Build Back Better Billionaires

By Michael Every of Rabobank

Before internet memes allowed for spontaneous sarcasm to go viral, work-based humor used to be based around coffee mugs and posters. The reigning king of these David Brent / Michael Scott media was: “You don’t have to be mad to work here – but it helps!”

Yet what else is there to say of a day where a bankrupt meme trade US stock just a year ago was responsible for pushing the stock of another US firm – whose polarizing CEO is either the current Henry Ford or Barnum Bailey – up the equivalent value of an entire Ford company IN ONE DAY; and so taking its value into the “four commas” $1trn club mocked by ‘Silicon Valley’. Which, by the way, is still the most realistic program on TV, along with ‘Veep’.

Another famous US billionaire’s stock went up despite disappointing earnings, a slew of attacks on it from politicians, and withering criticism from a whistle-blower (funded by another billionaire, says Glenn Greenwald) – because it decided to blow $50bn on a stock buyback, which is also around the equivalent value of a Ford motor company.

Another billionaire is going to build a space station, not just a rocket, sorry a ‘business park. And again, we are back to David Brent / Michael Scott and ‘The Office’. Said billionaire is also going to be hosting secret data for British spy agencies. I am not sure how the latter sits alongside the vision for ‘Build Back Boris’ we tried to paint ahead of the UK budget this week (more so was the hike in the UK living wage), but Bond films really are over, aren’t they? Blofeld should just use a SPAC to buy MI6, or at least host its data.

And this was all on a day in which the White House said it was serious about an “unrecognized capital gains tax on liquid assets”, which would mean an annual tax bill of around half a Ford motor company for some of the Gavin Belsons involved in these particular Hoolis. Or are they assuming this tax proposal will join free community college, green power, and expanded Medicare (etc., etc.) in the Congressional trash can?

As the financial and tech economy sees the heady days of 2000 again, forever, the physical economy is still experiencing a 2008 – in that the supply taps have been turned off, like the credit ones were back in the Global Financial Crisis. And no central bank can help, or even seems to want to. Has any emergency liquidity to fund logistical responses been offered to anyone, similar to what would be made available to any good over-levered, under-researched financial firm stuck for cash? Silly question. Actually, a very good question. Silly central banks.

Against this backdrop, just after allowing shipping containers to be stacked higher than usual to help clear a vast and growing goods backlog, the Port of LA/Long Beach has announced it will charge ocean carriers $100 a day in late fees for every container hanging around. This policy begins from 1 November and kicks in after 9 days waiting time for truck pick-ups, and 3 days for rail. As we predicted with ‘In Deep Ship’, what we see is a structurally logjammed system, and a political backlash against those reaping vast profits from it. On one hand, carriers are not responsible for containers once unloaded, so why should they pay? On the other hand, ports are attempting to incentivize carriers to find new ways of working – and make money. Presumably, carriers will pass these costs on as demurrage, making importers pay. Which will increase the likelihood of Congress passing the Ocean Reform Act that flips demurrage charges from importer to port and carrier, turning global shipping on its head.  

Not to worry though, investors. The financial economy and the real economy are two entirely separate entities.  

Or are they? Yield curves are flattening again, as we had expected, underlining that raising rates is a policy error in the making. That might even be enough to dent the physical and the financial economy! But who am I kidding? We all know a bailout would then emerge for the financial side of things via more QE.

And yet, absent any policy tightening, we see insane action in financial markets, a surge in supply-side inflation, and rising wages in some sectors, as labour regains some bargaining power now foreign labour can’t be used so easily due to the slowdown in import flow. Oh, what is a poor central bank to do?!

On one level, they end up looking like David Brent / Michael Scott, with their bad dad jokes.

• If they act, they err
• If they do nothing, they err
• If they say “Err…”, they err

On another level, they are paid far better than David Brent / Michael Scott, and get to front-run trades they make, and/or give $250,000 after-dinner speeches afterwards, or work in advisory roles. Oddly, never for charities. So, “You don’t have to be mad to work here – at all.”

Don’t we need new thinking, new ideas, new vision, and new leadership though? The only ones providing it so far are the Gavin Belsons of the world; and so we get what we see around us – ‘Build Back Better Billionaires!’