Uncertainty

We live in complicated times and boiling everything down to a single word is a fool’s errand but if that task were forced upon me my single word would be uncertainty. People don’t like uncertainty and neither do capitalist markets. Currently both our personal lives and economy are trapped in multiple uncertainties making life uncomfortable. Let’s explore.

I have long been on record professing that Wall Street is far from a complete indicator of our economy but it is a convenient and easily accessible barometer. Over the last few weeks to say it has been volatile is like saying NBA centers are tall. While the Dow has experienced a few very good days the net is decidedly negative. (My suspicion is that the few good days have been examples of bottom fishing with investor/lucky sperm cell club gamblers taking advantage of semi-crash induced low prices.)

The primary cause is the uncertainty that the coronavirus poses to the global economy. Regardless of your economic philosophy the one factor where all “models” are consistent in is that markets like to have an idea of what the future holds. Uncertainty breeds fear which trumps the “players” normal primary motivation of greed.

On an individual level people don’t quite know what to anticipate. We see something approaching panic buying. The prudent stock up while not exactly knowing what the future holds including the very real possibility of prolonged “home confinement” along with shuttered or bare shelved stores. Here is a very real question many are facing: how long of a confinement/supply drought should you plan on and exactly when will it commence? How does a small retailer prepare to be shuttered by government order or face the very real possibility that customers will be afraid to come in the building? Bottom line important impulse sales can’t happen online and you can’t deliver when the government bars delivery vehicles and drivers are “confined to quarters”.

I did not vote for George W. Bush and am the antithesis of a fan of his but I feel his greatest moment of leadership came on the evening of 9/11. The events of that morning deeply shook America. Plain and simple a lot of people were flat out scared. Bush got back to the White House, went on national TV and calmed everyone down. I’m not praising his overall handling of 9/11 before or after the events of that morning but his job that night was to reassure the American public that its federal government had a handle on things that that it would be kept safe. That, not the silly publicity stunt on the aircraft carrier was W.’s mission accomplished moment.

Wednesday night President Trump addressed the nation for about ten minutes from the Oval Office and the next day the Dow tumbled over 2,000 points. That is what happens when you are challenged to read a teleprompter loaded with a “plan” that contains a lot of lies and no discernable solution to the problem at hand. The main point in the plan was to shut down travel from Europe with the notable and inexplicable exception of the UK and Ireland, (that last part was contained in one of the many clarifications issues subsequent to the address).

The idea of shutting down access to America from some European countries to stop what Trump portrays as a foreign invasion of the coronavirus defies logic. The virus is very much here already. What Trump is doing is like locking the door after the bandit has already gotten in your house but them making sure a ground floor window is wide open. Where I grew up we had a word for actions like that: stupid.

The reality on the ground is that the Trump administration disassembled the infrastructure it inherited from the Obama administration to face an unpredictable but over any appreciable amount of time inevitable health crisis. Then it largely ignored the “warning signs” that came at least as early as last December. Subsequent to that it failed (and I suggest intentionally) to adequately test. (That condition exists to today.) Other than incompetence – which is certainly a major contributing factor – the only other motivation is the willful ignorance of Donald Trump. Which he “let out of the bag” when referring to the Americans on a cruise ship in American territorial waters just off the coast of California he really doesn’t want accurate numbers because without them he can understate the extent of the problem and it makes him look good in Bubba’s eyes. This is a case where ignorance enables deniability and in the case of Trump relative bliss.

Perhaps Trump really is a Republican. For years I’ve been telling my readers that Republicans are hazardous to your health. Like most Americans I have a lot of questions but this much is clear: it’s going to get worse before it gets better and the lack of competent leadership causes additional uncertainty which is exacerbating the problem. There is a certain unintended irony that this article was posted on The Ides of March.

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One thought on “Uncertainty”

  1. With respect to the stock market I have been saying for decades that it is way overvalued. That seems obvious to me and I have no training as an economist. Before the crash on Black Monday in 1987 the Dow was at about 2,700. Plug that number into your inflation calculator and the 2020 number is around 6,200. It appears that the coronavirus is making clear the artificial bubble. Let’s see what happens tomorrow.

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