You Didn’t Build That

Welcome to This Week’s Leyendecker View

You never know when you’re in a golden age. You only realize it was a golden age when it’s gone.
– Former Vanity Fair editorGraydon Carter in his new book, When the Going Was Good

FAVORITE READ OF THE WEEK

Bonds, Stock Market and China: What’s Going On?
Great overview from Substacker Kyla Scanlon

THINKING OUT LOUD

You Didn’t Build That

Sometimes we take for granted how lucky we are.

“You didn’t build that” was a controversial statement Barack Obama made during his 2013 presidential campaign. The statement caused ferocious backlash from Republican leaders and many conservative voters. How dare Obama suggest that private sector initiative, effort and success was dependent on the federal government. As if government was the only reason private sector initiatives could succeed.

The pushback on Obama’s statement was quite strong, and deservedly so for those who believe the government is actually here because of the private enterprise’s successes, not the other way around. It is private enterprise’s efforts that produce the economic growth and taxes that fund government’s existence.

While federal workers, by definition, do not build private enterprise, there is a kind of truth at the heart of Obama’s statement. In an ironic way, many of us, myself included, have been great beneficiaries of the federal government’s actions over the last twenty or more years. What we think of as the fruits of our labor wouldn’t have been possible without government actions.

Let’s just take my business as an example…

Back in the late 1980s, I was fortunate to stumble across the corporate and investment finance market, the world our search practice has served ever since. At the time, I was an accounting recruiter, relatively fresh off an accounting degree and my Big 8 CPA experience. Corporate and investment finance were much more intellectually interesting to me than accounting, so it was off to the races. And boy was I in the right place at the right time.

The private equity boom that today seems ubiquitous was just getting started. Soon global commercial banks were setting up offices in the US to provide the liquidity our domestic banking sector lost in the great savings and loans and housing crises of the late 1980s.

That boost to bank lending liquidity helped fuel a growing finance sector. Investment banks were the domain of Wall Street back then, but soon banks started opening offices in other major urban markets. Mezzanine finance specialty boutiques got their start. Regional investment banking activity took off. Hedge funds quickly became a big deal.

The finance world started a boom—a boom that has lasted pretty much until now. And what made its success and duration possible? Our federal government going all in on ever-flowing fiscal and monetary stimulus. 

Outside of a couple years when President Clinton had an accommodating bipartisan Congress, our federal government has consistently operated in the red, in a deficit. Deficit spending, known as Keynesian stimulus, has been flowing into the private sector ever since. Thank you, Washington!

In addition, after interest rates peaked in 1981, the Federal Reserve went on a measured and constant reduction of interest rates until 2001. And then during Covid, the Fed added trillions to its balance sheet. Dropping interest rates and “printing money” juiced our economy and economic activity. They also drove up the value of financial assets, like the stock market and real estate, making financial asset owners more money.

In 1985, just before we entered a banking crisis, our federal debt to GDP was around 40%. Today, it is around 120%.

In 1985, our total federal government debt was around $1.7T. Today, it is around $36T.

In 1985, total stock market capitalization to GDP was around 35%. Today, it is around 194%.

So as Obama had said over a decade ago, “you didn’t build that” seems at least somewhat relevant to the last couple of (few?) decades. The truth is, our booming stock market, booming home values and the explosion of private equity, venture capital, hedge funds, private credit and more have greatly benefited from the federal government’s “generosity.”

But is it now time to pay the piper?

THE RANDOMS

Trump likely blinked on tariffs because the falling stock market was going to force institutional investors to shrink their alternative investments portfolios, which include venture capital, private equity and private credit. An investment reduction in these markets may have created a liquidity trap, a process of dominoes falling in our financial sector, which may have put the overall financial system at risk. It should be no surprise that Jamie Dimon, a big bank CEO, and Bill Ackman, a big hedge fund CEO, sounded the alarm.

This tells us how far the financialization of our economy has gone. Today we are less dependent on the hard assets of factories and much more dependent on the computer algorithms that allocate capital.

A liquidity crunch will certainly get us into a recession. Team Trump has to thread the needle while in a hurricane of anti-change sentiment. 

How soon will a Fed interest rate cut come, and will it have any stimulus effect? Or will it just postpone painful restructurings in the private loan market?

When researching for my essay on education two weeks ago, I noticed this survey that found 54% of Americans read at a 6th-grade level or below. Our education system is working fine, right?

