Desert Wall Street!

9 October & 27 November 2011

My "meditation" of the day (first posted 9 October 2011)....

I've gotta say this, with apologies to my liberal/progressive friends. "Occupy Wall Street" is totally misdirected and unnecessary. I am not saying this to offend. But here are the facts:

(1) Wall Street has destroyed shareholder value for 12 years.

(2) It is still doing so.

(3) The shareholders are deserting, and this will continue over the next decade - which will ultimately constitute 2 decades (and counting) of value destruction on Wall Street. By the end of the present decade, I'm pretty sure that mainstream investors will have "caught on" that self-serving directors and executive decision-makers are not in the game to create value for them, and they will have voted with their feet!

(4) The bad guys - of whom there are many - are likely either be fired for failure to serve their shareholders, or to lose their jobs, as the companies they have misdirected will cease to exist!

(5) Michael Moore, Paul Krugman and President Obama are thus redundant on this topic, and should find something else to do....

The free market knows how to fix THIS problem. What it can't fix is over-intervention by central planners, particularly the practice of money printing.

Seriously - protest the guys pulling the strings behind the stage, not the snow-blind executives who are destroying their own companies and paying themselves millions to do it!

I for one would be protesting (1) the Federal Reserve; (2) the Treasury Department; (3) the SEC; (4) Congress; and (5) the White House. What do they have in common? Their interference in the market has caused the majority of the present problems, particularly the creation of a distorted business climate that rewards speculation, excess, litigation, misdirection of capital and greed!

The value-destroyers will all disappear through natural processes (otherwise known as "hard times"). But it will take citizen action to put a stop to the intrusions of central planners, as they operate freely behind the scenes, and exhibit little change in behaviour under either Democratic or Republican administrations.

The present problem in the US (an excess of central planning) is thus most directly analogous to the decades of stagnation under central planning which still characterize Russia (under Putin, Russia has reverted to central control following a brief flirtation with very limited free market reforms), and which plagued China until its (still active) central planners began to unleash citizen initiative in the post-Mao years.

Interestingly, though the Chinese economy is still very much centrally planned, an argument could be made that the US economy is now more planned and controlled (and certainly more litigated and regulated) than the Chinese economy!

The Chinese have more or less figured it out. They are arguably further down the road towards free market reform than the still constricting economies of the West. Time for us to catch up!

In brief, the focus of "the 99%" on the bad actors on Wall Street is evidence that once again, the broad majority are looking in the rearview mirror for an understanding of our broad public dilemma.

While the Wizard of Oz still pulls the strings and works the levers behind the curtain, the centre of global economic power has rapidly shifted to Asia's less fettered markets.

NOTE: One somewhat obvious example. The free market was able to "repair" the problem with General Motors, by putting the company out of business. Joseph Schumpeter described the "creative destruction" of capitalism, and it was working fine in the case of GM!

What happened? The central planners intervened, and the US government - with taxpayers' money - bought the dysfunctional company. Now WE own it! While salvaging GM may seem like a "good thing" on a short-term basis, what we have forgone is the opportunity to open up the competitive landscape in one of our still very important industries.

Had we not "propped up" GM and Chrysler, would the auto manufacturing business be a far more creative and interesting one today? I argue, "yes, almost certainly!"

Rescuing mismanaged companies from a natural death is NOT how to fix the problem!

(Think first, then act.... it saves a lot of time and energy!)

A FURTHER RANDOM THOUGHT: Precious metal investing is a bet that governments everywhere will keep doing the wrong thing and destroy value every time they intervene in the marketplace.

Unfortunately, this proposition has proven to be the "best bet in the casino" since 2001.

Would that it were otherwise, and some day, I am hopeful that it will be.

That is, hard times teach businesses lessons pretty quickly (adapt or die).

But they also teach governments lessons, just more slowly, as governments have more lines of defense, including such actions as money-printing, confiscation of citizen and corporate wealth, misdirecting and agitating the masses (refer to the Nuremberg Diary for a historical account of this process), etc.

LINK: An on-the-ground encounter with Occupy Wall Street. Great writing (and observation). Click here.

26 November 2011: As the "OWS" movement has worn on and developed, I suspect that all of us have grown more "accustomed" to it. My fundamental criticism remains that the occupiers are about three decades late, and are now protesting a "self-extinguishing" class, the operators of American public companies, whose shareholders are obviously already deserting them. I have thus been arguing more recently for a movement to "Desert Wall Street."

That is, the desertion of Wall Street is already in progress, and, as Tom Lehrer might have said, we might as well get on with it! When the last shareholder has left, the excesses will certainly be repaired.... It is not mainstream Americans who must protest the excesses of "the street," but the longsuffering and deeply exploited shareholders, who have been robbed of potential profits to fund inordinate compensation, buybacks, speculative behaviour, etc. Do not forget that the craziness all started with inflationary monetary policy, a topic on which I have written extensively elsewhere (click here)....
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