4 Hugely Important Changes That Are Happening Before Our Eyes

exploding coke can
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Here are four things I’m pretty sure are changing before our eyes.

I wonder if Coke is the next Camel
Tobacco companies were icons of American style half a century ago. It wasn’t until 1964 that the Surgeon General published a report linking smoking to health risks.

This seems incomprehensibly stupid — you’d think the hacking cough would be a giveaway — but hindsight is 20/20.

I wonder if soda is following the same path.

There are so many similarities between cigarettes and soda…

A delicious and addictive product powered by brilliant marketing, sold as a lifestyle enhancer that brings joy to the masses — but at its core is an unhealthy product we know contributes to chronic illness, higher medical costs, etc.

You can already see a trend in Coca-Cola’s soda sales. Industrywide soda sales are at the lowest level in two decades.

San Francisco supervisors voted unanimously this week to require soda bottles to start carrying warning labels. “WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay,” they’ll say.

That’s pretty much what cigarettes have had to disclose since 1966.

The big differentiator is the lack of second-hand-soda risk. But if I had to place a bet on what we’ll look back 30 years from now and shake our heads at, it would be a simultaneous obesity/diabetes crisis while soda companies are icons of happiness and joy.

I wonder if for-profit education is done
Take an emotional industry, tie it to a dream, distort the facts about that dream, jack up the price against the existing market, and let 18-year-olds pay for it with rubber-stamped government-provided loans.

What could possibly go wrong?

After Corinthian Colleges was shut down for misleading students, and those students will likely have their student loans forgiven, I wonder about the future of for-profit education. My guess is it’s limited.

For-profit schools have the highest dropout rates, the lowest completion rates, the highest student-loan burdens, the highest student-loan default rates, the lowest job placement rates, and so on.

There’s growing panic about a student-loan bubble. If you dig into the numbers, I think you’ll be shocked at how much of that bubble is specifically tied to for-profit schools.

Only 16% of students at for-profit schools were debt-free, and 65% had more than $28,000 of student loans. At public schools, the same numbers were 40% and 14%, respectively, according to the College Board. For-profit schools originate about 10% of student loans but account for nearly 50% of defaults.

And the entire industry relies on government-funded student loans. As more politicians balk at the results of for-profit schools, I can’t see how the industry maintains a viable future in its current form.

My guess is it will shake out into a niche that focuses on training careers that traditional schools don’t, like welding and machinery, rather than competing head to head with traditional schools.

I wonder if it’s different this time
“It’s different this time” are supposed to be the four most dangerous words in finance, used at the top of bubbles to justify idiocy.

But the more I look into it, the more I see that it’s always different this time.

No two booms, busts, recessions, or expansions are the ever the same. The way we measure the economy, the stock market, corporate profits, and productivity are constantly changing over time. The S&P 500 used to be made up of a bunch of railroads and industrial socks. Now it’s nearly half tech and financial stocks, and banks weren’t even included in the index until 1976.

So how do we compare today’s market to the past? We can’t. It’s different this time.

I have seen time and again investors get irreversibly slaughtered by clinging to historic data and assuming the market will cleanly revert to time-tested norms. And I’ve seen time and again that the best investors are open-minded and respect the fact that things change.

I’ve become skeptical of long-term historical comparisons being used for anything more than entertainment purposes.

But I can’t tell you how uncomfortable this feeling is. The market rallies 200%, and all the sudden I’m skeptical of historical comparisons. It’s the perfect setup for feeling like an idiot once the market crashes.

Here’s what I’ve concluded: Data is always different this time. Valuation metrics are always different this time. How the economy grows is always different this time. But human emotions — greed, shortsightedness, overconfidence, extrapolation, psychopathy, and overreaction — are timeless. They’re never different this time.

I wonder why nobody is happy
If, six years ago, you told someone that that by 2015 the stock market tripled, unemployment fell to 5.5%, job openings were the highest in 15 years, housing prices were surging again, the budget deficit fell 70%, corporate profits were at an all-time high, and businesses had more cash than they knew what to do with, they’d say you’re crazy. Yet it’s what happened.

The outcome we’ve had since 2009 is better than almost anyone predicted at the time.

But I’ve been surprised at how little fanfare there’s been celebrating this recovery. I see about as much cynicism and disappointment today as I did four or five years ago.

That’s partly because so much of the recovery has helped a small minority of the population, while many are still worse off now than they were before.

But a lot of it — and I don’t think this gets enough credit — is that it’s easy to ignore progress when things improve slowly.

The economy is clearly better off today than it was five years ago. But it’s only a little better than it was a year ago, which was only a little better than the year before it, and so on. This makes it easy to miss the bigger trend.

If that’s the reason people are still cynical, there’s a sad conclusion: A lot of people will pretty much never be happy with the economy, because all improvement is slow and gradual.


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