We asked nine of the feature contributors to our magazine one question: What will the 2020s bring us?
We narrowed it down to just 20… a grab bag of predictions, expectations, and flat-out sure things. From political disasters, technological innovations, macro-economic trends, and companies in crisis – we’ve got them all.
Read on for what to expect… and how to profit.
The Coming Renaissance of Value Stocks
founder of Empire Financial Research
Big investing trends tend to move in cycles, often a decade or longer. Wise, experienced investors know this and take advantage.
My investing career began in the late 1990s, at the tail end of a 17-year bull market that ended with one of the great melt-ups of all time – the Internet bubble. I’ve never seen anything like it, before or since.
It was hard to be a value investor back then. When I launched my first hedge fund on January 1, 1999, I made legendary investor Warren Buffett’s Berkshire Hathaway my largest position. The stock was then trading just above $60,000 per A-class share. I continued adding to the position as my fund grew, at prices that rose to more than $70,000 by midyear. At that point, tech stocks were doing well, with the Nasdaq up 22% for the year… But other stocks were also doing fine: the S&P 500 Index was up 12% and the Dow Jones Industrial Average had risen 20%.
But then investors truly lost their minds and drove tech – especially Internet stocks – through the roof. The Nasdaq rose 54% in the fourth quarter alone and another 15% in the first two months of 2000, ultimately peaking on March 10. As investors chased performance, money poured out of “old economy” stocks and funds – so much so that, over those five months, the S&P rose only 7% and the Dow was actually down almost 2%.
Berkshire, a prototypical “old economy” stock run by the most famous value investor in the world, declined seemingly every day. It sunk below $70,000, then $60,000, then $50,000, and finally approached $40,000 in early March.
It was a sickening slide for my largest position. Day after day, the market told me I was wrong. But I knew I wasn’t, so I kept buying the stock all the way down, finally making it a massive 30% position on the very day it bottomed – and, not coincidentally, the day the Nasdaq peaked (though I didn’t know it at the time).
This story, of course, has a happy ending… Berkshire’s stock rose by more than 50% within a few months and is up more than 700% since then. March 10, 2000, marked not only the bottom for Berkshire, but also the start of an extended period in which value stocks, after many years in the wilderness, outperformed growth stocks.
From that day until the market peak on October 11, 2007, the iShares S&P 500 Value Fund (IVE) outperformed the iShares S&P 500 Growth Fund (IVW) by more than 50 percentage points, as you can see in the chart…
It was a glorious time to be a value investor.
Then, pretty much all stocks got killed over the next 17 months until the market bottomed on March 9, 2009. And in the six years after, both value and growth stocks did equally well – moving roughly in lockstep.
Since 2015, however, value stocks have gained only half what growth stocks have…
As you can see, these cycles tend to last six to seven years. The current one is now approaching five years.
Led by the tech sector, the market has had a huge year in 2019… despite numerous headwinds such as a slowing economy and the ongoing trade war.
It feels to me like we’re close to another inflection point, where value is set to outperform growth for many years.
Thus, I suggest overweighting stocks like Berkshire (BRK-B), tobacco giant Altria (MO), and financial-services company Goldman Sachs (GS) in your portfolio.
Science Fiction With a Tinge of Horror Story
legendary speculator and founder of Casey Research
My task is to make some predictions (although “forecasts” sounds more legitimate) about the Big Picture. OK, I’m game. Let’s write some plausible science fiction, with a tinge of horror story.
First, it’s good to remember that demographics have a life of their own. That’s not good from the point of view of those of us of European descent. We’re only 10% of the world’s population, and that number is falling rapidly. Worse, it seems we’re responsible for all the world’s problems, and therefore aren’t very popular.
In Europe, I expect the 2020s will have a lot of mass migration – the largest in scale since the barbarian invasions of the fifth century. There will be millions, then tens of millions, of Africans coming across the Mediterranean.
In the U.S., there will be hundreds of thousands coming from Central America. A Reconquista movement will develop to “make the Southwest Hispanic again.” And young chicanos and cholos won’t be interested in paying 50% of their incomes to support old white broads on Social Security in New England.
