A collection of today’s economic, market, political, geo-political, and human-interest news, thoughts, and analysis.
In This Month’s edition:
- Beware Years Ending in 7
- The Tale of Two Indicators
- Goring the Bull
- Going Higher…Still?
- Tax Reform
- Necessity is the Mother of Invention
- Random Thoughts
I’m at risk of becoming the next Dr. Doom as I continue to write about the building risks in the market. This edition firmly places another brick in my personal wall of worry. Please understand that I have no predictive advantage over anyone else as I peer into the future. No one knows with any certainty what will happen in the markets in the days, weeks, and months ahead. What we can do is establish probability weightings based on historical data and tendencies which can give investors a definitive advantage over the longer term if they are willing to listen. Unfortunately, human nature generally prevails.
Economic news is good. We have recently seen the first quarter in almost a decade where GDP has grown at a 3% annualized rate. Unemployment is at full-employment. Stock markets are at record levels. Inflation is benign. Interest rates are low. Oil prices are deflated. What’s not to like? Well let’s see…
Beware Years Ending in 7
For the stock market, lucky number 7 has not been so fortuitous. The last time summer was winding down in a year ending in that mystical number 7, the foundation of the housing market and domestic banking system was quietly crumbling beneath our feet. The ensuing carnage was swift and unforgiving.
In 1997, the early stages of the Asian currency crisis sent shockwaves through the global markets. October of 1987 saw the DJIA fall 24% in one trading day. A similar event today would see the DJIA fall over 4,800 points.
Going back all the way to 1887, one finds an eerie pattern where the seventh year of each decade is not particularly friendly to investors. It should be noted that years ending in 7 always follow a presidential or mid-term election. Maybe it’s simply a market gag reflex and a little buyer’s remorse setting in.
In the most recent case, Trump’s election was met with a huge market rally expecting change in the areas of deregulation, tax reform, and healthcare reform. Through mid-August, the DJIA is up 18% and the S&P 500 is up 13% since the November election. Will it hold, or will cracks developing in the foundation of Trump’s policy platform begin shaking the confidence of investors. On top of that we have hyped fears of a Korean conflict. Could these two issues derail the bull market in the coming months? Weirder things have happened.
The Tale of Two Indicators
For 115 years, one of the foundationally predictive cornerstones of DOW THEORY compares two DOW indices to anticipate where the market may be headed in the near term. This measurement compares the Dow Jones Industrial Average (DJIA) to the Dow Jones Transportation Average to determine the relative strength of the current market trend as well as its sustainability.
The ideal relationship will show both indices performing well at the same time. The underlying assumption believes that if the economy was fundamentally strong and growing, transportation companies would be reaping the benefits. As a result, the DJIA and transports should both be doing well during and in front of prosperous times. When both are indeed performing well, as they are today, the trend in the markets have historically been upward over the following 12 – 24 months. Both are at record highs. Are there more records in the weeks and months ahead or has the easy money been made? Are the recent record highs perhaps marking market tops? Many respected pros believe more records are yet to come this year.
So, what about the longer term? The Shiller P/E ratio is a very accurate indicator of long term probabilities. There are many types of Price/Earnings (P/E) ratios used by investment professionals. The numerator (Price) is always consistent, however the denominator can use different types of earnings: e.g. reported vs. operating vs. future estimates. Each will tell a different story.
The Shiller P/E Ratio, also known as the Cyclically Adjusted P/E (CAPE) ratio, uses a 10-year average to smooth out the results and remove earnings anomalies that occur through an economic cycle. The data below shows real (inflation adjusted) market returns for the decade following when the Shiller P/E ratio was in specific ranges:
Shiller P/E Next 10 Yr. Real
Ratio Level Ave. Market Gain
11.9 – 13.8 9.1%
13.8 – 15.7 8.0%
15.7 – 17.3 5.6%
17.3 – 18.9 5.3%
18.9 – 21.1 3.9%
21.1 – 25.1 0.9%
(Source: AQR Capital / Money Magazine)
The CAPE ratio currently sits at 30.0. It has only been higher on one previous occasion during the last 125 years…in late 1999 just prior to the tech bubble bursting. Based on the above CAPE history, what would be your guess for the market’s real rate of return for the next 10 years? What kind of roller coaster ride might the markets take investors on while achieving that return? The truth is that none of us know, but forewarned is forearmed.
