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By Trader Mark
October 22, 2010 7:45 PM EDT
A very nice piece via Reuters (quite lengthy - good for weekend reading to cheer you up) touching on themes we've been very early on. [Dec 8, 2007: Do the Bottom 80% of Americans Stand a Chance?] In fact I am starting to see a lot of things in terms of income inequality, wealth concentration, loss of job security, fear of children living worse than their parents, failure of of creating "the American dream" for the masses, and such starting to pop up.
According to Internal Revenue Service data, income inequality in the U.S. is at its worst since the 1920s (before the Great Depression). The top percentile of wealthy Americans earned 21.2% of all income in 2005, up from 19% in 2004, while the bottom 50% of wage earners earned 12.8% that year, down from 13.4% a year earlier.
Maybe that's just a sign of the economic bottom? ;)
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I've highlighted a Citigroup piece from 2006 I believe many times, in which an analyst talked of the investment themes from the "Plutonomy" developing in our country. [Sep 7, 2009: Citigroup - America; A Modern Day Plutonomy] Indeed, this analyst (who has since upgraded to D.B.) is cited in the story - along with a host of well known pundits. Whatever the root reasons which surely will be argued over ad nauseum (I've voiced my opinions many times) the reality is little (if anything) is being done to change the course, and based on what I see in our political system - I don't see that changing for a long time. And frankly with globalization, much of the genie can NOT be put back in the bottle. So it's best to get used to it, and continue to find investing themes that cater to the quickly growing lower ranks and working poor, or the top end where all the wealth is shifting.
For those who do not believe it is "that bad" out there for many, I'd ask you to take away the modern day version of soup lines [Nov 10, 2009: Walmart Executive "There are Families Not Eating at the End of the Month"] [Nov 29, 2009: 1 in 4 Children, and 1 in 8 Americans Now on Food Stamps] and unemployment benefits and watch the chaos unfold. Or stop transfer payments (rather than wages) from being nearly 20% of income of the typical American. [May 25, 2010: 1 in 5.5 Dollars of American Income Now Via Government; All time High] Or have a situation where the states top source of income is ... wait for it... funny money from the federal government (which doesn't have the money either). [May 5, 2009: Federal Aid Surpasses Sales Taxes as Top Revenue Generator for States] But maybe the S&P 500 hits 3000 and we all become rich, pensions become fully funded, tax revenues soar, and we all live happily ever by having the Fed buy all the national debt. We don't have traditional prosperity anymore - we have paper printing prosperity. [May 19, 2009: Paper Printing Prosperity Defined] Did you know the Fed is poised to pass China as the largest holder of U.S. debt? The right hand buying from the left hand.... Banana Republic style.
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Here is the link to the piece - again as stock market speculators we reside in the upper pantheon of American society, and apparently the domestic economy no longer matters as long as we have Asians with our old jobs buying stuff from our multinationals ;)
[Warning: anything you read below may be construed as 'class warfare']
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