The consequence of scores of trillions of new currency units being printed around the world in response to the crisis that began in 2007-2009 will be a catastrophic Greater Depression… made worse by negative interest rates. One consequence of that will be the election of a left-wing Democrat, if not in 2020, then definitely in 2024.
China is on its way to dominating the world this century… But in the meantime, its financial system – starting with its banks – will implode. Mrs. Wong will be very, very unhappy to find that the 50% of her income she has been saving has disappeared.
The U.S. is likely to provoke a major war, and not just a “sport war” like we had in Iraq or Afghanistan. This time it will probably be with China, possibly Russia or Iran… perhaps with all three. It won’t do well, since it will find that its aircraft carriers, F-35s, and the like are equivalent to cavalry before WWI and battleships before WWII.
The U.S. dollar will lose its pre-eminence and will be treated like a hot potato by foreigners. Trillions will flood back to the U.S. in exchange for whatever is available – land, companies, what-have-you. This will help take domestic inflation to unprecedented levels.
But enough gloom and doom. On the bright side, we’ll approach the Singularity. Many technologies – including artificial intelligence, robotics, space exploration, biotech, genetic engineering, and nanotechnology – will really come into their own and start transforming the very nature of reality.
So, what should you do about it? I can give you a lot of speculations. But in times of radical change, the most important thing is to keep what you have. I suggest three simple actions: Diversify politically and geographically… Buy lots of gold and silver… Have a nice piece of productive land in a reasonably secure jurisdiction…
And get yourself a nice widescreen to watch it all happen. You might as well be entertained…
Capture the Biggest, Most Lucrative Gains
renowned stock picker and analyst
The key to predicting the future is to think outside the box. According to Dator’s Laws of the Future, “any useful statement about the future should appear to be ridiculous.” What you are about to hear may sound ridiculous, but the fact that we can’t leave our house without a smartphone sounded insane 10 years ago.
The Roaring 2020s will be one of the most exciting times in the history of the stock market as a confluence of several technological factors are all coming together at the same time. I believe the stock market is set for a rally similar to the 1990s, when the Nasdaq gained 750%.
The boom of the 1990s was driven by the Internet, personal computers, and cellular phones. The next 10 years will be driven by innovations in artificial intelligence, blockchain, the rise of precision medicine, 5G, and the Internet of things.
By taking a simple approach and investing in the overall market, you will do fine.
However, the only way to capture the big gains, like the Nasdaq in the 1990s, is to look at investment trends and specific stocks.
One of the most lucrative investment trends will be the transformation of the multitrillion-dollar transportation industry. By the end of the decade, self-driving cars will be the norm, and most of us will no longer need to own a vehicle. I realize this is difficult to fathom, however all signs point to a world of driverless cars before we know it.
Blockchain technology is synonymous with bitcoin and cryptocurrencies. Even though bitcoin is built on the blockchain, there is much more to the technology. The opportunity I see is the tokenization of everything into digital assets. The blockchain will eliminate the need for middlemen – realtors will be extinct. It will also allow us the ability to invest in everything from fine art and wine to future earnings of athletes… all via blockchain and tokenization.
And the key to these technologies I have mentioned is 5G. Without 5G, there will not be a fleet of autonomous vehicles… There will not be a boom in the Internet of things… And so on. In 2020, the introduction of 5G will start to expand and the invention of new industries will begin.
Investors need to ignore all the talking heads that have been calling for a market pullback for years. There is no better time to be in stocks than today.
A Senior Wave and Changes in Food Production
the best healthcare analyst on Wall Street
I originally created my favorite chart in 2008 to illustrate the growth of aging folks who would shortly seek Medicare coverage from private sector insurers.
As you can see, people born on the part of the curve with the gold star turned age 65 in 2008 and became eligible for Medicare. This was the beginning of a 15-year “hill” of more and more people joining the ranks.
That has been a great underlying trend for companies like Humana (HUM), which has been a three-bagger since.
We can use this chart again to highlight another major trend… senior housing and geriatric health care in general.
The average age when people will need senior housing and help with daily activities is about 82. Let’s do the math… 2020 – 82 = 1938. Now, look at the chart.
