The world has always been complex and difficult to predict and, as a result, often confusing. That said, for most of our working lives there have been some fundamental realities which have proven to be so consistent that they have been foundational to how we think and live. What happens when these once thought invincible pillars are challenged or, like almost every other thing in life, are subject to interpretation and outright change? Our guess is that many of you may be feeling some of these shifts right now and, quite frankly, the word "unsettling" is a mere understatement to describe how it feels.
Interest rates have been declining generally for close to four decades, culminating in the last few years where money was essentially free on a global basis. The result has been that many of the good things in business and life were artificially magnified by cheap financing and most mistakes were not that harmful, as there was extra time and resources always available to set things on a better track. Every dip might as well be bought, and if you owned an asset, the sky was the limit. Growth was the path of least resistance and the only metric that was truly rewarded. Profit and tangible worth were devalued and practically frowned upon because that meant growth objectives weren't optimized. Whenever the occasional problems popped up, global stimulus was the easy recipe to cure them because money was free, and why should the size of deficits matter when the incomprehensible trillions were multiplied by minuscule interest coupons? But somehow, the inflation we all hoped to bring back in a controllable manner has escaped the barn and wow, it is angry. When money starts to have a cost, then what?
For decades, virtually all of us lived in a world where we felt physically secure. While there were isolated events, skirmishes and clashes that were big deals to those living in the troubled neighborhoods, for the lucky rest of us they were events that we watched calmly from a distance as we surfed between our favorite sporting events and new streaming shows. Discussions about nuclear events, brutal attacks on the innocent civilians of sovereign countries, and God help us, even the whisper of a potential world war, in our minds were matters for the books our children would read in history class. We don't believe any of this is imminent, but there is no doubt that a couple percent of our brain cells are now occupied on such horrible thoughts.
Equally “unsettling” is the social fabric of America (and many other countries around the world). Many of us have been eagerly anticipating the eventual return to the more logical “center” or “middle” on topics that appear more common sense oriented than either extreme would have you believe. The world used to value discourse, difference of opinions, compromise and unity behind the larger number of common goals we all share versus the handful of individual differences that set us apart. There was a fundamental optimism that we would eventually “do the right thing,” though only after exhausting all alternatives as Winston Churchill famously said. But all one needs to do is put two dueling cable channels on simultaneously today and wonder if those days will ever return or conclude that the “American Experiment” is indeed, just an experiment. What has happened to our world that people cannot even agree on the facts, let alone the interpretation of them?
The purpose of this note is to acknowledge that almost all of us are going through some version of these painful machinations in our own minds. If these monumental and worrisome shifts are affecting you, you are not crazy, a hopeless pessimist or alone. We believe that acknowledging what is going on and honestly talking about it will help all of us, both individually and collectively. Only then can we begin to make sense of the cross currents and come up with smart action plans to make things better. For example, if you embrace that money will no longer be free versus living in denial, you can make smart pivots in every aspect of your life. You can manage your household better and you can truly serve your clients by being honest and pivoting in your advice and perspective. None of us can enjoy hearing harsh reality, but those of you who accept reality are highly likely to pivot in the right direction and succeed. Accepting, understanding and proactively changing course can certainly help us get through at least some of these complex new realities.
It may not feel like it (especially around election time), but we can also all make a difference toward bringing our society closer together. First, everyone must vote in whatever election or referendum is upcoming. That is the low hanging fruit, and it is our responsibility, privilege and honor. The harder part is to start listening to each other before quickly judging or reverting instantly to our pre-existing beliefs. The two of us have our own biases, as we do not take much solace in extreme perspective or ideology from either side. We rarely see much in life that is simply black and white. Further, we have found in life that those who are the loudest and most sure of their perspective are often the ones most wrong. Compromise is the way to improve the fortunes of the greatest number of people, and what is politics if it isn't serving the interests of as many good people as possible? We will remain optimistic that the “American Experiment” will continue to shine as the brightest pillar on the planet based on our fundamental belief in the positive nature of people and the importance of supporting each other (especially those in need and, of course, regardless of race, religion, sexual orientation, gender identity or ability).
And while at times we feel a sense of helplessness about the state of geopolitics, the potential of an ever-more spiraling war, and an unprecedented ugliness in domestic politics – wondering if our efforts are making a difference – we find relief in staying focused on the things we can directly affect as opposed to engaging in debilitating worry about things we cannot. Things like family, personal growth, philanthropy, friends, health and career all need our attention, especially in times like these. It can be hard to sleep at night or turn the news feed off given the scale of pain around the world, but we can’t lose sight of the things right in front of us that desperately need our focus as well. We also take comfort in our belief that good has always eventually triumphed over evil and we believe this period will be no different. We choose to spend our time, energy and emotion where we believe we can make a positive difference for as many good people as possible.
Thank you for listening to us. If you cannot tell, we are hugely optimistic in the face of a very complicated moment in time. November is the last month of Jefferies’ fiscal year, but more importantly it is a month for all of us to give thanks and appreciation for our considerable blessings. All of us at Jefferies are incredibly fortunate to be joined together through our careers, but at Jefferies we all know the connections we share are far beyond any job we do. For all of us, it is truly personal. Let’s charge through this last month of fiscal 2022 like we always do, together with teamwork, tenacity, focus, passion, sense of urgency and a deep appreciation that united we can handle even the largest and most complicated of fundamental changes and challenges.
Embracing change and thankful we have all of you with whom to navigate it,
Rich and Brian