Every year, I put together a report that I share with friends, providing my thoughts on what's happening around us and what the preparedness community should be thinking about for the next year. Now with this blog, I'd like to share my thoughts with you. I do so in the hope that you will find something useful in it for planning purposes or just food for thought for the coming year.
"The Year Nothing Worked: Stocks, Bonds, Cash Go Nowhere"
We start with the economy, as President Bill Clinton once famously (and aptly) said during his 1992 presidential campaign: "It's the economy, stupid."
From none other than financial media stalwart Bloomberg Business:
"After embracing everything from Treasuries to high-yield bonds and technology shares amid seven years of zero-percent interest rates, investors found themselves with nowhere to run at a time when the Federal Reserve’s campaign of stimulus drew to an end. Normally it isn’t like this. Since 1995, practically every year has seen some asset deliver returns exceeding 10 percent."
Do yourself a favor - watch the video in the Bloomberg link referenced above. It's not a gloom and doom prediction, but it does highlight how we are in interesting ("We have never been here before; we have no roadmap") times.
Contrast this to President Obama's State of The Union speech in January of this year. From MSNBC:
"A confident, often feisty President Barack Obama claimed credit for the improving economy in his State of the Union address Tuesday, chiding Republicans – who won sweeping victories in the 2014 midterm elections – to follow his lead in enacting policies to help the middle class."
There's no doubt that some of the traditional metrics of economic conditions support the President's claim. The official unemployment rate is at five percent, a rate not seen since April 2008. Even U6 unemployment - measuring not only those in the official unemployment number but also those marginally attached workers and those working part-time for economic reasons - is below ten percent for the first time since May 2008. GDP growth remains positive. Official inflation numbers remain modest.
Such numbers belie what's happening beneath the surface, however. The labor force participation rate - measuring the number of people in the workforce - is at lows not seen since 1977. Many have claimed such a drop in the participation rate is predictably due to a large number of baby boomers retiring. Yet we see the Federal Reserve's conclusions do not support such claims:
"A study by the Federal Reserve Bank of St. Louis took on the notion that the drop is all about demographics and not a sign that the labor market is sicker than we think. The study looked at the labor force participation rate not just in the U.S. but in eight major developed countries, including Sweden, Japan, Canada, Germany, France, Spain, and the United Kingdom. Nearly all of those countries are facing the same demographic trends as the U.S. And Japan is currently dealing with an even more severe case of aging population. And yet, out of the eight nations, the U.S. is the only one where the participation in the labor force is declining."
The bet/hope people are making when confronted with this data?
"There are far more people in the freelance economy than there used to be, and there are soon to be more, given the rise of sharing economy startups like Uber and AirBnb. If you work for yourself, you are supposed to be captured in the government’s surveys. But if you are being paid in cash and not paying taxes, you may not report yourself as part of the workforce when a government surveyor calls to see if you are currently seeking work. So it could be that the underground economy, which some have measured as growing, makes up for the drop in the labor force participation."
In essence, we're counting on off the books work to make up the difference. Draw whatever conclusion from that you wish - many believe such disruptive technologies and industries are good for the economy.
The reality is that we continue to witness a divergence in the data. My question to my fellow Americans, as a layperson with a modicum of education in economics and public policy, is how can there be:
The good news? People sense this divergence. The bad news? People sense this divergence.
"Battered, bruised and jumpy - the whole world is on edge."
Perhaps, then, we can understand what led the Financial Times to run this article on December 28 with that headline. From the article:
"If you judge by the economic figures, the US should be an exception to all this gloom. The country is in the sixth year of an economic expansion. Unemployment is about 5 per cent. The US dominates the internet economy. And yet the public mood is sour. The prospect that the Republicans, one of America’s two great political parties, might genuinely nominate Donald Trump, a boorish demagogue, as its candidate for the presidency, does not suggest that the US is at ease with itself. Indeed, Mr Trump’s entire campaign — and that of his main rivals for the GOP nomination — is based around the idea that America is in dangerous decline. Beyond these local factors, are there common elements behind this global unease? Clearly, the world economy has not fully recovered from the financial crisis. There is also a widespread fear that, after years of highly unorthodox monetary policy, another financial or economic crisis might be building.
"The global gloom makes the international political system feel like a patient that is still struggling to recover from a severe illness which began with the financial crisis of 2008. If there are no further bad shocks, recovery should proceed gradually and the worst political symptoms may fade. The patient is vulnerable, however. Another severe shock, such as a major terrorist attack or a serious economic downturn, could spell real trouble."
No doubt driven in part by the growing risk of terrorism in the United States.
The shootings in San Bernardino earlier this month and larger attacks in Paris a month earlier reminded Americans how terrorism can manifest itself here in the United States. Much coverage has been devoted to these events over the last few weeks, making Americans more cautious about taking trips to highly populated and high traffic areas.
Truth be told, far more people are killed every year by the flu or car accidents than are killed in mass shootings. From Stratfor:
"However, in the big picture, an attack that results in 14 deaths is terrible and tragic, but it is not an existential threat to our national security or survival, especially when compared with the 589,430 cancer deaths, more than 23,000 flu deaths and more than 32,000 traffic fatalities expected in the United States in 2015.
"Some will argue that the 14 deaths in San Bernardino came all at once and not as separate cases as with cancer and the flu, and are therefore more significant, but this argument does not hold water with me. More than 227,000 people died in the 2004 Indian Ocean tsunami, and fewer than 3,000 people died on 9/11. Yet the 9/11 attacks spawned a global sense of terror and a geopolitical reaction that had a profound and unparalleled impact upon world events over the past decade; the tsunami did not have the same type of impact. Clearly terrorism is having its desired effect and is causing people to fear it in a manner that is hugely disproportionate to the destruction it can actually cause."
