I was driving in downtown Topeka a couple of weeks ago and as I was crossing 7th Street on Kansas Avenue, I saw young ladies, one on the left corner and one on the right corner, holding up large placards. One sign said something about corporate greed and the other declared membership in the club that is 99% of America.
Occupy Wall Street had become Occupy Topeka, Kansas? It had never even occurred to me.
Granted, it was only two people and the weather was really nice that day so, come mid-January they may find other ways to spend their afternoons. That wouldn’t surprise me. But I also wouldn’t be surprised if two people turned into a crowd.
Twitter, Facebook, unemployment and good weather have become an effective and a potentially dangerous combination… organizing people all over the world… as the former leaders of Egypt, Tunisia, and Libya can attest (although one of them is no longer talking). I’m sure the mayor of Topeka has nothing to worry about yet.
The “Occupy Wall Street” movement has made its way into over 900 cities all over the world,Topeka probably garnering the least amount of attention. Larger and more ambitious gatherings have resulted in clashes with police and arrests. In Rome, Italy and Oakland,California, violent confrontations with police have turned ugly. I’m confident this is going to get worse before it gets better.
Mindy and I were in San Francisco this week and happened by the “Occupy San Francisco” movement, which seems to have the luxury of really nice tents, not the crummy ones we used in Boy Scout camps many years ago.
Toma la calle is Spanish for “Take the Street.” So far all they had taken was this park, so perhaps the sign should have read “Toma la Parque.”
Their goals have not yet become one common voice with one common interest, although it seems to me the most frequent complaint is that the wage earners in the top 1% have really been sticking it to the wage earners in the bottom 99%. I noticed at least one protester in San Francisco who wants to solve our country’s problems by raising MY taxes:
Why me? Why not Warren? He’s paying less than his secretary. Take notice of the American flag on top of the sign, as if to imply this message is patriotic.
Our taxicab driver was not shy about expressing his opinion of the Occupy San Francisco participants. With his very thick Russian accent he said, “These people think they want socialism. They don’t know what socialism is! Socialism is when everyone shares nothing because everyone HAS nothing! This is the greatest country in the world! I came here thirty years ago and if somebody wants to work here, they can get to the top!” He’s driving a taxi and he still sees the U.S. as the land of opportunity.
What’s behind all these movements seems rather simple to me… unemployment. They can call it a lot of other things but I’m guessing there are very few people participating in OWS who have a full time job. And from what I have seen, the majority of them are under age 30, which makes sense because people over age 30 get tired of living in tents much quicker than people under age 30. When people are employed they might think it is absurd that someone else is making a boatload of money but they don’t get that upset about it.
For the record, I agree with the protesters that CEOs seem to belong to a country club that rewards “existence” rather than performance. Why is it that a CEO can get a $10 million severance package after being fired for doing a lousy job? I can understand why the protesters don’t get upset that Albert Pujols may sign a contract in excess of what… $100 million? Because they saw that he had a good year so it makes sense that he should get $100 million, right? I digress… this will be addressed in a future Investment Commentary about shareholder incompetence.
The cab driver is correct. The protesters don’t want socialism. What they want is capitalism which operates the way it is supposed to… capitalism that isn’t sprinkled with government intervention and politicians pushing agendas designed to gain favor with constituents in order to get re-elected. Beginning with the Clinton Administration (and continuing through the Bush Administration), policies were enacted for the purpose of providing home ownership to people who did not have the money or income to support ownership. A nice, charitable idea that helps garner votes but not very practical. And, of course, if those who could NOT afford a home were provided funds to buy a home, then those who COULD afford a home were provided funds to buy a McMansion.
Socialism doesn’t create and provide jobs. Capitalism does. Henry Ford (and the Mustang), Bill Gates (and Windows) and Steve Jobs (the i-everything) and all the jobs they created don’t exist under socialism. Which provides a unique bit of irony in that many of the people involved in the OWS movement are accessing Facebook and Twitter using their iPhones and iPads.
When I see the OWS encampments, I’m reminded of a song by the Guess Who in the ’60s (in fact there is a lot about the OWS encampments that remind me of the ’60s). The chorus goes like this:
Baby, I’ll be there to take your hand
Baby, I’ll be there to share the land
That they’ll be giving away when we all live together.
