"If your actions inspire others to dream more, learn more, do more and become more, you are a leader."
-John Quincy Adams
The team at Hedgeye has been waxing a bit philosophically the last few weeks. That happens when we get away from the office, and get a chance to read and reflect. Today the topic is leadership and a book we've been recently reading called, "Leaders Eat Last: Why Some Teams Pull Together And Others Don't".
In Rio, the Olympic Games have so far provided some classic case studies of individual leadership. The Games also provide examples of just the opposite. Front and center in the "lacking leadership" department is the group of American swimmers who feigned a robbery to cover up a drunken fight at a gas station.
But this all begs the question: how should leaders act and conduct themselves?
The premise of the book is that for teams to succeed, leaders need to foster an environment where people matter first and foremost. So much so that hiring, according to the book, should be akin to adopting a child into your family.
One chapter of the book is actually devoted to the idea of having a policy in which your employees are given lifetime employment. The premise here is that hiring becomes incredibly rare and every employee is highly vetted. On the flip side, they can't be fired (with the exception being some criminal or unethical act), so if they aren't performing they must be coached, moved around or trained to improve.
As former Marine Corp Lieutenant General George Flynn wrote in the introduction (and no doubt the two retired Generals on our team would agree):
"When leaders inspire those they lead, people dream of a better future, invest time and efort in learning more, do more for their organizations and along the way become leaders themselves. A leader who takes care of their people and stays focused on the well-being of the organization can never fail. My hope is that afer reading this book readers will be inspired to always eat last."
Back to the Global Macro Grind…
In the current Presidential race in the U.S., leadership of sorts is on display. In what JT Taylor, the Managing Director from our Washington office, is calling Groundhog Day, nominee Trump has brought in a new set of advisors and is executing another pivot. Interestingly, the new CEO of Trump's campaign is Steven Bannon of Breitbart news fame and as JT writes:
"Known as a devil-may-care conservative, Bannon's populist and nationalist sympathies reflect his longstanding disgust with both major parties, which perfectly outlines his overall objective - disrupt the narrative. Bannon has been floating around the campaign for a while now, and is expected to be an expansion of Trump's mind and values."
So, in essence the pivot is to double down on "Trump". Bannon certainly has his work cut out for him as with less than 90 days left in this race, Trump is trailing in poll aggregates by about 6 points, which, depending on who you ask, gives him about 20% chance of winning. The larger question that looms is whether the Republicans can maintain control of the Senate ... More on that and its implications in coming weeks.
Staying with the topic of leadership, New York Fed head William Dudley came out yesterday reaffirming his view that growth will be stronger in the second half. As a result, he and presumably by extension the FOMC, believe we are getting closer to raising rates. Talk about Groundhog Day! The Fed has nothing on Trump.
In the Chart of the Day, we show the course of Federal Reserve GDP projections over the course of the last years. As the chart shows, they have been down and to the right. For those newish to reading charts, that means that growth has been gradually slowing and so the Fed's projections have been coming in.
The market, of course, continues to largely track growth. As an example, the U.S. 10-year Treasury yield is trading at 1.55% down from 2.27% at the start of the year. But even the venerable Alan Greenspan joined in the chorus by suggesting the Fed should raise rates in recent days. Perhaps we will see the interest "river card" on August 26th when FOMC Chair Yellen speaks in Jackson Hole.
Interestingly, this chatter of an imminent rate hiking is not dissimilar from the chatter surrounding the Fed about a year ago. Unfortunately, not only did a hike not appear, but rates have declined dramatically since then. Maybe, as they say though, this time will be different.
No levels today.
Keep your head up and stick on the ice,
Daryl G. Jones
Director of Research