All
economics is local
In the throes of a
Presidential election here in the US, many of us are familiar with the phrase "all politics is local". But did you also know that many
municipalities have their own unofficial market basket/economic monitor that
tracks the rise and fall of local businesses or stocks located within their
domain? These informal indices serve as
important mileposts/talking points about not only the vibrancy of the local
community and the health of the stock market overall but also the psychological
and emotional well-being of the citizens.
Semiconductors in Silicon Valley, travel and tourism in the Southeast,
agriculture in the Midwest, coal mining in Appalachia, oil production in the
Southwest are industries obviously not uniquely confined to those regions, but
which have a kind of self-evident connection to these communities and
territories in the country.
From these examples,
and others, one also might reasonably say that "all economics is local".
Of course, no axiomatic phrase is meant to apply in all cases. They are simply for instructive
purposes. To the contrary, I argue that
globalism and technology have made all economics universal. This local
versus global conversation has
broader meaning because a case can be made that the stock market's rally is
really a mirage of sorts, a deception which belies the hardships of those who
are falling behind versus those who are thriving.
Yes, I understand that
if you are an investor in the stock market there is no denying that you are
doing well...it's kind of hard not to!!
However, not everyone is invested nor has the means to do so. That means that in spite of superior numbers
being posted by the Dow Jones, a local index of stocks...shops on main street,
the neighborhood mall, or environs....might be in deep distress. This kind of dichotomy between the market
(and the daily profusion of business news) and your local economy is what I
have frequently called "a parallel
disconnect".
Again, no one is
disputing the market's fantastic performance recently nor the abundance of
wonderfully positive economic news.
Consider, though, how one justifies medical pandemics, homelessness,
hunger, climate catastrophes, and regional warfare in the face of such
incredibly strong global economic data?
Wouldn't a truly universal economic boom eradicate or address some of
the inattentiveness or disregard that many have towards the disaffected in our
communities?
Is
it all about you?
Thus, "all economics is local" becomes
a figure of speech for "I'm fine,
you're not...and that's no concern of mine". When
you are comfortable in your personal life and enjoying modest good fortune in
your pocketbook, you become too skeptical about taking on many other issues
outside your four walls. Scores of
governments and provincial politicians are starting to adopt cultural
purity. One's well being, it appears,
has become a condition of their location of birth and financial circumstance
more so than any empathy or compassion that the well-to-do feel towards the
unfortunate. I strongly believe that geopolitical issues
and a diminishing interest in "how the other guy is doing" is the
trend that has the potential to eviscerate the valuation gains the markets have
made in the last decade.
Last week's activity in
stocks was a continuation of more of the same..."Coronavirus"
volatility; low interest rates leading to "default" stock purchasing;
high consumer confidence causing sales figures to increase; better than
expected earnings affecting the energy and tech sector; and moderate GDP, which is "just
fine" according to Federal Reserve Chairman Powell. It is almost as if the laws of physics,
gravity, mathematics, and economics themselves have been suspended for a moment
to placate the fervent equity shoppers of the world. Money makes money when no other alternatives
are presented.
Sector-specific
analysis and micro managing one's portfolio daily gains have become a fixation
for some. Every little detail has become compartmentalized. Tech stocks are a proxy for technological
innovation and computerization; travel and leisure stocks are a proxy for
discretionary spending and savings; oil stocks are a proxy for industrial
capacity (and vehicular manufacturing); defense stocks are a proxy for conflict
and warfare. Be aware for the future
that automation and artificial intelligence are forming the underpinning for an
economic configuration in which medicine, transportation, agriculture, and
engineering derive from a whole new global nexus and regional identity...yet to
be determined.
Every industry, every
category has its "homeland" of origin. The next time you hear that the Dow Jones
Average has made a new high, do two things: (1) walk into your local town
center and observe whether or not there are shuttered storefronts, and (2) thank
your lucky stars that you are one of the "local" beneficiaries of the
market's current largesse.
Finally, I would
strongly urge you to open your aperture of awareness and take the long view
about investing.
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