Be careful of a potential stock market dead cat bounce. After Bear Stearns collapsed in March 2008, the S&P 500 ran up +12% in short order on the narrative that the worst was behind us. After Lehman plunged in September 2008, the S&P 500 went on to enjoy a near +20% snapback. After those bounces, we entered the Great Recession, which turned into the Global Financial Crisis.

There is no perfect world. Just a pendulum swinging between being in the right place, right time and being in the wrong place, wrong time.

ECONOMIC NEWS

Economy

Inflation slowed down in March
Small business optimism keeps slipping
The airline canary in the coal mine
The US is wealthy but doesn’t feel so
Fed Chair hints at stagflation

Labor

The job interview coffee cup test
Has the decline of knowledge work started?
How AI made me stupid
College degrees’ return on investment

BUSINESS

Finance

Have hedge funds put treasuries at risk?
Has a run on private equity started?
The stock market is not a Trump priority

Real Estate

US homes are shrinking
Mortgage market addicted to big government
Europe has a housing affordability problem

Tech

Microsoft backs away from data center boom
Is Meta compromising national security?
How Elon Musk rescued X
Google helps US with border surveillance

AI

DeepSeek ripped up the AI playbook
When to use and not use AI
AI can replicate your personality

Energy Transition

Largest ever US gas plant going up in PA
Cleaning up air leads to global warming
Public companies backtrack on climate talk

THE NATION

The Washing-Tone

To vote, you may need proof of citizenship
Trump to cut off sanctuary cities
SCOTUS delivers Trump three wins
Trump open to higher taxes on the rich
$300MM hiccup in Panama deal
Trump to help out coal industry
Will Trump bail out farmers?
NY to ignore Trump DEI order
Will Trump team take over Columbia U?

Tariffs

All bets are sort of off…for 90 days
China and US, the real trade war
China has a trade war weapon

The Tariff Effect

Taiwan to triple US LNG imports
The EU wants US LNG, too
Big pharma to invest big billions in US plants
Why do US bike brands manufacture in China?
Hyundai announces $28B US steel investment

Social Trends

Convicted pedophiles in Idaho face firing squad
The Houston model for turning around schools
Is a restaurant apocalypse coming?
Quit taking your lunch to work

GEOPOLITICS

Global

Indonesia will shelter displaced Palestinians
India says “no” to BYD
US seeks minerals deal with DR Congo
Brazil is a world-class aircraft maker

Europe

The EU needs to play catch up
Europe has a worker absentee problem
EU backtracks on controlling companies
Germany’s right-wing AfD now most popular party

Ukraine

Lower oil prices not good for Russia
Russia launches new offensive
Ukraine catches Chinese citizens fighting for Russia
Russia hammers Ukraine, killing children
Russia executes POWs in public

Middle East

Iran sending missiles to proxies in Iraq
Trump and Iran to talk nuclear deal
Israel ready to hit Iran if no nukes deal
Iran threatens US allies
Iran and Houthis have a new plan
Palestinians tell Hamas to leave

China

China prepares for full-on trade war
Will China or the US win this game of chicken?
Property crash wipes out offshore investors

War Creep

Australia arms Philippines with drones
US stations long-range drones in Japan
Israel aims to be world’s arms dealer

MAKING A BETTER YOU

Mind
Get more quiet time.

Managing in the age of TMI
The path to everyday enlightenment
Understanding and coping with mood swings

Body
Get more outside time.

The 7-minute stress workout
Are shellfish good for you?
4 weird signs you’re getting older

FUN STUFF

Let your hair down, baby! Even if you’re all alone.

The Extraordinary

A history of monsters
Are you familiar with this amazing hero?
The joys of floating down a river

All Aboard!

5 beautiful European train trips
The best train trips in the world
6 spectacular US train trips

Music That Found Us

“Drinking Age”
Rising young rock star, Cameron Winter.

“Love Takes Miles”
Lyrics can be poetry, ya know.

“Darlin’ Be Home Soon”
The Lovin’ Spoonful on Ed Sullivan.
How ‘bout them lyrics.

Worth a Watch

The Naked Gun remake looks hilarious.
Who’s up for Happy Gilmore II?
Pamela Anderson selects her favorite films
Hollywood studios are struggling

The Yum Yums

Yummy breakfast potatoes
Spinach and gruyere breakfast casserole
The full British breakfast

PARTING THOUGHTS

Success in investing isn’t about making a lot of money in a short period of time. It’s about earning reasonable returns over very long periods.
–Bruce Flatt, CEO of Brookfield Asset Management

IN CASE YOU MISSED IT

Bull in a China Shop
April 4, 2025

Fix the Family, Fix Education
March 28, 2025