Welcome to Episode 44 of The Transcript Podcast
In this episode, we recap 2021 through earnings calls quotes from each week. We discuss vaccinations paving the way for economies to reopen, the slight easing of supply chains, and 2021 being the year of the consumer.
The episode is based on yesterdays’ newsletter which is available on Substack.
A transcript of this podcast, with relevant images and quotes, is available after the show notes below.
00:00:35 Vaccination paved way for economies to reopen
00:01:42 The Fed was behind the inflation curve
00:02:55 Tapering has began
00:04:33 There is slight easing of the supply chains
00:05:00 2021 was the year of the consumer
00:06:51 Meme stocks and speculative mania
00:07:35 It’s been a great year at The Transcript too
Scott: [00:00:00] Welcome everyone to a new episode of The Transcript podcast. This will be our last one of the year. You've got me Scott Krisiloff, I'm the editor of The Transcript, along with Erick Mokaya who's our lead author. We sent out a new issue of The Transcript newsletter yesterday, and it was our usual end of the year where we took quotes from each week and told the story of the year throughout the year through those quotes. It's always a fun thing to put together and watch the way that a year unfolds. A year is long enough that you can't really remember the way it started, but short enough that it feels like it just started yesterday.
Vaccination paved way for economies to reopen
So the end of the year is always one of my favorite times for me personally. What I saw when I was putting things together yesterday was, the biggest thing was it's hard to believe that we weren't vaccinated at the beginning of the year. Most of us weren't at least. And so the economies around the world were mostly still closed. The story of the year was the vaccine. As people got vaccinated, economies around the world were reopening and really punctuated by the consumer euphoria that was felt during the summer of people getting out of lockdown, reconnecting with friends, and family gathering for the first time in a very long time. That was the primary story of the year and then the secondary story was about the impacts that had on the supply chain, inflation, and the Fed's response.
January 18: The world was on the brink of mass vaccination
“….we expect the federal program to open up shortly, and we are ready in our CVS Pharmacies to administer the vaccine. We have over 90,000 clinicians who are pharmacists, who are pharmacy techs, who are nurses and are nurse practitioners to be able to administer the vaccine. And we do expect that we can administer 20 million to 25 million vaccines per month once the federal program opens up.” – CVS Health (CVS) EVP, CVS Health & President, Aetna Business Unit Karen Lynch
[00:01:19] Mokaya: Yeah. It's fascinating to work through the year because it doesn't feel like the president was inaugurated early this year and it feels like it's such a long time ago. The midterm elections are next year. Time flies by so fast when you are not paying attention. I think this was a really nice way to go back to the beginning of the year to see what was going on.
The Fed was behind the inflation curve
One thing that I noted is a little bit of the tension between what the Fed sees and what the companies are saying. So I could see from the beginning, from as early as February and March there, companies which were already saying that inflation is higher and the Fed was at the same time saying hey, there’s no inflation, inflation is transitory and that tension went on until the end. Really it feels like The Transcript could be a better source for information for the Fed than whatever it is that they are relying upon.
February 15: The Fed vs the C-Suite
“…we are seeing the same inflation. We’re also seeing the inflation that you’re seeing, and coming from non-commodities – non-key commodities, ingredients, especially packaging in transportation in the U.S. And we think that the level and the type of inflation that we are seeing, it’s manageable,” – Kraft Heinz (KHC) CFO Paulo Basilio
“My predecessor has indicated that there’s a chance that this will cause inflation to rise. And that’s also a risk that we have to consider. I’ve spent many years studying inflation and worrying about inflation. And I can tell you we have the tools to deal with that risk if it materializes, but we face a huge economic challenge here and tremendous suffering in the country. ” – US Treasury Secretary Janet Yellen
[00:02:13] Scott: Yeah. I mean, the Fed was just totally behind the curve this year on the inflationary impacts. And to your point in February, we were picking up concerns about it. The minute that the Fed started calling it transitory, we had quotes from many companies basically saying this isn’t transitory, this could be lasting throughout this year and into next year mostly driven by the supply chain stuff. And then it was like every week we would find quotes about the inflation impacts of being broad-based, of being severe and sure enough, by the end of this year, we're seeing the worst inflation since the 1980s and the Fed still is pretty slow to react differently.
Tapering has began
[00:02:55] Mokaya: But I mean, at the end of the year, now they're doing a little bit of tapering and then going into next year, there is a chance that they might raise rates and the Bank of England already started last week also by suddenly surprising the markets by raising rates by a small percentage, but still significant in the sense that they're sending a message that there may then next year, at least more rate rises.
December 6: The Fed changed its tone
“The economy is very strong and inflationary pressures are high, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases - - perhaps a few months sooner” - US Federal Reserve Chair Jerome Powell
[00:03:21] Scott: Yeah. I mean, if you just look at where we would be with this inflation rate and this unemployment rate in decades past, we'd probably be in the 6 to 8% interest rate zone already, and we're at zero. So you know, there's a lot of room to go. If the Fed is actually going to have to fight inflation next year, it could be pretty damaging to the economy or pretty damaging to the capital markets because certainly no one is expecting 5% plus interest rates. But that's probably not going to happen next year. More likely is a continuation of higher inflation if that's the case
[00:03:58] Mokaya: Yeah, something else I also noticed is that from as early as February, we were also picking the bottlenecks in the supply chain. And I think that's the same thing that you're tying to what we talked about with The fed. It seems that transcripts are a really good source for such kind of information because very early the companies were saying the supply chain is constrained. Companies can’t get enough inventory. And that was at the beginning of the year. And at the same time, they were also saying there was a lot of stimulus in the system and a lot of excess demand. So that means that it was setting up for what we saw in the summer and in the fall, a lot of companies struggling to meet the demand that was out there.
