Monday, December 28, 2020

 Roaring 20s



With free money and pent-up demand ready for release, the economy is poised to repeat the Roaring 20s all over again...this time with booze legal!

We are on the cusp of a Gatsbyesque epoch. The Fed has already declared they will not raise rates until 2023 at the minimum. Three (or is it four now?) major pharmaceutical companies have their Covid vaccines approved. There is an excess of over $2T sitting in savings accounts in the United States alone. The world is awash with capital...and all if it is looking for a home. Cue the big band music.

Traditional outlets of excess liquidity have been fulfillment of hedonistic impulses. The 2020s look like they will be no different as pent-up demand for physical relationships will undoubtedly result in a Baby Boom on par with the end of WWII. Plus, there are significantly reduced societal norms defining what a relationship should be...many couples live together for years, purchase homes/condos together, and begin their families without a thought of marriage. 

Loose money and loosened moral norms will accelerate natural trends to their apogee. It took approximately a decade for the "Lost Generation" to finally party themselves out of energy. The fireworks most likely will start in the United States. From there, it will spread in lockstep with vaccine rollout, monoclonal antibody therapies, and ICU/treatment capability.

What's going to be catalyst that pushes the country into the Roaring 20s again? Already signs of it are becoming apparent. High end liquor sales are creeping up. Second homes in vacation areas are becoming primary homes. Household wealth is up considerably. Real estate prices are soaring. Stocks are soaring. But the great litmus test is going to be an increase in the birth rate. That will be the lagging indicator that the Roaring 20s are upon us again and the good times are already rolling. Hopefully this time, however, a modicum of prudence learned from the Great Recession will let some air out of the balloon before it pops. But of course, nobody ever says "Enough!" So be sure to take some off the table on the way up.


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