“For finally, “you can always count on Americans to do the right thing,” as Churchill pointed out, “but only after they’ve tried everything else.”
-John C Bogle
Childhood stories stick with us, don’t they? I have found myself frequently referring to The Wizard of Oz over the past two decades. The story behind The Wizard of Oz may have been inspired by the real-life economic struggles during the Gold Standard of the late 1890s. We have the familiar plight of the tin man, the scarecrow and the lion as they trek to Oz via the yellow brick road.
Our dear Tin Man represents the American steel industry worker. At the time, steel workers represented 18% of the workforce. Factories were shuttered and thousands were without employment. When we first meet the Tin Man, he is so rusted that he cannot move. He is without a job, out of money and out of hope.
We soon meet the timid Scarecrow, who represents the American Farmer and then the Cowardly Lion, who depicted unsuccessful Democratic presidential candidate William Jennings Bryan. Farmers were particularly hurt by these events. They faced a rising value of their debts along with declining agricultural prices and massive inflation. They owed the bank more than they borrowed and struggled woefully with day-to-day expenses.
Fast forward 120 years and we are seeing many of the same things today. History always rhymes, but it never repeats itself.
Layoffs are intensifying and unemployment is soaring as coronavirus closures continue. All sectors will suffer, but retail, leisure and travel top the list. We all suspect an inevitable global recession. A record 3.28 million Americans applied for unemployment benefits last week and we suspect another 1 million this week to apply.
To put this in perspective, peak unemployment for any week during the Great Recession was 665,000. These were big numbers. Real big!
Congress, in the “Emerald City,” has worked up a $2 Trillion emergency relief package to keep us afloat day-by-day that the Senate has already passed. But as we all know, the American way – and our free-market economy - will not work with government-imposed shutdowns and a cease of business activity. Americans want to work! We want to produce! We must get back to innovation! And rest assured, we will.
While we weather the uncertainties and fear of today, remember that nothing will dim the strength and resolve of the American spirit. We are tenacious, we are innovative, we are driven. We have prevailed during periods of tragedy and crises, and our markets have always recovered.
We cannot control elections, U.S. fiscal policy, an oil price collapse. We cannot control a deadly pandemic. We need to focus on fundamentals, and what we can control.
This industry, as you have experienced, thrives on a cycle of fear and greed. Decisions made during the height of uncertainty are the lifeblood of our industry. It is never if, but when we recover as markets always make new highs.
Stay focused on the yellow brick road, friends.