“As sure as the spring will follow the winter, prosperity and economic growth will follow recession.” -Bo Bennett
“Nothing in life is to be feared; it is only to be understood. Now is the time to understand more, so that we may fear less.” —Marie Curie
Is it really unprecedented times? Or have we lived this type of thing before?
The shutdown – yes, that is new. Disease? No, not really.
We have had worse, we have overcome worse, we have expanded during – and away from – worse.
Consider this if you will: It is in the midst of what many perceive as end of times disasters that some of our best, most valuable and impactful inventions arise. From great darkness comes light. From fear, comes understanding, which in turn, locks fear back in its mental cage.
The darndest thing always happens when you are willing to look back at the setback events we overcome: Technological progress always confounds the pessimists. It does so in two primary ways: a) by solving scarce-resource problems and b) fueling productivity and prosperity, as it did in the 1920s (just after the last pandemic) – and is set to do so again in the 2020s.
The only difference? Speed. Think fueling productivity and prosperityon steroids – squared. Think paradigm shift. Think Roaring 20’s – again.
The bigger boost this time? You guessed it: Generation Y. The largest generation of people to ever hit the US economy. They will drive us ahead of global competition faster and farther than we have ever witnessed.
Like all change, the naysayers will tell you to be afraid of it. We will suggest you get an extra box of popcorn and maybe a hot dog or two – along with your favorite beverage. The pitchers are warming up, the outfielders are stretching, batting practice has a few more swings in the line-up, the sun is shining and this slugfest is set for a long, extra-inning battle.
A Little Side Break
As some may know, Max’s dream came true in May when he was recruited to play ball with the DePaul University Blue Demons, a top D1 – Big East competitor in Chicago. You can imagine how excited we are for him and how proud we are of him. Once we get back to normal, rest assured I will be sharing the TV schedule for their games!
Here is the setup for you on the short video below. Max and his teammates checked into their dorms two weekends ago – good Lord, these players’ dorm rooms are bigger than my first apartment – LOL! Anyway, after move-in they all got to the inside court for the first time this summer. Max is the three-point shooter. He is also the youngest on the team. As you can imagine, His older teammates were quick to challenge his capacity at the three-point line.
One of them grabbed a camera, another tossed him a ball and said, “let’s see that three-point shot.” A dribble or two, lots of funny heckling and laughter – and then…this…
Ice-water in his veins – way to go Max:
Back to “The End”
Many things will end for sure. Unproductive things. Sadly, many low paying jobs as well. Don’t fret – over time, they will be improved. That is what happens after massive setbacks – as we will show you below.
It is easy to forget previous times which launched significant change – especially when we are ensnarled in something causing great fear and temporary, massive disruption. But recall – you heard it here for 15 months straight:
The 2020’s and 2030’s are the decades of disruption.
Let me remind you what it was like in 1982 when I started in this business. Just a few things:
We mailed things.
If I wanted to communicate with a client on the west coast, I sent them a letter – in an envelope. When it was dropped in the box, we placed a reminder to ring them to follow up on our calendars – 7 days later!
There were no cell or smart phones – yet. If you were at lunch, you had to wait to get back to the office to find out what happened and who called. You were handed those little pink slips – “While You Were Out”. No text, no mobile, no scrolling the news while waiting for the check, no notifications, no beeps – nothing.
Oh – and no email, websites – or internet. That was just 1982. Consider that for a moment.
Ponder this as well: We can all read that the Spanish Flu pandemic of 1918 infected roughly 500 million people and killed as many as 50 million of those getting ill. Recall at that time, the world population was 1.8 billion people. This suggested a staggering 28% infection rate and nearly a 3% death rate.
While it surely seems a lot worse, Thank God the stats are currently significantly lower for COVID-19. Today, the global population is 7.5 billion, with roughly 20 million cases and 735,000 deaths worldwide so far.
Remember our saying here:
Markets are not about “What’s Now?”
They are about “What’s Next?”
So, let’s take a walk back to then – what happened “next” last time? Some pretty good stuff. The good news is that the bad news during the previous pandemic precedent was followed by the Roaring Twenties.
Now, we have already kicked off the 2020s with the pandemic and meltdown. There is plenty of the decade left for a lengthy runway of prosperity to become much like the (1920’s) precedent.
The driver of the coming boom is more than obvious by now, for reasons we have shared for years: technology-driven, productivity enhancement across ALL industries, services and consumer actions.
Importantly, Dr. Ed reminds us that the late 1700s saw grim-reaper type forecasts from Thomas Malthus. “He was the first economist, and he was an extreme pessimist. He predicted that populations would grow so fast they would outstrip the capacity for food production.”
The coming results in his mind? You guessed it again: a regular, consistently bad cycle of starvation and death. Thankfully, he was, uh, dead wrong.
Agriculture was among the industries that benefited the most from the Industrial Revolution of the 1800s.
Never forget, technology fuels the three P’s: productivity, problem-solving and prosperity. It did in the 1920s after the 1918 pandemic and it is already doing it again in the 2020s.
This from Dr. Ed:
“In 1920, 51% of the US population lived in cities, up from 23% in 1870. This remarkable urbanization was enabled by innovations in electricity and plumbing. Electric grids provided clean, bright light without emitting smoke.
