I saw the film Network in 1976 with my future wife at the Arnold Theater in Point Pleasant, New Jersey. Beyond being blown away by Faye Dunaway’s portrayal of someone akin to Mary Tyler Moore’s evil twin, I realized immediately that the writer, Paddy Chayefsky, had brilliantly captured the mood of the time. Most people remember the “angry man” speech by Peter Finch as the fictional newscaster Howard Beale. Particularly, the part where he urges people to go to their windows and shout “I’m as mad as hell and I’m not gonna take this anymore.” That probably misses a lot about Chayefsky’s insightful speech. For those who have never seen the movie, a little more of the Beale rant deserves to be repeated.
"We know things are bad – worse than bad. They’re crazy. It’s like everything everywhere is going crazy, so we don’t go out anymore. We sit in the house, and slowly the world we are living in is getting smaller, and all we say is: ‘Please, at least leave us alone in our living rooms. Let me have my toaster and my TV and my steel-belted radials and I won’t say anything. Just leave us alone.’
Well, I’m not gonna leave you alone. I want you to get MAD! I don’t want you to protest. I don’t want you to riot – I don’t want you to write to your congressman, because I wouldn’t know what to tell you to write. I don’t know what to do about the depression and the inflation and the Russians and the crime in the street. All I know is that first you’ve got to get mad. You’ve got to say: ‘I’m a human being, God-dammit! My life has value!"1
The film has such resonance today that the temptation is to see the current period as an update to the movie. Certainly, the multitude of similarities provides many opportunities to engage in confirmation bias. If you lived through the period, it certainly feels the same. Yet, the differences between now and then are great. We do not have double-digit unemployment or rolling recessions, at least not yet. Instead, jobs go begging as the labor force participation rate has collapsed and not recovered. Some of us have retired and others are being paid to be left “alone in our living rooms.” The United States also never integrated its economy with the Soviet Union as we have with Communist China. Yet, the global supply system has broken down and everybody knows it.
In May we wrote that “if inflation is too much money chasing too few goods, globalization has allowed the quantity of goods to expand accordingly. Where we once depended upon ourselves to supply most of our goods and services, we now buy what we need from developing countries. The supply of goods expands and keeps inflation under control. We cannot outsource our houses and so we see inflation there.”2 The pandemic has exposed the weaknesses in our supply chains. We are not currently able to use globalization to expand the supply of goods to match an unfettered expansion in the money supply. Inflation is now once again with us, and the expectation that it will continue is becoming widespread at boardroom tables and kitchen tables. Inflation is not likely to be as temporary as central bankers around the world had hoped. Jerome Powell may wish for things to return to normal, and supply-chain problems will certainly ease, but, if normal means leaving ourselves vulnerable to more breaks in our supply chains, that is unsustainable.
We do not know who today’s Paddy Chayefsky will be, but for now, the Federal Reserve (Fed) has no choice but to ease off on its program of unprecedented securities purchases, even though economic growth in the last quarter grew at a weak 2%.3 That will still leave the markets and the economy in a very accommodative (and inflationary) monetary position. Instead of a 120-mph monetary policy, we may have a 90-mph one. This will be bad for government bonds. At the same time, we believe that business earnings will continue to mildly favor stocks, but with periods of significant volatility as higher rates periodically spook the markets. I endeavor to explain that below.
By the way. Did you know that Faye Dunaway was born in Bascom, Florida, current population 120?4
1.) Lumet, Sidney, director. “Network.” United Artists, 1976.
2.) Bassini, G. “May Newsletter” Treasure Coast Financial Planning, 05.2021
3.) Cambon, S. “ U.S. Economy Slowed in Third Quarter on Delta Surge, Supply Crunch”. The Wall Street Journal, Online: Economy/U.S. Economy, Oct. 28, 2021. https://www.wsj.com/articles/us-gdp-economic-growth-third-quarter-2021-11635371631. Accessed on 11.02.2021.
4.) https://www.imdb.com/name/nm0001159/. Accessed on 11.02.2021. Population Estimate, Florida as of 2020. http://edr.state.fl.us/Content/population-demographics/data/2020_Pop_Estimates-Revised.pdf. Accessed on 11.02.2021.