Welcome to 2020: Hindsight and Vision

Posted on Jan 1, 2020 in Community, Family, Investments, Planning, Retirement, Tax, Technology

Welcome to 2020: Hindsight and Vision

This time of year we often look back over the past 12 months, and as we close out 2019, we also close out a decade. Time goes by in the blink of an eye, and the past ten years are only different in that there has been more change than ever before. That will only be exceeded by the rapid change in the next ten.

We’ll welcome some of this: systemic and technological changes to make life better. Other changes,  like those which require shifts in well-worn habits, or to combat climate change and rewrite our social contracts to reflect life today, will be more difficult, and require more attention.

LOOKING BACK: THE DECADE IN REVIEW

ECONOMICS
We all remember where we ended the last decade, surrounded by the tatters of financial life after the Great Recession (aka the Financial Crisis, August 2007-March 2009). We weren’t sure it was over, and while the recession had technically ended, the impact would still be felt by many for years to come. While we are spending lately like the Financial Crisis is forgotten, some have still not recovered, and the trauma of the event continues to affect almost all of us.

As the decade began, we were told the recovery was happening, then we were hit with a series of smaller crises in financial markets: 2010 Flash Crash (trillion dollars lost in the stock market in 36 minutes, started by automated trading programs); 2011 European Sovereign Debt Crisis (causing a write-down of Greek bonds); 2013 bailout of Cyprus by the European Union (to avert a banking crisis); 2015 Chinese stock market crash, followed by a commodity-driven US stock market drop, and finally a 2018 worldwide stock market downturn, ending last Christmas Eve, when the S&P fell nearly 20% in the preceding three months.

While the economy is NOT the stock market, the two are related. Here is what the largest U.S. companies did over the last decade, in terms of their stock prices:

It hasn’t been an entirely smooth ride; we have forgotten the hiccups that occurred because of the events noted above, and others.  But what does this tell us about the economy?  Is it reflective of fundamental strength of companies and demand, or of manipulation of interest rates, and tax laws that favored stock buy backs? Or a combination?

Despite very low unemployment, wages have barely budged for most, and some Americans have taken to working two (or more) jobs. A minimum wage of $15/hour works out to $30,000/year for a full-time job, which hardly meets rent in some urban areas. You enjoy the benefits of a rising stock market when you can invest, and for many, that’s still out of reach.

POLITICS
President Obama was two years into his first term as the decade began, and the push-back to the change he represented was evident. A Republican-led Congress blocked attempts at government spending on infrastructure programs to jump-start the economy and get Americans, particularly those in the trades, back to work in the wake of the Financial Crisis. The Tea Party, a movement within the Republican Party and a harbinger of where we would end the decade, gathered power, pushing for lower taxes, reduced government spending and a reduction in the national debt. By the decade’s end, they’d achieved 1 of 3.

Obama’s first term was devoted to health care reform, and Congress passed the Patient Protection and Affordable Care Act (“Obamacare”) in 2010. President Obama’s second term included another big change: in 2013 the U.S. Supreme Court decided the case that recognized same-sex marriage and overturned the Defense of Marriage Act (DOMA).  Reforming our health care system and expanding the definition of marriage were both HUGE shifts in the American landscape.  No question there would be a reaction to big social change.

Part of the reaction to the economic situation was political of another persuasion: the Occupy Wall Street protests began in July 2011 in New York City and spread to 82 countries by October. Bailouts for big banks led to an outcry against financial greed and corruption, starting a new discussion about economic inequality that continues today.

The BlackLivesMatter movement began in 2012 after the shooting death of teenager Trayvon Martin, and went national in 2014 after the deaths of Michael Brown in Ferguson, MO and Eric Garner in New York City at the hands of police. Social media aided both the spread of participation in the campaign against violence and systemic racism, and in the backlash, with the appearance of “All Lives Matter” and Blue Lives Matter, in support of the police.

The election of Donald Trump in 2016 was the capstone to years of work to bring America back to an earlier time, to re-entrench systems and institutions to support the economic and social structure we created after World War II.  The President’s Inauguration in 2017 kicked off worldwide Women’s Marches, with 420 reported marches in the U.S. and 168 in other countries, becoming the largest worldwide protest in recent history. In March 2018, Stoneham Douglas High School students led nationwide protests over gun violence, called the National School Walkout. By May the protest movement became the March for Our Lives, with demonstrations in 900 U.S. cities.