So, the take away may be that there is still a little more gas left in the market tank based on the DJIA/Transports relationship. However, investors need to decide if it’s worth the risk of trying to squeeze that last ounce of gain out of this aging bull market given what the CAPE ratio is telling us.
In our opinion, the smart investor will be taking a capital preservation approach right now. This does not necessarily eliminate growth potential. Well executed, it will minimize participation in a future correction keeping your physical and emotional capital intact for when it can be deployed to your full advantage.
Goring the Bull
We have had 9 bear markets since WWII. Several have been catastrophic. What can we learn from them that may help us in anticipation of the next bear? What has happened in the past is interesting and important to remember, but we can’t change the past and all that really matters is what happens going forward. Successful investing over the long run revolves around consistently placing the probabilities of success on your side.
Contrary to popular belief, there are more certainties in life than just death and taxes. In the world of investing and economics, the next bear market as well as the next recession are absolute certainties. The real mystery always confounds in several ways. We never know the eventual cause(s), timeline, severity, or from what level they will occur.
As we move through every bull and bear market cycle, we are overwhelmed with a tsunami of fundamental and technical data accompanied by a flood of conflicting opinions by the learned experts de jour. The interesting thing I have found is that the average informed investor has about the same likelihood as the pros of predicting when and to what degree the bear defeats the bull and vice versa. Often, a simpler view is more valuable to investors.
John Waggoner recently penned a piece published in Investment News that took a walk down memory lane littered with victims of past bear markets to see if any common theme developed. He began by telling us that, “Bull markets don’t die of old age; they die of fright.” He tends to eschew all the technical triggers like elevated market valuations or economic growth figures. His interpretation of history takes on more of a Black Swan feel believing that it is major shocks from surprises or exogenous events that induces the fear reflex that awakens the ravenous bear from hibernation. Let’s join him on his walk-through time.
- 5/1946 – 5/1947: Dow -23.2%
- Sharp winding down of the war effort.
- 12/1961 – 6/1962: Dow -27.1%
- Bay of Pigs, rising Cold War fears, and labor unrest.
- 2/1966 – 10/1966: Dow -25.2%
- The “Go-Go” years hit a wall as the Vietnam War escalated while the Fed warned of an overheating economy. Treasury rates and inflation began ramping up.
- 12/1968 – 5/1970: Dow -35.9%
- The nation struggles with race riots following the assassinations of Martin Luther King Jr. and Bobby Kennedy. Inflation hit 6% and Treasury bill yields moved above 7%.
- 1/1973 – 12/1974: Dow -45.1%
- Watergate, an oil embargo, spiking oil prices, and the prime rate hits 11.5%.
- 4/1980 – 8/1982: Dow -24.1%
- Paul Volker becomes Fed Chairman focusing on crushing soaring inflation by raising rates. The Prime Rate eventually hits 21.5% and unemployment climbs to 10.5%.
- 8/1987 – 10/1987: Dow -36.1%
- Following the Bull market born out of the Reagan tax cut era and falling interest rates, inflation fears sent the 10-year Treasury note to 10.1% from 7% in October. The market plunges 22.6% on October 19 which would be equivalent to an almost 5,000 point drop today.
- 3/2000 – 10/2002: Dow -38.0% (technology loses 75% – 80%)
- The “irrational exuberance” of the 1990s unravels with fear enveloping investors as the tech bubble bursts.
- 10/2007 – 3/2009: Dow -53.8%
- National credit collapse takes down housing market and financial institutions setting U.S. on the brink of complete economic failure.
