Davos Attendees Split on Economic Outlook, Sno-Bunnies.
DAVOS, SWITZERLAND: You can wander around Davos, Switzerland for a week, skiing, rubbing elbows with your corporate betters and half in the bag on kümmel without running into the committee that, rumor has it, picks the next US president, or the room where they keep all the reptilian aliens who are really running the show. If you are the sort inclined to listen to the political theories of your yard guy, this can be a disappointment.
The charming Swiss resort town became decidedly less so when 1,500 or so A-types gathered under the banner of “Cooperation in a Fractured World.” With all due respect to my yard guy, the industrial leaders attending the forum this week certainly didn’t look like they were starting wars, engineering a New World Order, or even organizing a proper business conference orgy. These people looked blue.
High interest rates to the fight against inflation will have a knock-on effect of a recession – something that you used to fix with buckets of cheap money. But money isn’t cheap anymore, and that is what has the young bucks carrying on about the end of days. The older attendees – the ones who know the difference between good whisky and the simply expensive – are less panicked.
They have a different term for it. When I was in the bond business the three phases of the business cycle ran roughly:
1. The next round is on me!
2. Last call…
3. Sell the boat!
It seems that we are staring into the barrel of Stage 2, and hoping to avoid a protracted “Sell the boat” phase.
The hope here is for a soft landing, and with inflation at least making noises that its peaked in US and Europe, we just might get it. There are red flags to be sure, from Ukraine going wide, Taiwan starting up, and a debt ceiling battle in Washington that triggers a default. Just six years ago, a US default was one of those things that was not possible, but since then a lot of impossible things have happened. The conventional bet is that Western economies can catch wing again on China’s headwinds; until some ass from Memphis points out that we’re all on the brink of war with each other and their collapsing economy isn’t going to help this. President Xi doesn’t throw a bone anyone but Xi.
For their part the annual Davos migration of protestors aren’t in any mood to throw common sense a bone either. Waves of the aggrieved flew in in the back of the same gas-guzzling planes as many of the attendees to protest the big oil companies that keep those jets airborne. Greta Thunberg was being arrested protesting a German coal-mine so couldn’t attend, but did issue a “cease and desist” notice on the forum. Ms. Thunberg is not, in fact, a lawyer, or a judge. I have no idea how the young lady pays her bills.
Back at the bar, the chatter isn’t that the end is nigh, but that it might be time for a last call. Executives are preparing for recession, and to judge by the latest drop in sales numbers, so is that segment of the population who don’t fly to Switzerland to talk about money, or scream at people who do.
Markets, however, have a perverse logic of their own that favors asymmetry. True, a stampede can turn a mere spook into a panic, and it happens all the time. On the other hand, everyone making the same bet, even if it is calmly prepping for the inevitable, can ensure that it doesn’t happen. No one in Davos can precisely say which it is. Neither can the protestors. President Xi is clueless, and for that matter, so am I.
With that in mind, we might be better served breaking out the schnapps and keeping an eye out for the sno-bunnies.