30,000 Foot View #6
A MORE BALANCED APPROACH
One year ago, I moved across the United States. While the move was prompted by a job opportunity, it was more than that. It was part of a shift in thinking about how to re-shape life in an attempt to embrace balance. In telling this story it’d be remiss of me not to acknowledge there has been a running joke that Portland is where young people go to retire.
That notwithstanding, my 2019 cross country move correlates to a broader 2020 real estate story that I want to use as a jumping off point for a broader conversation. That narrative being; people are FLEEING major cities!
Like most things in 2020, that statement is probably overblown. Are people moving from large cities to smaller cities/suburbs at an increased rate? Yes, it’s in the data¹.
But, are cities dead? No. The Zillow data tells a compelling story, but it may not be quite as dramatic as news headlines would lead you to believe. It seems like more of a rebalancing or a rotation, just like what occurs in the public stock market.
In other words, it’s a healthy sell-off of urban metropolis living in favor of smaller city and suburban living.
But then there is San Francisco…
…now that is a striking chart and much less of a “healthy sell-off”. Is San Francisco dead and gone forever? No. It might be in a temporary zombie state as it’s inhabitants assess how they got here.
Through this short-term pain—the real estate market being just one example—something profound could be happening in this country. The year 2020 could be the beginning of fundamental changes in how Americans think about life, work, and the role of government.
A few tidbits on each, in reverse order:
🏛️ National Government: In 2020 we witnessed a Republican administration send 𝗍̶𝖾̶𝗆̶𝗉̶𝗈̶𝗋̶𝖺̶𝗋̶𝗒̶ 𝗎̶𝗇̶𝗂̶𝗏̶𝖾̶𝗋̶𝗌̶𝖺̶𝗅̶ ̶𝖻̶𝖺̶𝗌̶𝗂̶𝖼̶ ̶𝗂̶𝗇̶𝖼̶𝗈̶𝗆̶𝖾̶ checks out to the American people. You would have been laughed at if you thought this possible as recently as February of this very year. As an example of how this type of thing was looked at; here is Joe Biden’s 2017 take on universal basic income:
The theory is that [_________] will result in so many lost jobs that the only plausible answer is some type of guaranteed government check with no strings attached. I believe there is a better way forward.
The piece of the quote that I redacted originally stated “automation” as the culprit for the mass loss of jobs in Biden’s 2017 article.
What if we dropped “a pandemic” in that [_________] space? That’s precisely what took place in the spring of 2020.
In a year of polarization and disagreement, when it came to cutting these checks during COVID-19, everyone (party affiliation aside) seemed to agree there was no “better way forward”. That agreement in itself is an amazing thing.
🗳️ Local Government: At the national level, the presidency will likely shift towards the center (a.k.a, a more moderate platform) in November when Biden takes the White House. Even the fact that Biden is the Dem candidate shows a shift back towards moderation when compared to more progressive alternatives (e.g., Warren, Sanders).
At the local level, a more moderate governing body tends to happen naturally. One way that happens is via the make-up of the individual representatives. In some generally super liberal states, there are conservative government officials in high-level key roles. Examples from back in New England include Republican governors in Massachusetts and Vermont as well as a long-tenured Republican senator in Maine (for now). Those examples leave out New Hampshire which is one of the best examples (at least in the northeast) of party fluidity in its recent governors and senators.
On the other hand, California has not elected a non-democrat governor or senator (not named Arnold) since 1988—an example of a bit of a lack of balance.
The best way I’ve heard this dynamic described is by Matt Yglesias. Matt is unquestionably left of center, but is 𝗆̶𝗈̶𝗋̶𝖾̶ ̶𝗐̶𝗂̶𝗅̶𝗅̶𝗂̶𝗇̶𝗀̶ quite good at offering a non-partisan analysis on topics like this.
Hyper progressive coastal cities (e.g., the previously discussed San Francisco and Portland) are currently working to find the right electoral balance.²
🗄️ Work: 2020 might make it feel as if there is only one option:
Blow up the current American capitalist model.
Here’s to hoping there is a second alternative. Namely:
Modify the current American capitalist model for the modern world.