People born in 1938 will begin to seek more senior health care services beginning in 2020… the bottom of the hill. The growth trend will accelerate each and every year until about 2040. This is huge.
In addition, the way that people produce food will be disrupted in the coming decade. This has been a trend a long time in the making, but it’s now becoming more cost effective and investable.
There’s a 1971 book called Diet for a Small Planet. It was the first time someone suggested that how humans eat and produce their food – meat in particular – was massively inefficient and would become unsustainable. This argument has been re-written many times since.
Food production in the next decade will most certainly see drastic changes… The recent initial public offering from Beyond Meat (BYND) is just the beginning of this trend.
Think about growing actual meat in a lab… broadly known as “cultured meat” or cultured food. Muscle cells are painlessly harvested from a living cow and nurtured until they multiply into muscle tissue. It may sound off-putting, but it’s biologically the same as what you’re buying in the grocery store meat section.
Lab-grown food is an alternative to raising chickens or having cattle graze over hundreds of acres, eating much more than they ultimately produce in food. Plus, livestock release copious amounts of methane, a greenhouse gas many times more powerful than carbon dioxide.
Also, cultured food reduces the need for inhuman treatment and slaughter of animals. Now, that is a noble motivation. And population growth here in the U.S. and other developing countries may move the argument from morality to practicality.
A few startups in this field include Future Meat Technologies, Memphis Meats, Finless Foods, and SuperMeat. There are also many public companies that use science to grow everything from meat to cannabis to sweeteners.
Only Own Businesses With Pricing Power (and Gold)
Stansberry Research portfolio manager
The world is more indebted than it has ever been, when you add government, corporate, and individual consumer debt together. Collectively, we owe more than three times the world’s gross domestic product (GDP). And each year, debt balances are only going up.
But governments and central banks show zero interest in solving this problem the way you or I would – by prudently spending less than they make and paying down debt over time. Instead, it’s clear that they want to keep spending big and hope to grow their way out of the problem (if GDP goes up more quickly than debt, then “voila,” the debts look smaller by comparison).
They also have one additional tool that we don’t have: a money-printing press. Over the next decade, expect governments to throttle down even more on monetary stimulus and money supply. Expect currencies around the world to decline in value and inflation to eventually soar. This will artificially reduce the huge global debt burdens by devaluing the debt that we all owe. (The idea is, if in 10 years a dollar is worth half what it’s worth today, then the debts I owe today will be half as burdensome a decade from now.)
With this in mind, I don’t want to hold cash… That’s a recipe for guaranteed losses.
Instead, I’ll be focused on owning two things with the bulk of my assets: gold and companies with pricing power. Gold is simple, so I’ll focus on the other category. I want to own world-class companies with products or services that are in high enough demand that they’ll be able to pass on cost increases with ease and continue generating excellent returns and profits.
The most straightforward type of companies are toll-taking businesses that get paid as a percentage of a larger transaction. My favorite among these are the credit-card companies like Visa (V) or American Express (AXP). As inflation rises, you’ll need to pay more dollars for the same good, but Visa and Amex will still get their cut.
Lastly, the flip side to this is you want to avoid owning businesses without pricing power. Stay away from businesses that employ lots of folks earning minimum wage (those rates are definitely going up) and sell products where pricing is tough to get. Two areas that come to mind for me are restaurants and nursing homes.
The Slaughter of the Unicorns
financial analyst, CPA, and former “Big Four” auditor
The 2010s will go down as the decade of the unicorn. If you’re unfamiliar with the term, a “unicorn” is a privately-held company valued at more than $1 billion.
Unicorns used to be rare. But in the 2010s, they started popping up everywhere.
Fueled by cheap debt and Middle Eastern sugar daddies, there has been an arms race among venture capital firms like the SoftBank Vision Fund to invest as much money as possible, as quickly as possible, in any company with a cool logo and a remotely viable business model. The 2010s saw the term “Unicorn bubble” enter the financial lexicon – there’s even a Wikipedia page describing the new phenomenon. How did this happen?
Jacob Goldstein, host of Planet Money, nailed it when he pointed out that: “It used to be that startups competed to get money. Now money is competing to get to the startups.”