- To Be Determined:
- Markets are richly valued, geo-political risks abound, rates are rising, inflation is stirring, and the government is dysfunctional and paralyzed. Yet, complacency is the norm.
The average decline during the last 9 bear markets was over 34%. Over a nine-year period in the 1960s, we had three bear market periods with Dow declines averaging about 30%. Over the first 9 years of the new century we had two major drawdowns in the DOW averaging a decline of 45.9% each. Here we sit over 8 years since the last bear market. He must be famished and the berries are ripe for the picking.
How will you respond to the next bear market? One theory is not to fear a major correction as they are just little speed bumps in front of long-term market growth. In other words, stay the course. Unfortunately, most investors will go into what turns out to be the next bear market with much bravado. They will take their lumps believing the end is near and then all too often limp away at the worst possible time. They eventually can’t take it anymore and get out only to miss the next recovery.
Advisors love to tell you that the markets are up 9%-10% per year over the last 100 years. What they leave out is that the average investor only gets about 2%-3% because of emotionally driven bad decision making. Sadly, once you apply the erosion of spending power caused by inflation, the real rate of return for most is negative.
Our capital preservation approach includes a plan that is very different and pretty simple in theory. In application, it requires high levels of discipline and vigilance.
- Goal number 1: Don’t get greedy. Minimize participation in future major drawdowns while getting your fair share of the any remaining growth. Define downside exposure in quantifiable terms. Modern Portfolio Theory can’t and won’t do this. Keep physical and emotional capital intact when the bear roars.
- Goal number 2: (assumes you achieved goal #1) As the next bear market plays out with physical and emotional capital intact, back up the truck and load up for the recovery. The easy money is always made during the recovery, but most do not have the courage to jump in having been stung too badly during the drawdown. Our tactical plan includes the application of risk based margin, where borrowing limits are governed by the amount of defined risk, and employed in order to lever the recovery within a low risk framework.
In the meantime, the market continues to set record after record after record. GMO co-founder and perennial perma-bear Jeremy Grantham in his most recent quarterly letter used words that are almost always fatal. His letter was entitled, “This Time Seems Very, Very Different.” He basically sees these market levels and continued slow growth as sustainable in the most boring of ways. Boring economic growth, boring day to day market growth, boring monetary policy moves, boring inflation, boring volatility…yawning!
As soon as the theme of ‘this time it’s different’ begins to make its way into the daily lexicon, change is near. Grantham’s short term stance seems to be at odds with GMO’s seven-year forecast expecting U.S. large cap stocks to produce a negative 4% annual real rate (after inflation) of return. This translates into a decline of 3% per year in a 1% inflationary environment. Small caps are expected to return a negative 3% real rate of return according to GMO. Emerging markets sports the most optimistic 7-year forecast of a positive 3.4% real rate of return.
The above mirrors our view of the markets for the next decade. For equities, when priced at current levels, the average ROI for the next decade almost always disappoints. As for fixed income, we will be in a rising interest rate environment for years to come. By default, most fixed income asset class values will be pressured as interest rate normalization is pursued. Once we have the next decade in our rearview mirror, there is a very high probability that the cumulative outcome of traditional, long only asset allocation models will be very disappointing which will almost certainly include a visit from a cyclical or even secular bear market. Given this, how much risk do you want to carry?
As the markets continue to set new records while the second longest cyclical bull market on record has played out, we find investors more optimistic today than they have been since the tech bubble began to burst a little more than 16 years ago. There has been a lot of water under the bridge since that period.
As I have written in the past, expansionary periods typically last about 3.5 years on average. We are going on 9-years with the current expansion knowing that during the 63 years leading to the beginning of this record run, 9 major market corrections occurred on average every 7 years with an average market drawdown over 34%.
