V-Shaped Recovery for Me, L-Shaped Recovery for Thee: The Aftermath

Byrne Hobart
7 min readMay 1, 2020

This is from the weekly free edition of The Diff, the newsletter that tracks inflections in finance and tech. Last week was a five-part series on the most important trend in the economy today: the V-shaped recovery we see priced into the market and an L-shaped recovery for the rest of the economy. It’s not a call for pitchforks and torches, just an assessment of what’s going on right now. Some of it stems from forces that already existed (the world’s best-run companies are high margin and have more cash than they know what to do with). And some is because of policy. In short: the Fed has done at least an A-minus job, while Congress gets a generous D. But we can grade them on a curve: the Fed is an economic A-team, and even if Congress were full of epidemiologists, economists, and executives, a committee of 535 people can’t accomplish anything. Last week’s posts:

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V-Shaped Recovery for Me, L-Shaped Recovery for Thee: The Aftermath

Over the last week, I’ve laid out the most straightforward explanation for the divergence between equities and the broader economy: large companies were unusually well-equipped to survive, and they’re better able to benefit from monetary interventions — which have been far faster and more effective than fiscal ones. Meanwhile, small companies, individuals, and municipalities just don’t have the cash reserves or flexibility to react.

In the last few posts, I’ve focused on what this means in the short term. Now I’d like to take a step back and explore two longer-term possibilities. The pessimisic one is front-end corporatization: small…

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Byrne Hobart

I write about technology (more logos than techne) and economics. Newsletter: https://diff.substack.com/