomers die out, a large generation of Millennials and Gen Z will be able to replace them with new policies, new habits, and more spending power than they’d had when the bottom fell out. It will mean we adapt to fewer people working in general, and companies forced to pay premiums in taxes for those they no longer hire. It will likely, one day, mean a guaranteed minimum wage similar to welfare being implemented at larger levels, but companies also being taxed accordingly to pay for it. It will also mean a transition to significantly less consumption, stronger environmental effects that will help combat global warming, and the resetting of an over-inflated world economy that was destined to collapse.

But there isn’t avoiding the fact that we’ve got a rough decade ahead of us.

I can’t tell you what to do, or even what the smartest ideas are out there to prepare for this burst. Because I truly believe it’s not a matter of prevention (it’s going to happen), it’s a matter of preparation. All I can do is tell you what we are personally doing, or trying to do, to help offer some ideas as you plan for your approach to life. Will you be the grasshopper, who finds himself facing a cold winter unprepared, or the ant, who stockpiled his resources for the days to come? I can’t answer that for you, and I can’t guarantee we’ll come out unscathed. I’m sure, in fact, we won’t. But to bury your head in the sand is the one action we know won’t help in the event of something bad happening.

• We’re living beneath our means. Duh, not everyone can do this. But we tried doing this early on in our careers so we could maintain a similar standard as we worked our way up over time. We own a home that cost 1/5 of what a bank told us we could “afford,” and we invested in a neighborhood that was on the low starter end of its bell curve. We didn’t over-extend ourselves to maximize equity. Our home has risen in value over the years and even if the economy bottoms out to pre-recession levels, we don’t anticipate we could go underwater. But regardless, this approach also means we can afford to keep our home in the event that one of us loses a job. At the time, we planned that way because we are both in a tenuous industry (ad agencies). Now, we’re grateful we did in the event of larger-scale economic redundancy. Don’t get me wrong: we’re not perfect at this, and not by a long shot. We take a lot of damn vacations. We travel. We spend a lot of money renovating the house. We have roughly 6 million pets we feed. But we’re trying our best to save our pennies and live below our means.
• I’ve stopped investing in my 401k this year. WHAT?! That might sound stupid, but hear me out. Brandon gets a company match, which we maximize, because we’re leaving money on the table otherwise. I get no match as a self-employed person, outside of what I match with my own S-Corp umbrella (a long, complicated conversation that may lead to me eventually investing again for tax reasons, but there’s a balance to be struck). The stock market peaked in mid 2015 and has been slowly sliding ever since. The money you invest in your 401k today has a reasonable chance, in my prediction, of being worth substantially less in the next year or two. My theory is I’ll wait, save my money in a low-earning but “safe” bank account, and buy up bottomed-out stocks when they are at their lowest values. Timing is hard to predict, but it seems to make more sense to me than investing in a stock market at the top of its game. Now, this does nothing for us in the case of the dollar losing its inherent value. Which is why…
• We’re considering diversification. That’s an easy statement to make and much harder to confidently implement. I don’t see real estate (at least in America) as a safe bet. What is the commodity that will thrive in a down economy, though? Specific international bets in either money or property? Gold? Gasoline (ha)? Bitcoin? Weed? This is the kind of research we need to do to ensure all our eggs aren’t in the American Dollar Basket. This might sound extreme, but by at least diversifying some of what we have, we’ll hedge our bets against everything going down the tubes.

That’s a short summary of standard things we’re doing to try and brace for the impact of a possible collapse. It doesn’t mean we’re changing our entire lifestyle or burying a bunker in our backyard, but it’s better to try and be safe than sorry, watching the patterns of history repeat themselves. What are you doing to secure yourself against the gravy train ending soon?