The vast majority of experts whose livelihood is dependent on selling stuff to investors seem biased toward expecting growth to continue. Conversely, those tasked with ‘running money’ seem to be more and more concerned about the sustainability of current market valuations.
As regular readers will confirm, I have been becoming more and more concerned about these markets over the last few years as they set record after record on the foundation of anemic economic growth. That doesn’t mean we haven’t benefited from the market’s run up…we have performed quite well. On a risk adjusted basis, our results are superb. However, we have re-allocated exposure to risk more and more towards strategies that are not dependent on the traditional markets for their success.
Five well known pros recently offered some very sobering thoughts about the markets and the world we live in today. All five are quite bearish as they issue their warnings. All five expressed major concerns prior to the 2008 financial collapse and are now predicting declines ahead…some at potentially catastrophic levels. Their names should be familiar to most: Thomas Forester, Jim Rogers, Marc Faber, Rob Arnott, and Bill Gross.
There have been many very smart industry professionals who have offered dire warnings in recent years only to see records continue to fall, so don’t accept these warnings as fait accompli. No need to place all your capital under the mattress…yet. These opinions should serve to keep you well informed, prepared to take evasive action as necessary, and re-evaluate your allocation to riskier asset classes. No matter how smart they appear to be, they don’t know with any certainty where markets are truly headed. So, here’s what they are seeing according to an article by Annie Nova in the September issue of Money Magazine:
Thomas Forester – CIO Forester Capital Management
- Forester managed the only traditional U.S. stock fund to make money in 2008 having sold off most of his financial holdings prior to the collapse.
- The past two crashes were precipitated by single industry failure: tech in 2000, and housing in 2008. Now 9 out of 10 sectors are arguably overvalued.
- “The next time we see a bear market, it’s going to be agonizing. There won’t be anywhere to hide on the way down.” Well, that’s not necessarily true. Neither of our capital preservation strategies should feel much, if any, pain.
Jim Rogers – legendary Hedge Fund Manager; cofounded Quantum Fund with George Soros
- He was short selling investment and banking stocks in the run-up to the 2008 meltdown.
- How big will the next crash be? “It’s going to be the biggest of my lifetime.” WOW.
Marc Faber – Author “The Gloom, Boom, and Doom Report”
- Marc (Dr. Doom) has never seen a market that he has liked much.
- Currently he sees three major red flags:
- More stocks owned on margin than since the 1950s. This tends to occur when speculation is high and markets are expensive…like today.
- The CAPE ratio is at 30…well above its long-term average of 17.
- The market’s breadth has narrowed. Only a few stocks are driving market gains which suggests the market isn’t healthy.
- He believes that once the selling starts, it will result in an avalanche. “I think a realistic scenario is that asset holders will lose 50% of their assets. Some people will lose everything.”
Bill Gross – The Bond King; Janus Henderson Global Unconstrained Bond Fund
- Investors are funneling more and more money into the financial markets instead of the real economy. When you combine this with high U.S. debt, an aging population, and the automation of labor, he believes it all presents a big problem for productivity which is the long-term driver of economic growth and profits.
- This set of challenges “promises to stunt U.S. and global growth far below historic norms.”
Rob Arnott – Chairman and founder of Research Affiliates
- The “Godfather of Smart Beta” was warning investors in 2007 in advance of the financial crisis predicting that a recession was coming.
- His concerns lie in the fact that there is not enough fear out there. “There’s a sense that the risks are not there.”
- “It’s hard to paint a rosy picture for any long-term investor. The market is just too expensive. At any point, it might roll over and die.”
In an August 23rd article published in Financial Advisor magazine, three major banks cited mounting evidence that global markets are in late stage rallies in advance of downturn in the business cycle. HSBC, Citigroup and Morgan Stanley are worried about breakdowns in the longstanding relationships between equities, fixed income, and commodities in addition to investors proceeding with blinders on as valuations and other risk data are flashing warning signs.