In December 2018 “Yellow Vest” (“gilets jaunes ”) protests in France that were initially motivated by rising fuel prices and a high cost of living shut down urban centers weekend after weekend; by December 2019, the movement broadened its focus to include opposition to President Emmanuel Macron’s austerity measures, which included pension reform that would postpone retirement until age 64 instead of 62. The protests spread across political, regional, social and generational divides angry at economic injustice, with polls indicating than 80 percent of French people supported the movement.

A series of strikes in 2019 for action on climate change drew millions of people worldwide. The third global strike in September, also known as the Global Week for the Future, was timed to occur around the UN Youth Climate Summit and UN Climate Action Summit. The September Climate Strike included over 1,000 strike events in all 50 states, Puerto Rico, and the District of Columbia.  The student-led protests had five demands directed at world leaders and elected officials centered around a “Green New Deal”: to transform the economy to 100% renewable energy by 2030, while creating jobs and ending leases and permits for fossil fuel projects; respect for indigenous land and peoples; investment in communities affected most by poverty and pollution; protecting biodiversity, restoring 50% of the world’s lands and oceans, and stopping all deforestation by 2030; and sustainable agriculture, including the end to subsidies for industrial agriculture. A bold “to-do” list.

We closed the decade with anti-extradition protests in Hong Kong against a bill that was viewed as eroding the “one country, two systems” balance between Hong Kong and mainland China. The protests morphed to reflect broader threats to Hong Kong’s autonomy, as well as underlying discontent in Hong Kong, from the dearth of affordable housing to the demand for universal suffrage for elections rather than use of an Election Committee, which is viewed as non-representative.

Worldwide, there were protests related to housing affordability, economic inequality in general, climate, safety, and the concentration of power in few rather than many hands.

DEMOGRAPHICS
We’ve all heard about our longer life expectancy, and that reality is rapidly coming head-to-head with social safety nets worldwide. Despite reports of a reversal of this trend, looking closely at the numbers, the decline in life expectancy in the U.S. tends to cluster around certain regions, in rural areas where the opioid epidemic, among other factors, is concentrated and driving down life expectancy.  In coastal areas in the U.S., life spans are tracking the rest of the developed world, and increasing.   The safety net failing here is general health care coverage (as well as regulation of pharmaceutical companies).

The other safety nets running into headwinds are those for our elders. In April 2018, Nicaragua announced reforms to its Social Security programs to decrease retirement benefits; 34 people were killed by police in the resulting protests. In France, the aforementioned Yellow Vest protests now include push-back on labor law changes and plans to overhaul the pension system. In the U.S., the Social Security Administration notes on every Social Security statement that as of 2035, only 76% of benefits can be paid; for disability insurance benefits offered through the program, those benefits become unsustainable in 2020.  Medicare is on an even less solid footing.

Meanwhile, and because we like acronyms, a legislative proposal, called the Time to Rescue United States’ Trusts, or TRUST, Act, would create congressional committees to evaluate how to bolster solvency or make other changes to improve the programs. That sounds like kicking the can further down the proverbial road, but further increasing the age when we are eligible for benefits should be part of the solution. The Social Security 2100 Act calls for increased benefits, and increases payroll taxes to pay for it. Also in the hopper are plans to cut both Medicare and Social Security in a second Trump term, based on growing federal deficits, the same deficits Republicans and the Tea Party wanted to avoid, but created by the most recent tax reform legislation.

We are living longer than ever before, and the math these demographics present is straightforward: we need to work longer, pay more in taxes, and start benefits later. We’ll be experiencing exponentially increasing change over these longer lives, and we’ll need to retrain/retool/refresh along the way. All of which argue for a restructuring of how we work, not a return to a post-WW2 ideal, and a reworking of how we enjoy leisure time, “retiring” the current concept of “retirement.”

DATA
Throughout the decade, leaks and breaches of big data caused turmoil large and small:
2013 – Edward Snowden exposes widespread government surveillance
2016 – Panama Papers are revealed, showing myriad ways the rich can stash cash offshore
2016 – WikiLeaks releases Hillary Clinton’s emails and Russia interferes with US elections
2017 – WannaCry Ransomware attack hits computers in 150 countries

Wikipedia lists 138 data breaches from 2010 to the present, from Reddit to Capital One, the U.S. Department of Homeland Security to Uber, Premera Blue Cross to Facebook (Facebook was hit five times; in July 2018, a drop in Facebook’s share price on the heels of its latest data leak wiped out $109 billion from its market value, the largest single day loss in corporate history).

