Keith Fitz-Gerald: There are many reasons why the Occupy Wall Street movement could fail – a lack of cohesion, too many directions, no leadership, not enough money, and no representation, to name a few.
But what if it “succeeds?”
What would our investing landscape look like and what would we do about it?
I think that’s an interesting question, especially since Occupy Wall Street has gained some traction, even taking on a global appeal. And more importantly, there are two other reasons the movement could succeed:
- First, our political system is broken and has deteriorated into little more than a fancy debating society.
- And second, the world’s central bankers remain out of control; their bailouts are saving the irresponsible at the expense of the hardworking. Our regulators and Wall Street remain locked in an unholy alliance that has done very little to fix the underlying problems that have resulted from decades of bad fiscal policies, unsound monetary practices, and dysfunctional leadership.
You may remember the 1960s and the many protest movements that were very clearly focused on civil rights and the Vietnam War. You even may have been part of a few.
A lot of people thought they would go away, too. But Tom Hayden and his collection of Students for a Democratic Society didn’t. Nor did Abbie Hoffman, Bobby Seale, and others. Their passion and that of thousands who joined in eventually succeeded in changing the course of social consciousness.
OWS could too.
By shunning the hierarchy that is organized politics and corporate America, there is the sort of strength necessary to address the growing disparity and the vanishing opportunities that are the new economic reality for millions of Americans.
I, for one, am hopeful that OWS will find the leadership needed to clearly delineate its goals and mandate change on the strength of the raw unvarnished potential that is now driving it.
I am also hopeful that OWS will succeed in raising the social consciousness to the point that living within our means becomes both an economic and political reality.
But that’s just me. You may have entirely different feelings. That we might not agree is irrelevant.
Since OWS began, I’ve been watching carefully and doing a lot of deep thinking about what things might look like if OWS “wins” – however you define the term.
So here’s a look at some of the potential changes that could take place if the movement succeeds:
- Fiscal responsibility and fairness will rule. As liberal as the movement is as a whole, many of the individual protestors – I’ve talked at the OWS camp here in Portland – remain fiscally conservative. They’re not looking to get rich, they are looking for financial fairness. They’re also seeking responsibility and accountability in key areas that matter to all of us, like bank accounts, medical payments, and simple survival.
This means OWS-friendly companies like Google Inc. (Nasdaq:GOOG), Apple Inc. (Nasdaq:AAPL), Facebook Inc. and other millennial-friendly companies will rise to the top of the investing pyramid. Meanwhile, industries associated with the establishment, like energy or finance, will face an uncertain regulatory environment. They also will have to deal with increasingly hostile public backlash. It will be a new world in which many former stalwarts will find themselves on the defensive.
- A new economic reality will arise. I am not sure exactly what this term means yet as the OWSers define it. This is not because I disagree with them. In fact, I don’t on many issues. But for every articulate individual I’ve encountered who is part of the movement, I have also run across a variety of foul-mouthed cretins who have no concept of how economics work and whose antics diminish the OWS movement. Still, living within our means seems to be the overarching theme.
I am not yet sure how this will manifest itself in the future but it seems to me that the concept of liberty is the undercurrent here and fiscal responsibility is the driver. People are enamored with the American dream and the right to succeed. What they forget is that liberty also includes the right to fail. It is not yet clear to me if the OWS movement has really internalized this. Nor is it clear that the OWS movement has collectively thought through the principles of liberty that put us in control of making our own decisions – for better or for worse. Socialism is not the answer but neither is the few ruining the lives of the many.
Milton Freedman reportedly quipped there is no such thing as a free lunch. Perhaps we are coming to the end of a free lunch society. I have to wonder.
- Banking will be boring. Many OWSers have focused on corporate greed without really identifying the elements needed to rein it in. To me, this is part of the greater social justice narrative. It’s also indirectly a political process because the bankers who got us into this mess are tied to the K-Streeters who, in turn, are tied to the special interest dollars used to “buy” our entire political system. If anything, the anger being directed at our bankers is a spectacular glimpse into the very roots of democracy and equality because it could come full circle come election time.
Movements often start with noble ideas that are commonly accepted and often very hard to argue with. But if OWS fails to come into its own, I see self-aggrandizing politicians jumping into the void with draconian proposals that actually make things worse. Generally speaking, this is going to be bad for the markets and even worse for the preservation of personal wealth. It also speaks to shorting virtually the entire mainstream financial sector while investing in small, local community banks, as well as the infrastructure companies they fund.
- Social investing will go mainstream. We’ve had social investing funds and social investing mandates for years. There are “sin”-free portfolios, portfolios that comply with the spiritual values of the world’s major religions, energy-free investments and more. I can easily envision additional social investing categories based on the many divergent causes now wrapped up in OWS. Sadly, though, I can also envision Washington riding to the “rescue” with mandated investments designed to control what’s left of our personal wealth as a result of the OWS movement. The biggest target is the wealth already accumulated in our 401k plans – more than $14 trillion at last count. Social security, mandatory healthcare, infrastructure…these are all thinly disguised taxes. If OWS truly represents the 99% as it claims, perhaps it’s time to engage the big issues rather than let politicians dictate our choices regardless of which side of the aisle they sit on.
That’s the real key here. If OWS gets traction, it will carry the debate away from traditional politicians. Therefore, the real objective should be to change the agenda. The question is, can OWS get enough momentum to make the politicians yield to its will?
This is about as good an argument as any I’ve heard for continued investment overseas. The combination of overzealous politicians, punitive tax policies, and the involuntary redistribution of wealth that will inevitably hit us all – from the very highest earners to the very lowest – signal weaker financial markets ahead. The best choices will be companies doing the bulk of their business in foreign countries where their money (and their investment) is treated better. Until politicians understand that stretching the recovery does nothing to eliminate the excess, nothing is going to change.
- Hard assets will back a new global currency basket. I’m not hearing any talk of this from OWSers; perhaps they haven’t put two and two together yet. If there is to be equality and the gap between the haves and have-nots is to be closed, there has to be a reduction in debt and a corresponding increase in real assets. This will take a concerted, worldwide effort that may ultimately need to include a common currency or at least a common currency trade basket. In that sense, OWS may prompt the “new world order” long feared by conspiracy theorists.
I believe this game is already underway and has been for some time now. The United States fancies itself a player but, in fact, is being played. The dollar, which it tries to use as a weapon, is seen as a liability by a growing percentage of the world. This speaks to investing in creditor nations backed by real reserves rather than debtors with mountains of funny money they cannot possibly pay back. Hard currencies will be backed by countries with hard economies – right now that’s the Asian countries led by China, warts and all. After the euro debacle, I doubt very seriously there is a nation on earth that will subordinate their currency to a pool of countries ever again.
Keith Fitz-Gerald is the Chief Investment Strategist for Money Map Press, as well as Money Morning with over 500,000 daily readers in 30 countries. He is one of the world’s leading experts on global investing, particularly when it comes to Asia’s emergence as a global powerhouse. Fitz-Gerald’s specialized investment research services, The Money Map Report and the New China Trader, lead the way in financial analysis and investing recommendations for the new economy. Fitz-Gerald is a former professional trade advisor and licensed CTA who advised institutions and qualified individuals on global futures trading and hedging. He is a Fellow of the Kenos Circle, a think tank based in Vienna, Austria, dedicated to the identification of economic and financial trends using the science of complexity. He’s also a regular guest on Fox Business. Fitz-Gerald splits his time between the United States and Japan with his wife and two children and regularly travels the world in search of investment opportunities others don’t yet see or understand.