What land? Whose land? They’re just giving it away? Are they taking it from someone else so they can give it away? So then after they give it away, does somebody else own it? Are we just back where we started before we gave it away? Did they not think it through?
If the Occupy Wall Street movement continues, I hope they find the ability to focus as much on Washington as Wall Street. Washington has either created rules or removed existing rules based upon their cozy relationships with bankers who contribute to political campaign funds. In 2008, the U.S.government bailed out banks which were deemed “too big to fail.” Financial reform was supposed to remedy that problem. Many of those banks are larger today than they were in 2008. That’s not Wall Street’s fault. It is Washington’s fault.
As I said, most of the participants in OWS are of the demographic who voted for Obama, so they might be a little reluctant to view Washington as part of the problem. I understand that. I would feel the same way. Focusing on Washington will probably only happen after their contempt for Wall Street has produced nothing.
Meanwhile, Washington just announced a new political agenda to help fix a problem they created. And if I sound critical of this latest intervention, I’m not. In last month’s Investment Commentary, I criticized policies that made the wealthy wealthier and the poor poorer. The Fed’s moves to reduce long-term interest rates (and mortgage rates) made it easy for wealthy people to re-finance and enjoy reduced house payments, while poor people were underwater on their mortgages and didn’t qualify to refinance. So they were stuck paying 6% – 7% interest while wealthy people enjoyed new mortgages at less than 4%.
The Obama Administration announced some major changes to HARP (Home Affordable Refinance Program) which was enacted one month into his term… and which has had virtually no effect on home ownership or the economic recovery. Under the changes, some borrowers who are underwater and are current with their monthly payments can refinance and take advantage of lower interest rates. This will undoubtedly be a welcome change for strapped homeowners who might see their monthly payments reduced by several hundred dollars.
And for students who graduated in the past few years with huge student loans, only to find jobs bussing tables, the Obama Administration issued an executive order limiting student loan payments to 10% of “discretionary income.” Question: what is your discretionary income if you are living in a tent in a “parque?”
We frequently get calls and solicitations from “investment professionals” seeking to help us manage our clients’ assets. Calls of this nature generally revolve around helping us get exposure to an investment asset class which would be difficult for us to achieve on our own… like Brazilian repo debt… or managed futures contracts… or emerging markets real estate. There may actually be some merit to some of these investment avenues but all of them come with a cost.
If you are ever wondering if we would put a bunch of money into Himalayan Sherpa futures contracts due to their low correlation to the S&P 500, think about the following various qualities of an investment that are important to BCWM:
- Liquidity (how easy is it to get your money out of the investment should you decide you want out?)
- Transparency (on any given day, do you know what you actually own and what it’s worth?)
- Control (do you have any say in how your money is invested?)
- Idiot factor (when they are explaining the investment to you, do you feel like an idiot?)
Investments which don’t let our clients have their money when they want it, which don’t tell us what the investment is worth on a regular basis and are too complicated to understand are investments with too many red flags. Some of them are designed to rob you of your money.
After five consecutive months of declining stock markets, October provided some unusual relief. Historically, October can be a scary month, but this October resulted in an almost 10% increase in the S&P 500. It’s hard to believe that news from Europe could be subdued for almost an entire month. However, on the scariest day of the month (the last one, of course), and the first day of November, the PIIGS said, “Hey, remember us?” And then we remembered and the markets fell almost 5% in two days.
Here are some of the monthly statistics which are positive:
- U.S. GDP increased 2.5% in the third quarter, much better than the first two quarters.
- Car sales were up significantly vs. September, 2010.
- Industrial production was up.
- Consumer sentiment was up.
- Friday, it was announced that unemployment fell from 9.1% to 9.0%. We’ll take whatever we can get.
As MF Global illustrated, we may still be at the mercy of Europe. It appears a Greece default can be absorbed. Italy, on the other hand, may continue to cause much market angst. At Boyer & Corporon Wealth Management, we have taken advantage of the October stock market to hedge our equity positions further. We remain skeptical and cautious.
¡Toma la calle!
This information is provided for general information purposes only and should not be construed as investment, tax, or legal advice. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.