Investors411, formerly Market Updates, was started almost 10 years ago to to help my kids with their finances. It grew into an AM news letter about 4 years ago that included friends, family, fellow artists, and some of their friends. Now its a blog.
Over the last 4 years Invesors411 has done significantly better than the benchmark S&P 500.
Why?
Investors411 recognized 3 and now 4 Significant Mega Trends that moves markets and invested accordingly. There are, of course other major mega trends like technology, scientific growth, etc.
The MegaTrends
Globalization - Globalization has many sides (good,bad and ugly). However as an economic trend it is perhaps best described by NYT columnist and author Tom Friedman His book The Word is Flat demonstrates the growing economic connections around the world. Globalization is a key force that allow some countries and economic sectors to develop faster than others.
Peak Oil – Peak Oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline. One of the best web sites/blogs that daily goes over the implications of Peak Oil is The Oil Drum.Without energy nothing moves and commerce stops. The prospect of no further oil fueled growth will dramatically impact everything from wars to economics.
Spread the Wealth – Societies or countries that have a growing and working lower and middle class grow faster than countries where simply the rich get richer. A major reason for this is that the money the working class spends gets turned around faster economically and upper class money does not trickle down in significant ways.
“The Great Recession” - The short turn problem is the collapse of the housing problem and the deregulation of the financial industry that led to white collar crooks gaining vast sums of money/profits by over leveraging insurance, banking and other industries.
The longer term and more important systemic problem is the transfer of wealth in the USA away from the working class to a growing weathy oligarchy. (Longer “Deer in the Headlights” explanation below)
Investors411 uses these four mega trends to identify sectors and countries to invest in
Deer in the Headlights
Stop staring at the headlights and Get out of the road
The reason Investors411 brings you news like “the worlds financial system has effectively disintegrated” (see last post on blog - Roubini, Volker Soros) is so YOU can stop standing like a deer in the headlights and do something to protect your economic well being. -
Obviously, the Laissez-Faire capitalism under the previous four Presidents has spectacularly failed. The tech, housing, and credit bubbles have all burst under the absolutism of “free market capitalism” and something better has to arise from the ashes.
Over the last eight years we have so decimated/cut and tainted the staffs of regulatory agencies from the SEC to the national government that any solution to our fiscal problems, becomes, at best, very very difficult.
The Real Structural Problem
What we watched over the last 8 years is an orgy of economic bubbles bursting because of unregulated greed of our capitalist system. Yes its time to restore balance, but first you have to recognize the long term structural problems.
Researchers Picketty and Saez on where the money’s gone in our country over the last 40 years. Quote from economist Robert Reich on their research -
“since the late 1970s, a greater and greater share of national income has gone to people at the top of the earnings ladder. As late as 1976, the richest 1 percent of the country took home about 9 percent of the total national income. By 2006, they were pocketing more than 20 percent. But the rich don’t spend as much of their income as the middle class and the poor do — after all, being rich means that you already have most of what you need. That’s why the concentration of income at the top can lead to a big shortfall in overall demand and send the economy into a tailspin. (It’s not coincidental that 1928 was the last time that the top 1 percent took home more than 20 percent of the nation’s income.)
What Made us Strong
Back after WW 2 President Eisenhower led a major stimulus program that transformed Americans. He continued FDR’s New Deal programs, He massively expanded Health Education and Welfare departments, created a Interstate highway system, developed a GI bill to help returning vets own homes, and the civil rights movement began. Economically, only one member of a household usually worked, and America whose infrastructure was not devastated by war flourished.
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The Decline
What happened is that the rich grew richer and the working class lost in its struggle to catch up and stay solvent. Wages got hit in the late 70’s “by a double whammy of globalization and technology.” (Robert Reich quote) Women went to work to keep up with the Jones. But this was not enough.
In the 80’s to fix an over reliance on welfare we changed to a tax and government system that rewarded the wealthy and began to strip away the very regulations that were put in place to prevent the Great Depression.
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The Fall
Both members of families now struggled and were encouraged to go further into debt (credit card, college, mortgages etc) just to hold on. The rich got richer and the working class simply fell further into debt. The bubble burst with the fall of housing prices and the over leveraged greed of the wealthy financial companies. Debt exploded.
Therefore the current over leveraged financial meltdown is deeply connected to our long term structural wealth inequity problem.
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Solutions
We have created a fundamentally flawed economy with a huge gap between the rich and the working classes. While Obama has fundamentally and structurally set us back on the correct path it may be too little too late. The financial oligarchy that set up the “shadow banking system” is still a very powerful entity that holds sway over many Democrats, and the global financial hole we’ve dug is very deep.
Economist and former Labor Sec. Robert Reich concludes an editorial on this. – “We have failed to address — widening inequality, sagging median incomes, a broken healthcare system, crumbling infrastructure and global warming — are that much larger now, making the current crisis all the worse.”
Two other excellent editorials on how we got into the financial mess and solutions
- Matt Taibbi (Rolling Stone) – The Big Takeover
- Simon Johnson (The Atlantic) - The Quiet Coup
