I wish that “full contact juggling” was some sort of clever metaphor I’d come up with to explain investment or living in these complex times. Unfortunately, it is not. I was on Instagram the other day and what should come across my screen but a video of a professional game of a sport called full contact juggling. Where the participants are literally juggling while trying to hit the other contestants and knock their clubs out of the air.
There might be no better example of people today having too much time on their hands and not enough real problems. Now I’m a big advocate of doing what you love regardless of what people think, but to me, this kind of thing is symptomatic of the level of hubris and complacency we have in Western society today. That’s not a social statement but an important observation because what happens in society translates into the economy. That’s the part that matters for investors.
While it may be just a silly example there are others that I think reveal more about the state of the psyche of society and more importantly the consumer today. I look at how many people, of all levels of wealth, go out for dinner at fancy restaurants and they are all sipping on $25 cocktails. These items have moved from being the luxuries that mark a special occasion to how we live our lives in the day-to-day. As an observer of consumer habits these are the little markers of hubris within society that tell you we are collectively living beyond our means and that an adjustment is coming.
Over the years I’ve often observed the seemingly innocuous anecdotal signs of excess that provide insights into the pulse of the people and the consumer. You can learn a lot just from observing the changes in daily habits over time. Even the way media headlines change over time signals shifts in sentiment as they tap into the most emotive topics of their respective readers. But paying attention to the anecdotal evidence is often a good place to see breaks in patterns that are worth investigating further into the real data. Inevitably the economy at any point in time is in the throes of being between ever more excess or austerity. These turning points between the two matter a lot.
I’ll never forget the first sign of excess ahead of the GFC. It was 2006 and I was in Perth and saw a tradesman in a brand-new top of the range fancy BMW X5 drive past me with a trailer behind and a ladder on the roof. It screamed to me that something was dramatically out of whack. Now of course it may have been a wealthy builder who was living well within his means. But that’s not the point, it was the stark break from the pattern of what ‘should be’. Being anecdotal it didn’t directly influence investment decisions, but it certainly raised the alarm to make me more cautious and dig deeper in my research on the state of the economy at the time.
At every turn, the government has smoothed the way and removed any hint of hardship. Yet what is considered hardship today would have been considered luxury by our parents or grandparents. I can assure you no one has saved for a rainy day because there are no rainy days. That fundamentally changes the mindset of a generation. For anyone under 35 this probably all seems normal. But I am really interested to see how consumer habits change once the economy starts to tighten up, especially as unemployment starts to edge higher.
This will impact companies in many industries as many of the everyday products and services we have become accustomed to and assume are minimum required living standards are actually luxuries when the economic push comes to shove.