The fact is that most bankers and fund managers who oversee OPM (Other People's Money) simply don't have the intestinal fortitude to take the risks that most of their commercial clients take every single day. Most business owners are always just a few bad decisions away from living in their car, a possibility that would terrify the average banker.
Right now I can see that fearlessness in practice everyday as I discuss how to best finance inventory purchases and pay expenses with different business owners. According to the NFIB (National Federation of Independent Business) even though most expectations from business owners are negative for sales and earnings they're still borrowing to fund growth!
"The NFIB Small Business Optimism Index rose 1.9 points in August to 91.8, marking the eighth consecutive month below the 48-year average of 98 but reversing some of the declines in the first half of the year. Twenty-nine percent of owners reported that inflation was their single most important problem in operating their business, a decrease of eight points from July’s highest reading since the fourth quarter of 1979."
There are plenty of reasons to be cautious, even fearful, it really looks as if the Fed will no longer support the market with low-interest stimulus. Everyone expects them to reverse course - I'm not so sure they will fold this time:
"And the reason for the Fed’s dramatic shift away from stimulus and into tightening? One could argue that it’s merely the natural end result of inflationary manipulation; that central banks like the Fed were ignorant or arrogant and they weren’t thinking ahead about the consequences. Except, this is false. The Fed knew EXACTLY what it was doing the whole time, and here’s the proof…
Way back in 2012 before Jerome Powell became Fed Chairman, he warned of a market crisis if the central bank was to hike rates into economic weakness after so many years of acclimating the system to easy money and QE. During the October 2012 Fed meeting Powell stated:
“…I think we are actually at a point of encouraging risk-taking, and that should give us pause. Investors really do understand now that we will be there to prevent serious losses. It is not that it is easy for them to make money but that they have every incentive to take more risk, and they are doing so. Meanwhile, we look like we are blowing a fixed-income duration bubble right across the credit spectrum that will result in big losses when rates come up down the road. You can almost say that that is our strategy.”
In other words, Powell and all other Fed officials knew ten years ago what was going to happen. They knew that they were creating a massive financial bubble and that when they raised rates that bubble would collapse causing serious economic damage. Yet, they kept expanding the bubble, and now with Powell as chairman, they are popping the bubble. No one honest can claim that the central bankers were “blind” or ignorant. This is an engineered crash, not an accidental crash."
If this is correct, than we should all at least be aware of the implications and alert to both challenges and opportunities; no one besides a wafer thin group of insiders knows what is coming anyway. Certainly no one can predict the future and fortunes have been both made and lost in every single economic situation ever.
Right now activity is brisk and requests for working capital are many. Even though rates are going up on conventional loans, commercial advance rates are actually lower mainly because higher quality credit candidates are seeking more short term capital.
The upcoming election will be both stimulative and disruptive at the same time-
I might use this election to seek out candidates who have experience running small a business because they display the characteristics most compatible with leadership IMHO.