Mediocrity knows nothing higher than itself, but talent instantly recognizes genius.
-Sir Arthur Conan Doyle
I've been saying for the past five years that America, fractured by an economic shock and a follow-up crisis not seen since the late 1970s has focused on blame, rather than recovery and has settled with mediocrity as greatness. Last week the media and White House bragged about the idea that the new healthcare law will seduce 2.5 million Americans out of the workforce, because they'll make more money from taxpayer funded programs and from special subsidies associated with Obamacare.
There were already 126 public assistance programs before the so-called "Affordable Care Act," which might be the cherry on top for those that feel the role of government is to provide economic justice by any means necessary.
The problem with an agenda so narrowly focused on redistribution, not only of wealth, but of accountability as the broader nation gets mired in a slow slog of a recovery kept alive, only because there are still millions of Americans willing to start at the bottom and work their way to the top; along the way this positively impacts mankind with jobs, innovation and inspiration. After the Congressional Budget Office pointed out how many people would bail on the American Dream for a modern welfare state, President Obama's team went to work to remove any stigma.
"At the beginning of this year, we noted that as part of this new day in health care, Americans would no longer be trapped in a job just to provide coverage for their families, and would have the opportunity to pursue their dreams. This CBO report bears that out, and the Republican plan to repeal the ACA would strip those hard-working Americans of that opportunity."
The White House
-Office of the Press Secretary
When the healthcare law was being pitched (before it was rammed) I don't recall any proponents saying people earnings up to 400% of poverty would be rewarded with subsidies. I heard you could keep your doctor if you wanted to, but it turns out the real pitch should have been; you can keep your job if you want to or you can quit, or work part-time, because the others who are dumb enough to punch a clock will pay your bills.
Or I should say, passionate enough to work, even as their paychecks are relentlessly being siphoned to reward people for not working. These people are being described by the White House, news outlets, and the New York Times as "liberated."
"Will free people, young and old, to pursue careers or retirement without having to worry about health coverage. Workers can seek positions they are most qualified for and will no longer need to feel locked into a job they don't like because they need insurance for themselves or their families. It is hard to view this as any kind of disaster."
-New York Times on CBO report
Taken at face value the President of the United States has liberated millions of Americans, and the CBO has severely undercut how many people will simply seek the comfort of the sidelines the way senior citizens flock to those all-inclusive cruises. Of course people pay for their cruises, no matter the discounts; we are talking about people being rewarded and their actions cheered, and encouraged as a modern version of liberation without putting any skin or sweat in the game. I suspect this is a way to get even...reward those whose ancestors were prevented from climbing the ladder of success.
Just remove the ladder and replace it with a sense of comfort, and the smugness of knowing others are being force into indentured servitude.
Up to 70% of Americans are unhappy with their jobs (see table), and it is easy to see how there could be a bum-rush toward the Utopian Gates, and into the world of less work and more benefits. If you earn more than 400% above poverty you may not want to apply, but it's still an option. Welcome to the new American Revolution focused on mediocrity and social justice. Enjoy it while you can because it will not last forever, but it promises a kind of freedom...a new day. Of course, it will be a disaster for all, as it's already a disaster for all those things that made American great in the first place.
Ineptitude and misguided obsession with fairness that seeks to somehow address all the miscues of America's past have severely limited economic growth. The successful have been beaten to a pulp, and now the target is work itself. The White House continues to call people that don't work "hard working" and now, those that choose a more leisurely life at the expense of their neighbors footing the bills, are also deemed "hard working." Everyone, including those most enticed by the absurdity of being economically rewarded for not working should see the danger in this scenario.
I still believe that most Americans know the difference between genius and mediocrity and will choose the former, even if it means putting in more elbow grease, blood, sweat, and tears to allow genius to blossom from within, and for the entire nation.
For Those Willing to Work...We Salute You
The number flashed on the screen that only 113,000 new jobs were created in January, and stocks took a dive in pre-opening action. The initial panic subsided by the opening bell on Friday, but traders were shaken and it felt like the session could go either way. But, then the "good" stuff began to matter, and stocks got traction and boomed into the closing bell.
In the new world of mediocrity finding a silver lining isn't difficult, and in this case there were several:
- Manufacturing +21,000 three times the monthly average of 2013 (7,000 in machinery and 5,000 in wood products).
- Mining +7,000 versus monthly average of 2,000 in 2013.
- Retail trade plunged -13,000, but the loss of 22,000 came from hobbies, sporting, books, and music stores, but auto dealers added 7,000.
- Construction added 48,000 matching the highest monthly number over the past three years.
I'm excited about data I'm seeing in construction, which has informed a lot of our recent investment ideas. I think we'll see the building of single-family homes pick up and commercial projects as well. Since 2011, December through February has seen signs of life in construction only to watch it fade quickly, so I remain guardedly optimistic. There is pent-up demand, but the tug-o-war between old America (focused on greatness) and new America (focused on mediocrity) is the wildcard.
There is also an assumption that the private sector job creation of 142,000 will be revised significantly, even though the same assumption for a December improvement fizzled, when only 1,000 additional jobs were added to the original tally.
I rely more on corporate and industry data rather than government surveys for macro assistance in our modeling, and I think 2014 could be the best year economically in years, mostly as businesses invests and consumers continue to spend. Consumers are going to have to demand more credit, which could still be difficult as banks are more willing to make business loans, but reluctance to make loans to the general public lingers.
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