Ain’t Seen Nothin’ Yet

The New Year’s economic tack is not the same as last year’s. In some ways, changes brewing over the last few years have matured and disclose more clarity about their form. In other ways, it’s like somebody flipped a switch. If you thought earlier trends were life-changing, you ain’t seen nothin’ yet. Trends emerge and we examine a few here as we embark on this new year.

Oil Supply, Demand, and Price

Oil prices have a volatile recent history and promise more of the same in 2019. Before the turn of the century, oil prices blipped up and down, but nothing like what we’ve seen since 2004.[i]

U.S. sanctions on Iran have already reduced exports by 62% from spring 2018. Prices have not jumped much yet because:

  • the U.S. granted exceptions to large Iranian oil customers; and
  • S. oil production increased.[i]

World economic malaise, political instability, particularly in Venezuela and Sudan, and continued protests in Iran could drive prices up. Also, oil prices move inversely with the dollar, tipping the scale either way.[ii]Nobody knows for sure, but we expect supply to fall and prices to make a comeback.

Socially Responsible Investing (SRI)

This is not philanthropy, and it is no longer the fringe movement that wobbled onto the investment scene in the 1990s. Consumers and shareholders have adopted a preference for conducting business and government with respect for the environment, social justice, and corporate governance. In early 2018, socially responsible investments accounted for 25% of investments in U.S. professionally managed funds. The first SRI exchange-traded fund, iShares MSCI USA ESG Select (SUSA), has grown to over $11 billion in assets,[iii]and its risk and return profiles closely resemble large domestic stocks. [iv]SRI is an example of how investing has changed, and we think its appeal will continue to influence corporations, governments, and shareholders.

Demographic Convergence

Local demographers expect trends will exert a compounded effect on life in Minnesota:

  • Projections indicate the 65+ population will represent one-fifth of the population by 2030;
  • Today, 55% of the state’s population lives in the seven-county Twin Cities area. Demographers expect some of these counties to experience 10% population growth by 2030 while 36 rural Minnesota counties will lose at least 2% of their populations.[v]

These trends will have a direct bearing on life in Minnesota and on both senior housing and large (100-200 unit buildings) multi-family housing. Demand for affordable housing, particularly in areas with rising populations, is large and growing. Meanwhile, vacancy rates were only about 3% at the end of 2016 in the Twin Cities area.[vi]The combination of the need for affordable housing, rapid population growth in some areas, a low vacancy rate, and a rising senior population presents both threats and opportunities. The situation is particularly important because wealth among seniors is expected to decline, and we are not prepared to address the challenges.[vii]

Annuity Sales and Market Volatility

When investors are nervous about losing their hard earned savings, the typical annuity sales pitch about guarantees sounds appealing. Variable annuities are complicated and impose significant fees. Even the regulatory organization for sales organizations posts warning about these products at

If markets continue the volatility we’ve seen in recent months, we expect annuity sales to increase. If we’re right about that, we expect some investors will use IRA money to buy annuities.[viii]

That’s maybe a problem. You would not use a circular saw to cut down a tree. All tools have their most suitable purposes. The same is true of annuities. However, some annuity salespeople recommend registering an annuity as an IRA. Here’s the rub: Annuity owners pay no income tax on income or gains produced inside an annuity until they take withdrawals. The same is true of IRAs, so registering an annuity as an IRA duplicates one of the main benefits of an annuity.


[i]Historical energy prices and commentary appear at

[ii]Sheppard, D. (2019, January 16). Data show US sanctions hitting Iran’s oil exports hard. Financial Times. Retrieved from

[iii]Shaffer, B. (2019, January 19). The economy, stupid: The key factor for oil prices in 2019. The Hill.Retrieved from

[iv]Connaker, A. and Madsbjerg, S. (2019, January 17). The state of socially responsible investing. Harvard Business Review. Retrieved from

[v]Morningstar compares the performance of funds with indexes. This comparison was retrieved from

[vi]Wilder Research leads research reported at The source for data and projections reported was retrieved from

[vii]In April 2017, the Minnesota Housing Finance Agency published “2017 Key Trends for Affordable Housing.” The report was retrieved at

[viii]Miller, M. (2018, November 29). Column: Future U.S. seniors to face housing crunch as wealth declines. Reuters. Retrieved from

[ix]A complimentary, no-obligation service at enables prospective and current annuity owners to get the facts about their annuities.

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