Not everyone agrees…no surprise there. In an effort of being fair and balanced, I found the following bullish opinions:
Jim Paulsen – Chief Investment Strategist, Leuthold Group
- “Slow but broadly based global economic momentum, remarkably tame inflation, interest-rate pressures, and a perpetual wall of worry…should push the S&P 500 index toward 2600.”
Charles Lieberman – CIO, Advisors Capital Management
- “As long as the economy remains healthy without excesses, with rising profits and with inflation not a visible problem, the equity rally should continue. I’m anticipating another 5% by year end.”
David Becker – President, Northern Oak Wealth Management
- “Given the market’s strength in the first half, we expect the S&P to grow more modestly in the second half, hitting 2540 by year end. But we wouldn’t be surprised if it went sideways for the rest of the year.”
Charles Lemonides – Founder, ValueWorks
- “I see the market going higher. We’ve had a nice rally in the Dow Jones Industrials and Nasdaq 100, but it has been dominated by a handful of mega cap companies. Small and mid-caps have missed out and are getting cheaper. The leadership will turn over, and we’ll get fresh legs. The S&P should be at 2600 by year end.”
Krishna Memani, CIO at Oppenheimer Funds
- Recently published 15 reasons why the current U.S equity bull market will continue well into its ninth year including stocks still cheap relative to bonds, the market is not ‘euphoric’, and High Yield bond spreads are historically tight.
There you have it…clear as mud.
‘Government Gone Wild’ has again led to rational minds challenging the current tax policy. Reagan successfully reigned in tax and regulatory abuse 35 years ago. Since then, tax and regulatory creep has become a weighty albatross slung around the neck of the average family and business as well as the U.S. economy. With tax reform part of the daily news cycle and a cornerstone of the Trump agenda, maybe it’s time to spend a little time unpacking the economic goals of tax reform.
Let’s first dispel the claim that lower tax rates result in less tax revenue. History has proven that lower rates actually increase dollars received by the Treasury. We can begin with a quick study of the highly-respected Laffer Curve…a theory developed by supply-side economist Art Laffer which demonstrates the relationship between tax rates and the amount of tax revenues collected by governments.
Using Gross Domestic Product (GDP), Laffer’s main premise revolves around the assumption that the more GDP is taxed, the less GDP you will eventually get and by default, tax revenues in dollar terms will decline. Conversely, the less GDP is taxed, the more GDP you will get which will increase total dollars received by the federal treasury. Powerful evidence in all areas of the economy proves this theory making it a key economic cause and effect rule.
GDP consists of personal consumption, business investment, net exports, and government spending. The argument is that the more you take from individuals and businesses in the form of taxes, the less individuals have left to spend and the less that business has to invest in growth, create jobs, and pay higher wages. As a result, consumption/production rates decrease. Even though tax rates are higher, there is less consumption/production to tax so actual revenues decline.
From the perspective of the labor force, the more of a person’s wages that are taxed, the less incentive there is for them to work harder. For every type of tax, there will be a threshold rate (T) above which actual tax dollars produced will decline.
The above Laffer Curve suggests that as tax rates rise from low levels, tax revenues will initially rise as well but at a diminishing rate. Eventually tax rates become too onerous and the total revenues received begin to decline. Thus, at some point, increased taxes will have a negative impact on the actual tax dollars received. Arguably, that is where we find ourselves today.
We have experienced 8 years of very weak growth coming out of the ‘Great Recession’ when you would have normally expected high levels of economic growth especially given the severity of this event. The two biggest deterrents to economic growth have been over-regulation and debilitating tax rates. The purpose of tax reform would be to get the relationship between tax rates and tax revenues back in line where businesses are incented to grow and individuals have money to spend. This requires the relationship on the above curve to get well back to the left side of the curve.
