Moneybeat: Resilient by design

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JENNY ROUGH, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat.

NICK EICHER, HOST: It’s time now to talk business, markets and the economy with financial analyst and advisor David Bahnsen. David heads up the wealth management firm the Bahnsen Group, and he is here now. Good morning to you.

BAHNSEN: Good morning, Nick, good to be with you.

EICHER: Well, David, as we talked about this before we came on the air this morning, the fact that last week, a terrible political assassination rightly overshadowed even our 9/11 remembrances, so let’s circle back to it now, because I thought you had some important thoughts on what the hijackers on that day seemed to understand that maybe we don’t understand well enough, and that is the centrality of the American free enterprise system, and the heartbeat of that strength which is our capital markets. Say more about why you think that’s so.

BAHNSEN:Yeah, you know, there has been a tradition of talking badly about financial markets. You know, that Wall Street is easy to demonize. And I don’t just mean the obvious things of bad actors on Wall Street who should be demonized. I mean the existence of our banking systems is often presented in a pejorative light throughout American history, and class warfare around this picked up in certain parts of the 20th century.

And I would argue it is a really underappreciated part of what drove the target selection of the 9/11 jihadists—that their very self-conscious disdain for American markets and desire to strike a blow at the symbolism of America’s financial markets was behind their selection of the World Trade Center in Lower Manhattan at the heart of Wall Street, the heart of the financial district.

And Khalid Sheikh Mohammed, who is still at Guantanamo Bay, who was the operational mastermind of 9/11, said so in interrogation. He laid this out very clearly. And it was very consistent with things that Osama bin Laden himself had said in advance of 9/11, and then again after 9/11 when he released a video to Al Jazeera.

My point that I would make is not just to further delve into the evil of what the jihadists did on 9/11, but it’s to point out that we have a huge need to defend America’s capital markets for the same reason that the enemies of America have a reason to destroy America’s capital markets.

Okay? These are different sides to a coin here. If you hate America, you want to destroy our financial system that funds entrepreneurialism, that helps transfer capital, that helps grow capital, that gives us an ecosystem to take our ideas—and before you get to execution you have to have capital between our ideation and our execution. Capital, whether it’s venture capital in Silicon Valley, private equity, commercial banking, access to loans, and all of the sophistication that goes around these financial markets—these drive so much of our prosperity, drive so much of our unique, exceptional execution in our free enterprise system.

Why the jihadists hate it, I understand. Why Americans don’t love it more, I don’t understand. And this is the point I was making in Dividend Café that I think is very important for WORLD listeners to understand. Our capital markets are a byproduct of our exceptionalism, and you cannot have capitalism without capital markets.

EICHER: Would you take it a step further and say that there really is a worldview clash here? This Islamist ideology is really anti-capital markets. But the Biblical worldview is at the heart of free enterprise¡ so wouldn’t you say that the economic sophistication we enjoy today does grow out of a Biblical framework?

BAHNSEN: Well, there’s absolutely no question, and that sophistication of those capital markets has obviously evolved a great deal since biblical times. But that we want honest weights and measures, and that there is a sense of capital that underlies transactions is a part of the modernized economy.

The principles are extremely biblical, and they come out of the dignity of the individual. Our desire for an aspirational society, for people to produce goods and services and to do so at scale, to meet more human needs, deliver on more human wants—these are all a necessary byproduct of a creational theology.

Where capital fits in in a more contemporary setting is underappreciated. There isn’t going to be an elaborate exegesis of convertible debt securities in the Book of Leviticus, for example. But the principles that I’m talking about are extremely biblical. And the fact that just like with medicine, by the way—the Bible doesn’t speak to the particulars of complex heart valves, but it does speak to the sanctity of life, right?

And that’s what I’m getting at: we have tools and equipment available to drive human flourishing. And yet because some people have gotten richer than others, we’re demonizing these things. Because some people are jealous and covetous, which is the Tenth Commandment itself, we’ve made a sort of meme out of disdaining Wall Street. That was fine for the jihadists because that’s consistent with their worldview. It’s not consistent with our worldview, Nick.

EICHER: Really looking forward to delving more into some of these theological questions tonight in Houston. But before we go, I do want to turn back to, again, 9/11 and how quickly the markets recovered and showed this sort of resilience in the face of tragedy. But looking at today’s environment, David, of debt strain and global instability and political division—and boy, did we get a dose of that last week—do you see the same resilience built into our markets today?

BAHNSEN: Well, I mean, it’s interesting that a couple of the most dramatic market occurrences we’ve had even since 9/11—other than the Great Financial Crisis—we’ve seen even quicker recovery.

You think back to the world being shut down when you and I began doing this podcast together in March of 2020. I came on Moneybeat to talk about the market swooning. Two weeks later the market had hit its bottom. Two weeks. And it took a long time for the world to reopen, for the economy to recover, but the markets had bottomed by late March of that same month.

The Liberation Day swoon with the trade war a number of months ago—you know, dropping 5,000 points in four days and then a recovery, and now sitting here at new market highs. Markets have a recovery function that is unbelievable.

It’s largely driven by what markets themselves are, which are discounting mechanisms, pricing what they believe about the future, not what was in the news yesterday, but what we believe will be in the news a year from now. And that was a lesson out of 9/11 markets.

And it was in an earlier stage in my career, but the reality is people would say on September 12th or September 16th or what have you, “People aren’t gonna fly again. America’s way of life is gonna change.” Markets felt differently. And people do resume their lives. They do go on to produce new things, new solutions, solve other issues that we didn’t even know about.

It’s kind of surreal to think about the fact that when 9/11 happened and the market was tanking, there were other things to deal with even before that horrific terror attack. In markets, we were still dealing with the hangover of the technology bubble having burst, and we went into a minor recession.

And there were some of those things going on. But Nick, the fact of the matter is, we didn’t even have the cloud. We didn’t have social media. We didn’t have the iPhone. Google—Google wasn’t even a public company yet. You know, I’m not that old, and you know, that’s how quickly human progress can happen. God made us really capable co-creators with him.

EICHER: David Bahnsen, founder, managing partner and Chief Investment Officer at The Bahnsen Group. He writes regularly for WORLD Opinions, and at dividend-cafe.com. David, thanks. And safe travels down to Houston, I’ll try to do the same, and Lord willing, see you tonight.

BAHNSEN: Looking forward to it, Nick.

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