So, I started off the morning doing the September Market Thoughts video. While prepping for that, I realized how much had actually happened in August, but how little of it got translated into public perception and the markets.

The big story today is the most recent decline in Facebook shares, which was prominently reported in the Wall Street Journal (WSJ) with “Facebook Investors Cash Out” (p. A1), in the Financial Times (FT) with “Investors defriend Facebook shares” (p. 1), and in the New York Times (NYT) with “Facebook Shares Hit New Low Amid Fear” (p. B1). Sounds pretty bad, right, when a new tech heavyweight drops almost 50 percent from its initial price? Things must be bad?

The dog that isn’t barking—at most maybe whining a little—is that the U.S. markets are actually doing really well. Yesterday brought them back to relatively high levels, as reported all the way back on page C4 of the WSJ with “Stocks Approach Multiyear Highs.” With the markets doing as well as that, maybe it is time to worry. The fear referenced in the NYT Facebook headline certainly has not shown up in the VIX, referred to as the market’s “fear index,” which the WSJ comments on with “The Fear Gauge Goes Quiet – Too Quiet” (p. C1). We have had a quiet August, and when September rolls in and everyone takes a fresh look at the world politics and economy, perhaps they won’t be as sanguine as they are now.

Financial markets take one step back, two steps forward

The papers are all about slowing global growth today, featuring articles that talk about how the U.S. has gone from grow-grow in the first quarter to slow-grow in the second: “Wary Fed Is Poised to Act” on page A1 of the Wall Street Journal (WSJ), “Fed hints at fresh action on economy” on page 1 of the Financial Times (FT), and “Fed Defers New Action But Growth Has Slowed” on page B1 of the New York Times (NYT).

Other countries and areas have been hit as well: the NYT has “Local Governments Face Fiscal Peril, State Comptroller Warns” on page A15, the FT has “Asian output hit by global headwinds” on page 1 and “Weakness in Europe and Asia dents US revenues” on page 13, and the WSJ has “Factories Lose Steam As Global Fears Rise” on page A2. Even hedge funds are shrinking, as seen in “A Hedge Fund Too Big To Profit” on page B1 of the NYT and “Bacon to pay investors $2bn” on page 13 of the FT, which talk about the voluntary downsizing of a large and famous hedge fund.

A couple of days ago, at the end of a post on reasons for optimism regarding the economy, I promised that the following day we would discuss what could go wrong. And of course, something did go wrong—I didn’t discuss it. In any event, Friday the 13th just seemed like the right time to discuss the downside—so here we are.

Uncertainty continues

Just finished giving a talk on the economy at Commonwealth Live!, so thought that might be a good thing to share for general comment.

A strong month at the end but losses for the quarter

On an industry level, and certainly on a personal level, a different article caught my eye in today’s New York Times. On the front page, J.P. Morgan was called out for favoring its own mutual funds in its advisory business. The basic idea is that its brokers and advisors were encouraged to sell proprietary funds over funds from other companies that might have been less expensive or better performing.

One of the key advantages of an independent agent for consumers is the lack of institutional incentives to select one service provider over another. In a past life, I had a mortgage brokerage company, and we dealt with a wide range of lenders and investors. Often, when we talked with prospects, they would ask what we could do that their bank could not. “Maybe nothing,” was our honest answer. “But, when you buy a car, do you look only at one dealer and take what it says as the best model and price?” The answer was usually “no”—and our point was made.

One of the changes I mentioned yesterday is that we no longer live in a world that is dominated by finance and economics. With most of my blogs over the last month largely dominated by financial and economic issues, that statement may seem strange. That’s because the discussion up to now has been backward-looking—it has dealt with problems that were created in the past and now have to be resolved. Looking forward, finance and economics will not become less important, as we will be dealing with those problems for a long time, but less dominant as a decision framework.

Another way to look at this situation is to consider it not as a decline of finance, but as a resurgence of other factors. One of these factors is the role of government. Since Reagan, the job of the government has largely been to get out of the way. Government is the problem, went the cry, and deregulation was considered an absolute good. Much good was indeed done, but, over time, I’ve increasingly been thinking that perhaps the old regulated world had its advantages as well.

I am a big fan of the Lord of the Rings movies. I would love to embed Cate Blanchett’s witchy Galadriel voice, saying at the start, “The world had changed,” because we are seeing this more and more in the news and in how we look at the world.

I put together a presentation a couple of months ago that talked first about the U.S. economy and then about how it fit into the world and what that meant for our future. As I developed it, I realized that there was actually a consistent narrative that went beyond the U.S. and economics. Simply stated, the primacy of economics and markets as an organizing principle was rapidly eroding and returning to a much more mixed environment of politics, geography (broadly defined), and economics. I will get into this some more tomorrow, including posting a copy of that presentation, but today I want to make a related but different point about how our perception of the world has changed—and how that will affect how we live going forward.