By Michael Every of Rabobank
Back in early 2020, one of the ‘signs that things were really getting serious’ for the always-astute media was that the latest Bond movie, ‘No Time to Die’, was postponed for release until October. Now it is October, and it has been postponed again until April 2021. Moreover, the UK cinema chain Cineworld is suspending operations because business is not viable as virus restrictions stand; and the global chain AMC apparently only has enough cash for the next six months. In short, the movie industry --how we watch them, and so the money for how they are made, if they are made-- could be dying, indicative of a whole key slice of the service-sector economy.
The title of the Bond film is obviously ironic given the backdrop of Covid-19. Doubly so given the film itself looks like it could easily die at the box office anyway when it is released: the trailer looked staggeringly generic, and its plot --about an eco-terrorist who has to kill everyone to save the planet-- is totally unoriginal (Spy Who Loved Me? Moonraker?) and already eclipsed by reality around us, from environmental protests to Covid-19.
On which, real life is indeed better than a movie. US President Trump tests positive for Covid-19; seems fine; is then hospitalised; his doctors give North Korea style positive assessments; leaks say things are far more serious; he goes on a Popemobile style drive outside; and he might even be discharged today, after releasing a video in which he certainly looked healthy, even though everyone knows that it is the next few days that are critical with this virus. As Scott Adams might say, if this is all a movie, what is the ending you then project? Not just philosophically, but practically, this is all just about clinging on to narratives.
If the Walter Reed press sessions are a bit too banana republic-y, what can one say about the countervailing media and social media? On my own feed I have comments from leading journalists and economists, intelligent people all, who claim variously that: Trump is not ill and this is all an election ploy; Trump is in fact close to death and all his videos are staged; Trump knew he was infectious long before he was and deliberately tried to spread the disease; and that Trump needs to be replaced by VP Pence via the 25th amendment immediately, even though he may be discharged today. Just to underline, this is all coming direct from the intelligentsia, not the bazaar. Though it is bizarre.
Allow me to add this academic note (Giry, 2020) on conspiracy theories: they “are used to reaffirm the dominant and established values of an in-group while identifying and subsequently portraying outsiders in a negative light. Conspiracy theories express a reductionism that serves and contributes to uphold, promote and reinforce conventional behaviours, while discrediting or delegitimising inappropriate or marginal ones.”) Isn’t that dynamic as evident today from a deeply-rattled neoliberal establishment as it is from the angry populists neoliberalism created?
Of course, all of what we deal with in life is a story – even at work. In markets, you deal with either data or news-feed as the inputs for your decision-making; and if you lift the lid on data or news, you find it is all just a narrative too.
How about ‘hedonic quality adjustments’ on inflation that mean if the price of steak goes up, they assume you buy more chicken instead? The magical thinking on the Aussie labour market, where cities full of jobs come and go every month? That US initial claims suddenly had their methodology changed just as they are needed as a guide for the first time in decades? And I haven’t even mentioned huge backwards revisions that change the story years later. Or underfunded national data services struggling to keep up with structural change in the economy. Or data with Chinese characteristics.
Back to today: how about opinion polls, which sit between data and news? Two just out show Trump is within the margin of error vs. Biden, or beating him in the electoral college; yet an NBC/WSJ survey puts Biden 14 points ahead and set for landslide win. How does one account for this? Either by doing a deep-dive on the internals (sample size; geographic distribution; method of polling and the inherent errors therein; registered voters vs. likely voters; the assumed party mix vs. recent trends in both voter registration and enthusiasm surveys; the assumed demographic mix in times of change in such, etc.)… or by ignoring all that and seizing the poll preferred as one’s narrative.
Likewise, pure journalism is increasingly, deliberately partisan in what it does and doesn’t talk about – because that sells better to those wanting the narrative. As Twain put it, “If you don’t read the newspaper, you are uninformed. If you read the newspaper, you are misinformed.” (And if you read this Daily, you are probably either bored or confused – or very angry, based on some of the replies I get.)
On which, the press is now saying more US fiscal stimulus finally seems likely, probably helped by the sub-consensus payrolls data on Friday, showing economic momentum is ebbing. No time to waste if the recovery isn’t going to die, for sure.
Not so much global coverage today of China’s semiconductor giant SMIC saying that it is finding it hard to get key supplies due to its US blacklisting; or that the US is starting to enforce its long-standing immigration rules that prevent members of the communist party from immigrating there.
So, in short Trump is really sick; or Trump is faking; or Trump is recovering but not out of the woods yet. And Trump is going to lose; or Trump is going to win. And stimulus isn’t going to happen; or stimulus is going to happen. And so risk on; or risk off.
Man makes trades and markets laugh.
(And so do Aston Villa fans: reality really can trump fantasy in 2020, it seems.)