March 29: But supply chains were seeing challenges
“The supply chain is still catching up and trying to rebuild inventory levels in particular in the North American market…So some of those supply chain issues have been well-documented, in particular the semiconductor shortages…There are some other challenges, right? So there was a bout of severe weather in the southern US a few weeks ago. That has actually created a shortfall of chemical feedstocks. That’s also impacting the supply chain. There was a fire last week in Japan in a major semiconductor plant. So all of these are sort of impacting our customers. But in the end, it’s delaying the recovery, but the recovery is coming back.” – IHS Markit (INFO) EVP-Transportation Edouard Tavernier
2021 was the year of the consumer
[00:05:00] Scott: Definitely. I think all of those things are true and they're going to continue at least for a little bit into next year. I do want to hit again though that it's easy to focus on some of the challenges that the economy was facing from an inflationary and supply chain perspective. And we should make sure we're always focused on just how strong the consumer was in 2021. That was the driver of all of these challenges because the demand side push from the consumer, which there was this again euphoria for the reopening plus just so much liquidity pumped into capital markets, put directly into consumers' pockets through stimulus checks that consumers were in such good financial position for the first time in a very long time and consumer were spending heavily in 2021. A lot of that stimulus is coming off so it's going to be interesting to see if the consumer can maintain that pace in 2022. That will be the biggest question for 2022.
May 17: Consumers were euphoric
“…we continue to be conservative because between being cooped up, between being locked down, between the stimulus, between celebrating that we are - the country is still around, and we're still going to try to get back to normal, there's clearly some level of euphoria around that. It would be impossible for me to tell you what percent that is.” - Simon Property Group (SPG) CEO David Simon
[00:06:00] Mokaya: Yeah, I agree on that. And also I think to end the year, in the last two months, we also picked a lot of quotes that still emphasize the issues to do with the consumer being strong, headed into the new year. That's a really good setup for next year. And it's good to remember as you say like this year has been all about the consumer. The consumer has a lot of money. The consumer wants to spend, and the consumer really wants goods as soon as possible and that's what's pushing up some of these issues in the supply chain. We shouldn’t forget that. Also, something else that we shouldn’t forget also this year, it is the year Web3.0 became the talk of the town, Metaverse. Now Facebook has changed its name to Meta, and then we also have Square now is called Block. So I think this has been the year when Web3.0 and the metaverse have become common lingo now in the financial circles.
Meme stocks and speculative mania
This is the year of Wallstreet Bets once again. It's all happened within one year. It feels like a lot, but all this has happened this year. That's when AMC has become a crypto company and all. It's such a crazy year it's been in the markets and it was really good to go through all these quotes to get a feel of how we started earlier in the year.
November 15: AMC is now a crypto company
“AMC has also been speaking publicly in recent months about cryptocurrencies and NFTs. I can confirm today that we have been exploring with third parties over the past few months, both how we can accept cryptocurrency and if it is feasible for AMC to consider even launching our own cryptocurrency. We think we'll be able to launch the acceptance of Dogecoin in the first quarter of '22 -- And we are now figuring out how we can take Shiba Inu as a currency; that's the next one on our cryptocurrency hit parade -- I might add that we believe we have figured out ways where we do not have to hold cryptocurrency on our balance sheet. So we're not taking increased balance sheet risks with all this potential acceptance of cryptocurrency.” - AMC Entertainment (AMC) CEO Adam Aron
[00:07:15] Scott: Yeah. I mean, there were certainly speculative manias throughout the year. The meme stocks were probably the craziest with GameStop and AMC and then the entire crypto boom has been something to watch. We wrote in one of the newsletters that the most exciting thing going on in financial services right now is crypto. And I still feel that way as we're exiting the year.
It’s been a great year at The Transcript too
May 17: The Transcript moved to Substack!
Welcome to our first post on Substack! We are very excited to be here and glad to have our supporters make the move with us. We are pleased to continue to offer a mostly free version of this newsletter along with a few small changes.
One other thing I think we should note before we sign off for the year is this was a huge year for The Transcript too. I was reading back through our posts and we launched the podcast this year. This was our first year ever doing a podcast. I think we've done 40 episodes now, 44. So it's been great being able to get together and talk each week halfway across the world and talk about the global economy. That's been great. And then also we moved to Substack this year. This was the first year that we were on Substack and it's been a really time to be on Substack. So I think it's really appropriate that we finished the year by thanking all of our listeners, our readers, especially our subscribers who are supporting our work. We really are grateful for all of you and really also grateful for the work. I think Erick and I really learned a lot doing this. It's fun to just be able to share it with people. Any thoughts?
[00:08:32] Mokaya: I agree with you. I should say the first time I sent out the email that we were on Substack now I was super afraid because we didn't have any paying subscribers right then. An hour or two later, I was still very tense because I was like, did we make the right decision in terms of moving to Substack? But the last several months have been a strong validation that we are really doing a good job and especially when you see the scale at which we’ve been able to operate and have a lot more people on our paid subscription, which is allowing us to get more resources to make the product better. I'm also very excited for 2022 because then we have a really good base to build upon for this year. And I think it's a good time to say thank you so much for the people who have walked with us. We do welcome feedback all the time. Tell us how we can make this better and how we can keep enhancing this so that it can be the best product that you always look forward to read every Monday morning.
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[00:09:24] Scott: Well Merry Christmas to everyone and happy new year and hope everyone has good holidays. We will be back in the new year with more of The Transcript, following the economy through quotes from CEOs and other leaders around the world. Thanks, everyone.