The last major tax reform led to one of the greatest growth periods in our nation’s history. The Reagan tax reform was implemented between 1982 and 1986. The reform significantly lowered personal tax rates, eliminated bracket creep through indexing, cut subsidies and special interest provisions, dropped the corporate rate from 45% to 34% and provided incentives to work, save, and invest. Reagan also continued with massive deregulation efforts. When Reagan left office with less regulation and significantly lower tax rates in place, tax revenues were up 19% from his first year and the economy was booming.
Reagan’s tax reform became the foundation of 25 years where GDP growth averaged 3.4% per year. Obama era policies significantly raised taxes and introduced unprecedented levels of regulatory burdens producing 8 years of sub 2% growth at a time when early stages of post-recession economic recovery should have produced growth at the high end of historical ranges.
Tax cuts are good for the markets as well. Goldman Sachs recently published the chart showing how the S&P 500 reacts following significant corporate tax cuts. Investors should really hope that our bumbling legislatures in Washington are successful in tax reform goals.
The President outlined is tax plan this week. The Heritage Foundation looked at four key tax reform initiatives that would vastly simplify the current complex tax code and grow the economy:
- Allow Full Expensing: Full expensing will permit businesses to immediately deduct the full cost of expenses and major capital expenditures instead of being subject to complex depreciation schedules creating a deterrent to investing in growth while costing business over $23 billion annually (Source: Heritage Foundation).
- Lower Corporate Income Tax Rate: The proposed 15% federal corporate tax rate will make the U.S. the lowest in the world as opposed to the current status as the highest at 35%. This will allow U.S. corporations to compete evenly with foreign competition. Ultimately, corporate taxes are paid by consumers through higher prices and workers in the form of lower wages. Lower tax rates will increase corporate profits leaving more for wages and result in lower costs for the consumer. All Americans would benefit.
- Lower Individual Income Tax Rates: Lower personal income tax rates incentivize Americans to work, spend, save, and invest which stimulates the economy in many ways. Higher rates actually do not raise that much additional revenue and as discussed above, eventually causes revenue to decline. Ideally, this would be coupled with the elimination of state and local tax deductions where taxpayers in low tax states subsidize taxpayers in high tax states. Lower rates will stimulate employment and business startup. Under the plan, tax rates could be reduced by as much as 12.5% for everyone if state and local tax deduction were eliminated.
- Eliminate Tax Subsidies: The current tax code effectively picks winners and losers through intricate loopholes. Tax reform should end as many corporate/individual deductions, credits, exclusions and exemptions as possible.
Hopefully, our elected legislatures will find a way to get this done before next year when all eyes will turn to the midterm elections and legislative efforts seize up. If they fail, fire them all. After all, they serve at our pleasure, not theirs.
Necessity is the Mother of Invention
Baby Boomers are turning 65 at the rate of 10,000 people a day. More 65+ adults than ever before continue to work, but with rare exception their largest need and spending priority is oriented toward healthcare as they continue to age. Demand for healthcare services is expected to grow at rates that will be difficult to meet for many reasons. At the same time, the delivery method of the most common healthcare services includes a bias towards accessibility and convenience.
On another front, we are witnessing the gradual death of traditional retail shopping habits. Technology, lifestyle shifts, and efficient shipping methods have dramatically changed how people shop. I’m an Amazon Prime shopper. If you are not, you will be someday soon. The once glamorous regional shopping mall experience is quickly becoming a thing of the past. Vacancies are pervasive and mall closings are rising.
Mall landlords are frantically trying to find creative ways to fill vacant space at the same time healthcare providers are looking for existing locations to deliver their services. Voila…a marriage made in heaven. Malls tend to be in densely populated areas and along well developed public transportation routes good for both workers and patients.
A shopping mall near you may soon become a medical mall. However, the most common mixed use centers will likely include satellite healthcare facilities along with shopping and restaurants…maybe even a theater. In some cases, former anchor store locations are even leasing space to churches. The times…they are achangin’.
