In a news cycle that is measured in minutes as opposed to days, it can sometimes be hard to see the forest through the trees.
The overwhelming amount of information we receive from texts, notifications, social media posts, and the barrage of emails in our inbox, fosters an environment whereby while we may be looking at everything, we may not be seeing anything.
That is a major that has occurred to me as I’ve been reading various news items over the past few weeks.
As a financial writer, and one who is regularly thinking about the macro-landscape, I consume as much information as I possibly can. Sometimes that keeps me less focused on the bigger picture than I would like to be.
Every now and then, however, a theme sticks out like a sore thumb, and when that occurs I do my best to pay attention. That theme I can’t seem to escape at the moment for investors is that the trend is no longer your friend.
A few weeks ago the world’s billionaires had their annual party in Davos, Switzerland, otherwise known as the World Economic Forum. This is where the world’s elite gathered to discuss “the important issues” of the day.
What is remarkable about this meeting was the math regarding the wealth of billionaires around the globe. Their wealth has grown from $3 trillion in 2009, to over $11 trillion today and the total amount of billionaires has doubled over the past decade, to a total of 2208 individuals.
The craziest and most astonishing number is that the combined net worth of the top 26 billionaires in the world amounts to more than the net worth of the bottom $3.8 billion.
This was mentioned in the World Economic Forum’s 106 page report which calls serious attention to the massive wealth gap between the “haves” and the “have-nots.”
I also noticed that Billionaire Ken Griffin has been on a buying spree of late. In just the last few months he has purchased a Chicago condo for $58 million, a house in Miami beach for $60 million and, if only to be sure to outdo himself, paid the highest price ever paid for a home, a whopping $238 million for a penthouse on New York City’s billionaires row.
What makes this all more fascinating is that he has gone on a publicity tour touting the purchases and seems genuinely proud to have made the covers of every major news outlet promoting his massive wealth.
As an onlooker one has to wonder at the gall of these acquisitions in a world where the banker class is becoming out of favor. As a steward of capital we must question the wisdom of the decision.
These purchases have occurred at the top of the high-end market, which for every other buyer other than Ken, is down 20% in the last eighteen months. If I were a Citadel investor I may be asking Ken what fool he possibly can expect to purchase these from him down the road for more than he has recently paid?
Then finally, there was the op-ed section of this past Sunday’s edition of the New York Times, where Bernie Sanders and Chuck Schumer outlined their proposal for corporations to limit the amount of share buybacks.
The proposal would slap preconditions on a company’s ability to buy back their shares. Bernie and Chuck know where the money is at, and this proposal takes direct aim at corporate profits and the windfall stockholders received from last years tax cut. The vast majority of the tax benefit they argued did not hit the real economy, but rather those of the investor class in the form of higher stock prices fueled by corporate buybacks.
Taken individually, these news items are all fairly interesting to ponder. Collectively, they signal bad times ahead for the “net-wealthers” of the world. I believe we will look back on this moment a decade from now and realize this time was “peak billionaire,” and that the pendulum is about to swing a huge way in the opposite direction.
If you think the fat cats don’t see this coming, then you’re really not paying attention.
Most billionaires, perhaps with the exception of the Ken Griffins of the world, understand being a billionaire is becoming embarrassing.
This trend is one long term investors should pay attention to. The presidential campaign for 2020 is going to put the “wealth gap” front and center, and the Democrats are already laying out their more socialist strategies that promise to take from the wealthy and give to the less fortunate.
This was a point Donald Trump made certain to highlight during his State of The Union address, “We renew our resolve that America will never be a socialist country.” That hope may turn out otherwise if the Democrats have their way.
The term that may best summarize the last decade for investors was “Quantitative Easing.”
What’s coming next from the left are terms you’ll want to become familiar with sooner or later. The terms of the next decade will likely become “Universal Income,” “Helicopter Money,” and then finally, and the one that as a gold investor I’m most bullish about, is “Modern Monetary Theory.”
Whatever the future lexicon, pain sure seems to be on the horizon for the investor class as the pendulum swings in the opposite direction.
If you yourself are less than a billionaire, you may want to move out of the way now and get defensive before the smart money, and the massive herd of capital they control, start running for the exits in their effort to hold on to some of the billions they’ve currently got.
Adam Baratta is the author of the national best selling book "Gold Is A Better Way." He is one of the leading voices in the field of investments and precious metals today. Adam is the co-owner of Advantage Gold, the highest rated precious metal firms in the country, and the creator of the educational member site, www.goldisabetterway.com.
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