As we enter the heart of the “stupid season” aka election cycle, a few things are worth pointing out. The motive here will circle back to the world financial and more specifically, how it applies to our clients. Along the way, it will drift into other things. This one will be lengthy so apologies in advance for the number of words.
At the 30,000 ft view, we can all agree that presidential elections are the mother of all spending sprees. Massive amounts of money will be dumped into all forms of advertising. Media, social media, print pieces, robo calls, robo texts, door to door canvassing, yard signs, billboards.... all will be used to define or modify perception. All with an end in mind. Along the way, everything will be fair game in the fight to win.
We (or should I say I) have a term used around the house in everyday life that amps up this time of year. I call it, “being in the matrix”. Reference to the 1999 movie with Keanu Reeves in which “the system” is perpetually defining reality for the souls within it who are, in turn, feeding the energy needs of the matrix with their response. In todays world, the media and its handmaiden social media, are evolving into the 1999 version of The Matrix. The amount of money and influence these outlets command is staggering and the goal of “influencing” is evolving into attempting to refine our reality. If you haven’t already seen the Netflix documentary “The social dilemma”, I would strongly recommend you do so. It’s especially relevant during these times.
Ed...you are wandering (you say).... interesting.... but how about things financial? OK....here goes....
As stupid season unfolds, perceptions get formed, and emotions run hot. There is always a very human need to react. The fight or flight mechanism is ingrained in us. OMG, Biden is gonna win and taxes will go thru the roof, I need to sell now! Candidate X is going to win, inflation is gonna go thru the roof! All kinds of suppositions are floating around based on a perceived result which, in part, was formed by the matrix (er... the media). The point is, these are suppositions.
Because most (if not all) media is biased (at best) or fake (at worst), suppositions are dangerous. The media drive to influence us would not preclude the unintended consequence of us doing financial damage to ourselves. Think in terms of the depth of mis information spewed in March/April with Covid, and the financial damage done by many who felt the need to react. Because 2020 is the ugly follow up to the 2016 dumpster fire, it can and will get worse.
In the last ranting it was teased that the election will not be the primary driver over the next couple years. Here is “the why”....
An economy functions under the reality of supply to meet demand. Notice I didn’t say supply and demand because supply is useless without aggregate demand. If more widgets are produced and nobody demands widgets, it’s useless. If people demand widgets, someone (or many someone’s) will make them. It’s how all economies work. During this year (2020) there has been major disruption to that. The global knee jerk responses, fueled in large part by the vocal media hysterics, has done a number on aggregate demand. The US will have negative GDP in Q1 and Q2 with an uptick from a low baseline in Q3. Still all down meaningfully in contrast to 2019. Essentially severely reduced demand throughout most of the economy. Ok Ed... where is the good news? Sounds like what I hear on the TV that you just railed against?
The facts of where we are is what it is. The departure to where we go is the issue. If one believes (which I do) that demand is not destroyed, its merely postponed, you get a different forward look. If one believes (which I do) that the Fed dropping cost of money to almost zero has allowed free cost of capital to float the economy along until that happens, the future doesn’t look so bad. Regardless of who wins the election, there will be multiple vaccines before year end. There will also be greater use of therapeutics and medical techniques to drive the mortality rate down further. A mortality rate that is grossly overstated today (by the matrix) in large part to frame reality toward an objective. Life will return to normal with some permanent changes (mostly for the good). Following this trail, one would expect “postponed demand” to become “realized demand” as people spend to buy those things, take those trips, and enjoy those experiences that were delayed due to Covid. Yes, 15 percent of the population is in real hurt (which will be another ranting later) but 85 percent are flush. Everyone I speak with says “I haven’t been spending nearly as much as usual and my checking account is building up ! “ (Exclamation and smiley face for effect)...... For them, it’s not the lack of money that’s the issue, it’s that there is no place (or current drive) to spend it right now. Like kids waiting for Santa, the spend will happen eventually. When that happens, en mass, it will ramp up macro consumption (and the economy). Think about it. Do you honestly believe people are not going to travel again, cruises and Caribbean beaches are going to be empty forever, and sports fans are not going to pack their teams’ stadiums? Trust me, people are wired to spend and spend they will. Just a matter of the “when”.
Sadly, this isn’t the rantings of a maniac (although some might say so)....These are all real economic theories not being relayed by the matrix (er media...) because it’s not to their objectives. If the media’s job is to “sell more media”....pleasant outcomes don’t work. Because the narrative doesn’t fit, it’s not put out. Regardless of who wins, the financial system will continue to function, taxes will go up (or down), laws will be amended (or not), and we will adjust with the best interest of our clients at heart. Been that way for 25 years. Whatever the result, we will work with you, in a thoughtful and analytic way, to review impacts to your financial plan and investment portfolio.
As always, thanks for listening. Even more, thanks for entrusting us as your financial partner on life’s journey! Now and always, don’t hesitate to reach out for any reason.
Regards,
Ed Stiles
Disclaimer: This writing is for use by Retirement Capital Advisors clients or associates only. It is not intended as specific financial or investment advice and is for informational purposes only. All references to any investment markets are conceptual and no specific buy or sell recommendations are implied. Specific discussion can be directed to the author or your own financial advisor.