The most significant data points this week largely flew under the radar. The Conference Board CEO and Duke University CFO surveys give deep insight into the direction of the economy and markets and this thread will highlight why.

CEO confidence sits at a 10 year low. Despite early 2019 promise of a 2nd half rebound, 52% of CEOs say business conditions are worse than 6 months ago. Why is this so important?

A quick psychology lesson.

Maslow's Hierarchy of Human Needs is a theory that lays out a pyramid framework of human needs that drive behavior. Only when the most basic needs at the bottom are met will humans strive to meet higher level needs.

The framework looks like this (most basic first, highest level last):
1. Physiological
2. Safety (Physical & Economic)
3. Social Belonging
4. Esteem (Ego/Status)
5. Self-Actualization

For 10 years, many have been able to focus on higher level needs - Esteem and Self-Actualization. Hence the excesses in society and markets. For financial markets, think share buybacks, M&A, unicorn IPOs, and insane executive pay packages.

What happens if suddenly CEOs got scared and started to focus on lower level needs of Economic Safefy and Self-Preservation?

We're seeing that right now. Again 52% of CEOs say conditions are worse now than an already weakening 6 months ago.

Many are getting while the getting is good. CEO exits are at an all-time high. 1640 left their posts in 2019.

Those who stay are going to focus not on Ego, Status, and Excess, but on Self-Preservation and Security. And they're directing their CFOs accordingly.

Per Duke, 82% of CFOs have planned spending cuts for 2020. That aligns with non-financial CAPEX forecast to decline in 2020 for the first time since 2009. And it portends significant job cuts.

Everyone seems to believe Fed printing can drive the markets forever. It is a short-term fix in the grand scheme of things.

Q1 Guidance will be critical. If anywhere close to 82% of companies curtail buybacks & start cutting jobs en masse, Fed money printing will lose its overall effectiveness. CEOs & CFOs will use that money to pay down debt, shore up balance sheets, and focus on self-preservation.

Remember, Fed funny money in large part is making its way into markets through buybacks, M&A, and corporate speculation. It doesn't have to. And it won't if CEOs don't choose to deploy it there.

401k's are another massive source of funding for this market, and unemployed people don't contribute to 401k's.

Psychology tells us that buybacks will slow dramatically and job cuts will rise suddenly as CEO confidence dwindles. I believe those are catalysts for a market disaster.

I'm going to stop tweeting every little datapoint and start focusing on macro themes with a psychology underpinning. Next up, I'll highlight the most influential person most people don't know and his role in current market euphoria. My new avatar is a hint.

Side note: don't discount #3 on the hierarchy. CEOs generally are people who care what others think of them. Nobody wants to go down as the next Jeff Immelt or Carly Fiorina.

Exactly. Powell is 100% focused on #3 right now. I would argue Paul Volcker spent his Fed tenure in #5. That's the psychological difference.