Chief Investment Strategist, The Freeport Society
I miss grad school.
My time at the London School of Economics was truly special. The student pub was a place where you could pound your fist on the table, passionately arguing a political point… and then clink glasses with your debater and change the topic to sports, women, or whatever else was on your mind.
It was civilized.
You could disagree and still respect each other. There was no name calling… no shouting down… no tribalism. And no one felt the need to immediately grab their phone to record it to post on social media.
Yeah, those days are over.
Campus unrest is the worst it’s been since the Vietnam War era, and the pro-Palestinian protests at Columbia University have gotten so heated that Speaker of the House Mike Johnson openly called for President Biden to send in the National Guard.
Biden declined…
Columbia parents are part of the donor class, of course, and it’s bad for business if their spoiled offspring get roughed up or spend the night in jail.
Besides, the protests will peter out soon enough. Final exams are in a few weeks, and little Prescot and Addison will be expected at summer lacrosse or rowing camp, or whatever it is that Ivy League kids do on their summer break.
At any rate, I was pondering the fate of higher education when I read this morning that the number of babies born in America is now at its lowest levels since 1979. Just look at this chart!
We’re in the middle of the Baby Bust. Births have been trending sharply lower since 2007.
Remember, our population today is more than 50% higher than it was in 1979. So the fact that the number of babies born is at 1979 levels means that the birth rate – the number of babies born per woman – has absolutely plummeted.
I’ll talk about why that is in a minute. But first, let’s address the very large elephant in the room of every college admissions office.
Universities are completely, utterly screwed.
America enjoyed a mini-Baby Boom between 1997 and 2007. All else being equal, that means demand for a university education should be the highest in history as all of those kids reach college age.
Yet that’s not at all what we’re seeing in the real world…
The total number of undergraduate students peaked in 2010 and has been slowly drifting lower ever since.
The precise numbers vary depending on what qualifies as college enrollment (two-year degrees vs. four-year bachelor’s degrees, etc.), but the trends are the same. College enrollment is down by about 10% since 2010 despite the pool of would-be applicants being larger.
Of course, we know why admissions are down. College priced itself out of the market.
A mediocre four-year degree from an average state school will set you back about $100,000 these days, after including room and board. The price is more than double that for a private university.
Inflation in tuition costs have averaged about 12% per year since 2010, dwarfing the already absurdly high inflation in everything else. It seems that maintaining all of those safe spaces and DEI programs is expensive!
With this being the situation now… what’s going to happen to college admissions when the pool of would-be freshmen drops by several million in the coming years?
And how are the universities going to afford the massive administrative bloat they’ve built up over the past 20 years?
We’re about to find out.
As for the other elephant in the room…
Why Are Americans Today Having so Few Children?
Where do I start… ?
Would-be parents aren’t in a great place financially to start families when they kick off their professional lives buried in tens or even hundreds of thousands of dollars in student-loan debt.
Even if they were ready for that white picket fence in the suburbs, good luck finding a house. According to Redfin, home affordability is the worst it’s been in nearly 40 years… and that assumes two working parents. Having a new mom take time off to be with her baby is pure fantasy for most young couples.
To add insult to injury, white-collar hiring across much of the U.S. – in industries such as finance, technology, media, law, and accounting – has stalled. So starting your career and growing in it is as hard as it’s ever been.
Of course, college tuition would have never exploded to the levels it did without the existence of government-subsidized student loans. Rather than, I don’t know… make college more affordable… colleges were able to raise prices at will because their marks… er, students… could borrow unlimited money from Uncle Sam.
It was a classic incentive problem. The universities had no incentive to keep costs reasonable because the debts were someone else’s problem.
As for housing… we can thank the Federal Reserve for the mess we’re in there.
When the Fed injected $5 trillion into the monetary system during the pandemic, they inflated the prices of virtually all assets, including homes. The resulting inflation forced them to aggressively raise interest rates, which made affordability even worse. I fully expect their May 1 meeting to make this mess worse, as I explain in my Election Shock Summit video.
I don’t see any of this getting better any time soon.
The forces pushing Americans into having smaller families or not having families at all don’t turn on a dime. If anything, they’ll likely get worse before they get better.
All we can do is protect ourselves from the potential fallout. This requires smart – and agile – investing. Have inflation hedges in your investment portfolio. Invest in companies with good track records in essential industries. And add short-term investing – even trading – to your wealth-creation arsenal. The days of relying on long-term “buy and hold” investing alone are gone.
In my Election Shock Summit video, I explain how to do this with confidence and ease.
Don’t wait for the chickens to come home to roost. They’re not on the way.
To life, liberty, and the pursuit of wealth.