That’s a very important distinction. With so much money sloshing around Silicon Valley, suddenly the founders, not the investors, were the ones holding all the cards.
The traditional playbook has early investors – that is, venture capital firms – cash out their investment for a huge windfall via an IPO. As the 2010s pulled to a close, we’ve seen an unusual reversal of the traditional exit strategy. As it turns out, the public markets are not interested in paying Silicon Valley prices for bubbly, cash-gorged unicorns with lousy business models.
Since 2017, 11 venture-backed unicorns have gone public. Collectively, this group generated around $12 billion in revenues in the year before their public debut… and burned through around $6 billion of cash flows in that year. No wonder the venture capital firms were ready to cut them loose!
The public markets have not been kind to this herd of unicorns, with ride-sharing firms Lyft (LYFT) and Uber (UBER) among the worst performers (both down around 40% in the nine and seven months following their IPOs, respectively).
In the final months of the decade, the unicorn market suffered the ultimate indignity… The public markets rejected the IPO of office-rental giant WeWork. That is almost unheard of. The message is clear: the public markets have little appetite for venture-backed unicorns.
The inflating unicorn bubble was one of the most important trends of the 2010s. And I believe that the bursting of this bubble will be one of the biggest trends of the 2020s. Firms like the aforementioned ride-hailing giants, tooth-aligner SmileDirectClub (SDC), and social media wannabes Snapchat (SNAP) and Pinterest (PINS) will have a rough go in the years to come.
We’re also wary of cyber-security firm CrowdStrike (CRWD), one of the few unicorns whose price has increased since its IPO, and Peloton Interactive (PTON), which sells “happiness” in the form of stationary bikes.
No longer nurtured by the deep pockets competing for their affections, in the 2020s we’re going to watch these companies struggle in the harsh reality of public markets.
Two Bigger-than-the-Internet Tech Developments
financial analyst and owner of Revolver Magazine
My first day working full-time on Wall Street was the day that Netscape went public – August 9, 1995.
This was the real kickoff of the Internet era on Wall Street, and within a few years, the first generation of Internet giants would go public. Yahoo was the first real Internet content company to go public in 1996, and then Amazon became the first real e-commerce company to go public in 1997.
As I think back to that period, one of the most interesting aspects of it was that initially, all of the stocks of the companies that – in theory – would be negatively impacted by a disruption of free Internet content and ecommerce sold off very strongly. The businesses, though, didn’t miss a beat. And while investors were absolutely right about the eventual result – they were a decade early on the actual impact!
The newspapers and retailers are perfect examples… There was an initial moment where investors feared that these new Internet companies would cause great disruption to these traditional business models. Those investors were absolutely right! It just took about another 10-plus years for those impacts to really be felt.
Those early Internet pioneers in content and commerce had business models where we knew that it could all be built. However, in those early days, the technology or infrastructure wasn’t there to support them.
I would use the analogy of putting a man on the moon. By the early 1950s, we knew how to do it… But it would take another 15-plus years to develop the technology to actually do it.
I feel very similar right now about two huge technological developments that will change our world as much – if not more – than the Internet did 20 years ago…
Autonomous driving and electric cars.
With both of these technologies, we know that they will work and that eventually the technology will develop enough to make them economic… and ultimately dominate the market. And I suspect that it will happen quicker than it did for the Internet.
The ramifications of both of these are massive…
Think about the impact on auto accidents if the vast majority of cars are autonomous. Each year, there are 6 million auto accidents in the U.S. involving 3 million injuries and counting for 1% of total deaths. What happens to auto insurance companies in this scenario? Auto repair?
The electric-car technology is not technically related to autonomous driving, but it is being developed along a similar path. If the majority of the U.S. auto fleet primarily uses batteries, then oil consumption would plummet. Sixty-five percent of the consumption of oil in the U.S. is just for personal vehicles.
This has huge ramifications for the energy industry as well as on a geo-political basis. Ultimately, these technological developments will be as big – if not bigger – than the internal combustion engine.
The Failure of Central Banks
CMT and technical trader
I usually find long-term predictions silly… especially if you think about how accurate 10-year predictions are in anything (paging Al Gore). Still, here are mine…
Central banks are clearly on a warpath to do everything possible to prop up the economy. But they are really creating the illusion of prosperity and price stability through zero and negative interest-rate policies and rising stock market prices.