By the end of 2018, the UN reported that more than half of the world’s population is now using the internet. Also in 2018, Europe enacts strict privacy controls for European citizens called GDPR (General Data Protection Regulation), and we can expect the U.S and others to follow.  (Expect California, non-conformist state that it is, to lead here.) We are all in cyberspace now, even if we got there kicking and screaming, and the last decade shows us how we must be vigilant about how we manage our activities and information online. Those of you with kids who want to opt out of learning new technologies, think again; you will need to know about whatever follows SnapChat and TikTok to keep your kids tech smart and safe.

TECH
Social media and gaming were not new when we started the decade, but mainstays that we use today were just emerging: Instagram launched in 2010, PlayStation 4 and Xbox One were released in 2013, Pokemon Go in 2016. More ways to stream/play/be entertained are on the horizon.

Other parts of the tech community were focused farther afield, and there was no shortage of space exploration over the last decade.  NASA’s New Horizons probe visited Pluto (2015), NASA found water on Mars (2015), SpaceX landed a Falcon 9, the first reusable rocket (2015); a new Mars rover is headed out into space next year, complete with an oxygenator (just like in The Martian) as part of the Mars 2020 project.  Recently, I overheard two middle school kids on the bus talking about the budgets of NASA and the Department of Defense, noting that the former is 1/20 the size of the latter, and if they switched budgets, we’d be living on Mars.  Out of the mouths of babes.

In between our personal screen and the Final Frontier, there are technological developments to herald and to watch carefully.  Automation, self-driving cars, drones, AI-driven “helpful tech” from Siri to Alexa are here to stay.

HEALTH
Major health crises – the Ebola virus in 2014 and 2018, the Zika virus in 2016, cholera in 2017 in Yemen, plus famine in Africa in 2017 – occurred alongside medical breakthroughs: a vaccine 70%-100% effective against Ebola was found by the end of 2016; 3D printing created a lab-grown ear (2013); China created monkey clones in 2018.

Like other new ideas, some need to come with a warning label. In late 2018, a Chinese scientist announced he had altered human DNA in twin girls to make them resistant to HIV, news that was widely criticized by scientists and medical ethicists. The technology that made this possible was “CRISPR” (pronounced “crisper” = Clustered Regularly Interspaced Short Palindromic Repeats), which forms the basis for genome editing technology. In June 2019, U.S. scientists used CRISPR to treat a 34-year old woman with sickle cell disease. Also in 2019, a second case of sustained remission of HIV after stem cell treatment aided by the CRISPR research was reported. Alas, most of the decade was spent in a patent dispute between the two scientists laying claim to the CRISPR research and the huge educational institutions with which each is affiliated.

A man-made health threat is that of gun violence, and the decade proved laden with examples: Aurora, CO (2012) — Sandy Hook Elementary School (2012) — San Bernadino, CA (2015) —
Orlando, FL (2016) — Charleston, VA (2017) — New York City (2017) — Sutherland Spring, TX (2017) — Parkland, FL high school — Tree of Life Synagogue (2018) — El Paso Walmart (2019) — Dayton , OH (2019) – White Settlement, T (2019). Active shooter drills become commonplace in schools.

Technology continues to make us safer, and seemingly simultaneously exposes us to more, and deadly, risk.

CLIMATE
We talked about the climate Crisis the whole decade, continuing the discussion organized through the Kyoto Protocol (a 1992 international treaty to reduce CO2 emissions, the first commitment period of which ended in 2012), followed each year by climate change conferences. In 2015, at the UN’s annual climate change conference (COP 21), almost the entire world came together to agreed to reduce carbon. The U.S. and China, responsible for 40% of the world’s carbon emissions, joined the Paris Accords in September 2016. As of October 2019, the hold-outs were Angola, Eritrea, Iran, Iraq, Kyrgyzstan, Lebanon, Libya, South Sudan, Turkey, and Yemen. In November 2019, the U.S. formally began its withdrawal from the agreement, announced earlier during the Trump Administration. The U.S. will be officially out in November 2020.

