‘Tis the season and I think it’s way overdue to put in a good word for sunny optimism. It’s been a while since the Golden Turkeys, and I apologize for being offline. This having to work for a living gets in the way of serious bloviating. Here is what is bothering me. The overall tone of the national dialogue as mediated through the mass media seems overly dark and bleak. The Sunday talk shows and the business press seem to deliver day in and day out an entirely untoward and, in fact, largely data free bias toward pessimistic outcomes and gloom. I think that’s wrong (so I’m really writing about how stupid and obdurately mule-headed, faux sophisticated pessimism about virtually everything really can be, but ode to that made for an awkward title.)
Here at Dechert, we are in the middle of our annual effort to understand the risks and opportunities of the new year. Admittedly, it is more akin to staring into a crystal ball or at one’s navel, or reading sheep entrails than a rigorous science, but it does mean that we look up from our desks, look at the world around us. We look at data and try, in a clear-eyed way, to understand the road ahead. At the end of the day, and to ensure I don’t bury the lead here, having done that, we’re pretty bullish. But that view is not getting me on the Sunday talk shows.
This is not to say we don’t worry a lot about… well, frankly almost everything, because why otherwise be a lawyer? But we see many around us who seem to have become unduly negative, evidencing an almost fetishistic angst and anxiety over the economy and geopolitics writ large. Looking at the world through such deeply darkened glasses clouds thinking. It’s enervating and antithetical to the creativity and dynamism which typically marks our economy. The path of the pessimist is littered with things not tried, opportunities not taken, new structures not embraced because… they might not work and, hey, the ultimate sin for the sophisticate is… lack of sufficient pessimism.
Late in the business cycle is a wonderful time for pessimists, cynics, killjoys and worrywarts. It just stands to reason, sayeth the consigliere of doom, that after a ten year expansion it’s time for us clear-eyed pessimists to have our day, to embrace that bad things are finally happening, to revel in calamity, to chortle over catastrophe and to congratulate our fellow sophisticates and say, “See? I told you it was going to end badly!” There’s nothing happier than a Jeremiah wannabe on a bad day.
Sunny optimism has gotten a bad name. Jejunity (I’m not sure that’s a word, but you get the point) is the stuff of the eye roll. To the true sophisticate (largely all self-anointed), the optimist is as a naïve waif, unthoughtful, and an embarrassment at cocktail parties.
The cadres of the disaster mongers among us are excited right now. They think they are on the cusp of a splendid vindication. There are so many mawkish and self-indulgent public displays of febrile “sadness” by the chattering class, looking down and tut-tutting at the rest of us for not appreciating that the world is a mess and only they can see it, while anathematizing those who don’t share their world view.
I can argue here that really clear-eyed thinking right now is to see that the prospects for near and immediate term are pretty darn good. Oh, sure, there are always black swans (and at least one orange swan). There’s geopolitical risk (think that chubby dictator with all those missiles and bombs), there’s Brexit (still), there’s continued dysfunction in Washington (and in the EU among other places), there is an election coming up. Each of these events contains a kernel of an event risk which could trigger bad outcomes. But, you know, none of that’s happened yet and we’ve been in a place where none of that has happened for quite a while now.
Unemployment is unbelievably low, productivity is fine, inflation is similarly low, equity markets are strong, and even if half the country hates the other half of the country on sundry political issues, we all generally get along. The dynamism of the American economy seems relatively undiminished by all this noise. The Sun’s still out.
Nonetheless, much of the chattering class still sees terrible things ahead. Through darkened glasses, they whip up for sale a frothy intellectual confection of anxiety and worry, taking isolated bits of bad news and folding it gently into underlying notions of the end of capitalism, the growth of inequality and all those various “isms.” It seems they’re cheering on the notion that the American experiment is failing and the center won’t hold, and they’re just damn pleased with themselves for noticing and highly dismissive of those who don’t. All this seems way more ideologically than observational.
In this world view, no matter how good things look right now, those who don’t see the end of days, those not amongst the initiated, are simply misled. In fact, the better things look, the worse it probably really is. (Sidebar – This is all the mother’s milk of the political set. Isn’t it a little tacky to express deep sadness at our multitudinous failings in front of the klieg lights and high five in private over calamity? On the other hand, we keep electing the scoundrels, so it obviously doesn’t bother us that much).
So why am I nattering on about this and what’s it all mean in the real world? If we all get convinced that the end is nigh, we hunker down, we pull in our horns, we reduce our ambition, we get defensive and depressed. Really good doomsaying can actually trigger a self-fulfilling prophecy. We might talk ourselves into a recession if we try hard enough. Remember all the handwringing over the inverted yield curve? How’d that turn out? But, what we think matters and can trump (sorry) what is actually observable if we’re not careful. There’s a time to be defensive, there’s a time to hunker down, but only when the data supports the crouch. But that’s not now.
So as 2020 starts, we remain bullish. (I may hedge a bit in public because, hey, even I have to go to a cocktail party once in a while and not get shunned). As far as I can tell, there’s no hidden disaster looming in the economy right now. Sometimes a cigar is just a cigar. Sometimes there is no secret subtext. The DaVinci Code made a terrific read, but hey, it was a novel. There’s no trilateralist commission at work secretly conspiring for the destruction of the West. Elvis really is not hiding in Key West and there are no alien corpses cooling their heels in Area 51. Wield Occam’s Razor regularly, please, and don’t be misled by the noisy chatter of those critics of success amongst the talking heads trumpeting a failed future in endless search for airtime. The economy is not on the edge of failure, nor is the culture, nor is the American experiment. Things are OK. The economy will expand for a bit longer anyway. We’ll get through elections. We’ll get through Brexit. The EU will continue to bumble along in its can-kicking glory. Geopolitical risk will bubble but not burst. And we will all get along.
So I plan to enjoy the holiday and I’m suspecting that when we get to the CREFC convention, the parties will be pretty cheerful. (As Dechert had over 350 RSVPs to its party within hours of sending out invites, it appears people are in the mood to have some fun.)
So let’s enjoy the holidays and Merry Christmas to all. At some point, this will all end, but not right now. I’ll worry when it’s time. As St. Augustine said on a slightly different topic, “Lord, make me chaste, but not quite yet.”