That’s the Thing I’m Sensitive About!

Thirteen-year-olds are the meanest people in the world. They terrify me to this day. If I’m on the street on like a Friday at 3PM and I see a group of eighth graders on one side of the street, I will cross to the other side of the street. Because eighth graders will make fun of you, but in an accurate way.

They will get to the thing that you don’t like about you. They don’t even need to look at you for long. They’ll just be like, “Ha ha ha ha ha! Ha ha ha ha ha! Hey, look at that high-waisted man, he got feminine hips!”

And I’m like, “NO! That’s the thing I’m sensitive about!”

John Mulaney: New in Town (2012)

Yesterday I read a social media post from Dana Carvey, who played a version of the recently departed Regis Philbin on SNL in the early 90s. Darrell Hammond did a later version that – like many of his impressions – relied a bit more on physical resemblance. Jimmy Fallon once did a version in 2011 that – like all of his impressions – relied more on a late-Millennial audience’s willingness to see his constant breaking as endearing instead of obnoxious. For my money, Carvey’s impression is still the standard.

In later conversations between Dana and Regis, they discussed the “Regis persona” that Philbin had created. He described it as an “exaggerated version of himself.” That made Carvey’s impression an exaggerated version of an exaggerated version of Regis.

When the 2016 Disney film Moana was being cast, the composer of some of its original songs – Lin-Manuel Miranda, of Hamilton fame – sent a draft score and demo tape to the actor who would ultimately voice the senicidal giant crab Tamatoa. Jemaine Clement, that New Zealand actor, later recounted that the demo was a recording of Lin-Manuel doing an impression of Jemaine’s impression of David Bowie. If you listen to the song Shiny from the film, you are listening to Jemaine Clement doing Lin-Manuel doing Jemaine Clement doing David Bowie.

When it comes to the stories we hear and tell, this kind of thing isn’t uncommon.

Sure, sometimes the extremes of what everyone knows everyone knows about a person or thing can be unfair and counterproductive. After all, with as many pixels as we light up on your machines with warnings about narrative abstractions, you won’t find us arguing in favor of applying our exaggerations as proxies. You can’t boil down David Bowie to a singing style in which you create an abnormally large cavity in the central sound-shaping part of your mouth to lengthen every vowel and a staccato approach to every consonant and plosive. You can’t boil down Regis Philbin to going halfway on a Kermit the Frog impression.

Extremes can be misleading.

Extremes can also be revealing. You learn a lot when you learn what thing a person or institution is sensitive about.

The extremes of a global pandemic have revealed a lot about what our political and corporate leaders and institutions are sensitive about.

For months, the Federal Reserve and White House have told anyone paying even the remotest attention that they were very sensitive to the price levels of risky assets, even at the risk of a variety of other considerations that they are theoretically or statutorily required to be sensitive to. Not that any of this is new, of course, but sometimes it’s good to appreciate the small things, like not having to update your priors for the better part of a decade or so.

Today. regional and super-regional banks are telling you that they are very sensitive to changes in the commercial real estate market. So sensitive that the CARES Act – you know, the one that was designed to help families and mom and pop small businesses? – includes a provision to allow them to suspend GAAP accounting and treat troubled debt as deferred, with much more favorable capital treatment. We’ve written more about this for our ET Pro subscribers, and will have a lot more to say about it.

Regulators and policymakers have told you that they are very sensitive to permitting the loss of equity value in certain industries and utterly indifferent to it in others. Remember when certain corners of the investment community told us that it was unfair and unjust that owners of airline stocks might permanently lose value because of government-instituted lockdowns, and then when those restrictions largely relaxed we were still operating at just a little over a 20% of normal capacity?

Even now, after most COVID-19-related fears have settled into the familiar ennui of 2020, investors are telling you that they are still very sensitive to the perception of a company’s ability to survive and thrive in an extended stay-at-home world. So sensitive, in fact, that the manifestation of beta – systematic risk – today looks more like beta exposure to that ability than to a traditionally accepted expression of market risk. It is a fascinating phenomenon that Arik Ben Dor’s quant equity research team at Barclays wrote about yesterday. We don’t have permission to post it here, but institutional investors should reach out to your Barclays rep and ask for “Betas Reshaped: The COVID-19 Effect”.

Some of the lessons have been business lessons, too. Asset managers told you they were very economically sensitive to loss in management fee revenue associated with even brief declines in risky asset prices. Hedge fund managers told you with their pricing that they are very sensitive to all of your moves to allocate away toward other alternative investment vehicles.

It has been a busy few months.

In the end, COVID-19 too, shall pass. Like all extremes, treating all of this as a proxy for the world we will live in for the rest of our lives will be misleading. Yes, some things we thought could never change will be permanently different. And some things which we thought might be permanent will be only temporary. But in the midst of that, a lot of the institutions that should matter to you as an investor and citizen told you what they were sensitive about.

As the financial world emerges from one of the strangest periods in most of our careers, we cannot forget those lessons.