Possible Paradigm Shift?
The last few weeks I have been busy traveling so that will explain why I have missed a few columns. I was in Charleston, South Carolina attending the College of Charleston attending the 8th Annual Strategic Investor Symposium and in Oxford, Mississippi attending The 13th Annual Taste of Oxford Charity Event for St.Judes Children’s Hospital. Two great events with two different focuses.
What I love about these events are the people and the reasons they are there. To learn, to explore and to give. The last part is key. We can bitch and moan about America and the division we see every day but when it comes to giving, there is no country in the World that gives as much as we do. That is something that all Americans should be proud of.
While I was in Charleston and Oxford I spoke to a lot of people, mostly business owners, and I did something the Fed has never done. Got a small feel for what people on the ground are worried about and the struggles they are faced with everyday.
Maybe, talking with this small segment of America is not really a true indication of what is happening across America but I believe if you talk to business owners in Worcester, Mass or Des Moines Iowa or Fort Collins Colorado, you will get similar concerns. Business is business and people are trying to build wealth or maintain wealth for the next generation and the next.
By and large what I heard was pretty simple: The Fed has gotten it wrong from the start. The concern for ESG is pretty much at the bottom of everyone’s list. The generation coming out of college wants to do the right thing but the right thing does not help get them to work at a high level. Inflation is not transitory and it will be around for much longer than expected. The regulatory environment is getting worse again and that will hinder growth.
What I would like to do is go over these concerns, one by one.
The Fed, I have lambasted endlessly and won’t do it today but I feel some solace in knowing I am not the only one that feels this way.
I asked a couple of business people what they thought about ESG initiatives and the responses were pretty much unprintable. It may have been just a southern thing or maybe I asked the wrong people but the feeling I got was that these were nice ideas in principle and yes, some things could be better managed with ESG in mind but for the most part they thought it was some left leaning Democratic push to control even the smallest detail of their businesses.
The biggest concern for a lot of business people was getting qualified people to work in their businesses and stay in their businesses for longer than one year. Many new employees feel entitled and that entitlement takes many forms. From feeling no obligation or loyalty to any particular company to expecting more from the company than they intend to give. It has to be frustrating trying to build something and not being to fill the roles needed for the overall company’s success. One owner told me that he would rather hire a 45 year old man who lost his job in a similar field than hire any fresh graduate out of college at half the cost. He said he would have to train both on how his company did things and he fully expects the new graduate to leave in 18 months while the 45 year old would stay as long as the company would have him. I have heard this from several different people and they feel that this shift in work is going to be a long term problem with no solution in sight.
Regarding that situation, I told a friend of mine who was very concerned about it that believe it or not, a recession will completely reconfigure the work/life scenario and things will rebalance because employees will not hold all the cards during a recession and the employees that remain loyal will have a better chance of retaining their jobs.
Every business owner and practically every person I spoke to felt inflation is here to stay and it will top out within the next few months. The Fed raising rates will help but it needs to be more aggressive and they all understood that rate rises won’t filter through for at least 6 to 8 months (interesting because I thought it was 12-18 months). They all said they are dealing with it and raising prices just to stay even. I asked them when inflation subsides will prices and that answer was NO. Market forces will determine pricing and if their costs remain high, so will their prices. That is inflation 101.
The last point they made was the regulatory environment and how it will benefit where they live and will hurt Northern (and yes Democratic) states. Companies again are moving operations to locations throughout the South and yes costs are a major factor but regulations are equally as important. Complying with hundreds of pages of regulations through different jurisdictions is time consuming and expensive. If I am going to build a new plant in the Northeast and each state I propose to build in has volumes of regulations that I must deal with, why wouldn’t I look to move South? I can build the plant on cheaper land, lower taxes, lower power costs and a major reduction of regulation and compliance costs as well. Not to mention that unions are not as powerful. In the past 40 years there have been a couple of migrations out the Northeast and Midwest and they eventually settled down and as time went on, the cities that lost population regained population for multiple reasons. It is possible this reverse migration will happen again but the longer Northern states put roadblocks up to success, the longer it will take to regain what they lost.
Again, this is just a small sample of concerns people are having with the present economy. We didn’t even get into talking about politics because I knew beforehand their political feelings and I kept the conversations about business and the economy to keep them sane.
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