Camelot Portfolios Talking Points

50 Years of Creative Destruction

We live in a world today with some of the most technologically advanced products and services available at a click of a button. The largest companies currently have disrupted markets that 50 years ago were untouchable. In 1950 companies like American Motors, Studebaker, and Collins Radio were a part of the Fortune 500 (Perry). Now, they are a remnant of the past or have merged with another company. Of the 500 companies listed the Fortune 500 in 1950, only 59 appear in the list today (Perry). What exactly does this say about business in the United States economically?

The fact that there is a large amount of churn within business shows us that the US is a society in which innovation and creativity are integral to growth. 20 Years ago, Amazon, Google, Facebook, Netflix, eBay were either in their early stages or not even an idea (Perry). People in our society decide which companies stay or go based off of the value they provide (Perry). This value is created over time through a combination of quality, understanding its customer, and price (Perry).

It is likely 50 years from now the list of Fortune 500 companies will look different from it does today. Money flows in different directions and revenues will shift to new companies, which is the benefit of creative destruction.

Jerome Powell nominated for Chairman of the Federal Reserve

This week in Washington, President Trump tapped Jerome Powell to be head of the Fed. Over the years, the chairman of the central bank has been considered one of the most influential positions in the world (Forbes). Every word spoken and every action taken by the chairman gives an indication of what the Fed thinks about the US economy. One of the best examples of reactions about the economy was Allen Greenspan’s irrational exuberance comment about the dot com bubble. This comment was made in 1996 which was 3 years before the bubble burst.

Along the lines of what to expect from Mr. Powell is likely more continuity from the Fed. The next chairman is considered “dovish” when it comes to raising interest rates, so an accelerated raising of short term interest rates from today is less likely to happen compared to other candidates (Goldstein).

One of the notable differences between Powell and Yellen is that Powell’s background is divergent from the recent chairmen’s. Janet Yellen’s and Ben Bernanke’s experience is very academic: their pedigrees are from economic thought in higher education (Snider).  Jerome Powell does have a doctorate, but the majority of his experience prior to joining as a governor in the Fed was in the financial sector in finance and banking (Snider).

The chairman position is prestigious in its own right. Whether we see further tightening by the Fed and talks into deregulating markets by the central banks is open for future interpretation.

 Compiled by the Camelot Portfolios Investment Committee

Darren Munn, CFA, Chief Investment Officer

Eric Kartman, Research Analyst

Drew Steinman, CPA, Lead Portfolio Analyst

Zach Hartenburg, Trader/Analyst

Frank Echelmeyer, MBA, CKA®, Advisor Consultant

-for Broker/Dealer and RIA use only-

 References

Forbes. "The World's Most powerful People." 2016. Forbes. 2017.

Goldstein, Steve. "What a Jerome Powell Fed means for investors and the economy." 2017. MarketWatch. 2017.

Perry, Mark. "Creative Destruction Builds Prosperity As It Topples Big Companies." October 2017. Foundation for Economic Freedom. 2017.

Snider, Jeffery. "Jerome Powell Believes As Economists Do, Without the Ph.D." 2017. Real Clear Markets. 2017.

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