Urban water networks supplied clean water, and sewer systems removed waste without the pungent odors of chamber pots and outhouses.
Telephones allowed people to converse with distant friends.
Henry Ford’s Model T, built between 1908 and 1927, was the first car invented and helped people to live an easier life by making transportation easier and faster. In 1900, just 8,000 motorcars were registered in the US, but there were 9 million in 1920 and 23 million in 1929. Streetcars and subways, unheard of in 1870, were in all the major cities by 1920. Intercity trains were becoming steadily faster and more reliable. Detroit Police Officer William Potts came up with the idea of traffic lights, taking inspiration from railroad traffic signals. General Electric bought the idea for $40,000, and traffic lights soon were everywhere.
Ford’s assembly line innovation boosted productivity in many manufacturing industries, including the processed food industry. National food brands—including Heinz, Campbell’s, Quaker Oats, Jell-O, and Coca-Cola—began to fill cupboards. Refrigerated railroad cars and in-home iceboxes meant that vegetables were available in winter. Restaurants began to proliferate early in the 20th century. When people out and about in their Model Ts got hungry, their options were few, but the first fast-food chain opened its doors in 1919, an A&W (better known today for its root beer). White Castle hamburger stands opened in 1921, and the first Howard Johnson’s restaurant in 1925.
Increasingly, anything not available in a local store then could be obtained by a mail-order catalog. The Montgomery Ward catalog was first issued in 1872, the Sears catalog in 1894. By 1900, Sears was fulfilling 100,000 orders a day, and its catalog featured fur coats, furnaces, furniture, and much more—including homes. Sears sold more than 70,000 mail-order homes between 1908 and 1940. The catalog business was helped along by Parcel Post, which arrived in 1913.”
All of this unfolded – after the pandemic – or maybe we should better say,BECAUSEof the pandemic.
Technology always defeats the sellers of fear and trepidation…even though the audience is always ravenous for the drug in any delivery form – usually a newsletter or a well-placed soundbite.
Seeds Already Planted
We can all be confident that the technological revolution ahead will bring benefits to the entire world, from every crack and crevice of business and services. How? It is all about R&D trends and the investments already made.
Important overarching themes will massively outrun Covid…and likely sooner than most fear. Thanks to Generation Y, Tech is set to bring improvementsto every area of our lives:
The doomsday gangs on every channel are set to be confounded by biotechnological innovations that deliver not just a vaccine (likely several) for COVID-19 but go one step further and capture solutions for ALL coronaviruses.
It’s clearly seen by all that scientists from around the globe are rapidly working on a massive array of ways to fight COVID-19. But what could this also lead to? Beyond finding an immediate solution, the spillover effect of all this work could be how they bring us all many more ways to combat illnesses in general and viruses in particular.
Billions of dollars, provided by both the public and the private sectors, are funding historical, global campaigns to develop tests, vaccines, and cures for the virus. They are unlikely to be defeated given the powers in labs today.
The virus fears, along with the divisivemedia world we are living through today, have blinded many to the benefits brewing around us. The charts below will show a surge to record-setting levels of technological investments being made over the last 6 months.
Innovations will come from all the areas we have touched on before in many morning emails: biotechnology of course, but nothing stops there. Think robotics and automation, artificial intelligence, and nanotechnology. Don’t ever underestimate the massive impact from the significant innovations rapidly unfolding in 5G for cellular networks, 3-D manufacturing, electric vehicles, battery storage, blockchain, and quantum and edge computing.
Now – for the charts from Dr. Ed and his team on record TECH capital spending. This should not be a surprise but the numbers are still, well – large:
High-tech spending on IT equipment, software, and R&D rose to a record $1.32 trillion (saar) during Q2-2020.
It jumped to a record smashing 50.1% of total capital spending in nominal GDP during the quarter.
Equipment and software accounted for 31.1%, while R&D accounted for 19.1% of capital spending in nominal GDP.
Last for Now – Housing is Smokin”
One sector that is totally off the leash is housing. This a a marathon event of demand — with years and years of under building and a massive wave of buyers dead ahead.
They are even running out of Lumber…hot off the press of releases:
The Continuing Theme…
As boring as it may sound at times, we need to realize what is unfolding in the larger picture, well beyond COVID. Like a wave forming way out in the ocean, its power is hidden – until it hits shore.
Adapting, overcoming and making things better are all foundations of American History. Doubting it for anything more than short stints during the shocks themselves – has been a bad bet, forever.
Demogronomics©does not fade.
It may be lost in the haze of current fears – but it will remain the underlying current.
Ignore it at your peril as a long-term investor.
While tech sectors could sure use a corrective wave to spook even the small percentage of bullish investors away, I suspect setbacks will be short-lived with $18 Trillion sitting in bank accounts and 10-year bonds selling at 135+ times earnings.
Yes friends – the world is changing -forever.
Every single thing will become new again.
The 80’s and 90’s were the Boomer’s Decades.
As stated for the last two years, to the point of getting boring and repetitive, the 2020’s and 2030’s are the Generation Y Decades – and the rocket-ship driving that expansion will be “everything tech” – including stuff we have not even dreamed of yet.
Imagine that – me – repetitive?