This report was written and sent to my clients in the beginning of 2024. Read and pass along if it helps.

About two years ago I noticed strange things happening. Financial things. Broad trends have been in motion and will likely continue for years to come. I take it as my chief duty to better understand these things, for you, my favorite people – my clients. This is a report about what is happening and as it continues what it will mean for you, your finances, your families, and your future.

We’re not trying to predict the future, we’re trying to understand what current trends will likely mean. Likely is the operative word, for though we can have a general idea, we can’t know precisely. It’s like the old joke about economists: “How do you know an economist has a sense of humor? He uses a decimal in his forecasts.”

My responsibility is to help you steward your resources. Irony of ironies, my last name apparently comes from those trusted advisors who were the “dis-spencer” of the king’s treasury. May this report give you guidance and comfort. Do not let fear bully you as you read, for ultimately, all shall be well.

And I hope you read it as a love letter, from your financial advisor to you.

We are Living Through a Historical Transition

“History never looks like history when you are living through it.”

John W. Gardener

From roughly 1750 to 1950, the world's population grew from 1 to 3 billion people. And from 1950 to 2000, it grew from 3 to 6 billion. As modern technology and medicine proliferated the world, the population exploded, lifespans increased and mortality rates plummeted. Industrialization changed how humans human.

The economics of having babies even changed as societies transitioned from an agrarian world. On a farm you can’t have enough kids – free labor! But as we moved into cities, kids really couldn’t contribute financially to their families (child labor laws, etc). Today it's common for children to produce almost no $$ until their mid twenties. What was once a marker of wealth could financially ruin a family today.

And no! I’m not opposed to kids, but tending to 12 kiddos today is a far different equation from just a century ago. Human behavior bears this out: all industrialized nations began to have a decline in birthrates in their history – our history.

Depopulation

Less children are being born today than in previous generations. And demographers spotted the coming decline decades ago. Like rings on a tree, one can count what future generations will roughly look like, and they have.

Historically, our demographics have had a pyramid shape: a few village elders at the top, parents in the middle, and lots and lots and loooooots of rugrats as the base of the pyramid. And this makes intuitive sense, that there should be more kids than adults as the years go by. Yet…

There aren’t.

The population explosion of the last few centuries will likely come to an end in our lifetimes. Note, I said the explosion. Children are still being born worldwide but not at the rate to replace and grow current population levels.

Globally in 2019, there were more people aged 65 and older than those younger – by 2030, there will be twice as many 65 and over. The median age of the average American is now pushing 40 years old.

The natural pyramid shape of previous generations is inverting. Correction: has inverted.

It’s been in motion for decades.

Deglobalization

After WWII, the world was divided between the United States and the former Soviet Union. The US struck a deal with its allies that if America could run global security, the allies could trade with each other and the US. Freely. Globally.

And they did.The greatest economic expansion in history occurred as nations exchanged goods and services as never before.

Up until then, it was a matter of national security to manufacture vital goods in-house. But with the Americans focused on international security, it made far more sense for countries to 1) focus on their own internal economics, and 2) outsource lesser work to other countries. As the decades went on, the world became vastly interconnected and interdependent – local and regional markets became a global market, something that never happened before.

However…

The conditions for a global market, to trade freely and safely around the world, were because the US ensured the safety of trade and travel. So, what would happen if they pulled back?

After the collapse of the USSR, there were no security reasons for the US to play policeman of the world. But there was still a major economic one: oil.The US Navy guaranteed the safe delivery of all oil shipments globally. Had the US pulled back after the Soviet Union collapsed, it could have tanked the US economy if oil prices shot through the roof.

And yet, the recent Shale Revolution, making the US the largest producer of energy in the world today, changes the entire equation.

There are now few incentives for the US to continue global security – a strategy as old as 1945.

The US is going insular.

Because of that, the world we were born in – the one of global trade with cheap products made in China – is unwinding. It’s now cheaper to manufacture in Mexico. It now makes more sense to bring manufacturing home, what is being called “onshoring” or “reshoring.” Manufacturing in the US and the North American continent is underway.

