I'm Not Going to Take This Anymore
Written by Paul Siluch
August 16th, 2024
"I'm as mad as hell, and I'm not going to take this anymore!"
- Howard Beale, from the movie Network (1976)
The 1970s are remembered as being some of the worst years for global conflict since WWII. This occurred after a relatively peaceful period from 1953 to the mid-1960s, following the Korean War.
Cold War tensions never stopped, and they exploded in the late 1960s and through the 1970s as conflicts broke out in Vietnam, Angola, Iran, Syria, Israel, and many parts of Africa.
After a short lull, a second surge of conflicts in Afghanistan and Iraq happened in the 1980s. Both the Russian invasion of Afghanistan and the Iran-Iraq war started in the 1970s. Whatever ignited tension in this decade took a long time to die out.
Humans fight. It isn’t something we should be proud of, but history shows it to be true. Whether it is for food or territory, we battle like every form of life and use whatever means to gain both. And that often leads to war.
Causes of War
Because we are such an irrational and emotional species, we can disagree for almost any reason. The two primary ones are:
- Lack of Dominant Leadership
- Food insecurity
Lack of leadership has played out over the centuries when the dominant power becomes distracted by internal struggles. When the cat is away, the mice will play.
The US, Canada, UK, France, Germany are all distracted today. Election turmoil, policy polarization, wealth inequality…especially in the US. Russia has used this to its advantage, as have China and Iran. Time will tell if the U.S. reasserts itself as the world’s top dog, or if that role is shifting somewhere else.
Food insecurity is another cause, although one that takes longer to simmer. Food becomes expensive through disruption (wars, strikes) or inflation but the end result is the same: empty bellies cause unhappiness and conflict.
Inflation was high in the 1970s and played a part in many conflicts. We are seeing many of these same factors today.
The Pandemic of 2020 saw a huge surge in stimulus money pumped into global economies to offset billions of people out of work. Too much money chasing too few goods caused the surge in prices that we are still feeling today.
Wages rose, but not as fast as food prices and mortgage costs in Canada – as shown below. When people struggle to put food on the table, out come the pitchforks.
Statistics Canada
Throw the Bums Out!
- First quoted in Saturday Evening Post, 1926
In 2024, there is a great resolve to replace politicians. From Venezuela to Vietnam, it doesn’t matter who they are or what party they represent - just get them out. When voters are unhappy, they blame the party in power.
2024 and 2025 are important years for global elections. We have already seen many European leaders replaced and, just this week, the Prime Minister of Japan announced he is stepping down. The US goes to the polls this November and Canada follows a year later. The US election is already causing global angst because neither of the candidates is especially appealing.
Despite the rhetoric, markets care less about policies than they do about uncertainties. As elections approach and the outcome becomes clearer, markets adjust accordingly. Once the winner is declared, markets move on.
As a result, stocks are strong in election years. The average return in U.S. markets in an election year is +11.4% with Democrat Presidential years seeing +14% gains.
The U.S. market has returned exactly 14% so far in 2024. Maybe this is all we get. Maybe we get more.
“It happens every election year, which is why the vast majority are positive, with back-end loaded returns. As Exhibit 1 shows, year four has the second-best average return and second-highest frequency of positive returns of the four-year electoral cycle. And the good times come regardless of the winner’s party.
As this year progresses, we will gain clarity on who is set to be the next president, how the next Congress looks and what the likelihood of big legislation is. As that gradually happens, the falling uncertainty should lift markets.”
- Ken Fisher, Fisher Investments
Not only are political leaders sent packing when things get rough, so are corporate CEOs. Boeing, Burberry, Starbuck’s, Victoria’s Secret, Gap, and Macy’s are just a few of the companies replacing their chief executives this year.
The first quarter of 2024 saw 622 CEOs quit, the highest number on record for a single quarter (Global Finance). Some are simply retirements, but many more are due to poor performance in a very challenging economy.
The Good News?
New leaders can bring fresh ideas and needed change. After the malaise of the 1970s, leaders in the west ushered in many reforms that led to much stronger economies.
And turmoil can lead to opportunities, as well. Our managed portfolios recently acquired CP Rail shares. They rose quickly but have fallen back to our purchase price as the threat of a nationwide rail strike looms.
These are Canada’s arteries, and we can’t live long without them. Because railway companies are essentially government regulated monopolies, strikes are usually short. Warren Buffett bought BNSF (Burlington Northern Santa Fe) in the US years ago because it was such an essential service.
If strike threats push CP shares lower, it is an opportunity to add more. We will certainly consider it.
