Saturday, September 19, 2020

THINK STRATEGICALLY: The Psychological Coward

By on April 28, 2020

The Essential Qualities of Great Leaders are Compassion and Honesty

This past week, during one of the White House press briefings on the Covid-19 epidemic, President Trump wondered whether light and disinfectants could be used inside the human body to cure the disease. 

“Supposing you brought the light inside the body, which you can do either through the skin or in some other way,” the president said. “Then I see the disinfectant knocks it out in a minute, one minute. Is there a way we can do something like that, by injection inside or almost a cleaning?”

The remarks caused furor to erupt on social media over concern about the gravity of such remarks being made at the White House. State emergency and poison control hotlines saw spikes in the number of calls. The makers of Clorox and other major disinfectant manufacturers issued statements. RB, which makes Lysol and Dettol, reportedly said that “under no circumstance should our disinfectant products be administered into the human body.”

A day later, Trump claimed he was being sarcastic, which in my opinion, after watching the footage several times, I did not find Trump’s statement to be true.

So often, when we listen to Trump we note that he fails in accountability. Why do I say that? Accountability is doing the right thing and taking responsibility whether or not anyone is watching, but he is unable to make himself accountable even as the whole nation is watching. 

To be fair, we must remember that the hallmarks of Trump’s term in office have become undone, and they were as follows:

  • Tax Reform
  • Stock market at record levels
  • Unemployment at 50-year low
  • Employment growth in most sectors
  • The U.S-China trade deal
  • The USMCA trade deal
  • The economy in robust expansion with solid fundamentals

Before late February, Trump seemed like he would be invincible in the November election. Few could have predicted how coronavirus would destroy the U.S. economy and, with it, certainty in his reelection. 

One of the most distinct traits that a good leader must have is emotional intelligence. Most leaders with high emotional intelligence outperform those who are less aware of their emotion’s effects. 

How does emotional intelligence work:

  • Self Awareness: the ability to recognize and comprehend one’s moods, emotions and drives, as well as their impact on people.
  • Self Regulation: the ability to control or redirect disruptive impulses and moods—the propensity to suspend judgment or not thinking before acting.
  • Motivation: passion for working for reasons that go beyond money or status. A determination to pursue goals with energy and persistence.
  • Empathy: ability to understand the emotional makeup of other people. Skill in treating people according to their emotional reactions.
  • Social Skills: proficiency in managing relationships and building networks. Finding common ground and building rapport. 

Trump focuses primarily on himself and the lack of praise he has received from the media for the “fantastic job” his administration has done in handling the pandemic. As of this writing, there are 987,160 Covid-19 cases in the U.S., where 55,413 people have died of the disease. In my opinion, the coronavirus pandemic can only be categorized as a human tragedy.

A leader must excel in listening, serving and observing, while developing healthy relationships, which, to me, is the foundation for leadership. Any leader that lacks humility cannot have empathy. Humility does not make you weak, and arrogance is never a strength. 

As we have seen, Trump blames anyone and everyone for his troubles. His lack of accountability, humility and transparency are evident. So after much analysis, it dawned on me that he is simply a psychological coward, unable to have the courage to support his convictions, his statements or his behavior.  

My friend and mentor, Tony Faria, said to me a long time ago: “A leader with credibility always under-commits and over-delivers, and remember, you will make some mistakes; when you make them, own up to them, be humble and learn.”

Against the backdrop of these sentiments and those powerful words that have meant so much in my life, I am compelled to hold anyone in power against them. 

Week in Markets:
It’s the Economy, Stupid; Economic Weakness, Oil Glut Impacts Markets

As James Carville said in 1992, “It’s the economy, stupid.” Our economic engine is not firing on all cylinders and its showing. The U.S. and global stocks lost ground during the week as a dramatic drop in oil prices. Two factors drive the decline in oil prices, limited storage capacity and the absence of demand from airlines, cruise lines, consumers and commercial clients,  sparking market volatility. Oil prices continued to drop to such an extent that, for the first time in history, stepped into negative territory. Not all was bad news as Trump signed into law the new package, “Stimulus 3.5”; The ink on the bill is not even dry and there is widespread speculation that the additional Payment Protection Program (PPP) funding may run out in less than a week.

Let’s examine what was approved:

Stimulus 3.5: With overwhelming bipartisan support, the House and Senate passed stimulus 3.5. We must note that although it is called Stimulus 3.5, this is, in fact, the fourth stimulus bill Congress has passed and Trump has approved in less than 60 days to help Americans fight the epidemic. The $484 billion package includes $310 billion to replenish the PPP and $174 billion for hospitals and COVID-19 testing. 