The central banks will fail, probably sooner rather than later…
I won’t get into a major history lesson, but all great economies crumble from an expansion of too much credit in the system.
The more central banks intervene, the more dislocated things become. The more dislocated things become, instability rises. And eventually that’s when systems fall apart. This is how economies collapse.
What central banks are doing is the exact opposite of the free market… Free markets sniff out ineffective institutions, technology, and corruption, allowing capital to move where it will be used best. The more central banks intervene, the more it hides the underlying problems in an economy and exacerbates the problems, which causes much more instability. That’s the exact thing central banks claim to prevent.
I’m not the doom-and-gloom, end-of-the-world type… No matter what happens, the sun will continue to rise. But I find it disappointing that the only thing that has mattered for investors over the past decade is what central banks are doing.
It’s also sad that central banks have destroyed the interest-rate market. God forbid someone just wants to earn 3% to 4% in a savings account and enjoy the time value of money, as opposed to being forced to speculate in the stock market because there’s nowhere else to park their hard-earned money at reasonable rates.
President Trump recently met with Jerome Powell to discuss negative interest rates. It’s almost as if the powers that be are telling you exactly what is coming down the pike. Negative rates are already a reality in Europe, Japan has had zero interest rates for decades, and China isn’t far behind.
The one thing that makes me think we may have already reached an inflection point and that it’s possible for things to move the other way is the possibility that interest rates have reached their low. What if central-bank intervention has reached its peak and now if things get out of control and interest rates rise, central banks can’t control it?
The issues in the repo market over the past few weeks are a perfect example of what can happen if things really get messy. The Fed didn’t want repo rates to go too high for fear of a freeze in lending, so it intervened. If lending does freeze up, that’s when the tide goes out and we’ll likely find out which financial institutions are really in trouble. No matter the amount of intervention, the free market eventually reveals the underlying issues.
So my big-picture prediction over the next one or two decades is the implosion of central-bank intervention. Whether we are in the beginning stages of it now or the life span has a bit more room to run, it will make for interesting times either way.
Central banks have killed volatility over the past 10 years, so a reversion to the mean will bring it back. There will be lots of trading opportunities, if nothing else!
The ‘Tokenizing’ of the World
cryptocurrency analyst and entrepreneur
This may take a while to play out, as some of the building blocks necessary to make it happen are still being perfected, but I foresee a time that blockchain technology is used for unlocking the value of real-world assets and services that previously haven’t been very liquid.
The big idea is called tokenizing.
Tokenizing is a complicated process now… much like when digital scanners were first sold to consumers to use with their home computers. Those scanners were big, slow, hard to install, and they required special software. (Anyone remember installing drivers?) But after a few years, computer technology got better and scanners got smaller… And now there’s a free scanner included in my desktop printer and it works easily every time.
Tokenizing goods and services will work the same way. Right now, we have some tokenizing pioneers who have been successful attaching a gram of real gold to a crypto token. It all exists thanks to how tokens can be created, transferred, and verified easily on the Ethereum network.
Of course, gold has some special properties. It’s fungible, for one. Any gram of gold is equivalent in value to any other gram of gold, so once the authenticity of the gold is proven, anyone buying the token attached to the gold is assured of its value.
But over the next decade, we’ll start seeing more items of value become tokenized. I anticipate not just art or even a song from a musician’s portfolio, but what about real estate or even shares of stock? What about tokenizing a building or even an oil well?
Over the next decade, where rules are needed (tokenizing stocks and bonds, for example), those rules will be developed. And an ever-growing use by people who want to conduct transactions peer-to-peer will start to learn about tokenizing. Think of the possibilities such as buying tiny pieces of a classic car, a Rembrandt, or a piece of beachfront property… all items of value that are out of reach of most people. But by tokenizing the asset, smaller pieces can become liquid.
How far can we take this? I was recently at a private meeting with an investor who is working on tokenizing health care services for people who may require future care… and want to own a piece of that care now. That’s innovation that blockchain will make possible in the next decade.