The act of modifying isn’t as sexy as blowing something up. To better market this, I offer you “capitalism as a solution” (CaaS).
According to Deloitte, 84% of millennials believe it is their generations’ duty to “change the world through what they do and who they work for.”
If the American workforce, which will be increasingly comprised of millennial and gen z workers, continues to use its collective head and heart when deciding not only which companies to purchase from, but also which companies to work for, a more balanced view of the role of the corporation could actually take hold in America.³
Consumer spending is approximately 70% of US gross domestic product. If the up-and-coming workforce sticks to these morals, it will be “purpose and profits” rather than profits vs. purpose. That’s an extremely exciting shift. CaaS!
🌎 Culture & Life: In Extraordinary Popular Delusions and the Madness of Crowds, Charles MacKay obsessed over the psychology of nations. Fitting for 2020, this included writing extensively about apocalyptic soothsayers and past plagues. But maybe the most important concept is a broad statement right in the preface:
Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.
While 2020 has been a year of extremes, the underlying theme weaving through each of the concepts above is the idea of more balance. People are increasingly making decisions that they believe will lead to a more balanced approach to their lives. A shift to more balance in both the who and the how of government. Balance in the role of the corporation. Leading to balance in precisely how these important elements of the American culture fit into our lives.
Black Lives Matter and COVID-19 may have been the combined catalyst that marks the start of truly dramatic changes in how Americans work and govern. What could continue or even expedite the changes and lead to more outside the box thinking across political lines? A couple of examples could be; (a) the climate and (b) considerations regarding how to manage the first real challenger to America since the USSR in China.
But just as Mackay observed in 1841, this type of rebalancing takes time.
Unfortunately, in the short-term we can only expect 2020 to continue to be tumultuous with the US elections⁴ and COVID-19 hanging in the balance. As stated previously; at the end of the day, one must choose to be long the American system or short it. Better days ahead.⁵
FOOTNOTES:
¹ Using Portland as the example; UHAUL data shows a greater than 300% increase in UHAUL truck rentals from San Francisco to Portland in 2020. Anecdotal? Yes. Illustrative of a broader trend? Yeah, sure—see the Zillow data below.
² Conversely, there are hyper conservative states (mainly in the mid-west and south that I am less familiar with) that would benefit from more balance (in the other direction) in their elected officials as well.
³ The Business Roundtable took the rather shocking stance of at least alluding to the idea that not only profits matter when it comes to corporations. Even in the consumer products space, this movement towards considering environment, social, and other governance issues in purchasing decisions is happening. Here’s one example—Beyond Meat. People are paying more for these alternative meat products than their real meat counterparts. Even with the price working against Beyond Meat, there is a clear shift in consumer behavior that is drive by something other than cost to the consumer.
⁴ I am completely obsessed with the political prediction markets that have really come into their own since 2016. Speaking of my proclivity for American culture/capitalism; markets like these are stunningly interesting to me. With the pre-election polls so far off in 2016, it would have been very interesting had these markets been a little further along in their lifecycle at that time.
⁵ CaaS!
Part 3 — continuing to disclose individual stock purchases since COVID-19 hit the US and impacted the stock market
Keeping this one super short given the lengthier content up above. But at least we have some sexy sectors this time around!
🔩Industries/Sectors: Technology and Consumer Goods
📈Short-term Performance:
I say these are sexy sectors because, on balance, these are mostly growth names. Growth is cool. Value is lame.
That’s sarcasm but because growth companies have been outperforming in 2020, on any given day seven or eight out of ten of the best performing individual stocks in the COVID CAPITAL portfolio are in the above sectors. The other two/three of the top ten have been discussed in prior notes — UPS, Disney, and ViacomCBS.
EDITOR’S NOTE: Like some of the other 30,000 content, the
A MORE BALANCED APPROACH
memo above was written over an extended period and with the purpose of thinking through several important macro trends. The intended outcome for the author, and hopefully the reader, was to embrace positive thinking during a polarizing time. Not by sticking our heads in the sand, but by attempting to look past those with an agenda (e.g., certain news headlines and bipartisan politicians) and better understand the data, the historical context, and the good that can come from 2020.