But this transition will be frustrating.

What made the global market work was that countries focused on what they could do best or cheapest, so we could get reliable products at the lowest price or highest quality. But we’re about to enter a world where we will pay more for lower quality. As US companies bring manufacturing back, it will take years for them to match their previous production capacity, both in volume and eventually in quality.

Just look at Apple: 91% of their products were manufactured in China, but experts say if they decided today to bring all those supply chains to America, it would still be at least five years before they were fully operational.

In a global world, price was the first and almost only question when manufacturing a product. But as the world fractures into regional and local supply chains, reliability of raw materials will be more important. Soon, price will no longer be the primary concern.

As the US pulls back from a global security paradigm, countries now can’t focus exclusively on economics. The world's technological progress will hit a speed bump over the next few decades.

For instance, there will likely be a period of years where new products are “dumb” or “dumb-er.” Devices may be more analogue (e.g. your car may not connect wirelessly to your phone). The tech we have today won’t be lost, it just may take time to manufacture the same sophisticated tech we’ve grown accustomed to.

A key example: Smartphones. Some are suggesting that whenever the supply chains break we will likely go years with our current iphone, before the next model is even available.

Technological development as a whole will likely focus more on addressing these two themes of depopulation and globalization: if we have less people to perform the same roles, things like automation, AI, and robotics, will make far more sense for nations than for the coolest new app on your phone.

The North American Century

“I slept the sleep of the saved and thankful.”

Winston Churchill, after learning America was entering WWII

I can almost sense the sphincters tightening, but fear not! Many historians labeled the 20th century as the American Century because of her influence and dominance after WWII. But the real American Century is about to happen now – in our lifetimes.

As the world depopulates and deglobalizes, the North American continent is best positioned to weather the storm in the transition, especially the US.

Just look at these distinctive advantages:

The US’s demographic pyramid is one of the better in the world - still fewer younger people being born but not as bad as others. Couple that with a melting pot culture and strong immigration trends, the US has far more time than any other country to navigate depopulation issues. Countries with a rigid ethnic identity, such as France or Japan, will struggle far more.
The US can supply its own energy needs - America is now the largest oil producer in the world. That is a stark contrast to just 15-20 years ago.
The US can feed itself: famine is nearly impossible. Odd fact, climate change is actually making the Midwest, the most fertile region in the world, more productive.
North America is financially independent: 8 in 10 dollars is generated within the continent, the most insulated of any other region. Only 10% of the US economy is based on foreign trade, one of the smallest in the world.
National Security Strengths: the US has two oceans, a desert, and a dense forest to protect virtually its entire border from an invading army. And the US Navy is 10x that of any other around the world.
Integration between Canada, Mexico, and America will create a supercontinent for manufacturing: we will have hiccups on the way to onshoring our own manufacturing, but the dynamic advantages in North America will compound over the coming decades, eventually making them the largest manufacturers in the world.

The 20th century was one where America influenced world events, more so than any other country in world history. But in contrast to what is coming for the rest of the world, the stark contrast between America and other countries will be even starker. We will be living through the real American century.

How This Affects You

So, we’re depopulating (great?), and we’re deglobalizing (yay?), but America will be okay...but how does this all relate to me?

Many of these changes will affect your investments, your retirement, your parents' golden years, and your children’s futures.

Financial Headwinds are Coming

For a host of reasons, we are about to live through a long inflationary period, likely through the 2030s. As Boomers retire, there won’t be enough people in the generations following to fill their gaps. Say it with me…labor shortage. We will need the same products and services but with less people supplying it.

Here’s the rundown:

Costs will rise for years: from the labor shortage, to more expensive US manufacturing (initially), many factors will jack up prices.
Taxes will likely rise: as Boomers retire, they pay less in taxes but demand more government services (Social Security, Medicare, etc). And they'll still be the largest voting bloc for a while.
Investment Growth will likely be very low (4-5%) for equities through the 2030s.
The leading sector in the US stock market (Tech stocks) will likely decline in value as these themes directly batter their growth. These companies are often referred to as the FANNG companies: Facebook, Amazon, Apple, Netflix, Google.

