Common Cents & The End of the Week (Finally) – November 1, 2019

November 1, 2019, by John Norris

This past Monday, I told some co-workers this was going to be one of the biggest weeks of the year, if not the biggest. There was an FOMC (Federal Open Market Committee) meeting on Wednesday to determine the future of monetary policy in the United States. Also, on that day, the Bureau of Economic Analysis (BEA) announced its first stab at the 3Q GDP (Gross Domestic Product) calculation.

Today, Friday, the Bureau of Labor Statistics (BLS) released the Employment Situation report for October 2019, and the ISM issued its Manufacturing Report on Business for last month. These are all weighty economic releases and events. Further, over 400 publicly traded companies announced their most recent quarterly earnings estimates. Whew. Then, there was the whole impeachment thing, which we felt was probably going to come to head this week or next, and it did. Double whew.

In fact, there was so much news and noise this week it is a relief Friday is almost in the rearview mirror, as I type. The best part? Well, I think everyone feels a little better about the health of the economy and corporate America now than they did on, say, last Sunday.

Where the rubber meets the road, to use a corny analogy, we might not be firing on all cylinders, but we are firing on enough to get to where we are going. Which is where, exactly?

If we were to believe the headlines and what purports to be nation’s zeitgeist on social media, it would appear as though we are on a train to nowhere or going to [much warmer climes] in a handbasket. Basically, our goose is cooked and the die has been cast. Stick a fork in us and call the undertaker. We are done for and our name is Mudd. There is no coming back from the system’s dysfunction and the misfortune it has wrought. Right?

Don’t buy a bit of it. Push back on it, and wade into it.

On this past Tuesday afternoon, I made a 3-hour economic presentation at the Alabama Power Company headquarters in downtown Birmingham. Yes, you read that right: a 3-hour economic presentation. I have news for you: it wasn’t my first presentation of that length this year. In fact, I have done longer, and have developed something of a framework for appearances of this length.

In the first hour, I break down the GDP equation into its component parts, discuss what is happening in each, and end with a broad 12-month forecast. During the second, I talk about those things, or foreseeable events, which could alter the forecast from the first hour and impact our investment decision-making process. In the final frame, I bloviate, which is probably an apt verb choice, on why everything I went over in the first two segments isn’t as important as we think it is. How it is temporary, transitory, if you will. Nothing but a snapshot in time. A glimpse merely of future months when the human condition is best measured in years and decades. By comparison, decades and centuries are better yardsticks for countries and cultures.

When you consider this country has had an economic recession, depression, or some form of financial system crisis or panic in, literally, every decade since its creation, you have to wonder how it is we have stumbled forward at all. How have we been able to grow our access to goods and services? Essentially conquer the basic needs of humankind (namely food, housing, and medicine) which had prevented growth in the past. Equal distribution? No, but distribution enough to allow for a sharp increase in the life expectancy and even height of the average American over the last century. Now, hunger or food insecurity is the exception rather than the norm. Shoot, as I believe I have written in this column in the past, my father’s father, my grandfather whom I knew, was born in 1891. This was 12 years before the Wright Brothers left the ground. My grandchildren will see human beings land on Mars, and I might as well.

This is how I closed my comments, mercifully, to the group assembled in the auditorium at 600 18th Street North in Birmingham, Alabama, at 4:15 pm CDT on Tuesday, October 29, 2019. Most heads nodded in agreement with my sentiment.

However, I tend to keep my remarks to economics, the markets, or what have you. But what of our society and how it seems to be falling apart at the seams? Whew, huh?

Some years ago, approaching 20, I heard a sermon in church about our collective wringing of hands and gnashing of teeth over the supposed decline in purported American values. It seems this is a constant concern, regardless of decade. The minister said something along these lines, and this is a major paraphrase: “I won’t debate whether our society is baser. All you have to do is look at what passes for entertainment and conclude it is. However, no one can sensibly argue it isn’t fairer. Even those who have attempted to do so with me freely admit they wouldn’t go back to the way things were, when life was supposed to be better, even if they could. Nostalgia, like has been said of inertia, is a very powerful force, and not for the better.”

This struck me at the time, and still strikes me, because it is demonstrably true. Perfectly fair? No, but that is an impossibility due to the very nature of the humans which make up our society. But…better? Getting better? A ha, that is the $64,000 Question.

If history serves as a guide, and it typically does, things will continue to get better despite the headlines and assurances they are not. Further, every time I say “this time is different,” I find out it really isn’t. With these things said, I am not certain there is an historical precedent for the ‘number of cooks we currently have in the kitchen,’ our ability to communicate and disseminate news/opinions, and the ability to create money out of thin air in order to solve all of our perceived problems. Perhaps this time really is different due to the tools we now have and our inflated egos from conquering the basic necessities of mankind, hubris if you will.

But, you know, if that last sentence has even a sliver of truth, a mere gram of it, perhaps we would be wise to do the follow the lyrics (below) of a somewhat obscure song by Billy Crudup from the movie “Rudderless.” The name of the song is Sing Along, which I listened to this morning on the way into work, and is the motivation for this edition of Common Cents.

Take a breath and count the stars

Let the world go round without you.

If you’re somewhere you can hear this song

Sing along

Close your eyes and count to ten

Maybe loves the only answer

I will find a way to sing your song

So sing along.

It would be a much easier than getting angry at the headlines, and IS a pretty good way to end what has been one of the busiest, most eventful weeks in 2019. You know, I feel better at the end of it than I did at the start…both the week and this newsletter.

 

Have a great weekend.

 

John Norris

(Please note: the opinions expressed in this newsletter are mine and mine alone. They do not necessarily reflect the views of Oakworth Capital Bank or any other of its associates or shareholders. Nothing in this correspondence should be construed as an offer to provide investment or financial advice of any type, let alone an offer to buy or sell securities.)