We believe the PPP funding will be depleted in a few days, and the U.S. Congress will be under extreme pressure to replenish the funds again. 

Stimulus 4.0: In our view, there is one absolute initial scenario for the next stimulus bill once the PPP runs out of money. The U.S. Congress will be forced to not only replenish it but also leave the program operating for the rest of the year. The rest of the stimulus will largely depend on how long the outbreak continues and how severely it affects states, cities and businesses. 

On to the markets, the Dow Jones Industrial Average closed the week on April 24 at 23,775.27, losing 467.06 points, or 1.93%, for a year-to-date (YTD) return of minus-16.7%. The S&P 500 closed at 2,836.74, falling 37.72 points, or 1.32%, and a YTD return of minus-12.2%. The Nasdaq closed at 8,634.52, dropping 15.58, or 0.18%, and a YTD return of minus-3.8%. The Birling Puerto Rico Stock Index closed at 1,291.42, down 15.91, or 1.24%, returning minus-36.63% YTD. 

Meanwhile, the U.S. Treasury’s 10-year note closed at 0.6%, a minus-7.69% difference, and YTD return of minus-1.3%. The U.S. Treasury’s two-year note closed at 0.22%, up 10%, resulting in a YTD return of minus-1.7 percent.

What are investors to expect from the economy?

As the economy was forced into an abrupt halt, the big question is how fast will it reset. As previously mentioned, there are three distinct variables to the economic recovery that will follow. The improvement may represent itself in either a “V,” “U” or “L” shape. We predict a “U-shaped” recovery since it better represents the gradual resumption of activity that the White House Coronavirus Task Force is favoring after the social-distancing measures are relaxed. There will be states with a lower COVID-19 impact that will be able to open and operate near normal levels, while other hard-hit ones will take longer such as New York, New Jersey, Massachusetts, Illinois, California, Pennsylvania, Michigan and Florida.

The elephant in the room is how fast employment can return to pre-lockdown levels as measures are gradually lifted. The U.S. Labor Department reported more than 4.4 million new initial jobless claims last week, which, added to previous weeks, rises to 26 million new jobless claims, or 16% of the U.S. labor force. These numbers erased the 22 million jobs created during the economic expansion since the Great Recession. In the chart below, we present the most updated economic benchmarks and their recent performance. It is not a pretty picture.

We believe that the economy will reset to the extent that the day-to-day normalizes; however, we may not be able to see the same level of growth we saw in the first two months of the year. Additionally, some industries will experience transformative changes that will not allow them to operate as they once did. While we have complete confidence that the economy will reset, we may continue to experience stock market volatility for the rest of the year.

The Final Word: Reopening Puerto Rico

After more than 40 days under lockdown, we must reopen Puerto Rico. We have all learned to protect ourselves—with face masks, hand washing, using sanitizer, gloves, alcohol, and face shields. These actions will be applied to all businesses wanting to reopen. The scenario for millions of Puerto Ricans has gone from dire to critical, with 80% of the population living from paycheck to paycheck, people now need work to resume. It’s a do-or-die scenario.

Otherwise, we will have a healthy population dying of starvation with thousands of businesses bankrupt. 

The impact of the government lockdown that began March 15 has had a severe effect on the daily lives of families that are unable to earn a living either because they do not work in an essential services operation or can work remotely. Most private sector workers have had to claim unemployment benefits. Our numbers show that more than 300,000 employees have filed for unemployment, and after more than 42 days, few unemployment checks have been issued as the secretary of Labor seems unable to rapidly adapt to the circumstances, as evidenced in recent interviews in the “Jugando Pelota Dura” TV show. 

Also, the governor of Puerto Rico has not owned up to the realities of what the lockdown she ordered has created, and the dire need to create a safety net for people not only to reset their lives but also to be able to thrive again. The governor has been defending her performance with words, not actions. In my view, she needs to perform a realistic self-assessment of her inability to lead in a crisis. Among the clear signs that the governors are in trouble is the fact that others are setting the standards of her work, not her; the constant flip-flopping on decisions; and the inability to accept mistakes and own up to them. 

Great leaders win over the hearts and minds of others by leading with empathy, compassion, honesty and transparency, all essential qualities in a leader.

Francisco Rodríguez-Castro, president & CEO of Birling Capital, has more than 25 years of experience working with government, and multinational and public companies.

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