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September
22
2020

"This Kind Of Thing Is Enough To Make One Go To The Pub. Oh,
We Can't: It's Past 10pm..."
Michael Every

Stocks went down yesterday, which is generally considered to be a very, very bad thing that needs some serious “Don’t worry, this won’t last” headlines from Bloomberg. Not my bag, however. Let’s go a whole different route: gestalt.

Gestalt psychology is a school that emphasizes organisms perceive entire patterns or configurations, not merely individual components. The view is sometimes summarized using the adage, "the whole is more than the sum of its parts." Within global markets where the psychology is that sums are made by only looking at the parts, not the whole, I often want to cry “Oy gestalt!”

Once again, the unthinkable is happening: pubs are closing early in the UK. The same pubs Brits were being told to salt’n’vinegar-and-cheese-and-onion-and-ready-salted-ly spend their time in until 11pm are now too dangerous to stay in…after 10pm. Apparently, this is when Covid-19 gets really dangerous, like a werewolf: before 10pm, it is a poodle. The much-derided Rule of Six (meaning how many people you can have meeting in a household, not the number of pints it’s okay to have with your crisps) is apparently also soon to be iced – unlike your shots or chaser. The arbitrary rule will then be much lower – like pub profits. (Restaurants are also impacted, but generally aren’t doing a roaring trade at 11pm in the UK anyway.)

Once again, we see clear trends: the virus comes back as soon as normal life tries to; we haven’t seen it in a winter in Europe yet; some scientists are scared - and others aren’t; this is going to cost governments a further fortune, or swathes of the struggling service sector are going to collapse for good; governments are fiddling around at the edges, neither really locking down or really re-opening; and we are still where we were at the start of the year – hoping a vaccine miraculously saves our (smoky) bacon.

Meanwhile, of course, data show that Americans’ worth rose 6.8% in Q2 by USD7.6 trillion.The only issue is how many Americans we are talking about: is it double digits, or just Jeff Bezos? It’s hard to keep track. For the majority of people who own no shares, or so few they pale in comparison to their paler salary, it’s even harder to care.

As former Fed Chair Yellen said a few years ago, when the Fed was first trying to be all cuddly-feely, if only the poor had more assets they wouldn’t be so poor. The Fed does tautology much better than it does sociology.

On which note, current Fed Chair Powell will today give remarks to Congress we have already all seen, and which stress the US recovery will remain long and uncertain. But, hey, a few people just got USD7.6 trillion richer, so who really cares, right? He will also stress that more fiscal help is needed, which it arguably is. However, arguments and not fiscal help are more what Congress seems focused on right now.

A similar attitude lingers over the TikTok deal. China’s Global Times editor has tweeted that has far as he knows, the deal won’t be allowed to go through because, among other reasons, it offends China’s “dignity”. US President Trump is also saying he won’t sign off on the deal if the US doesn’t gain effective control of the firm. As stated yesterday, it’s not that hard to understand what looks like the dynamic here: either the US ‘does a China’ and makes the firm de facto American, and China allows that to happen, or it closes down.

What matters is not the source of a stream of ADHD-inducing videos that have one fearing for what a culture that once gave us opera and the Bhagavad Gita will produce as the next time-compressed endorphin high --“Oh my days! Have you see PishPosh? It lets you make 3 second-long videos and share them!” What scope for the narrative of the human condition-- it’s that this looks like it is going to be the new benchmark: global firms having to be much more local/balkanised - or shutting down. Even Facebook is talking about closing in the EU if the latter forces it to keep all of its user data there rather than sending it back to the US. When does Visage-Livre or Gesicht-Buch launch?

Keep this kind of thing up and there might be few hands holding trillions less fresh dollars per quarter: and then where would we be? It’s enough to make one go to the pub. Oh, we can’t: it’s past 10pm.

Elsewhere, Bloomberg reports China’s Xi Jinping just gave a speech in which he stated no country should “be allowed to do whatever it likes and be the hegemon, bully or boss of the world,” called for the “international order to be underpinned by international law,” and decried countries being “lorded over by those who wave a strong fist at others.” There must also be “no practice of exceptionalism or double standards. Nor should international law be distorted and used as a pretext to undermine other countries’ legitimate rights and interests, or world peace and stability.”

Bloomberg adds that Germany’s Angela Merkel heartily agrees with this sentiment --indeed, it’s very hard not to-- but then goes on to plaintively add: ”China faces a challenge in trying to fill the void on the global stage,” before detailing why this is the case. Xi speaks again to address the UN General Assembly today… and then so does Trump. Tick-tock, tick-tock?

Which holds true for AUD. Besides the fact that it is worst-placed for a US-China decoupling, the RBA’s Debelle just gave a speech in which he said a lower AUD would be beneficial to support the economy, and that higher public debt levels (which the RBA will support) are not a problem. The RBA’s projections, always too optimistic, are also that it will be three years before rates need to rise again. Ask the BOJ how long it has taken them.

Allow me to conclude that gestalt therapy, as opposed to psychology, is a form of psychotherapy which emphasizes personal responsibility, and focuses upon the individual's experience in the present moment, the environmental and social contexts of a person's life, and the self-regulating adjustments people make as a result of their overall situation. We could all do with a course.

If only markets self-regulated. If only they emphasized responsibility or saw the environmental and social contexts of people’s lives, rather than just the experience of the present moment. Until then, it’s all “Oy gestalt!” for me.

Michael Every is the Head of Financial Markets Research Asia-Pacific. Based in Hong Kong, he analyses the major developments in the Asia-Pacific region and contributes to the bank’s various economic research publications for internal and external customers and to the media.

Michael has nearly two decades of experience working as an Economist and Strategist. Before Rabobank, he was a Director at Silk Road Associates, a strategy consultancy based in Bangkok. Prior to this, he was Senior Economist and Fixed Income Strategist at the Royal Bank of Canada based in both London and Sydney. Michael was formerly also an Economist for Dun & Bradstreet in London, covering ASEAN. 

Michael holds a Masters degree in Economics (with distinction) from University College London and speaks Thai.

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