By: Michael Moe, CFA, Owen Ritz, Brent Peus Jr.
“A leader is one who knows the way, goes the way and shows the way.” — John C. Maxwell
“The price of greatness is responsibility.” — Winston Churchill
“The greatest leader is not necessarily the one who does the greatest things . He’s the one who gets the people to do the greatest things.” — Ronald Reagan
As is our custom for three-day weekends, EIEIO took last week off to celebrate Presidents’ Day. Reflective of that coupled with a trip to India that highlighted the outsized impact Prime Minister Narendra Modi is having on its future, got us thinking about leaders.
In the Black Hills on the Western Frontier of South Dakota is Mount Rushmore. Carved in the granite sixty feet tall are the bust of four of the United States greatest Presidents…George Washington, Thomas Jefferson, Abraham Lincoln and Theodore Roosevelt.
It took the sculptor Gutzon Borglum fourteen years with 400 workers to complete in 1941. Lesser known is behind the Presidents, carved seventy feet in the rock, is a canyon with a titanium vault containing the Declaration of Independence, the Constitution and the President’s biographies. Two million people visit Mt. Rushmore a year, which sounds impressive until you realize that forty million people visit the Mall of America located in the next door state of Minnesota.
While you could argue the imperfections of each of these leaders, I’d say if you took any one of the four away, America wouldn’t have become America. Consequential people and consequential moments are what make history. Cleopatra, Alexander the Great, Nelson Mandela, Julius Caesar, Queen Elizabeth, Winston Churchill, Margaret Thatcher, Mahatma Gandhi and Indira Gandhi are just a few examples of this.
The story of George Washington is both remarkable and inspiring. They called him “the Soldier who wouldn’t die” because throughout his career, he had miraculously escaped death over and over.
As a 23 year old Colonel fighting in the French Indian War with the British, he got ambushed by the French along with his 1300 British Troops…714 were killed within 2 hours and Washington was the only mounted officer who didn’t die including British General Braddock who Washington took over command from after he was mortally wounded. Washington had two of his horses shot from under him and had four bullets lodged in his uniform. Years later two of the Indian Chiefs said that after repeatedly attempting to shoot Washington and missing, they decided a special spirit was protecting him.
Years later, during the Revolutionary War, British Major Patrick Ferguson and the head of His Majesties’ sharpshooters were in a direct confrontation with General Washington and had a clear shot on him, but an impulse came over him telling him that Washington needed to live so he never took the shot. If Washington would have fallen, the psychological impact it would have had on the American people and the outcome of the War would have been devastating.
Nowhere was the bravery, leadership and destiny of George Washington more evident than the Battle of Trenton. Down from 28,000 troops to just 2400, on Christmas Night, 1776 Washington needed a “Hail Mary” to have any chance to survive. Using the secret password “Victory or Die”, General Washington crossed the icy Delaware River nine miles above Trenton during the middle of the night with a surprise attack that resulted in nearly 1000 of the Hessians fighting for Britain captured and over 100 died.
As the First President, George Washington set the tone for the Presidency. He created a cabinet with a Secretary of State, a Secretary of Treasury, Secretary of War and Attorney General. He established relations with Foreign Countries including Great Britain and France putting the United States on the World Stage. President Washington warned against the divisiveness of political parties and sectionalism. Perhaps most importantly, despite his popularity, he self-imposed a two term limit on his Presidency to directly contrast with Royal Rule more commonplace.
The leadership, class and vision he showed the Country what America could become and gave it the confidence to get there.
Now fast forward 223 years to my trip to India last week. The energy and ambition of this Country with 1.4 billion people was palpable. Yes, there are many issues including pollution, extreme poverty, dilapidated infrastructure, horns from cars that are non-stop, and power that goes out all the time (even at a five-star hotel).
In a fitting closing keynote by somebody I think could be a potential future Prime Minister of India, Minister of Women and Children Smriti Zubin Irani said the reason why we should all be excited about India was powerful leadership of Prime Minister Modi. The bet is he’s the right person at the right time.
Market Performance
Just when we thought inflation was being tamed a bit, the January PCE Index came in above expectations. Moreover, consumer spending reached its highest level in two years. Add it up, and investors became concerned that the Fed wasn’t going to be able to ease up on interest rates any time soon.
As inflation/interest rates are the trigger for Market movement in the current ERA, not surprisingly stocks were down for the week. The Dow, which has now had four negative weeks in a row, was down 2.6%, the S & P 500 was off 2.6% and the NASDAQ dropped 3.3% but is still up 9.7% ytd.
Reflecting the tougher environment for futures, Venture Capital fundraising was at a nine year low for the Fourth Quarter of 2022 with $20 billion raised. This is off 65% year over year.
Despite being in a bit of a “two steps forward, one step back” Market Dance, I’m constructive on the outlook for growth stocks based on better valuations and a better outlook than feared.
GSV’s Four I’s of Investor Sentiment
GSV tracks four primary indicators of investor sentiment: inflows and outflows of mutual funds and ETFs, IPO activity, interest rates, and inflation. Here’s how these four signals performed last week:
#1: Inflows and Outflows for Mutual Funds & ETFs
Source: Yardeni
#2: IPO Market
The IPO market has been quiet, but that could change given that Growth is back in style. One potential leader to keep an eye on is Reddit.
Source: Renaissance Capital
#3: Interest Rates
Would a Soft Landing be once in a lifetime? A new research paper released this week concluded that there is no post-1950 precedent for a sizable disinflation that does not entail substantial economic sacrifice or recession.
Source: Edward Jones
#4: Inflation
January’s inflation report was hotter than expected, as consumer spending was up 1.8%. One possible cause? American millennials’ debt balances are up 27% since late 2019…the fastest pace of debt accumulation over a three-year period since the 2008 financial crisis.
Source: WSJ
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Chuckles of the Week
EIEIO…Fast Facts
Entrepreneurship: 80 — new startups formed per day in India (Source)
Innovation: 80%— percent of Starbucks orders that are customized (Source)
Education: 11.9 Million — number of women in the US workforce with advanced degrees currently in work (Source)
Impact: 1 million — number of US immigrants in 2022, the first year over 1 million since 2017 (Source)
Opportunity: 60% — percent of Americans under 25 that have completed a purchase on a social media site (Source)
Connecting the Dots & EIEIO…
Old MacDonald had a farm, EIEIO. New MacDonald has a Startup…. EIEIO: Entrepreneurship, Innovation, Education, Impact and Opportunity. Accordingly, we focus on these key areas of the future.
One of the core goals of GSV is to connect the dots around EIEIO and provide perspective on where things are going and why. If you like this, please forward to your friends. Onward!
Make Your Dash Count!
-MM