The Cycle of Indulgence and Entitlement is Coming to an End

We have the spectacle of two of the most disliked and least trustworthy people in the US vying to be president…the person who is supposed to lead by example. Rather than the emotion stirring a rallying cry of ‘God Bless America’, it should be replaced with one said in forlorn hope — ‘God Help America’.

In addition to the political farce in the US, hardly a day goes by without some form of senseless tragedy being beamed into our living rooms. A new massacre takes centre stage. Rendering ones that happened days, weeks or months ago — think of Nice or Orlando — old news. The frequency of attacks is desensitising us as a society. We are becoming inured to the horror.

Today I’d like to share with you the introduction of a letter I sent my children a few months ago.

My reason for writing the letter was to provide them with another perspective on the trends at play within society…the coming revolutions.

What I omitted in my letter were the political and social ramifications these powerful trends are likely to unleash.

There are always unintended consequences when change takes place. When that change is going to be as disruptive and transformational as I think it is going to be — wholesale job losses, massive downturn in asset markets, longer life expectancies (and the attendant costs and infrastructure that comes with an aging society) — then you can expect those unintended consequences to reach a whole new level.

What we are witnessing in the US and Europe is the tip of the ‘social and political revolution iceberg’. When people lose jobs, money and hope, the social mood darkens. Frustration boils over. Tensions rise. Flashpoints are reached.

It’s critical to our financial, physical and mental wellbeing to stand back from the day to day mayhem, seeking to identify the trends (actions) that are creating the reactions.

In this way, we can hopefully be a little wiser before the event, taking the necessary precautions to protect our family wealth, health and wellbeing. Below is the letter I sent to my children.

The Revolution Is a Comin’

Dear girls,

Everyday I’m reminded about how different the world you are growing up in is to the one from my youth.

People taking photos of themselves in provocative poses hoping they will be liked by other self-absorbed wannabes…I don’t get it. In our youth these people were called “show offs” and were generally disliked for being “so far up” themselves. Yet today’s self-obsessed individuals can make a healthy living by getting enough brain dead people to follow them.

The abbreviation of the English language is another adjustment I’m still struggling with — thx, fyi, omg, lol. My Grade 7 English teacher — the one who taught us “the quick brown fox jumps over the lazy dog” — would be turning in his grave. Long gone are letter writing skills of yesteryear…commencing a letter with “Dear” and signing off with “Yours Sincerely”. Now, if you’re lucky, it is “Hi” and “Cheers”.

Skype and “WhatsApp” are fantastic ways to communicate with each other at no cost. What perplexes me is we don’t pay anything to use these applications yet the companies are valued in the billions of dollars. Either I don’t get it OR these companies are not worth what people think they are.

Twitter is another one I don’t get. Never used it and probably never will. I’d rather take your Mum for a coffee and have a chat. Maybe a few more people are opting to do the same because Twitter recently announced it’s laying off 300 people. This is a company worth US$20 billion and for every share on offer the earnings are MINUS US86 cents. Again I don’t get it.

I hear you talk about Instagram, Snapchat, Facebook and other forums you use to stay connected.

When you have time to actually meet these people I am not sure, but somehow it must work because coffee shops are full of young people…are they working (doing their next self-indulgent pose perhaps), going to Uni or living courtesy of the taxpayer? I don’t know, but they inhabit local cafes in their droves.

Then you read about sites like Tinder and Ashley Maddison where single, attached and married people can connect for some casual sex…just like that. What does that say about society’s moral compass? Again, I don’t get it.

The purpose of this letter was not to go on a rant (or at least not a complete rant) and confirm just how old-fashioned and out of touch I am. There are some things in this new world of technology that I admit don’t make sense to me, yet there are others I do comprehend.

It is these that I would like to share with you.

A large percentage of the population operate in a “head down, bum up” fashion. Swept along with the tide of life. Jobs to go to. Bills to pay. Courses to study for. Kids to educate. Careers to worry about. Relationships to manage.

Technology has made life easier in some ways, but busier in others. Because so much more can be done over the internet, we have come to expect more to be done. The demands keep escalating. Emails pile up. Text messages “bing” away at us. Photos demand to be liked.