Terrorism is a low frequency, high severity event. It rarely happens, but when it does, it creates a lasting impact. That impact is felt by both the families directly affected as well as the rest of America watching it unfold in real time on their cable news outlet of choice.
And this renewed fear in terrorism is driving gun sales and Americans' changing attitudes about guns.
Support for that proposition comes from the Today show. In a piece entitled "Guns topping Christmas lists thanks to terrorism concerns, fear over restrictions," Scott Stump reports:
"Last month, the FBI ran more than 2.2 million firearm background checks on potential buyers, a 24 percent increase from November 2014. On Black Friday, a record 185,345 background checks were processed by the FBI.
"That increase coincided with the coordinated terrorist attacks at multiple sites in Paris by ISIS gunmen on Nov. 13 that killed 130 people and wounded 368.
"Weeks later, on Dec. 2, an attack on a holiday party in San Bernardino, California, killed 14 and injured 17 others."
And in what represents a sea change in public opinion, ABC News reported earlier this month that more Americans now oppose a ban on assault weapons than support it:
Further, the article goes on to say:
"Indeed, while the division is a close one, Americans by 47-42 percent think that encouraging more people to carry guns legally is a better response to terrorism than enacting stricter gun control laws."
El Niño está aquí.
What can we expect from the strongest El Niño in 18 years? It really depends on where you live. Above average temps and below average precipitation this winter for the northern half of the U.S. and below average temps and above average precip for the southern half. We've already seen significant weather here in Texas and in much of the southeastern U.S. the past 10 days, with over 40 deaths reported due to severe weather.
Stratfor's Annual Forecast for 2016 isn't rosy.
Their summary of the coming year:
"2016 is shaping up to be an unsettling year for much of the world. The United States and Russia are still locked in an intractable standoff. Nationalism is resurfacing in Europe. The price of oil and other commodities are low. Chinese consumption is falling. And countries around the world are more resolved than ever before to intensify their military campaigns against the Islamic State. But it is important to remember that all these trends are connected, and the way they play out this year could determine how tumultuous the world will be next year."
The organization concludes their report by stating:
"The defining events of 2016 will raise apprehension around the world, leading into what will likely be an even more tumultuous 2017 as an array of developing conflicts comes into sharper focus. The essential thing to bear in mind is that all these trends are connected. The U.S.-Russia standoff, surging nationalism in Europe, Turkey's re-emergence and other geopolitical currents will tie in to and feed off of one another."
Many in the preparedness community have feared the so called "coming collapse" - a dystopian worst case scenario in which multiple failures of the grid, financial and food delivery systems result in certain chaos and doom for the nation if not the world.
Yet lessons in crises from Venezuela, Chile, Greece, and all of Europe for that matter have taught us that collapse is a) not certain and b) when it does happen, it tends to happen asymmetrically - not everything implodes around us in a predictable, orderly fashion.
Blogger Sarah A. Hoyt touched on this earlier this week in her blog entitled "The Myths of Collapse." She writes:
"Collapses are messy things; often leave no clear records. In addition, collapses are chaotic and almost impossible to teach unless you go on the micro level, which even when available is the province of serious researchers, not popular histories OR schoolrooms. So one gets “French society collapsed, and then Napoleon–”
"This generates several myths, which are actually hurting the decision making people are doing RIGHT NOW."
She concludes with this statement, which resembles the central theme of Pivot Points:
"Put down those matches and take up your hammer and nails. The only solution is to build under, build around, to teach, to learn, to change minds and hearts. The future must be built piecemeal. So… that’s what we’ll do.
"It’s not fun. It’s not glamorous. It’s the only thing that can save us.
"Screw your courage to the sticking place, and possess your soul in patience. And work.
"Be not afraid."
Despite the various pieces of data I have shared above, I do not believe this is a time for panic or even worry. It is a time for getting your affairs squared away, increasing your preparedness, and readying yourself and your families to be leaders in the event of a crisis.
The 2016 election cycle will bring with it a fair amount of uncertainty. For only the second time in my lifetime, we will have a presidential election in which neither candidate of the two main political parties is a sitting president or vice president. There will be no continuation of the Obama administration - even if Secretary Clinton is nominated and elected. This uncertainty will no doubt manifest itself in the financial markets over the next year. And given the Federal Reserve's willingness to begin raising interest rates, it "could be the start of a series of interest rate hikes, and the cumulative effect of those could be significant over the course of the next couple of years."
President Obama's plans for use of executive orders (EOs) to impose additional gun control will likely be another driver in firearm sales in the coming months. Coupled with the perceived risk of terrorism mentioned above, we can expect firearms and ammunition sales to remain strong in the coming months as well. I can attest from my own observation that the Paris terror attacks in November have greatly increased demand for License To Carry classes as well.
Meanwhile, Ted Koppel's recent book, Lights Out: A Cyberattack, A Nation Unprepared, Surviving the Aftermath received critical acclaim for its sobering assessment on the state of the electric grid. (I highly recommend you read the book, by the way.) Perhaps the most surprising feature of his book for me was his decision to devote three chapters to the preparedness culture found within The Church of Jesus Christ of Latter Day Saints - the Mormons. I don't know anything about Koppel's religious leanings, but when a mainstream journalist of his tenure and reputation is writing books talking about how great it is that these people have such a strong element of preparedness in their culture, it's evidence that attitudes towards preparedness continue to shift and change.
My main areas of concern for 2016 are:
I've blogged previously about what I'm doing to prepare for such risks. Understand there's not much we can do, on an individual level, to fix many of these things. We can simply be ready to deal with them as they come up and to be the leaders in our communities when things are bad.
I hope you'll take a moment and share your thoughts and outlook on 2016 in the comment section below. I'd love to hear what's on your mind.
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