Forget Decoupling: Divorce Is A “Shock Wave”

By Michael Every of Rabobank

It’s not as if we are short of big picture themes right now: vaccines vs. vacillation; inflation, hyperinflation, disinflation, or deflation; tax and spend vs. no tax and spend vs. no tax and no spend; crypto vs. Tales From the Crypt-o; fast US-China decoupling,…or slow US-China decoupling; and even war or peace. No new developments on any of them today, however.

Instead, the focus is obviously on that most crucial of developments: that Bill and Melinda Gates are divorcing after 27 years. As Bloomberg puts it, “Their separation is likely to send shock waves through the worlds of philanthropy, public health, and business.”

And equal waves of excitement through divorce lawyers given there is allegedly no pre-nuptial agreement in place and a USD130bn pot of assets to divide. (Which is larger than the 2019 GDP of 153 of the world’s 213 economies and territories, with the cut-off point being Kuwait, and Ukraine potentially the next one in line – the second time I have had to use that phrase in very different contexts in recent weeks.)

But really, why the “shock waves”?

Did Amazon stumble after the Bezos divorce? Hardly.

Does the Gates divorce somehow prevent the philanthropy that sees them oppose developing nations being allowed to produce generic versions of Covid-19 vaccines? Yes, that won’t solve the terrible problem in India right now given the issue is physical supply – but arguably if everyone could produce vaccines to begin with, then there would be far fewer crises in the first place. That message –right or wrong– backs countries not relying on global supply chains in the future. Or finding a ‘vaccine-daddy’ that they *really* trust. And of course, this is about more than vaccine: what will the next crisis be? What will we be lacking then? Semiconductors are an obvious example, and it will be years before we sort that mess out, apparently. But there are many other critical goods supplies which billionaire neoliberal CEOs have “assumed away” in their world-is-flat business models. Of course, some countries have been thinking much further ahead: the not-so (neo)liberal ones. The EU is slowly catching on, based on the news reported here yesterday; as is the UK based on this report.

Back to the “shock waves”. Does the Gates divorce mark the end of anti-competitive business practices that sometimes end up in court? To say this is unlikely is an understatement, looking at the front page of the Wall Street Journal today. It also seems to ignore that the business model of much of the tech ‘disruption’ we see around us is: “We bleed money now, but once we are the ONLY global firm doing X, we are the next Bill Gates.” Except unlike Microsoft, current market valuations for tech are propelling many firms close at least ‘entry-level’ billionaire status long before every business and household has actually had to buy the product. Didn’t Andy Warhol say one day we would all be famous for 15 minutes? Maybe now we all get to be Bill Gates.

And who gets the land in this divorce, not the house, given the Gates are the largest private farmland holders in the US, with 242,000 acres? That is a lot of space on which to “carry out research to help breed chickens that lay better-quality eggs and cows that produce more milk for farms in South Asia and Africa”.

So perhaps the Gates divorce “shock wave” is just because everyone in financial markets and media, philanthropy, public health, and business are out-and-out romantics(?) Yes, that must be it.

Anyway, enough celebrity gossip and time for some more of the bigger-picture narratives: except it’s hard to tell the two apart. In particular, the Philippines’ Foreign Affairs Secretary just went ‘Wolf Warrior’ to use his personal Twitter account for a four-letter word tirade against China, demanding it remove its ships from a disputed area. (To clarify, the dispute is that international law and the Philippines say the waters are theirs: China says it isn’t, and is acting like it.) President Duterte then had to state on TV that “China remains our benefactor. Just because we have a conflict with China doesn’t mean that we have to be rude or disrespectful,” as he negotiates delivery of up to 4m doses of Sinovac vaccine, and 2m of Russia’s Sputnik V – for a population of 111m. See what I mean about philanthropy and supply chains? But don’t worry: those better-quality eggs are coming real soon.

And down to Australia, where the RBA meet today in their latest studious attempt to pay no real attention to the world or economy around them. Will there be recognition of the “drums of war” flagged recently? Of course not. There will be vague and unreliable snapshots of what they think the Chinese economy is doing. Will there be recognition of the house-price rises that are pretty bonza even by Aussie standards, while the only other people who can do something about it, APRA, say it literally “isn’t their job”? Of course not. Expect something incredibly anodyne instead. One could say that the RBA only start to use more interesting language about housing when the market is going down: the higher it goes, the drier the lexicon becomes.

Given that this is the case, and that we can expect rates on hold, and QE on hold, and less-and-less-credible YCC on hold, and a copy and paste statement to boot, perhaps we should look at the latest headlines from an Aussie gossip mag instead? As New Idea Magazine (“Australia’s most loved weekly magazine, featuring the latest celebrity news, real life stories, exclusive interviews, recipes, health and more.”) excitingly reports: ‘Yes, it’s a wig’: MAFS’ Melissa shuts down critics on her new look; and if you think that is market-moving, try Princess Eugenie shares rare pics of baby August for Jack Brooksbank’s birthday. It’s all heady stuff, even if they aren’t covering the Gates divorce for some reason.

But what some of us wouldn’t give for some New Idea economics Down Under.

Or All Over. We live in hope