“Once I built a tower, now its done, Brother, can you spare a dime?”
In the headlines this morning
Another fascinating weekend… It’s a holiday in the US, and much of UK is off for mid-term. I’m still trying to digest the importance of last week’s news about Amazon pulling out of its New York HQ2 deal in light of protests by liberal lefties. I’m thinking it’s a very interesting moment, and rather changes the game.
How much do current events, like Amazon, change the game of Macro Strategy decisions? In the past the role of strategist was to carefully scrutinise, analyse and conceptualise Central Bank interest decisions, input the available economic data into our calculations, spice it up with some expectations about global trade prospects, and make rosy assumptions about growth and consumption to determine (ie; guess) if stock and bond prices will rise or fall, and therefore what to buy.
We assumed we lived in a solid-state political and employment universe where its binary that consumption will rise in line with employment, and that any job is a plus job.
Recent events demonstrate that simple equation may need massive revision. Over the past few years we’ve been forced to factor in the irrational and unpredictable politics of populism, and their effect on markets. Now our expectations about employment and consumption are under pressure.
My heightened interest in the topic might be because I’m a Scot (ie Socialism is part of our DNA), and had an uncle who ran away from Glasgow to America as a kid who became wonderously successful yet remained a Wobbly – a member of the IWW; Industrial Workers of the World – his whole life. (I so admired him I named my first born, Jack, after him!)
Nobody comes out well from the Amazon affair. Jeff Bezos and Amazon look out arrogant and out of touch – as one US chum told me New York’s politicians are idiots: “after its walked out on its current home town without paying a dime in alimony, let’s give a company that doesn’t pay any taxes a couple of billion in bungs to come to the last affordable bit of NYC and price all of AOC’s constituents out of their homes… what’s not to like?”
New York’s political leaders look stupid, confused, disjointed and lost. The young congresswoman AOC (Alexandria Ocasio-Cortez) might be smiling like a winner today, but strikes me as a child who expects congratulated for throwing her new toys out the pram. How will she explain chasing away 25k well-paid jobs as the core of her presidential strategy and her New Green Deal?
Whatever the rights and wrongs, the faction of the Democratic Party crowing about their victory over the unacceptable face of capitalism have set a new bar in the rising and angry debate about tax, wealth and jobs. Forget Trump and walls – that’s irrelevant. (Declaring an Emergency is more an issue – what can of worms has that opened?)
Where Congresswoman Alexandria Ocasio-Cortez has clearly scored is painting Jeff Bezos as the villain – arrogant, threatening, and a serial tax-avoider. That chimes with a large part of the US electorate – and sets some dangerous precedents in terms of populism – Remember how close Bernie Sanders came?
The US should be the happiest place in the world these days. Employment among minorities has never been so high. More women than ever before are in the total workforce, which now exceeds 63% in terms of the participation rate. Years of economic growth, and more recently Trump’s tax boost last year, means investment has been strong. Corporates are doing well.
Yet, after 10 years of ultra-low interest rates, tax-giveaways, and a massive increase in the wealth of the richest 0.01% of the US population (who now own a staggering 10% of the wealth!), wages for the rest are only now beginning to show any signs of upwards pressure.
While Bezos and his fellow trillionaires wonder which slice of cake to guzzle next, the facts are the poorest workers in the US are in poverty. Over 60% of the lowests’ incomes go to cover their housing and transport costs, the next 25% on food. The 50% percentile income bracket – definitionally the “middle class” – spend 44% on housing and travel. More than half the population aren’t saving for their retirement, but are scrabbling to put food on the table today.