Yours, mine..…and mine!!
Whereas rising interest rates over
the last two years have somewhat tempered the scourge of inflation, it is our
belief that the intrinsic damage done to the economy by the global health
pandemic, an increasingly larger wealth gap, and years of social injustice have
already aggravated concerns about the prospects for an all-inclusive market which
might persist for decades to come.
Concurrently, the aging of the
population combined with large pockets of regional strife/warfare is generating
a population and wealth migration like none ever witnessed before. This immigration, wealth, and actuarial
dilemma is already demonstrating the potential to divide the financial world
into two distinctly different strata.
The key question, though, is whether there is an appetite in political
and social circles to do anything which might dissipate the effects of pitting
one group of citizens against the other in a race to acquire and operate
precious natural resources. As these
finite supplies become more scarce, and more expensive, will straightforward
monetary and fiscal policies be sufficient to quell the yearnings of those who
are going without?
There is no doubt that a profound
shift is underway in market outcomes.
The pandemic and its associated uncertainty
blemished “traditional” market fundamentals and analysis for the foreseeable
future. A number of statistics became
meaningless in the grand scheme of things when everyone retreated to their
personal cocoon for survival’s sake. Why
might we think now that government, business, or the hierarchical elite are any
more incentivized to do things differently, given the complexity of social
issues that confronts us? Not only are
fiscal and monetary policies becoming irrelevant, but the agonizing progress
towards economic prosperity has been unmercifully side-swiped by the global
Covid pandemic, war in Ukraine, and political gridlock in state and national
capitals. Anecdotally, last week’s series of earnings
reports were indicative of that sea change in consumer spending and industrial production.
Rivalry amongst un-equals
Overall, the world’s business
community response to the demand slowdown has been less than persuasive. High interest rates and lower production capacities
created a buildup of idle corporate cash, thus creating a shocking divide
between those entities with “record profits” versus a grim crippling of local small
businesses and entrepreneurship.
Consumers are paying dearly for the
burden of a “recession-in-name-only” that we believe is already underway. Disposable income is not what it used to be
prior to the pandemic, and is at a smaller percentage of overall spending to its
previous levels. The trichotomy between
wealth, the perception of wealth, and lack of wealth is now increasingly
unsustainable.
A funny thing happened on the way
towards engineering one of Wall Street’s longest and largest bull market
spikes: business and politics unwittingly conspired to convince all of us
that as long as things appeared to be doing well, plump profits and expanding
portfolio valuations didn’t correlate to all the things we should have been
focusing on during our “prosperity”, such as agricultural infrastructure (hunger),
wage and savings rates (poverty), climate and war-induced population
migration (shelter), and disease eradication (healthcare)……all
things which came home to bite us in the last three years.
The problem is not that there aren’t
any strategic thinkers, qualified engineers, or compassionate bankers anymore. Rather, the pandemic panic inspired and
aggravated the worst characteristics of business and humanity: hoarding just
for the thrill of it. The staples of a
good life were taken for granted, and taken advantage of, by those who could
afford them, and held hostage by the lust of their greed from those who
couldn’t.
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