by Gary Alexander
June 2, 2020
Last Sunday, who could have forecast that America’s carefully planned, long-delayed emergence from three months of social distancing into business re-opening would be protests in dozens of U.S. cities?
In January, who could have predicted that a China-based virus would be the story of the year, or decade?
The future was always hard to predict. As a high schooler in Seattle, I was fascinated by the Century 21 Exposition (1962 World’s Fair), in which some early futurists predicted the world 50 years hence, in 2012. Fairgoers had to enter a “Bubble-ator” that took them up to “the world of tomorrow,” where they were faced with a fork in the road – to face nuclear annihilation in a fallout shelter, or… Marilyn Monroe.
Not such a tough choice for a 17-year-old boy!
After choosing “life” (personified by Marilyn), we were ushered into the world of 2012, where crew-cut white males in suits and ties took sky-copters to high-rise emporia to invent ever-more exciting toys, while their wives (the Jane Jetsons of 2012) were relegated to space-age kitchens with their 2.3 kids.
Alas, Marilyn Monroe took her life on August 5, 1962 and we were on the brink of nuclear war in the Cuban Missile Crisis in late October, when President Kennedy was scheduled to close the Fair, so the Seattle World’s Fair looked 50 years ahead and missed the big news of 1962 and the big picture of the next decade – the rise of feminism, civil rights, the Beatles, long hair, draft riots, and Vietnam War just a few years later. Now, 50 years hence, the Space Needle is still there, but the monorail is broken. The cloud is Internet storage, not mushroom, and space copters are Amazon drones delivering packages.
Reacting to our failure to see the future, a 1970 book called “Future Shock” by Alvin Toffler sold over six million copies. Last week, I began reading a 50th anniversary tribute by some 123 futurists, titled “After Shock: The world’s foremost futurists reflect on 50 years of Future Shock and look ahead to the next 50.”
About the time “Future Shock” came out in 1970, a few other bold predictions hit the market. There was the wildly popular “Population Bomb,” which predicted the mass starvation of millions in America and billions around the world, even though the “Green Revolution” had already begun. Then, in 1973 came “The Limits to Growth,” which predicted the scarcity of most natural resources by the end of the 1980s. These and many similar books were written with blinders on, focusing on the extrapolation of a single thread of numbers without reference to behavioral psychology, economics, or human imagination.
The same problem faces book writers predicting market directions. They use math formulas but ignore human psychology. There were many books about the “Coming Crash” of one year or another. One big best seller was Dr. Ravi Batra’s “The Great Depression of 1990,” but he missed out on two great bullish stories of that decade – the fall of the Berlin Wall and the rise of technology and the Worldwide Web.
Investing Isn’t Rocket Science – It’s Harder Than That
I’ve often told the story of my father, a rocket scientist who helped put men on the moon in the late 1960s. He thought he could figure out the stock market, but it kept defeating him. He finally turned to me, a lowly editor of financial newsletters, and asked me what’s the secret to this crazy world of stocks. I said, “It’s not rocket science, dad. It’s harder than that. If you use the laws of physics – your specialty and training – it would be easy to decipher, but there is a mob out there pushing and pulling the market in directions that make no sense from a logical perspective. It can drive you crazy, if you let it.”
Let me give you an example from “After Shock,” the 50th anniversary edition of “Future Shock.” One of the futurists concluded her survey with “a few short-term predictions on which leading futurists largely concur.” I’ll quote the first one (of seven), which raised a red flag of “not rocket science” in my mind.
“For starters, the construction industry is likely to experience tremendous disruption in the next decade. Large-scale Vulcan printers are already constructing 10 permanent 800 square foot residences a day in China at an astounding cost of less than $4,000 per home. As 3D printers slash the time and cost to build custom facilities, and virtual reality makes it possible to view spaces, finishes, equipment, and furnishings in place prior to breaking ground, errors associated with manual building methods, as well as homelessness, will become a thing of the past.”
–A prediction from “After Shock” (2020)
The lack of homes is about more than the cost of building a home. There are local zoning restrictions, green zones, rent controls, building codes, and more. Opposition to development has made housing almost unavailable in the San Francisco Bay area, and scarce in Seattle and Portland. San Francisco has virtually banned new housing, forbidding apartments of all shapes and sizes, even capping the number of small “shoebox” units to a few hundred. And homelessness, of course, covers a multitude of problems, not just the lack of a home. It includes the releasing of too many mentally ill out of institutions and onto the street.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Because of restrictions on new homes, the median rental price in the Bay Area is $3,700 a month, and if you want to buy a fixer-upper, your $1.5 million offer better be in cash, due to the housing shortage.
In “The Unbuildable American Home: How regulations and land-use restrictions have made it too expensive to build” (National Review, February 20, 2020), Kevin Erdmann says America “has developed a split housing market. There are cities where homes have become extremely expensive, and others where home prices have stayed low.” Too often the lofty prices in “closed-access cities” are a result of a “web of existing barriers, taxes and subsidies,” but building a home can be affordable without that web of barriers.
Nobody knows the future. Jason Bodner comes close – predicting the market’s top and bottom this year – but that’s because he doesn’t watch TV. He looks at the behavior of the big buyers, and he charts history.
Market timing is harder than rocket science, but at least we have Jason Bodner as our Werner von Braun.