Ted Lamade writes this guest post for the Collaborative Fund about the fallout of a prolonged bull market that we saw over the last 13yrs – many of us have either forgotten or some not even learnt the ability to rise after the inevitable fall.
“In the midst of one of the longest bull markets in history, had we somehow forgotten this along the way?
The last decade and a half has been a period characterized by low interest rates, abundant capital, unlimited support from both the Federal Reserve and the U.S. government, and low commodity prices. As a result, nearly every investable asset has appreciated in value.
If so, the logical question is, has this created a generation or two (or even three) of investors with an elevated opinion of their abilities? It would be hard not to.
The fact is, both millennials and the older Gen Z’ers have now spent the bulk of their careers working and investing in a sustained bull market, which has led to an elevated level of confidence. This confidence is arguably even more pronounced for the younger Gen Z’ers who haven’t even entered the workforce. How could it not be when, as the Wall Street Journal pronounced in an article titled What New Grads Want this past weekend, “This current class is the most in demand group of college graduates to enter the job market in years and they have expectations to match. Grads are seeking more money, flexibility, and specifics about likely assignments than prior classes.”
More money, flexibility, and specifics? I remember just wanting a job that paid enough to cover the rent for my apartment during the financial crisis
So, why does this matter?
It matters because the market is telling us that we are likely heading into a more challenging economic environment and are doing with a large percentage of investors (and employees more broadly) who haven’t had to navigate through one before. Said another way, they haven’t been forced to “rise after a fall”. It’s even been a while for those who have, so they’re likely a little rusty as well.”
Lamade then suggests an important aspect of navigating such times – working with the right set of people who have the stomach for the battle ahead:
“If this market and economy continue to weaken, business leaders and investors are going to quickly find out who they can (or cannot) lose with. This will lead to defining moments for many. Are you someone who will be steady at the wheel, or will this shake you? Did you add true value during this bull market, or was your success just a byproduct of it? With many investments already down materially, how will you balance mitigating further downside risk versus being positioned for when the market recovers?
For younger employees, I would be rushing back into the office. I would be ready and prepared to do any and everything to make my boss’s job a little easier. When things get difficult, people in leadership positions want to look others in their faces. They want to read body language. They want to see who is truly fully invested. You can’t do that from home through Zoom.
… My sense is that we will learn over time that work-from-home was an adequate short-term stop-gap, but a long-term culture killer for companies that kept it in place for too long, in large part due to mentorship. The reason is that a company without mentorship is like a team without a coach or captain. Talent alone can get you by for a while, but once the experienced players “age out”, the younger players are rudderless.
If I had to guess, there will be a high correlation between the companies that get employees back in the office and those that succeed over the next cycle and beyond. Why? In large part because recessions are when great mentors shine, and great mentees learn why.”
He ends on a positive note that new and enduring opportunities will inevitably emerge out of this crisis, much like the one in the 70’s:
“The 1970’s saw the birth of several legendary U.S. companies, namely Microsoft in 1975, Apple and Genentech in 1976, and Home Depot in 1979. It also led to significant scientific and technological advances, including dramatic improvements in fuel efficiency, energy extraction, personal computing, the microprocessor, cell phones, and home entertainment. However, maybe most importantly, the 1970’s gave birth to the modern day venture capital industry (notably the rise of Sand Hill Road, specifically Sequoia Capital and Kleiner Perkins).
Think about that for a minute. The worst decade since the Great Depression, one defined by high prices, poor equity and bond returns, and an overall malaise led to the creation of four of the strongest businesses this country has ever seen and the dynamic industry that shaped the American economy over the past four decades.
It’s likely still too early to even be asking this question, but are we going to endure a repeat of the 1970’s? I don’t believe so, but even if we do, there will be opportunities to rise from the fall. There always are.”
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Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