The face of climate change activism became Greta Thunberg’s, a 16-year old Swedish teen, proclaimed Time magazine’s Person of the Year for 2019. I’ll let her final tweet of 2019 outline where we need to go:

NEW IDEAS
The last decade may have been more about disruption than innovation. Tesla made its public debut in 2010, and last year’s IPOs alone brought Uber, Lyft, Pinterest and BeyondMeat into the public domain.

For 2020 and beyond, the unicorns (private companies valued at a minimum of $1 billion) in the pen include CrowdStrike, The RealReal, Cloudflare, Peloton, Progyny, Bill.com, AirBnB, SpaceX, DoorDash, Robinhood, Casper (bed-in-a-box) and Didi Chuxing (China’s Uber competitor, which recently spun-off its autonomous driving unit into a new company), Ant Financial, Droom, Gitlab, Hemptown, Instacart, Neptune Energy, Palantir Technologies, Saudi Aramco. Remember, the companies that go public are rarely start-ups, they’re often many years (and many rounds of financing) old. And while sometimes they do well, Renaissance’s fund-of-IPOs ETF (IPO), for example, was up by about 33% by the end of 2019…but the S&P 500 was up by 29% over the same period, and with a lot less risk.

LOOKING FORWARD: THE NEXT DECADE

Data — If you’re not paying for the product, you are the product. The “free” services we use so readily are gathering our personal data into privately-owned assets. You may not be concerned about your Instagram account, but you should be concerned about the silos of health care data that are owned not by you, but by a specific health care entity, and not shared. Look for agitation for a national health care database.

Demographics – Longevity, work and family structures are all changing, and our social safety net will need to change to reflect these shifts. There are ways to adapt our institutions to meet our future needs. Don’t get hung up on fear-mongering about costs and taxes; smart legislation on taxes, program eligibility, needs-testing, and even immigration can adjust programs that have proven to lift Americans out of poverty. As a leading First World nation, we owe it to ourselves to look to the future and blaze a trail.  There is a real opportunity here for elders and youth to unite, creating a “great trade” to reconfigure safety net programs like Social Security and Medicare in exchange for big structural changes like universal basic health care and climate action at corporate and governmental levels.  Both age groups have the numbers of people that could sway the vote, and coming together rather than working for their separate interests could benefit everyone.  Oh yeah, and we’ll still have a planet to live on, too.

Government matters – If the impeachment hearings have taught us anything, it’s that there is a whole slew of civil servants who make our lives work. They labor mostly invisibly, with much criticism and little praise, and even less in these last few years. Our trade, our travels, our place in the world owe TONS to these unsung Americans. Government and the people in it matter.

Power – There are two issues here: power politics and power generation. Leaders with dictatorial leanings are striving to consolidate power, and to change the rules so that they keep it. If you’re content as a serf, no need to worry. If not, you’re going to need to expend some energy here, to protest, to vote, to walk out. On the second front, it’s fine to talk about adapting to climate change when you live in a place with most of your energy coming from hydropower and nuclear power. Our economy is no longer dependent on horsepower, or manpower, but on electricity, and some places are going to have a harder time adapting than others. If you want them on board, you’re going to have to pay for it, so watch for ideas to pay for not using coal- or oil-fired plants. It’s like paying for guns to get them off the streets. If there’s a bailout that might be worth the dollars, this could be it.

Attention – When research tells us that being mindful and intentional makes us happiest, you might hesitate when offered the newest, greatest way to stream/play/get high. The age of distraction that’s coming is built of new forms of tv/streaming/video games along with legal cannabis in addition to booze and offers a challenge to us to stay in the game (life) even when we’d rather check-out.

Voting – The 19th Amendment, giving US women the vote, is 100 years old in 2020. This is one voting block that could decide the 2020 elections. The other is the Millennial generation (1981-1996), which is on the verge of surpassing Baby Boomers (1946-1964) as the nation’s largest living adult generation, according U.S Census projections.

The next time you’re inclined to say something snide about a Millennial, think twice.  They will hold an increasingly stronger hand over the next decade.  And besides, you will need them to teach you how to use that new app or how to control your household robot.

These past 10 years have been tough in many ways, and while I’m always glad to be able to make a fresh start, this New Year dawned with some serious dark clouds overhead.  We have big decisions to make; doing nothing IS a decision, just not one we want to make.  Thunberg said it above: This coming decade humanity will decide its future. Our future is really our kids. And the kids better vote.