Those of us living and working through this period will feel squeezed. Because we will be.

Investment Assumptions Will Change

Assumptions about investments, ones we’ve had since before WWII, may no longer be helpful or accurate.

When we invest, we expect our contributions will grow. Companies grow in value when more people demand their product or service. With depopulation and deglobalization, it necessarily means there will be less people to buy the same things as before.

So, bear (bare?) with me as we navigate these waters →

Growth must necessarily decline, for sure globally, but likely here for a while in the US.

A major assumption is that there’s an infinite amount of resources (supply) for an ever growing population (demand). Neither are fundamentally true. How we invest will change now. It has to.

Part of the push to deglobalize is the lack of essential resources – instead of trading globally, ingredients may be too precious to sell. For example, electric vehicles require 6x raw ingredients that might be better used in a power plant.

Before you remove your shirt, know there are examples to learn from: Japan has had a negative growth rate since the ‘90s but is still the third largest economy in the world. There are ways to grow in a declining population and the US is best positioned to figure it out.

You: How to Address These Oncoming Trends

It’s unclear when we will begin to actually feel the effects of these oncoming trends, but we will likely feel something after 2025 and definitely into the 2030s.

We must focus only on what we have control over.

We can’t control prices, or taxes…

But we can control where we focus our attention.

Such as:

Review Compensation Annually: because of the labor shortage, you will be in high demand. Your salary should start to grow too, but it may not grow nearly as quickly as it should (companies may hoard profits for as long as possible). Review industry benchmarks and make sure you’re not underpaid. If you are, there will be competitors that will be happy to pay you at least the average rate. Through the 2030s, the fastest growth to your networth will likely be wage increases, even more than your investment growth.
Keep Margin in your Budgets: as your wages increase, try not to spend it all! Keep a bit of a hedge for price increases. Inflation could get hairy for a few years, so give yourself space.
Pay Off Bad Debt: It’s unclear but it’s personal debt could go even higher OR less people could qualify for it, OR both. Pay off your credit cards and any other personal debt ASAP.
Own an Affordable Home with a 30 Year Mortgage: if you’re renting, expect prices to spike over the next decade. A mortgage on a home is a hedge against inflation in two ways: 1) the mortgage price will not increase, 2) the value of your home usually increases with inflation. If looking at purchasing, aim to get a home at 2–2.5x your income. If you live on a coast or a dense area, visit with me on the best strategy for you. And make sure it’s resellable! Don’t get into something only you wanted to buy…
Tax Planning is a Necessity: America is about to go over a tax cliff, which will demand a response, but it’s unclear what new taxes will look like. $400k of household income seems to be the boundary line, but that could change OR with wage growth, you could easily be there in ten years. If you’re working with me, we’re doing tax planning on the regular. If you're not, first THANKS FOR READING (Cap lock got stuck there) and second, you must do tax planning. As the single biggest expense for most Americans, Taxes could eat your lunch.
Prepare for a Recycle and Reuse Culture: we may need to get accustomed to holding on to things a bit longer (cars, phones, clothes, etc) over the next decade, instead of the “throwaway culture” we grew up with. At some point it just may be cost prohibitive to buy a new one. Be prepared either way.
Don’t Stop Saving & Investing: Although investing may not be so hot through the 2030s, there is some light at the end of the tunnel. The children of Millennials come of age in the 2040s and enter the workforce, bringing that good old fashioned growth that pumps up an economy. And by then, most of the retooling to onshore manufacturing will be complete. Based on the demographics, many suspect that period will be similar to the postwar boom of the 1950-1960s or even the 1990s – growing and going years. But if we aren’t saving what we need to save in the slow going years of the 2020s-2030s, we won’t be able to reap the harvest. So don’t stop saving! KEEP GOING…that caplock again…
Be Prepared to Work Longer: be open to the possibility of working to 70ish if anything changes. Emphasis on ish. If your numbers look good to cut out before then, I’ll happily let you know. Just be prepared, in these weird and funky times, that our plans may have to adjust so that you can have a lovely retirement.
Make Adaptability and Flexibility Your Motto: be prepared for random things changing over time – like paying too much for an American made product that’s not nearly as good as the old stuff. Be prepared for the US economy to just be downright strange. Be prepared for your investments to act like they’re in a tortoise race. Above all, I want you to hang on to hope! Gloomy forecasts aren’t forever.

