The Big Breakthroughs of 2020

I am writing this post to myself and sharing it with you.  This year has gotten a bad rap and for good reason. And while the inclination is to emphasize the turning of the calendar for a more positive outlook on life, that is a recipe for disaster should the positive outlook take some time to materialize (see Admiral Stockdale’s experience in Vietnam). Keep the faith, but keep it rooted in reality. In the meantime, this year has brought with it some major developments that we should not let get lost in the shuffle or lose sight of. This will not be a deep dive into any of these topics, but rather a list that I found helpful and at the topic of my mind as I was getting moving this morning.  In no particular order:

• Common European Union bond issuance:

The pandemic’s urgency produced a previously unthinkable result – the more formal tying together of European countries financial markets. Less than a decade ago, the prevailing wisdom was that a breakup of the union was eventually likely and perhaps imminent.  Sharing a currency while maintaining fiscal sovereignty proved disastrous (See Greece, et al). And while the US emerged from the 2008/2009 recession into the longest expansion in history, Europe double dipped back into recession early in the 2010s due to these fiscal limitations.  I will not even go as far as saying this was the right move or that every European will love this; but as investors, this is a positive paradigm shift for risky assets.  And it certainly sets them up for more flexibility and a better safety net for dealing with the next crisis.

• Asian trade pact (RCEP)

Most nations in Asia (including China!), as well as Australia and New Zealand, signed a trade deal in November.  The deal is far from perfect, and as with any trade deal – plenty will find themselves on the losing end.  However, the liberalization of trade is unambiguously good for economic growth in the region.  With time and new leadership perhaps the US, and later down the road, India, can sign onto the deal as well and compound this positive development.

• America awakens to lingering social injustices
  
  Again, I am writing this to me and sharing it with you. Taking the time to listen to the plight of others uncovered an alarming level of plight right under my nose. “The New Jim Crowe” by Michelle Alexander returned to the best sellers list and for a period – tough to find in stock on Amazon.  It clearly articulated what I have come to understand as this 4^th leg of social repair needed in the US.  Ending Slavery 1, Slavery 2 (why didn’t they teach us this in history class??), Jim Crow era I would consider the first three major legs with the mass incarceration / war on drugs the next one to soon fall.  

As this 4^th leg of repair begins to unfold, and it will, an increasing number of young black males will be offered more of the same opportunities as white ones to become productive members of society. It will be a long tough slog, but eventually (I have faith) turn into a virtuous cycle.  The virtuous cycle is that as more are allowed productive opportunities, communities will be strengthened, education funding improved and a stronger foundation for the next generation laid.  How great is that?!?  But that will only happen as more and more of us understand the problem.  But for today, let us celebrate at least that more eyes have opened out of the year’s travesties. Not much more than that punchline can be delivered in this brief post– I highly encourage reading “The New Jim Crowe” if you haven’t: https://www.amazon.com/New-Jim-Crow-Incarceration-Colorblindness/dp/1595586431 /

• We have learned to mine enormous amounts of our precious resource, time. No, not everyone that is currently working from home will continue to do so.  Yes, the death of commercial office space is certainly an overdone worry.  But there is no denying that many will reap the benefits from our mass adaption to more efficient communication.  Personally, a week of work from home saves me 5 hours a week.  That’s no small potatoes when each passing year has brought with it intensified competition for those 168 hours available each week.  I will not be keeping all of those going forward as returning to the office will be necessary for many important meetings, but a good chunk of them will.  Around the country, a lot of happy children will have a parent that can save that day of travel or two (at least here and there) for a meeting that they now realize would be just fine held virtually.

While on the topic of travel, odds are quite high that 2019 was the peak year in the world’s consumption of crude oil.  2020 brought a precipitous decline in demand and 2021 will see a rebound.  However, when you combine the miles saved by many fortunate workers (like me) with the persistent increase in alternative energy – its likely that the rebound in crude oil demand will fall short of those 2019 levels. And from there, face cheaper and cheaper alternatives. I am not a climatologist but have to believe this bodes well for our fight for our children’s healthy future.

These are not the only big items worth remembering, they are just the first ones that came to mind (leaving vaccine speed, sanitation habits, appreciation for people we will get to see and places to go when we can return to them, among others, to not lose sight of).  I do wish to remind myself that the lights on this dark winter are only beginning to dim.  But it too will pass, and we will emerge with all these positives right there under our noses.