MARY REICHARD, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat.
NICK EICHER, HOST: Happy to be talking with financial analyst and advisor David Bahnsen. David, good morning to you.
DAVID BAHNSEN, GUEST: Good morning, Nick. Good to be with you.
EICHER: And you.
Boy, what a tough thing to see last week: our Capitol under siege. Broken windows, rioters rushing into the two chambers, occupying those chambers, offices of lawmakers. Really unsettling.
I know you feel the same way most Americans feel seeing that kind of thing. But it was a little surprising to notice that the markets kind of shrugged it off.
BAHNSEN: Well, I wrote about this quite a bit last week because a lot of people are surprised that the markets didn’t speak in a sense of oh no, this is a revolutionary event that is going to reverse the direction of economic growth or reverse the direction of corporate profitability. And I really don’t believe anyone should be surprised by that.
This was a horrible event. This is one that has shaken a lot of people for very good reason. And there are all sorts of categories by which this event needs to be understood and remembered.
However, the impact of corporate profitability is just simply not one of those.
When you look at the role that interest rates play and monetary policy plays and GDP growth and the vaccine and Q2 or Q3 pent-up demand. All of these things are exponentially more significant to where corporate profits will go, where economic growth will go, than the events that took place at the Capitol.
So, I think it’s entirely logical that the markets didn’t respond negatively to the event. But, of course, that is not the same thing as saying that there isn’t a very significant cultural undertone, a social impact that is tremendously concerning in what happened. It’s just that the markets don’t have the ability or interest in pricing in something that is so immeasurable and ambiguous.
EICHER: We’ll get to jobs in a minute, because we got the final report on that from December and that puts 2020 in the books.
But I want to talk to you about the tech industry, which seems to be moving quickly and aggressively to shut down speech on the right—now that government oversight is about to be fully vested in the other side.
I bring this up to you, because you believe the market is the better vehicle for oversight.
BAHNSEN: Yeah, I think that the issues around Big Tech are complicated and I am really sympathetic to what a lot of conservatives feel is a concern right now in the biases that may be there and so forth. I do believe that it’s imperative that we seek market solutions and not government solutions because I don’t think people really want Elizabeth Warren in charge of Facebook anymore than they might be happy with Mark Zuckerberg. And so I think we have to be careful about jumping from the frying pan into the fire.
I also think we have to be careful about using expressions like denying free speech because, of course, these are privately owned businesses. They’re allowed to set their own rules. But people understandably want a fair playing field. And the real — if I’m being totally fair, the concern is the amount of power that Big Tech has. It’s different than just saying you have to publish my book. No, they don’t have to publish your book in these kind of open forum type deals and the Section 230 controversy. I get it. But I think from my vantage point as a markets guy and an economist, I just want to point out that this is a great example as to why Christians in particular need to take more seriously the idea of shareholder rights, shareholder activism. Avoiding these things disempowers you, OK? I would rather see there be more Christian presence in the boardrooms of Big Technology. And if not in the boardrooms, at least in the shareholder meetings. Our ability to wage our own proxy fights is completely legal and enforceable and impactful. They respond.
Market forces, though, will have to say to some of the companies that maybe get out of bounds, at the end of the day, there has to be an impact to their shareholder value. And to the extent that they do things that upset a significant portion of the customer base and the shareholder base, there is absolutely no question that the economics will trump ideology. They will not say, well, at least we’re controlling the world with our leftist view, but, yeah, our stock’s down 40 percent. They can’t suffer a stock that’s down 40 percent. So, there has to be an impact and I think market forces are going to be a powerful arbiter here.
EICHER: Let’s tear into this jobs report before we go for the week, David. This is the December jobs report. It gives us a complete official picture for 2020.
December, after month on month of job growth, we recorded minus 140-thousand. The vast majority in leisure—restaurants and bars—with all other sectors up.
But taken all together, 2020 was minus 9.2 million jobs net-net. Your analysis?
BAHNSEN: Yeah, and you said restaurants and bars. I would add in that leisure and hospitality category a really significant subcategory in the hotel or hospitality space. And so it’s part of that leisure category, but even beyond just the dining, the travel and hotel space that has just been decimated, and, of course, should be really transitory in the sense that that’s the type of thing that I think Americans are eager to get back to doing when they can. And so I’m encouraged by the fact that there should be a turn there, but it’s really discouraging at how severe it’s been for that group of people, particularly a lot of the lower paid, more like hourly workers that are less likely to have economic cushion to get through those types of periods.
But, yeah, the jobs report, I guess as bad as it is, it really could have been and should have been and would have been a lot worse. I think that the limitation into the sectors you’re talking about is tragic for those sectors, but there really is a relief that this didn’t spill over more into other parts of the economy, that the manufacturing data and the industrial production, the exports, our trade relationships. There has been a reasonably healthy part of activity that’s enabled full employment and certainly, I think, everyone’s aware that if it were not for such a heavy level of digital capability throughout the economy, that this would have been far, far worse.
What I just am so worried about is that labor participation rate, people that give up looking for a job, so they don’t have a job and they identify as no longer looking. If that number, which has just violently moved higher stays higher as it did in the post-financial crisis and throughout the years of the Obama administration, I think that’s an awful thing for the society. Because at that point you don’t just lose their labor output, which is important, you don’t just lose the productivity, which is economically important, but those people really can fall into depression. They can fall into– there’s a whole human dignity component there that becomes very concerning. So, when a four-week or four-month loss of a job of a local restaurant when you’re a college student, that’s awful and it’s financially stressful. But it’s not undermining human anthropology. But that higher labor participation number falling down, that to me could become much more concerning. And so I’m watching that very closely.
EICHER: I’m going to leave it there. David Bahnsen, financial analyst and advisor. Always great to talk with you, the voice of reason. Thank you, David.
BAHNSEN: Thanks, Nick.