BABL 077: Solocast- What will 2016 bring?


Hey life architects, Adam Carroll with a solocast for the beginning of 2016. Today I’m digging out my crystal ball and looking to the future to tell you what to expect in the building of your own bigger life.

This podcast is really meant to give you a glimpse into the trends I’m watching as I plan out the next year and beyond in my business and life. And, depending on who eventually is elected president, I may cash in all my chips and buy a condo in the Caymans and peddle shell jewelry on the beach. Heck, we’ll make it a family affair — I’m sure my kids could sell the heck out of unique t-shirts going chair to chair.

The reason I wanted to record this particular podcast is I think looking forward is essential to planning. Sure, most of what you’ll hear over the next several minutes is speculation, but it’s also based on history and facts that I can corroborate. Nothing that you’ll hear is stuff pulled from my backside…. though it may be pulled from the backside of our Federal Reserve, our nation’s investment system, and possibly our political environment.

Yes, let’s start there, with politics.

Without a doubt we will have presidential hopeful shenanigans. I was listening to Pandora this morning while writing and the ads that kept coming up were for presidential hopefuls bashing each other. What a country we live in where instead of talking about the issues, we just bash the backgrounds of those we are running against. Because I live in Iowa and we’re the first caucus state, the environment is ripe with negativity. Every single one of the egos running for president is doing their damnedest to sideswipe the others.

I checked out the most recently running ads and decided what each was telling me about the candidate, so here they are in no particular order:

Jeb, who is doing his best to separate himself from the Bush name by adding an exclamation point to the end of his name, (I like to call him Jeb!) puts people to sleep according to an ad by Trump.

Bernie is flat out crazy and can’t defend a microphone let alone the US.

Trump is a dictator, disguised as a self-made businessman, and is terribly angry at most everyone.

Rubio appears to be a flip-flopper, and according to my wife has huge ears, (not a reason NOT to vote for him, but look at them next time, she’s right.)

Cruz likes guns and carpet bombing terrorists and quite frankly he scares the shit out of me.

and Hillary, according to most every ad shown in my market is on the FBI watch list and should be convicted of dozens of crimes against humanity.

The bottom line is this is the pool that we have to draw from and as a result of the relative unknowns out there, I believe that what we’ll see in 2016 is a very volatile stock market. None of them, in the primaries at least, have shared a formal plan for “saving” our economy, when what I believe actually needs to happen is a major market correction so companies can begin pouring the cash they have on the sidelines into value based stocks. You’d be hard pressed to find one of those at the moment.

There are two glaring issues on the horizon that, in my opinion, will rear their ugly heads this year. The first is the sub-prime car loan market which has absolutely exploded in the past 3-5 years. According to the WSJ, top regulators are sounding the alarm about the $70B in car loans that have been written to people with a 620 or below credit score. The issue, it seems, is these loans have been packaged into collateralized debt obligations and sold to investors. You might remember CDO’s from back in 2007 and 2008 — they were pretty much the reason the housing market took a huge dump do to under and non performing mortgages. The theory is the same thing could happen in car loans.

The silver lining is the banks can always repo the cars and sell them again to borrowers who can barely qualify. Not to worry, we’ll just get you into a car loan at 18% interest over 8 years. That should make it better. (it’s called sarcasm.)

For something that can’t be repossessed and will also rear it’s ugly head in 2016, let’s look at student loans. Right now there is $1.3T in student loans (almost $1.4) and it’s growing at over $3500 a second. According to the CBO, 1 in 4 student loans will default in 2016. That’s 25% of the loans in repayment (only $600B). What will happen to the other $700B — only time will tell. Default, by the way, only occurs after 180 days of not making a payment. Car loans are around 90-120.

Both of these issues will have an effect on the economy, though to what extent, no one really knows.

What we do know is the Federal Reserve’s Money Honey Chairwoman Janet Yellen has made the proclomation that interest rates WILL be trending upward over the coming quarters and years. No idea how much or how fast that will go, but because our economy is supposedly on the mend, it seems a good a time as any to begin easing up the interest rates that have remained close to zero for a good long while.

What you may not know is that an increase in interest rates from the Fed pushes up interest rates on a number of things like variable credit cards, car loans, home equity lines of credit and yes, new mortgages. Now this will be the big adjustment for 2016 — interest rates on 30 year fixed mortgage products that could go above 5% or more. What this means to Joe and Jane consumer is their house will come down in price. The reason being when you have a set amount budgeted for your house payment and you start looking for places to live, there is going to be downward pressure on home valuations so that people can continue to afford the payment on their new properties. Not sure how much at this point, but you will most likely NOT see appreciation on your property in 2016. or 17 perhaps. It’s good if you’re in the market to buy, neutral if you’re staying put, and could be negative if you’re thinking of selling in the coming months.

When the market does adjust to interest rates, and especially as adjustable rates go up you’ll begin to hear about people deleveraging. This means you’ll have society as a whole paying down debts because the monthly holding costs are increasing. I bet we see a fair number of bankruptcy filings as well, but the legislation on that may be changing too.

In order to get some of those debts paid off, we’ll see a brand new genre of people making money on the side. On episode ____ I interviewed Nick Loper of Side Hustle Nation and he shared ways that some of his guests have been making money on the side. This will become more and more common. It’s predicted at this point that by the year 2020 nearly half of our population will be independent contractors, not working for one company, but for many.

If any or all of this frightens you, please don’t be worried. My last bit of advice is really geared for my Build a Bigger Life audience — 2016 will be whatever you make of it. In down economic years, I’ve only always made more. I think the same will be true for you. It’s my honest to God belief that what we take in on a regular basis begins to cloud our judgment, so the more you see of negative stuff, the more you tend to believe it’s negative. All the more reason for you to soak in the good news, revel in successes, and learn from the setbacks. In EP 3 I interviewed my friend Chad Carden who often gives the advice from the late Wayne Dyer — When you change the way you look at things, the things you look at change.

Great advice for building a bigger life. So for this week and beyond, focus on the positive, live to your core values, and ask bigger questions. It’s a pleasure to spend time with you.
See you soon…