All these forms of communication are constantly encroaching on society’s spare time.

Not having these distractions provides me with the luxury to read, reflect, comprehend and think.

Just because I “think”, it doesn’t mean my conclusions are right. Life can be very complex and throw up all sorts of surprises.

One of my warnings when it comes to investing is to be wary of projecting the past into the future. Life is dynamic and the influences that created certain past results may no longer be in play. You have to continually reassess the assumptions you’re basing your decisions on and build in some variables.

In looking to the past we can possibly make some broad assumptions about the future and try to gauge the world we are going to encounter in the coming decades.

The past century has been one of enormous change.

We need to go to museums or antique shops to catch a glimpse of the way the world used to operate.

While there were advantages in a world that was a little less complex and slower paced, there were also disadvantages. Infant mortality rates were higher. In a world before antibiotics, illnesses claimed many a life far too young. Your great-great grandfather died in his 30s from an infected tooth. The opportunity to travel abroad — unless it was to fight a war or represent your country for sport — was not an option for the vast majority. Communication was via telegram or letter.

Life was simple but also more insulated.

The priest, bank manager, headmaster and police sergeant were all respected pillars of the community. Beyond reproach.

These days priests and headmasters are tainted by child sex scandals. The bank manager is nothing more than a salesman and the police sergeant could be on the take. How the mighty have fallen — fairly or unfairly — in the eyes of today’s society.

We have come a long way (for better or worse) in so many ways.

We earn more. We also consume more — goods, services and calories. We are better educated. We are living longer. We are more heavily regulated and governed. We are less independent — we rely far too much on government and its agencies for “solutions”. We are more indebted — home loans, student loans, consumer credit, lines of credit, credit cards. We are in the midst of one of the great periods of transformation in history — technology is only just starting to change our lives.

In spite of the contrasts between now and then, some things remain constant.

We all die. Booms still bust. Fear and Greed will never go out of fashion. Prosperity is achieved by productivity not the printing presses. It is never ‘different this time’. Too much debt always ends in disaster. If it’s too good to be true, it usually is. While the world gets smarter and faster it is still humans — with all their foibles — who make the decisions. Society and our economy are the sum total of those decisions — good and bad.

Millions of collective decisions have created the three big trends that I see influencing our future:

  • Health revolution — living longer, plan for a working life well beyond today’s accepted retirement age. Expect higher taxes to be paid to finance age pensions and care.
  • Technological revolution — automation and robotics will drive costs lower and unemployment higher.
  • Financial revolution — after the next credit crisis, there will be a spurning of debt in favour of savings.

Understanding the interaction of these three powerful trends on society in general — and we as individuals — will be important in our endeavour to successful navigate our way through the challenging and exciting years that lie ahead.

Love Dad

From time to time, the world can divorce itself from reality — live beyond its means, push asset prices above fair value, believe central bankers can solve problems with the ‘solutions’ that created those problems — but, eventually, the stresses in the system between the old and new world cause that bubble to burst.

A revolution is nothing more than the full rotation of a cycle.

This cycle of indulgence and entitlement is coming to an end. When it does, there will be both enormous anguish and opportunity.

Position yourself well in advance to be on the side of opportunity.


Vern Gowdie,
Editor, The Gowdie Letter

From the Port Phillip Publishing Library

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Vern is a contributing editor to Money Morning — Australia’s biggest circulation daily financial email. (To have Money Morning delivered straight to your inbox you can subscribe for free here).

Vern has been involved in financial planning since 1986. In 1999, Personal Investor magazine ranked Vern as one of Australia's Top 50 financial planners. His previous firm, Gowdie Financial Planning, was recognized in 2004, 2005, 2006 & 2007, by Independent Financial Adviser (IFA) magazine as one of the top 5 financial planning firms in Australia.

Vern has been writing his 'Big Picture' column for regional newspapers since 2005 and has been a commentator on financial matters for Prime Radio talkback. His contrarian views often place him at odds with the financial planning profession. In his leisure time Vern remains active with triathlons and pilates.

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