Dear Friends,
Thanks for subscribing to my Substack! I haven’t had a chance to write much in the last few months but hope to post more regularly in the new year. I’ve been reflecting on what 2020 has taught me and wanted to share how I believe it will change our economic landscape.
To ring in the new year, I will also be updating my stock portfolio. Unfortunately, if you use my M1 portfolio it will not auto-update. I will share the changes here and you can either manually update or use the new link I’ll send out on Jan 1. Sneak peek: One company I’ve been investing heavily in and plan to add to my M1 portfolio is Etsy. More on that later.
Here are my ten reflections of 2020:
1. Change isn’t linear
2020 has served as a necessary reset, exposing our crumbling health infrastructure, incompetent government, inequality in our social and criminal justice system and much more. At the same time, our collective response to these issues has been incredible. In order to go up, you have to go down, and sometimes sideways and diagonal. Change is never linear; it’s exponential and can’t be timed.
2. Consistency hedges against timing
No one could have timed this pandemic nor the crazy upswing in the stock market. Automating your financial health with consistency allows you to hedge against trying to time the market. For example, every month, I auto-invest in my M1 basket of stocks and Bitcoin.
3. Middle class America and non-coastal cities
Wealth inequality has significantly increased in the last few decades especially impacting those in non-coastal cities. While the pandemic caused many jobs to be lost, the improved unemployment benefits actually forced companies to increase wages to incentivize people to come back to work. The digital transformation and required remote work environment will also bring new jobs to non-coastal states that were previously centered in coastal cities. Because of this, some of the areas we are continuing to invest in on the real estate side are the suburbs of Indianapolis, Dallas, Detroit, Phoenix and Charlotte.
4. Digital entrepreneurship
While many restaurants, offices and big-box retailers are shrinking, the rise of independent entrepreneurs is exploding. Etsy and Shopify onboarded a record number of sellers in 2020. We will continue to see retailers go digital, reduce their physical footprint and focus on online sales. Big-box retailers will be replaced by a wave of small and digital entrepreneurs.
5. Personal finance
The average saving rate in the US in 2020 compared to previous years has doubled from 8% to now 17%. The pandemic has forced people to look closely at their finances and evaluate where they are spending and investing their money. One of the reasons why the stock market is doing so well is people’s new interest in investing.
6. Asset prices
Asset prices have significantly increased in 2020 and will continue to rise in the next decade. On the real estate side, I expect surburban house prices to continue to soar due to a number of factors: more savings, historic low interest rates, lack of inventory, remote work, consolidation of families and a glut of capital chasing returns. Small retail, strip centers and self storage will also do well. The stock market, tech stocks in particular, will continue to rise over the next decade due to digital transformation, exploding growth, lack of other investment options, low interest rates and interest in personal finance.
7. Roaring twenties
After the vaccine is mass adopted, we will see a period of roaring twenties. There will be a number of industries and jobs that will not return. However, I am confident that the rise of digital entrepreneurship will also bring a wave of new small businesses rejuvenating the economy.
8. Nationalism vs globalization
In the last few years, we have moved away from globalization and towards nationalism. The pandemic has brought this to light with the import and export industry. For example, lumber, appliances and many other materials that are imported from China are severely undersupplied. With the rise of nationalism, more countries will look to bring manufacturing jobs onshore.
9. Bitcoin
Bitcoin hit $26K yesterday. I believe Bitcoin is important in the new digital world because the trust in government-backed currencies continues to be chipped away. The world is struggling from currency devaluation. We in the US live in a bubble with our stable currency. I encourage you to read about the rise of using dollars with Zelle in Venezuela and Bitcoin in Lebanon. For those in the US, buying Bitcoin serves as a good hedge against inflation. How Bitcoin materializes into a currency is still to be determined but its importance and need in the world couldn’t be stronger.
10. US is strong as ever
While the number of COVID deaths is highest in the US and our health infrastructure remains brittle, the US economy and dollar is strong as ever. In the past several years, the dollar was too strong making exports pricey, so the Fed pumping money into the economy has actually helped exports increase. The dollar weakening paired with currency devaluation and nationalism across the world, will make the US a safe haven, at least in terms of currency and global assets.
Happy holidays to you and your family.
I think the Roaring twenties is right, all that increase in savings combined with pent up demand over the past year should make for some interesting opportunities. I'm really curious how food services do, I can't wait to go out to restaurants and sit in coffee shops again.