If you go by the opposition party, most of the media outlets, and a few unhinged ‘friends’ on social media, our current president is a Russian sympathizer, Nazi, and a racist. He is a mentally ill, homophobic, and xenophobic misogynist. Is it any wonder why we are probably as divided as a nation today than we have been since the Civil War? Maybe if our elected officials and agenda driven friends in the media would just stick to the issues, we might get something done. Alas, dysfunction rules the day and common sense has all but disappeared. I don’t see much hope for the foreseeable future. This great nation is becoming a modern-day Tower of Babel as our self-serving elected leaders strive to carve out their piece of the pie under the guise of knowing what is best for everyone while using social re-engineering and today’s version of book burning to redefine our social structure and undermine our economic foundation. Our strength as a nation came from a core of immigrants from around the world willing to assimilate into one great society governed by the will of the people. We have now become a segmented nation where varied cultures refusing to coalesce have ceded control to a divided government that believes the populous is subservient to them. Most Americans are either complicit or sit idly by as Rome burns. This recipe for disaster reminds me of the parable telling us of the frog being boiled alive. As the story goes, a frog when placed into a pot of boiling water will immediately jump out. That same frog when placed in tepid water that is slowly brought to a boil will not sense the increasing danger and be cooked to death. We are continuing to marinate in a morass of self-destructive behavior that will eventually see us becoming that frog.
Illegal Immigration continues to be a hot button issue. Much of the demonization of Trump has centered on this issue. All he has done is take a serious stance on an issue most American presidents as well as most Americans have agreed with before him. Consider the following 84 second clip from one of Bill Clinton’s State-of-the-Union speeches: https://www.c-span.org/video/? %20c4351026/c
Our thoughts and prayers go out for those suffering because of hurricane Harvey. Many thanks to all those who have donated time and money to the rescue and recovery efforts. This experience reminds us all of how Americans come together in times of need. The true picture of America emerges at times like these. Unfortunately, as images of Harvey diminish with time, the divisiveness of our political leaders and elitist media outlets will take over and try to paint an image of America that is more myth than reality.\
It’s hard to believe another Labor Day has come and gone. This weekend, as we brought another summer to a close even though summer is more of a mindset than it is a calendar event. We celebrated labor while happy parents are sending their kids back to school. In some parts of the country, the trees are already starting to turn. This little calendar benchmark started my mind wondering a bit about the passage of time and where we might be headed
We will usher in 2018 in 118 days. Y2K is a distant memory but not so 9/11/2001. A year from now most college freshmen will have birth years beginning with the number 2. Some may learn about 9/11 if they happen to get near a history book, but for most, the slate will be clean as the newest generation of future leaders is born. To them, we have always been at war both at home (politically) and overseas. They may recall that the first president that they can remember was America’s first black president even though both news and social media tells them that we are an evil, racist society. Unfortunately, they lack context. Their view of the world started with the day they were born.
They will worry about what kind of jobs will be available for them when they begin to pay off their student loans. Instead of being taught about how great this nation is and the bountiful opportunities that await, the trend seems to be to cast America in an evil light and draft them into a class warfare system that seems to divide us today. Their entire lives have been defined by the internet and smart phones…an oxymoron for far too many.
The coming generations of Americans will be forced to clean up the economic mess that previous generations of political leaders have left as their legacy. It won’t be easy, but I am confident that the American spirit that was demonstrated during WWII, after 9/11, and the spirit we are currently witnessing in Houston will prevail to overcome the adversities a free society encounters along the way.
Their short lives have been plagued by two of the worst financial downturns in our nation’s history, which will ultimately define their attitudes much in the way the Great Depression formed economic framework of those living through that era.
The greatest generation gave birth to the era defined by the last 60 years of economic imprudence. This new generation of leaders will have fewer economic options as they are channeled towards righting a sinking financial ship weighed down by unsustainable debt and unfunded obligations. I foresee a great coming together from those silly things that divide us today as we work towards the next era of American prosperity.
Have a great month.
South Georgia Capital, LLC
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Naperville, IL 60563
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