Perspective


  • December 5, 2018
  • Chuck Osborne

The Last Presidential President

This week began with the sad news of the passing of President George H.W. Bush. Whenever a former U.S. President passes, it brings back memories from his time in office. When I think back to the first Bush presidency, the one thing I really miss is having a president who was actually presidential. He wasn’t immediately running for re-election; in fact, he almost seemed half-hearted in his re-election attempt. One commentator I heard said it best when he said that President Bush was a better public servant than he was a politician. Wouldn’t that be unique today?

When I think about George H.W. Bush and his time in office, what I remember that is so different from every president since is that everyone seemed to respect him. This does not mean everyone agreed with him or voted for him – he was our last one-term President after all – but no one went around talking about how much they hated George H.W. Bush. It just didn’t happen. One could argue this is because social media had not been invented, but that was true in the Clinton years, and there were plenty of people who said they hated Bill Clinton.

Social media was in its infancy when George W. Bush was in the White House, but we had congressmen who referred to him as “the current resident” instead of Mr. President. I don’t believe anyone was walking around in the 1988 to 1992 timeframe saying “he is not my President.” I, for one, miss that.

I hope we regain that civility in the future. The market activity yesterday even reminds me of the first Bush years. We plunged because the interest rates on the 2-year Treasury went higher than the interest rates on 5-year Treasury. That is what investors call an inverted yield curve, which supposedly means we are headed for economic slowdown and maybe even a recession. Ignore the fact that a month ago or so we were fretting over a yield curve being too steep, now it is flat and we are fretting over that.

Are we headed for a recession? Employment is the key. We have an unemployment rate under 4 percent, and real wages are growing for the first time in a generation. It is hard to imagine how a recession could happen under those circumstances. Yesterday morning Wells Fargo CEO Timothy Sloan was asked if the bank was hearing about economic slowdown concerns from their clients. His quick response was a flat, “No.” In fact, he is experiencing the opposite. He stated that small business optimism was strong.

The economy was strong in the late 1980s and early 1990s as well. Then we slowed just a little and all the talking heads started talking about recession. George H.W. Bush stated that we were not in a recession, which was, at the time, technically correct. Bill Clinton said he “felt our pain” and was our President for the next eight years. The lesson is that we can talk ourselves into a recession very easily, even when times are actually very good. This is why these market signals cannot be ignored.

That economic blip in the early 1990s was over before inauguration day, and what followed was some of the strongest growth we have ever seen. While we feel the pain of the market, fundamentals remain strong and as long as they do things will work out in the long term.

Markets may be down, but the biggest loss this week is for our country. George H.W. Bush will be deeply missed.

Warm regards,

Chuck Osborne, CFA
Managing Director