Boardroom Recession? Maybe Just Depression. Angst. Anger….

I’ve been worried about a “boardroom recession.”  The actual numbers show a decent/improving US consumer economy.  If nothing else, billions trillions of consumer stimulus from cheap oil.*  So how to explain the widespread gloom I encountered at a recent institutional investor conference?**  A lot of people seem genuinely convinced another 2008 crisis is around the corner.

Maybe I’m wrong?  Looking at the wrong set of numbers?  Should I be more worried about negative rates (competitive devaluations IMHO), Chinese bad debt (internally contained and eventually sustained by the Chinese government not investors), or tech unicorns tanking (valuations are down, but they still generate real revenues are aren’t going bust…).  But all these worries seemed to be more excuses for the general gloom.  What was I missing?

A good investor is supposed to be dispassionate.  Investing (and politics) isn’t like rooting for a sports team.  You need the mindset of an umpire, not a fan.  Call it like it is and bet accordingly.  A great investor realizes dispassion isn’t humanly possible.  So he/she develops coping strategies to counterbalance their own emotional biases.  Warren Buffet has feelings like everyone else.  He’s just better at managing them.

But there are a lot of not-so-great investors out there.  And lot of them are Republican elite-types…  And it hit me.  Doh!  These guys are mostly self-identified “moderate” Republicans.  No wonder they are depressed!   Investors are paid to look forward.  And they don’t like what they see.  Seen through this lens, “the market” is going through a very understandable emotional meltdown.

Put yourself in the shoes of a typical affluent, urban-dwelling, investor class Republican (or wiggle your toes a bit if you are already wearing those shoes).  The Trump hijacking has forced out a lot of ugly truths.  Highly depressing for an investor-class Republican.  Especially if you had been burrowing into deeper denial as reality got harder to ignore (see “Sarah Palin, Rush Limbaugh, Terrorist “Militia” armed takeover, Tea Party, or any randomly selected 8 hours of Fox News programming“).

It is all pretty depressing.  It just doesn’t solve for an (economic) depression.

  • “Your” party is tearing itself apart.  That’s been going on for years, but its now impossible to ignore.
  • Its not “your” party anymore.  Its a bunch of angry, under-educated, reactionary, pitchfork wielding peasants.   The Sarah Palin crowd.  The people you used to rely on for votes, but who would have ever thought they turn on us…?
  • Actually “your” party is turning on you.  The pitchfork peasants seem most energized by a deep resentment of the elite classes (followed by a dislike of most non-white people, but I digress).  An elite class into which you have somehow been inexplicably lumped.  “Moi?  Don’t you people understand that a family making $200k-$300k in a Whole-Foods zip-code is just barely middle class?  Are we not brothers in arms!?! [ripple of a firing-squad.  A pause… “Bring in the next next lot of class-enemies!”]  
  • Looking across the aisle, things don’t look much better.  The Clintons did a great job of talking liberal-left, but hiring elite-right-center (cue Rob Rubin et al).  OK, the Dems were asking people to, like, actually pay for mroe of what they consumed.  But they weren’t really going to rock the boat.  But isn’t that same peasant crowd is lurking behind Bernie Sanders and Elizabeth Warren too?  The Clintons have done many deals with many devils to win.  Hillary will do another on the backs of Wall Street.  Anything to finally grab that brass ring for herself.

I’m not thrilled about the above trends either.  But I don’t see them adding up to an economic crisis.  This is equating “my team is losing” with “all teams must be losing.”  The tide is going out on the last three decades’ class winners, but that is just re-balancing the distribution of spoils.  I do worry about 10-20 years out.  The great leftward swing will go too far (just like the great rightward swing that started roughly with Reagan).  But today, a little income redistribution would probably lift all boats (minimum wages, fiscal stimulus, etc…).

 * Oil:   Told a year ago that oil would be $30 a barrel, a rational investor would have bet on a consumer boom.  Every week, most every American family is getting an extra $20-$40 to spend somewhere else besides the gas pump.  That boom hasn’t shown up yet.  Those pesky proles are saving it – or something silly like that.  But every week, that same $20-$40 keeps showing up.  Those billions of dollars WILL flow through.  See “stocks vs flows.”  Maybe the problem is your average investor doesn’t see $40 as much money in a world of $4 toast?  Perhaps it isn’t surprising they’re under-estimating the impact.

** A smart Investor Relations guy I talked to complained that EVERY 1-on-1 meeting started with the same question – “How is the (presumably bad) macro affecting you?”  A  thoughtful, qualified, industry-specific answer got dismissed as “well, you just aren’t seeing it yet.”





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