The Great Migration to Come

 This year, in the United States, we have a presidential election. A great many comments are being made about border control in the Southwestern United States. There is no question that the situation is very messy. One issue that the media does not cover well is WHY people are wanting to come to the United States. If you look at the facts, you will see the major reason is why most of our ancestors came from Europe—economic opportunity. Also, some are coming as they live in dangerous places in Central America and want to remove their children from a bad environment. 

Okay, it is a difficult issue and I see no easy workable solution at present. Looking ahead a few decades or perhaps sooner, we and much of the Western world will face a far bigger issue—Climate Migration.

If we continue on our present track toward a 3–4-degree centigrade increase in temperature, our new hotter world will likely create a nightmare scenario. Our level of carbon monoxide in the air, as of year-end 2022, was higher than it has been for the past three million years.

I looked at various forecasts that ranged from moderately scary to total gloom and doom. It was interesting to see what would be affected. In no particular order I found: Rising ocean levels would take over some areas of the Florida coast. I have noticed that even a bad rainstorm causes some flooding in Miami. The Outer Banks of North Carolina are in a precarious spot. New York City will survive, and two pundits said that the financial world will build a huge barrier protecting Southern Manhattan and, of course, Wall Street.  Boston may be okay, and the Maine coast could become even more fashionable and expensive. There will be a northern movement if things heat up. Wisconsin and Minnesota have lots of lakes and people like to spend time near water. If the winters become milder there, the population might jump. A similar scenario has been forecast by some for Upstate New York and Northern New England.

Arizona and Texas already have some water issues which will only get worse as the population grows and the areas get even hotter. Agriculture will suffer as aquifers decline so food may become more expensive, and yields drop. The wheat crop should suffer as well, and government subsidies cannot help with lack of water.

Canada, along with Russia, has the world’s most abundant fresh water so, if the temperatures keep rising, Canada’s agriculture may be vibrant along with many wanting to migrate there.

Europe is already seeing many in drought stricken African countries trying to move to western countries. There are a few issues. Europe is full of senior citizens. Immigrants are needed to fill in many jobs, including caregiving to the elderly. Yet much of Western Europe is on an unsustainable path to maintain their provider state of education, healthcare, and old age pensions. How many immigrants can some countries take in?

Also, the humanitarian issue is huge. If many Africans cannot leave their parched homelands, millions may well die of disease and starvation.

South America has future climate issues although Patagonia and Southern Chile should be in better shape than the rest of the continent.

Australia is burning up these days. Some people will have to leave if climate change is not tamed. Southern New Zealand looks fine. India is in a bad spot with a huge population and no relief on the climate front. Many Pacific islands are likely to disappear.

Many politicians have lobbied hard for the use of more renewable energy. Some have said that by 2030 or 2035 all US vehicles and all electricity produced will be carbon free. They are well intentioned but hideously naïve. Right now, only a handful of U.S. utilities can meet the 2035 goal, and most have candidly told state regulators that they are pushing back their dates for a carbon free era. A big problem is with battery storage. Wind and solar technology have improved significantly in recent years, but their delivery is intermittent so a back up source such as natural gas is needed until battery development is stronger than what we have today. So, the use of fossil fuels (oil and natural gas), like it or not, is with us for some years to come. Also, electrical use will soar globally and the infrastructure is not ready to handle new demand via renewables.

Is it all hopeless? Not to me, but some hundreds of millions across the globe will need to move and what countries can/will take the migrants in? This will not be solely a political issue but a moral issue. In recent years, Canada has been very open to immigration, but they can be highly selective about whom they allow to enter their fair country. Will they take Americans who want to escape the southern heat?

So, if you think that discussing border security in the 2024 U.S. elections will be heated, may I suggest that you have not seen anything yet compared to what is to come?

For a slightly optimistic view on this issue, I recommend reading Gaia Vince’s NOMAD CENTURY (Allen Lane publishers, 2022).

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Are you in a 50+ US Millionaire Household?

 Recently, a report was released from the federal Survey of Consumer Finances that stated that the average US household with adults around 50 years old had an average net worth of one million dollars.

Last week, the statistic was mentioned on Saturday Night Live and I began to get messages from people who were upset about it. We need to clear the air a bit on this topic. Hence this post.

By year end 2022, the median net worth of American households  was $192,900. Please note that figure was MEDIAN, not average. 

For households with people in their late 30’s, the average net worth figure was close to $500,000 and, those in their late 40’s, $750,000. And, for families with household heads in their fifties, it was resting at $1million.

Now, while being a millionaire was a dream for many it is really a psychological yardstick and a somewhat meaningless statistic in 2024. A Californian who once called on me as sales rep admitted that his house alone was valued at $1.5 million but he still worries about paying his car insurance and keeping his job. He is, on paper, a millionaire but hardly feels affluent.

The study also stated that approximately 18% of US households had a net worth of over $1millon. Using a back of the envelope calculation with record high stock and real estate prices as I type, I peg 23% as the working figure for  current US households with the million dollar plus net worth handle.

Think about it for a minute. What does a million dollars mean? It buys you a studio apartment in a decent neighborhood in Manhattan. Most Americans still have a high percentage of their net worth in their homes. They are not that liquid. If you had a million in cash you could put it in CD’s at current interest rates and earn $50-55k a year. Hardly enough to qualify for what for decades we have considered a millionaire lifestyle.

What irks me about this report is not that it is inaccurate. It is probably very close to reality. The problem gets back to my old pet peeve about how the press and most individuals continue to use median and average interchangeably. 

Let us repeat the lesson that I have mentioned now and then in previous posts. Here are two key points:

1) A person can drown in a river with an average depth of six inches. If you had a reasonably good statistics professor, the lecturer would have used this homely analogy to stress the weakness of average as a statistical benchmark.

2) Let us repeat one more time the popular but effective joke showing how averages do not reflect reality—Bill Gates walks into a rural bar with 29 people in it. Let us assume that Mr. Gates has a net worth of $100 billion. The AVERAGE net worth of the people in that bar now sits at 3.3 billion dollars (100 divided by 30). But the more meaningful number is the median net worth (the 50th percentile with approximately half you sample over and the other half below the median) is $80,000.

Is point #2 an exaggeration? Of course. Yet it is what is happening in America today where a relative handful of people of extreme wealth are pulling up average numbers. The wealthiest 1% now have more net worth than the entire American middle class. Wealth skews are getting so sharp that we are beginning to look like many developing countries in terms of net worth distributions.

Here are a few comments from people whom I heard from or polled:

--"I worked hard for 30 years and on paper I am a millionaire. But, I don’t feel financially secure. A replay of 2008 would cut me back quite a bit. I still worry about losing my job, getting my kids through college, and saving for retirement. As you wrote in a post a few months ago, a million bucks is not what it used to be.”

--"When my wife showed me the news headline, I felt as if I was a total failure. Finally, she has stopped telling me that we are below average.”

--“This looks good and feels good, but we are in a tech stock bubble and real estate bubble. When one or both burst someday, people will get their comeuppance. No, we are not millionaires.”

--“I guess it is a milestone of sorts. I just keep flailing away at work. As a young adult, a million was my goal. It feels hollow and is not at all soothing. We are nowhere near the 1%.”

My advice is do not let the average figure get you down. If you are worth more than a million, great, but depending on where you live, life could still be a struggle given high taxes or cost of living or perhaps the majority of your net worth is tied up in your primary residence so everyday expenses are still a burden. If you are below a million, remember that median net worth for people in their fifties was about $300,000 in this study ($272.8k for 50-54 and $320.7k for 55-59).

Schools do a rotten job of explaining the difference between average and median. The media does not help. Thanks for reading my rant.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

Disney, ESPN+, and The Sports Bundle

 In recent weeks, the media world has been buzzing a bit about Bob Iger’s proposed plans for ESPN+. Additionally, Nelson Peltz of Trian is again making a run at Disney shareholders with an attempt to win a few seats on the Disney board of directors.

Over a month ago, Disney chief Bob Iger announced several changes. They include:

1) Disney is finally going to get a stronger position in gaming. This has been widely applauded as Disney does reach a lot of kids. Also, in sports, gambling is widespread so ESPN could benefit there and has credibility.

2) Disney will be a player in a new “skinny bundle” that will allow subscribers to catch major league sports across Disney channels, Fox, and Warner Bros. Discovery. It sounds great but does give me pause. How long will the alliance last; there are egos involved. Can they be Frenemies over the long pull? Will Amazon, Apple, and Alphabet decide to ramp up their sports presence and outbid these established media players for certain properties? 

3) Iger also discussed a limited streaming service for ESPN + that would debut in fall of 2025. It would be a souped -up version of ESPN+ with “much more personalization and customization.” They are projecting a cost of $30 per month. Admittedly, they are many sports fans in the U.S., but how many will be willing to pay $30 for this standalone service? Right now, you can get existing ESPN and other channels for $15/month is some cases.  The projected $30 price tag would be twice a Netflix subscription. If it clicks, it could be extremely lucrative for Disney but $30 appears to me to be over the breaking point for millions of consumers.

Tom Rogers was head of NBC Cable for a decade. He also founded CNBC for which I am very grateful. In a recent interview on CNBC, he weighed in on some possible Disney changes:

https://www.youtube.com/watch?v=px7nslNjdl4

Bob Iger was CEO of Disney from 2005-2020 and was widely respected in business circles. He retired and was succeeded by Bob Chapek who left Disney in Fall of 2022. Iger was called back as CEO in November 2022 and has a contract lasting in to 2026. 

He faces many challenges including the Trian initiative to get board representation and make strong changes. To me, the bigger if not biggest challenge will be to find a multi-faceted executive who can replace him in 2026.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

Is Advertising in The Super Bowl Worth The Cost?

 Okay, some of you may find the topic of this post a bit controversial. Several people asked me to draft it. Also, I polled several marketers and advertising people and asked them whether they think it is still a value in 2024.

First, a bit of background to refresh your memories. This year, 30 seconds of time on the Super Bowl cost approximately $7 million. Interestingly, many of the spots were 60 seconds long meaning the advertiser was shelling out $14 million for one minute. On top of that commitment, production was elaborate and first rate and probably added a couple more million to the tab. Lastly, a number of top-drawer celebrities appeared in many of the executions, and they probably did not work for free. So, in some cases, it is fair to estimate that the tab for the one-minute commercial was $17-18 million.

Was it worth it? For 25 years, we have been discussing how fragmented all types of broadcast, cable and streaming video have become. The Super Bowl was the only place where you could deliver 100+ million advertising opportunities all at once. The time-honored rule in media has been that you “pay more to get more.” So, the Super Bowl gave you a rating not seen since the 1960’s for over the air TV. And, importantly, the Super Bowl may be the only event on TV where people actively watch the commercials intently. So, attentiveness levels to Super Bowl commercials are the highest among all programming. Also, the 2024 Super Bowl was wildly exciting to sports fans and the audience held up through the final second in overtime.

For the reasons stated above, most people who responded to me said that it was definitely worth it—two even described it as a “no-brainer” if you could afford it. A few said it was worth it if it were done in good taste and was humorous.

A few curmudgeons appeared. Bless them. Here are quotes that have been edited a bit and with obscenities deleted:

--"My boss kept pushing for it and we once spent a third of our budget for the year on it. We got some nice press and it might have helped morale a bit in the office but it did not move the sales needle one damn bit.”

--“Our CEO wanted it and he went to the shoot. Sales went up the next two weeks and then dropped back to normal. I visited him before he died, and he still talked about it. Were I a large shareholder, I would not have been thrilled. The guy was on an ego trip.”

--“The brand must have broad appeal—booze, snacks, maybe a Detroit produced vehicle. Otherwise, I do not see how it can pay out.”

--“Why take an eight-figure gamble these days when there are many targeted digital alternatives that can hit portions of your target at a reasonable cost and are trackable? I do not get the appeal anymore.”

This year, Budweiser brought the Clydesdales back which was fun. The Detroit automotive cabal was absent with only BMW and Kia present in the big game. The BMW spot with Christopher Walken was wildly entertaining to me but how many young people can relate to an 81-year-old Oscar winning actor? How many know who he is?

So, the jury is still out. Perhaps it can work for some advertisers in a broad category but, in age of accountability, can many prove that a Super Bowl commitment pays for itself?

I will be watching closely to see if a minute in the 2025 Super Bowl goes for $15 million plus.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

My Favorite Attribute

 Recently, a young adult asked me what quality I looked for the most in a potential business partner or employee. I did have to think about it for even a moment. My answer is what it has always been—Curiosity.

Webster’s defines Curiosity as a desire to know or learn. Since the 1970’s, psychologists have found that being curious is closely related to inquisitive thinking, exploration, and investigation. They also have found that the curious have more perseverance and grit than the average person. On the job, they tend to have deeper engagement, superior performance, and personally, have more meaningful goals than their fellow workers.

This trait of curiosity often generates positive experiences, and, in some cases, what psychologists call “joyous exploration.” The curious among us enjoy confronting novelty and may well take risks that can be financial, social, or even physical.

As a child, I discovered that I had two interests that have stayed with me—history and markets. My parents took the family to Boston when I was five and we covered The Freedom Trail in detail. Soon, I knew not only of the midnight ride of Paul Revere but also all about his two lesser-known fellow riders, Billy Dawes and Samuel Prescott. At seven, my father bought me a subscription to American Heritage. He inscribed each issue with a personal encouraging note. I could not read them well at first but over the next few years, my fascination grew.

At eight, my mother, the daughter of a stockbroker, sat me down and taught me how to read the market tables after I asked her what the numbers meant next to each company. I am certain I was the only 3rd grader in Wickford, Rhode Island who knew what a P/E ratio was. 

All of this stuck with me. In college, my degree was on paper in economics, but it really was in Economic History. My courses included History of Money and Banking, History of Economic Thought, Economic History, and an Independent Study which covered ideas of the great economists from Adam Smith to Milton Friedman. I still devote time almost daily with economic theory.

In my career in advertising/marketing and later as a university lecturer, I was always excited to work with or meet someone who had endless curiosity about the business or subject at hand.

Millions of people spend their lives going through the motions or doing enough to get by or simply survive. If you are curious about a topic, pursue it and you will likely be happy and successful at it. People are surprised when I tell them that I really was not crazy about advertising. What I was enamored with was the media markets and how they fluctuated and presented new opportunities or great bargains in down markets.

Also, please do not confuse curiosity with nosiness. When someone says to me “I am curious about….”, an alarm goes off in my head. They want to gossip or find out something about me or someone else.

Finally, virtually every year, Warren Buffett speaks to an MBA class or two. One piece of advice he gives is: “Do not go sleepwalking through life.” Well, sadly, most people do. The truly curious never do that.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

Forever Renters?

Two weeks ago, I put up a post regarding the merits of renting vs. home ownership and how things appear to be changing for young adults compared to previous generations.

It generated a great deal of mail and phone calls. I suspected some anger from people saying that home ownership was the only way to go. Not really. A few people stated that it was the only way for most people to accumulate any meaningful capital which is what I heard over 40 years ago.

Today, people are marrying later or not at all. The Cape Cod house with the white picket fence around the yard has little appeal to these young adults. Also, the supply of affordable housing does not meet demand so, as prices rise, more young people are excluded from the possibility of home ownership. 

One reader who is wildly successful wrote to tell me that he doubted if he would ever buy a house unless it was a vacation home. He wrote: “I agree completely that if you take your down payment money and invest it you will be better off than buying a home in many cases. To succeed at this, you need to be very DISCIPLINED (caps his). Each year, I max out on my 401k but also take property tax and maintenance money that I would have to spend as a homeowner and invest it. Also, I have flexibility. If I change jobs or want to move, it can be done easily. I am 33 and may marry someday. If we have kids, I will probably buy a house. Otherwise, I will be a forever renter. 

Today, RentCafe estimates that the average rent in the US is $1,700 per month. Of course, an average is often a misleading statistic. In San Francisco, it could be several times that for a fairly modest apartment. In a rural or downtrodden, rent is often under $1,000 for a decent place. Two weeks ago, The New York Times did a spin on the RentCafe data, and showed how much square footage you would get in several markets for $1,700 per month.

Results were interesting. In a select sample of Manhattan zip codes, $1700 gave somewhere between 211-234 square feet. In Memphis, you were able to rent 1850-2000. Oklahoma City and Tulsa were quite renter friendly with the average national renter tariff getting you 1870 to 1970 square feet. As markets, the two Oklahoma entries were the most reasonably priced. 

It seems for many young people that even renting can be a stretch these days. Rents have moved sharply upward as real estate prices have jumped in the last few years, so it is causing some real problems for people under 30. As rents have escalated, some can handle it but are not able to save for a down payment on a home which pushes back their initial purchase by several years. Others cannot handle the rent, period.

Here is one example, perhaps not typical, that I learned after the last post about buying vs. renting. A young man who lives in a small town in Pennsylvania wrote to me and told me of his current struggles. He allowed me to use his comments after we jointly edited what he said and changed a few personal details. Here goes: “I am 26 years old and do not think that I will ever own a house. Three years ago, I graduated from a state college and picked up a job locally. I had $37,000 in student debt. Over the last two years, I have interviewed at businesses in big cities—New York, Philadelphia, Boston and Washington, DC. Before each interview, I visited college acquaintances and checked on living costs (especially apartments). Landlords wanted a few months’ rent in advance or a very large security deposit. One place offered me a job but would not pay moving expenses. Friends said ask your parents for the rental advance and moving expenses. They simply do not have it. I do not pay them rent but do pay for some of the food and the utilities. Now that I am paying back the loans again (after the Covid hiatus), I have little money left. My job is not bad, but it is dead end as is the town where I am now living.”

He also struck me with one comment re the student loans. Friends told him not to worry as the loans will all soon be forgiven. His response was as follows: “You did not know what politicians will do. Also, I signed the damned loan paperwork and understood the terms. I need to be responsible.”

Is my young friend an extreme example. Perhaps a bit. Yet, I remember being told 30 years ago by an ad agency CEO after I gave a presentation at a conference that he wound up only hiring upper middle-class kids. Their parents could subsidize them for a few years by picking up rents or part of them until their son or daughter was no longer earning an entry level salary in New York. 

So, until the real estate market cools off, many will not participate in “The American Dream” of home ownership. Others will be excluded, and some will choose a different lifestyle.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

Real Estate, Demographics and The Media

 Way back in 1976, I often read William Rickenbacker’s financial commentary in William Buckley’s NATIONAL REVIEW. I agreed with much of what he wrote but was always impressed by the remarkable clarity of his writing style. In a book that he wrote at about the same time, he took on the issue of home ownership.

He wrote—“Rent your house or own it?…….You have to do some pretty sharp figuring to come out ahead, one way or the another." As a young, single renter at the time, I raised this issue with many people. To a person, they all said that he was crazy. Homeownership was the only way someone like you (read loser) could ever have any financial security or build up any wealth. 

Rickenbacker essentially stated that if you invested the $10,000 that you would use for a down payment (for a $40,000 house in ’76) and bought stocks with it, plus allocated $1500 to equities that you would have had to use for maintenance of your dwelling each year, the result would usually match or exceed the appreciation of the house. At the time, the Dow Jones Industrial Average (DJIA) was at 700 and today as I type is perched at 37,592. So, unless your luck was unusually bad, renting could have indeed worked out well especially when you add several decades of dividends to the mix. 

A few years later, I was married, planning a family and bought my first house. Yet, Rickenbacker’s math kept gnawing at me so I suppose that is why residential real estate has always been a relatively small portion of my net worth. 

For baby boomers such as I, purchasing your first home was a right of passage. Some 79.2% of baby boomers were home owners while today 66% of all adults are homeowners. 

Recently, market analyst Meredith Whitney who became famous for forecasting the 2008 real estate debacle, is again weighing in on real estate. She says many things that are hard to argue with given, you guessed it, demographics. Many US adults are marrying much later than in the past, if they marry at all. In fact, she states correctly, that the rate of household formation is the lowest in 160 years (during the Civil War close to 600 thousand young men died so they never formed their own households). Now, the low rate is due to a strong change in lifestyles. 

Another problem that she brings up is household affordability. Some lucky young people were able to obtain mortgages at 3-4% for several years. Now, with more realistic long term interest rates, many young adults are priced out of the market for the time being. Lifestyle wise, many seem to like their turnkey existence and 30 years of mowing the lawn has little appeal. The average age of current first time home buyers is 38 which has to be an all time high.

She raises a regional issue that I believe is absolutely spot on. Some states such as Utah, Texas and a few others will grow and housing permits and construction will continue to move ahead smartly. In some states such as New Jersey, parts of Pennsylvania, California and Illinois will likely lose population and housing prices may weaken.

She also warns of a “Silver Tsunami” in real estate. As more baby boomers (born 1946-1962) become senior citizens they will sell their homes and move to apartments, smaller houses or go to continuing care facilities. This could really hurt real estate values in the future.

While I agree with her demographics and how many millennials may never purchase a single family residence, the Silver Tsunami argument is a bit overstated to me. When many of we early baby boomers hit retirement age, a number of Wall Street forecasters and some demographers forecast that US stocks would plummet as we took our Required Minimum Distributions (RMD’s) from our 401k and 403B plans. It did not happen.

The same thing may hold true for real estate. Many of my fellow geezers want to stay in their homes as long as possible. Yes, some will sell and a number will have to sell. Yet, with 70 being the new 50, a large number will stay in place for longer than has been the case historically.

I am not criticizing Ms. Whitney. She has a fine track record and her opinions always merit serious consideration. The idea that real estate has no place to go but up in the future has been said for decades but today those people appear to be inducing selective amnesia regarding 2008.

Millennials face household affordability and student debt in many cases but also, a different vision of The American Dream relative to any previous generation in America. That will have repercussions in the real estate market of the future.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com