Is It Really Only February 1st?

Just when we thought we saw it all in the torturous, volatile and seemingly endless year of 2020, the very first month of calendar 2021 delivers us a violent attack on the U.S. Capitol and a short squeeze of epic proportion that has turned into a virtual tug of war with financial, political and societal ramifications.  The fact that this is happening while the world is frantically working to mass produce, fill, finish and distribute vaccines in our attempt to outrun a quickly mutating Coronavirus creates a world that can only be described as surreal.  Add to this the foundation of social unrest based upon inequalities of opportunity and the complexities inherent in a transition of power across the U.S. Government, and it is enough to bring anyone to their knees wondering when we will come together and focus on solutions? 

Let’s all take a collective deep breath and break down our challenges so we can begin to understand these issues, appreciate the abundance of positives that surround us, and prioritize solutions to make ourselves and the world better.  Here are a few thoughts in this regard:

1. Violence of any kind is wrong and we cannot stand for any of it.  Frustration with the system, heartfelt conviction in one’s beliefs, a deep desire to effect change or any other excuse or explanation does not excuse any form of violence or physical harm to a person or property.  We personally believe those who take these destructive actions are a small cross-section of society, but they are incredibly vocal and active and cause much more damage per pound than one can truly comprehend.  The goal of these actors is to antagonize the rest of us with the hopes of creating an ever-more combustible environment that will only serve to cause more pain and division.  The vast majority of us who are not on these extremes must have the fortitude to call this behavior out, find a basis to bond with those who may have fundamentally different opinions, share debate and reason as the tools to mediate, and lead with maturity, compassion, empathy and the goal of unity.
2. The financial volatility and market damage last week was in many ways not just about making money.  For at least some of those driving this process, stock trading and the resultant short squeeze were the means to an end, but the end was about perceived societal issues and not merely trading profits.  We need to be mindful of the rhetoric accompanying these efforts that focus on people assumed to have too much and deemed to be out of touch with the suffering of too many.  The fact that there was such joy in harming a few of the people responsible for managing the assets of retirees, pensioners, union workers and endowments, speaks volumes about the underlying anger that continues to pervade society.  This passion traveled through a structural flaw in the stock market that not only allowed, but may have encouraged people to take real risk of losing their own precious money in order to hurt others they had never even met.  If you spend just a few minutes on Reddit, you can feel this anger and disregard for one’s own financial health as long as true pain is felt by those perceived as the oppressors.  This is not just about squeezing short sellers.  We don’t have all the answers to fix this and it will be quite an undertaking, but the first step must be to see this for what it is and then engage everyone in constructive dialog to begin to repair the fractured trust.  A big part of the American dream is a merit-based opportunity to do better than your parents and this has become an ever more difficult goal for far too many to achieve.  We need to strengthen the opportunity for upward mobility through education, training, economic and trade policy, thoughtful fiscal policy and the inculcation, elevation and enforcement of a universal sense of fairness and equality.
3. We are in the midst of the (hopefully) worst part of the Coronavirus pandemic.  We all feel it and the numbers do not lie.  As we have said in recent letters, the period from October until the arrival of spring in late March is the most dangerous period for all of us.  We are also in the midst of a political transition of power, right at this critical juncture.  Let’s give credit where credit is due, as the prior administration in the U.S. did much to enable the pharmaceutical industry to achieve rapid miracles and deliver multiple vaccines that will be effective (enough) to allow for the eventual return of normalcy.  Thank you and very well done.  The new administration appears to have some smart bold ideas to aggressively work on a national basis and help the individual states with greater production, supply chain logistics, distribution, prioritization and administration.  Let’s not fight any of this and just work together to achieve our vital collective goal of herd immunity and the restoration of “normal” life and opportunity.  Solving Coronavirus won’t cure all of our ills, but nothing we can do is more important to help us begin to tackle our myriad of issues.  Further, there is little doubt that we need yet another meaningful dose of stimulus to help individuals, states, hospitals, universities, selected companies and others get through this final period.  Further finger pointing and political maneuvering would be devastating right now, and we urge everyone in power to unite and together lead us to the other side.  Leaders should lock themselves in a room filled with good intentions, honest and transparent debate, and a heartfelt desire to find a compromise.  We can all be winners if we do this together.

There is so much that all of us at Jefferies have to be thankful for.  We are surrounded by family, friends, colleagues and clients who care deeply about us.  We have purpose in our daily lives as our firm is strong, our people are smart, empathetic, driven and kind, and we are able to safely operate effectively from our homes.  If we keep this up, Jefferies will emerge from this cataclysm of events stronger and more united in culture than ever.  Every step of the way, we have the responsibility and privilege of doing our very best to help all of those who may not be as fortunate as we are.  These next two months will be amongst our most challenging, but there is truly light at the end of the tunnel and we cannot wait to emerge with all of you as we confront every challenge the world throws at us and turn them into opportunities.

Happy February and Thank You For Getting Us All This Far,

Rich and Brian