This is a storm that we can and will weather.

Be prepared for the rough waters, before they hit.

We will just need patience and endurance.

So, let me help you put that helmet on.

And don’t forget your mouthpiece.

You are not alone. We will get through this.

Your Kids & Your Parents

For kids, it’s hard to see how all these things will play out beyond the 2040s, at least financially. But there are a few things that might be helpful to know as a parent.

Focus on Irreplaceability for Future Job Security : Even though the word is overhyped, AI doesn’t actually exist yet. To be artificial intelligence, it would have to be multidisciplinary – applying a skillset over multiple different knowledge domains. Right now, “AI” is really just sophisticated pattern recognition. But many experts believe true AI is possible by the end of the century.In either case, it’s important that children pursue roles that are irreplaceable. As an example: it’s very possible AI could replace my technical work in financial planning. But what it could never replace is listening. AI could never hear the way a human does, could never love the way a human can, and could never feel the way we do. The feeling part, that’s the kind of thing your children should focus on for future jobs. Use the $20 an hour test: if someone at some point, human or robot, could do a job for a minimum wage…don’t spend time getting good at something that could be replaced.
College Isn’t A 100%: in terms of future good jobs, it’s very possible that college may no longer be required. Don’t feel like they must go to school to succeed. Cultivating their natural interests may even be crucial, because if their natural interest enables them to help others and get paid while doing it, that may be far more important. Note: I’m not saying never go to college. I’m saying that what was once true – you have to go to school to succeed – may no longer be as true because of the labor shortage. Listen well.
Turn College 529s into Roths: For those of you saving for your kids' college, fear not! Congress has stepped in and is our savior (jk). Recent legislation now allows us to convert portions of a 529 plan meant for college into an untaxed retirement account. If you have a college account that could go unused OR you just want a cool way to give your children a financial legacy, this could be it.

For your parents, here are the top things:

Inflation Could Hurt Retirees: Social security and pensions won’t adjust as prices increase, and those on a fixed income will hurt the most. If you can, encourage them to invest/save more before retiring, and in retirement to save 10% of pension income through retirement. If they can live on 90%, that will give some margin as prices climb.
Pensions Might Have Issues: some, though not all, may not be as secure as we think. More reports are coming in revealing this, and as the Boomers retire they stress an already struggling retirement vehicle. If they can not count on their pension and save beyond it, please encourage them to do so. And if they can work longer...ditto.
Long Term Care Costs are Skyrocketing: because of the labor shortage there will be an ever growing demand for healthcare workers but a small supply of them. It’s going to get really bad. Median costs for a facility can easily be $5–13k a month. That could quickly drain retirement savings. Purchasing at LTC policy may save them hundreds of thousands in the long run. When I said “we’re going to pay more for less” this is exactly one area you’ll notice it. Costs will go up, but the quality of care will go down. It already is in most places.
Finalize Estate Documents: if you will have to pick up the pieces after they leave this world, encourage them to get as much of their documents in order. And if your family will have a sizable estate…run, do not walk! Estate tax legislation is about to sunset and they may pay even more in taxes. Get any wills, trusts, and medical powers of attorney drafted long before they’re needed.

The End

Remember, this is not forever. But it could and likely will get funky for a number of years. If your fear or stress level gets to a 3-4 out of 10 or higher, get in touch with me ASAP. There’s no reason for you to be in turmoil, especially if it’s something we can address.

If you have any questions from this report, let me know and let’s talk. This was written to help you prepare for the weirdness that’s coming, not stress you out more!

And if you were wondering, yes indeed, Lollie helped me write much of this. Because she was so instrumental in the writing of this report, here’s some an action shots: