Depth of Market and Volatility

As you are well aware, the stock market has become much more volatile particularly since January 2018. One of the main reasons for the increased volatility is there is less “depth of market” at any time available to accommodate any larger orders, particularly Sell orders. Another way to say it is that the “order book” is shallower than it used to be, even though trading volume is higher. Why is that?


Having a deep market is important because it lessens the impact of descent caused by a large sell order. Think about film of high-rise rescues you may have seen, where the rescue team inflates a really big pillow or puts up a net or trampoline so that the person caught in the high-rise can jump into it and not be injured. A deep market is like that pillow. Without it, the jump from the high-rise ends more like Wile E. Coyote going off the cliff – splat! That’s perhaps an exaggeration, but you get the point.

Why No Pillow?

There are several reasons why the market or the order book is not as deep as it once was:

  • Dodd-Frank and The Volcker Rule: Dodd-Frank Bank Reform laws passed in 2010, and the Volcker Rule, part of Dodd-Frank which severely limited the ability of banks to trade in equities markets, was implemented in 2015. The Volcker Rule thereby eliminated commercial and investment banks as a source of capital behind trading in equity markets. Now, instead of huge Wall Street banks standing behind their trading, you have hedge funds and high-frequency traders, which may be adept but don’t have the level of equity capital that the banks did.
  • High-Frequency Traders (HFT’s): HFTs are not evil, but the way they do business can be disruptive. Because of the availability of bandwidth and computing power, trades can be executed instantaneously. Whereas in previous years, a trade was sent to a market maker (who may have been electronic) and held on the order book until filled, now the trade is held off the books until it is sent and filled in less than a blink of an eye. This works most of the time during the ordinary course of business, but it doesn’t work as well when there is an order that at any time is larger than the existing order book can handle. Instead, when there is a big order, a lot of other electronic traders’ buzzers go off in an effort to fill those orders. You can see how these disruptions caused by large orders can happen, and they do happen frequently.
  • Algorithmic Traders: These are different than HFT’s. Whereas HFT’s try to make a profit by skimming fractions of pennies from buy/sell order imbalances, algorithmic traders try to profit on statistical anomalies that present themselves during trading. Examples include algo funds that buy positions when volatility is statistically low and sell positions when volatility is statistically high. Funds like these inherently exacerbate trends, and thereby cause more of the volatility they are attempting to profit from. Algo traders are not out there to provide depth of market; just the opposite, they are out there to profit from the shallowness of the market.


Because of the factors I bullet above, we have gone from a relatively deep, “pillowy” market in years past to a thin trading market that really scrambles when exogenous factors cause it to spike. I believe the most significant single factor is the Volcker Rule because it removed trillions of dollars of equity capital behind the support of the equities markets. If the Volcker Rule wasn’t in effect, the HFT’s and the Algos would not have the disruptive effect that they do in today’s trading.

I used this article from the Financial Times as a source, and it is a good summary, but I believe the FT article errs by not discussing the Volcker Rule as a source of volatility.

Get Used To Your Current Broadband

If you want to get ahead in today’s economy, or even if you just want to tread water, you need to have a good broadband connection. Cut the cord, you say? Just watch Netflix or Amazon Prime and the like? You still need a strong broadband connection to do so, and that can cost $100/month or even more. Cancel your newspaper subscription and read your news on websites? Same problem and same need.

Internet Service Provider


Frustration enters when you read about cities that have their own private broadband service, or when you hear about a new city that has partnered to install Google Fiber, their ultra-fast and ultra-cheap broadband service. Why can’t your city or neighborhood help itself by providing faster broadband service? This article from Fast Company magazine addresses some of the reasons why. They are summarized here as follows:

  • Laying Cable: At this time (more on this later), internet service providers (isp’s) still need to lay cable in order to provide service. Laying cable is old technology and it is expensive. Cable can be installed only by either stringing it from above-ground power poles or by digging ditches. Ditches can be very expensive, especially in urban areas, so it may not make economic sense. Poles may be prohibitive for another reason:
  • Poles are controlled by existing isp’s: If an existing cable tv or telephone company owns or controls the power pole, it is unlikely to allow a competitor to use the pole without extracting an exorbitant fee. Then there is the issue of politics and regulation:
  • Existing ISP’s are politically well-connected: Cable companies as you know are mini- or local-monopolies and those companies spend a lot of money in the political arena in order to maintain those monopolies. Any new “candidate of change” out there to slash these monopolies faces a steep uphill battle.

So, if you are currently serviced by Comcast, for instance, and you are hoping to switch to Spectrum, for instance, because they have superior or less expensive internet access or superior programming (i.e., the LA Dodgers), unfortunately that day is not coming any time soon. Get used to your current ISP, unless……


The Fast Company article does not address the new technology out there that could upend the entire world of ISP’s, and that is 5G, or 5th Generation cellular mobile communications. The only way to end-run around the cable conundrum is to provide the same level of service through the air, without ever having to lay cable. 5G offers this promise. I have written before that 5G will be a game-changer, and the promise of access for all people to high-speed internet without the cost and legal difficulties of laying cable is why 5G will be a game changer. 5G, if and when it is properly implemented, will significantly improve the efficiency of the US economy and could unleash a new era of growth and entrepreneurship.

How to Play 5G

Unfortunately, it is hard to find a “pure play” 5G stock. All of the companies that are investing heavily into 5G are existing companies with current businesses. Nevertheless, this article from Seeking Alpha offers some suggestions, with Verizon, Nokia, Ericsson, Qualcomm, Samsung, and Apple among them. I am not recommending any of these stocks, but the article is food for thought.


We are currently beholden to old technology (cable isp’s), but the future will be in 5G, unless 5G is not properly implemented. See: Political pressure. I believe 5G will eventually be the alternative to existing cable, but it may take a lot longer to implement.

How To Think About Debt

This Blogger, who writes on (one of my new go-to websites), opines that if the interest rate on the debt is under 7%, which he says is the average stock market return, then you should keep the debt outstanding and pay it off according to the payment schedule. If the rate is over 7%, then think about paying it off. That’s not a bad rule of thumb, but I think about debt a little differently, and I think you should as well.

Secured vs. Unsecured

My first advice is to understand if your debt is secured or unsecured. With most people, their most significant secured loans are their mortgage and their car loan. Most other debt, including student loan and credit card debt, is unsecured, meaning the lender can come directly at you if you default on payments. Most secured debt out there today is well under 7%, and if yours isn’t, you should either refinance to lower rate or you should sell the asset and pay off the loan. In my opinion, you should look to either pay down ahead of schedule or entirely pay off any unsecured debt. Interest rates on most credit cards are well above the blogger’s 7% number and don’t offer tax advantages. Student loans may offer tax advantages (although fewer now than in prior years) but are still at higher rates and are unsecured. Unsecured loans really drag down one’s credit rating. My advice is to pay off student loans or especially credit card debt, and keep your home loan and car loan. That said, if you have credit card and student debt, you shouldn’t have a big car loan because you really can’t afford a big car.

Debt vs. Investing

The blogger on Medium considers paying off debt vs. investing in the stock market and says you should keep debt that is under 7% because you can make more than that in the stock market. Fair enough, but that doesn’t address diversification of asset classes. I believe paying down outstanding debt that you have is equivalent to buying a bond or investing in debt, plus or minus some tax advantages. If you pay off $400,000 of debt at a 5% interest rate, that’s $1,667 per month more that you keep in your checkbook each month. It’s actually even better than that: That $400,000 payoff is actually like buying an AAA-rated bond, and AAA-rated debt such as US Treasury debt is at about 2.5% for a 10-year term. So, you are getting a better return for your debt payoff than you would if you bought an equivalent bond. How is this diversifying your portfolio? Let’s say you have a $400,000 mortgage and a $1,000,000 stock portfolio but no bonds or debt instruments in your investment portfolio. If you use part of the $1 million of stocks to pay off your mortgage, you now have $600,000 remaining of stocks but no debt. Someone might look at this situation and say you are still 100% invested in stocks, but an astute planner would say you are now “under-leveraged.” That is a good thing. In other words, you could have $400,000 in mortgage debt but you have chosen not to. Add that to the remaining $600,000 of stocks, and your portfolio is now effectively 60% stocks and 40% bonds.


Pay off unsecured, high-interest-rate debt as soon as you can, and keep secured debt if you so desire. Don’t buy too expensive of an auto if you also have student loan or credit card debt. When you do pay down debt, think of it as investing in a bond because your monthly net income goes up. Please contact me if you want to discuss any of this.

The Case For A College Consultant

Notwithstanding the bad publicity that the recent college admissions scandal and Rick Singer have brought to the industry, I believe hiring a college consultant can be a wise move and money well spent for the right family. Most college consultants are good, caring people who run their businesses on the up and up. Like every other business, there are crooks like Singer, but don’t let the crooks cloud your vision of what a good college consultant can provide to your family. Here are some reasons why I think you should look hard at hiring a college consultant if you have kids in high school (or even younger):

  • They are your kids, not your clients: Getting through the high school years while maintaining a good relationship with your own children is a high accomplishment. The more you helicopter your child’s college search and application process, the less likely you will maintain a good relationship with them. There are so many conflicting intellectual and hormonal issues involved with kids and their college choices, why would you want to add to them by involving yourself? Why not just delegate that process to a professional and keep on with your own life? Pay the consultant, and tell them to let you know what the result is. Hands Off might be the best strategy for maintaining a good parent/child relationship.
  • You will pay, but how much is it worth to you? According to, college consultants cost up to $6,000 for a package deal or $200 on an hourly basis. If you want, you can probably spend a lot more than $6,000 depending on how complete a service you want your consultant to provide. For instance, do you want a consultant just to discuss where to apply? Or do you want them to work directly with your child on their essays, as well as the timing of when each application needs to be submitted? And how far in advance of the child’s Senior year do you want the consultant to become involved? These are questions that you need to ask yourself. The more the consultant is involved, the more you pay, but the less headache you will have, at least that is the hope.
  • The decisions that your child and the consultant reach will be just fine. You may view your child to be a good fit at a particular college, but the consultant may (probably will) view them in a totally different setting. Accept that you won’t have complete control – you certainly won’t a few months thereafter when the kid goes to college – and move on, while hopefully keeping a close relationship with your child.
  • High school kids, particularly Juniors and Seniors, don’t want to confide in or with their parents. They are much more likely to confide in or with a college consultant that they trust. As a result, it is more likely that they together will make a better college decision than you will with your child. It is likely to be more objective and rational, to the extent that is possible with high schoolers.


For those of you who are contemplating sending a child to an expensive private college that could cost maybe $300,000 fully loaded if you are paying retail with no financial aid, spending an additional $6,000 or even $10,000 at the front end in an attempt to get it right is to me money well spent. If you are thinking of a less-costly state school, it is still probably money well spent because of all the hoops and all of the different deadlines one faces while applying to your local State U. Unless you have an ultra-mature and ultra-focused high school child who really knows what they want and is completely on top of the process themselves, it is wise to at least have a discussion with a college consultant. How do you avoid hiring a crook like Rick Singer? Talk to other parents, and ask about their experiences. You will likely find that there are a number of good consultants who are familiar with your kids’ school and will be of great help to you and your child as they strategize for their next great adventure.

No Collusion

“No Collusion” is a big headline this week in the political world. Collusion is a bad thing, even in the financial planning world. Collusion means to work together with another person or party toward an end that is evil. For instance, working with a fraudulent college counselor to have someone rig or take the college entrance exam for your child while also donating money to a fraudulent charity to get your child admitted to college on the fraudulent auspice of being an athlete would be a form of collusion. If something like that ever happened.

Collusion vs. Collaboration

On the other hand, the concept of collaboration, or two parties such as financial planner and client working together toward a good end is central to the financial planning process. The “to which end”, whether good or evil, seems to be the difference between collusion and collaboration. The client must be completely forthcoming with the planner so that the planner gets the entire picture of the client’s situation. The planner must take what the client provides and must then work with the client to develop a plan together. The planner can’t just sell a product or a plan to the client just because the planner stands to gain financially. Instead, the planner must provide solutions that are in the best interest of the client, always keeping the client’s interest as primary. That is what it means to be a Fiduciary. Financial Planning is at its heart a collaborative profession. That has ramifications for both parties, planner and client. Without collaboration, the planner will not be able to do their job and the client will be shortchanged.


If you work with or are considering working with a financial planner, make sure they are a Fiduciary. Most already are, but some are not. If your planner is a Fiduciary, they have to collaborate with you and work in your best interest. If they don’t do so, you are welcome to file a report with the CFP® Board (if they are a CFP® Professional). “No Collusion” isn’t an explicit part of the CFP® Board’s Code of Ethics, but it is implicit. Collaborate – don’t collude!

Lyft IPO – Caution!

Lyft is expected to complete its Initial Public Offering today. As I write this, Lyft’s investment bankers are seeing strong interest in the stock so they are raising the price, which is good for Lyft because they will net more money out of the transaction. However, there are several “issues” with Lyft and its IPO that you at least need to be aware of before buying its stock.

The Lyft Experience

Before I express these issues, have you ever used Lyft? They are a ride sharing service that acts like a taxi. Very similar to Uber. Download the Lyft app on your phone, open an account by linking your credit card, then tell the app where you want to go. A car shows up and it takes you to your destination. Lyft wouldn’t work without the GPS and routing system. Lyft (and Uber) is superior to a taxi because of the routing system – you don’t have to give the driver directions, which is good especially if you don’t know where you are going, other than the address. Also, no awkward cash transactions in the cab of the car – all done by credit card, including tip. Then there is a rating system – 5 stars max. You rate the driver, and the driver rates you. Although you wouldn’t think of getting a ride in someone’s car as a technological breakthrough, Lyft owes its business to cutting edge technology. Lyft (and Uber) is a godsend to some groups, including especially the following:

  • Drinkers: Leave your car at home and have someone else drive you to the restaurant or bar.
  • People who can’t drive: Now it is possible or at least much easier to get from place to place.
  • Kids: Although there are guidelines about it, now parents can send their kids off to their lessons and practices without having to schlepp them. Good for parental productivity.
  • The Outer Boroughs: In New York City, the argument in favor of Lyft is that it has always been hard to get a taxi if you aren’t in Manhattan. Now, if you are in Flushing, Queens, just tap the app and a ride appears. Likewise, in other underserved cities or outer neighborhoods, it is much easier to get a Lyft than a cab.


Although I am a big advocate of Lyft’s service, I am not as much of an advocate for the Lyft stock IPO. Here are some issues that concern me, starting with the most concerning:

  • Dual Class Offering: With the offering, Lyft will have A-class and B-class shares. The public will only be able to buy the A-class, which will have the normal 1 share 1 vote rule. Sounds good so far. However, the new B-class shares will be retained by the current Lyft ownership group and will have 20 votes for every share. That means that the B-class shareholders will (likely) retain majority voting power in Lyft. This makes it difficult if not impossible for an A-class ownership group to band together to effect a change in ownership or change in business practice. Said another way, go ahead and buy the A-class shares, but be prepared to accept current ownership’s business practices.
  • No Sunset Provision: Other companies (Facebook, Snap, Google) have dual classes of stock wherein the founders maintain voting control. What’s different about Lyft is that there is no sunset provision on its dual-class stock. This means that, not only do you have to accept the current ownership’s business practices, you also have to accept the business practices of the current ownership’s heirs. This is because there is not a set date in the future when the dual class stock setup ends. Facebook and Google stocks have performed well despite the dual-class structure; Snap has suffered I believe in good part because of it. Lyft will work as a stock only if the current owners are great and execute on their business plan and keep doing so forever. That’s a difficult bet for me to make.
  • Losses: In its most recent fiscal year (2018), Lyft lost $911 Million on revenue of $2.2 Billion. That’s a big loss, even if their top line revenue line grew by almost 100%. It means that Lyft isn’t even close to the scale and size they need to be in order to become profitable. It also means that the money they raise from the IPO is absolutely necessary to finance continuing operations and that they will possibly (probably?) need more money until they are at least cash flow neutral. Many companies have gone public in the past even as they lose money (see: Tesla), and some have been more successful than others in eventually turning profitable. However, it is a big risk for an investor to take. Don’t bet the farm on it.
  • Low-Cost Producer: Lyft competes with Uber by being a lower cost alternative. That is a broad generalization, but mostly true. Uber is a much larger company, with many more markets. (Uber is also likely to IPO this year). It is difficult for a smaller, lower cost alternative such as Lyft to raise prices to become profitable (or at least cash flow positive) while not losing its low-cost competitive advantage.
  • Driver Options: Many drivers drive for both Lyft and Uber at the same time. If you talk to them, they make more money from Uber, but they will take a Lyft ride if there is no better alternative at the time from Uber. At the same time, Uber has been in dispute with its drivers as to whether they are Employees or Contractors. Lyft needs to do something with its drivers to make it more appealing for them to take a Lyft ride over an Uber ride. That could mean making them actual employees or perhaps at least offering them health insurance. Any of these options raise the costs for Lyft, thereby making it more difficult to earn a profit.


I really like Lyft (and Uber) and I believe their presence as an option for getting from Point A to Point B has really changed the world. However, I am not so sure about the Lyft IPO deal. If you decide to play, dip your toe very lightly.

The Fed Turns Dovish

The US Federal Reserve Bank met earlier this week (March 19 and 20) and their tone turned dovish, or pessimistic about future economic growth. Not only did the Fed leave the Fed Funds rate unchanged, they revised their forecast to say they anticipate no Fed Funds rate increases this year, and they announced they are curtailing the normalization of their balance sheet earlier than previously stated and short of the goal they previously stated. The Fed’s concern is that economic growth is slowing down, and so they revised their US economic growth forecast downward from 2.3% previously to 2.1% now.

Jerome Powell, Chairman of the Federal Reserve Bank


Here are some of the ramifications that I believe will result from the Fed’s current position and more pessimistic economic forecast:

  • Rates Will Remain Low: I believe and I have stated before that the Fed will not continue to raise rates so high that the yield curve will invert. Prior to the Fed’s meeting, the 10 Year US Treasury Note yielded about 2.6%. Now, after the Fed meeting, it yields 2.54%, after bottoming at 2.5%. Unless economic growth significantly outperforms the Fed’s forecast, there is no reason for rates to increase. Due to global geopolitical uncertainty as well as anemic growth in Europe and slowing growth in China, demand for the safe haven of US Treasuries will continue, which will put even more downward pressure on US rates. Get used to this low rate environment.
  • Low Rates Are Good for Corporate Profits: Low interest rates means that companies’ borrowing costs and their cost of capital will remain low, which means that their profits will be boosted. Corporate profits grew due to changes in the corporate tax law in 2017, and while their growth rate is projected to slow, corporate profits will not be hurt by higher interest rates.
  • Strong corporate profits are good for stocks. The low interest rate environment is also good for stocks going forward. There is always the danger that corporate profits won’t meet or exceed the high expectations put out there by Wall Street analysts. “Earnings Miss” is a frequent headline in the financial media. However, when you read about an “earnings miss”, read further to determine what the expectation was, then read what the company actually delivered, and then decide for yourself if the headline was truly bad or really should have been good.
  • Inflation is not a concern of the Fed: Oil prices peaked in the low $70 per barrel range during 3Q 2018, then dove through 4Q 2018, and have rebounded to the $60 range, still lower than their 2018 peak. Wage growth is in the low 2% range and so within a comfort level with the Fed. The lower growth forecast means there is little catalyst for higher inflation.
  • Good for Housing: Lower interest rates mean that mortgage rates should remain favorable and may even fall. Most every metric indicates that we have an undersupply of housing, particularly in some geographic areas. Housing sales and prices were weaker in 2018 due to higher (at that time) mortgage rates as well as because of the reduction in the ability to write off mortgage interest on one’s taxes. As a result, mortgage rates decreased a few ticks and will remain more favorable going forward. While housing growth may not blow it out of the park, I believe the housing sector will be ok and prices and sales volume should perk up for the remainder of 2019.


I am optimistic because the Fed has set a low bar for US economic performance, and the headlines should be good if the actual performance is better than the Fed’s performance. A low rate environment is good for a lot of sectors – corporate profits and housing among them. Savers won’t like it as much because savings coupon rates will continue to disappoint, but most of the economy will benefit.

College Scandal – My Take

We have all read the details about the recent College Admissions Scandal, and so I will add my two cents about it:

  • Go where you fit in: Little is being written about how well these children performed at those colleges to which they had been fraudulently admitted. The likely answer is not too well. College is hard enough as it is. Don’t make it harder by playing in the Major Leagues when you should really be in Double A. Better to go to a college where your profile fits the profile of the college and its existing student body.
  • You will still find a good job: Trust me on this, you can still find a good job and have a good life even if you don’t go to any of the 20 Top 10 colleges. Many top employers recruit regionally at colleges where they have had success in the past or where their management perhaps attended back in the day. We have a labor shortage in this country. You or your child, equipped with a college degree, will be just fine even if that sheepskin isn’t covered with Ivy.
  • Don’t overpay for college: Most of these parents who defrauded college admissions departments did so for the privilege of paying retail to the tune of $70,000 or more per year for private college. USC is the prime example. Hope it is worth it to them. For you, I strongly encourage you to weigh the cost/benefits of attending less expensive state-run colleges and even junior colleges. Unless you objectively believe that your child is at least in the top quartile of academic performers, it is hard to justify the cost of a private college education because that education has become so expensive.
  • Think about alternatives to college: A college degree is an elite status checkbox thing. We as a society need to elevate the status of alternatives. If we truly are concerned with things such as income inequality and the welfare of the working class, then we need to raise the value of what the working class can do and achieve. We need mechanics, construction workers, electrical workers, restaurant entrepreneurs, and the like. Most of those don’t require a college degree, but they do require training beyond High School. Often an employer will pay for such training for an employee with a bright future. Studies show that you are financially better off to start work in a skilled trade right out of high school rather than to delay that work to obtain a Bachelor’s degree, even if the Bachelor’s holder’s salary is higher than the trade schooler, because the trade schooler is working and is cash flow positive while the college student is not working and is cash flow negative.
  • Easy for me to say: Yes, I have a Bachelor’s from an expensive private university and a Master’s from an expensive public university, so maybe you say I have no right to tell people they shouldn’t get a private college education? Well, the world has changed in the 40 years since I applied to college, mostly because the cost of college has increased exponentially. My point is to look very hard at the cost/benefits of a private college vs. a less expensive alternative.
  • College Is An End Unto Itself: Lastly, College isn’t just about what you get or can do as a result of earning your degree. Instead, College and an Education are ends unto themselves. Meaning, College is great because of the education you get. Once you earn your degree, you can’t take it away from you. So, if it is really worth it and you have the werewithal, then go for it if you truly value the College education, But, don’t go into insurmountable debt to do so, and, of course, Don’t Cheat your way in!

Do What You Are Good At

I recently had a conversation with someone who was considering two different job options. They were relatively young and early in their career and so they were concerned with developing their skills in order hopefully to move up within the company in the future. With one of the job options, the person would be using skills at which they were proficient and which they enjoyed using. With the other job option, they would be using skills with which they weren’t as comfortable but that they hoped to develop. The person asked me which job opportunity I thought would be best for them and their future development.

I opined that they should take the job that they were good at and liked doing. The caveats were all things being equal, meaning the bosses and the groups were comparable, the salaries and benefits were alike, and advancement opportunities were similar between the two job opportunities. I told this person that I believed they would go farther and get more out of performing the job duties that they were good at. While it is admirable to think about working on one’s weaknesses in an effort to get better at them, I felt they would grow even more if they continued to hone those skills at which they were already good, and that their goal should be to be the best in their company at that particular skill. I also gave the person kudos for recognizing what they were good at and what they weren’t so good at. That’s better self-awareness than many people have.

Why Is This Important For Financial Planning?

Getting the most out of your career and maximizing your salary and bonus within a company is one of the most important elements of a personal or family financial plan. After all, what you make equates to what you eat and where you can live. The decisions you make about your job, as well as your performance on the job, will have financial ramifications for you as you continue to work and thereafter. Therefore, having a personal strategy about what you want to do with your job as well as where you hope to be in 5 to 10 years are very important elements with huge financial ramifications. Work can be very competitive and life is short, so you should make the best of it. Therefore, you should recognize early on what you are good at and find job opportunities that fit what you are good at.


For instance, there are people who are good at finance, people who are good at sales, and people who are creative. Typically, those aren’t the same people. People aren’t typically good at all disciplines. There are those who are good with other people, and those who aren’t. People who have poor interpersonal skills, for instance, should not take an outward-facing job, even if they think they can improve their people skills with such a job.

Financial Planning

To use and example that is a little closer to home, there are people who are good at investment management and financial planning, and those who aren’t so good at those disciplines. If you recognize you aren’t as good with money matters and you recognize this, then you should work with a Financial Planner. Stick to those skills at which you excel, and delegate that which you aren’t as good to someone who is.


I feel like I am good at listening to other people and providing them with my perspective about things like what job opportunity they should take, but not as good at being as objective about myself in such circumstances. As a result, I have in the past sought out the perspective of others to help me make important life decisions. It has worked for me, and I believe it would work for you as well.

Student Loan Debt, Climate Change, and Pessimism

The American Dream is underpinned by a sense of optimism about the future. Even coming from the poorest of circumstances, Americans in general to this point have believed that they can work their way upward if they just keep their heads down and get up and go to work every day.

I believe that this sense of general optimism may be changing among the Millennial generation and younger. Two of the main factors, I believe, are student loan debt and climate change. The debt is a real issue to those that have it. Climate change is under debate, but a lot of young people believe with religious fervor that our future is doomed due to climate change. So, if you owe tens of thousands of dollars of student debt on which you will be paying heftily every month for 10 years or more, and if you believe we only have a few years left to live in our current state of affairs, then one can see how one can become pessimistic.


I have a high level of empathy for those who have a lot of student debt. This article from has the statistics, which I summarize as follows:

  • Americans owe $1.56 Trillion (with a T) of student loan debt.
  • Average debt per borrower is $29,800.
  • 11.5% of student loans are 90 days or more past due.
  • 75% of graduates from private colleges have loans with an average balance of $32,300.

If you are among any of these statistics, I feel your pain. If you are lucky enough not to have student debt issues, imagine if you did, and the changes in your life that you would have to make. Yes, college graduates have a lower unemployment rate and higher salaries than do non-graduates, but at the cost of student debt that puts a crimp on what you can do once you graduate, especially if you are a stand-up person and pay the debt off like you are supposed to.

Resulting Behavior

I think peoples’ behavior has changed due to this pessimism about the future. For one example, I think the slowdown in the housing market and the level of home purchases over the past year is in no small part due to higher student debt and pessimism due to climate change (among other factors). Think about it: We have almost full employment, with salaries rising (albeit at a lower rate than some think they should), and mortgage rates still low, though slightly higher than they had been for the previous several quarters. Yet, the headlines in 2018 were about a housing slowdown. Why? Because it is difficult to want to commit to a 30 year mortgage when you still have 10 years to go to pay off your student loan, when you are stretching to make your down payment, when maybe you are not overly thrilled with the inventory of housing out there to buy, and when you aren’t sure you will even have a job 15 years from now as the climate is changing. I get the pessimism. Low birth rates, as well: It’s difficult to think about paying to have and raise a child if you are already in hock to the government for your college education. As a result, the US is following the pattern of most Western European nations and Japan, with domestic birth rates below 2.0 per household, well below the volume we need to sustain ourselves.


The solution? We as a society need to change our collective elitism about college. Some people should pursue alternative careers that don’t necessarily involve college, including trade careers and apprenticeships. Others should look at much-cheaper junior colleges as an alternative or a stepping stone to a Bachelor’s degree. Those of us who are lucky enough to have achieve our Bachelor’s and/or are not weighted down by student debt must change our elitism and value these alternative education experiences and be more understanding of what students need to do now in order to get the sheepskin. Regarding climate change, politicians need to stop with the dire predictions made to enhance their personal political profiles. Instead, let’s have an honest discussion about what practical and affordable changes we can make that are out there within reach and that can benefit everyone. We need to keep the sense of optimism that has driven our economic and social engine for all of these years, and we need to do so despite the factors such as high student debt and dire warnings due to climate change that stand in our way.