Monday Musings
With this the “historic” one year anniversary of the Occupy Wall Street movement I thought it would be a good time to give some random thoughts around this subject.
First, these staged, organized and coordinated Astroturf events which started popping up first on Wall Street, then to other U.S. cities, then around the world failed miserably to achieve their stated objective. In fact, if you ask ten Occupy veterans, they would all give you ten different answers about what they were protesting. I actually believe the premise of the Occupy movement was misdirected from the start but originated with a noble message. The goal was goad the government to get off both the right and left halves of its partisan butts and do something, anything, to extricate the nation from this financial crisis. That quickly morphed into a jumbled message from all of the fractions within (a hundred different messages, or 100 x 1% - a lot of noise with no clear leader). The protests were a disaster. Arrests & violence highlighted the real message of the participants – which was “let’s have a party and try and get some free stuff”.
They hated the bankers, but did not see the forest through the trees. The real culprit was economic uncertainty due to government intervention including most recently the passage of Obamacare and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Bankers lend money when economic and political conditions are clear. In our current state, our times are anything but clear so why should a banker take the risk (and risk losing their job). In the right economic and political climate, bankers want to do their job and that is assist the growth of private industry by lending money or putting corporate CEO’s in touch with well-healed investors to take a stake in the equity of their private enterprise. In return, these companies will invest capital, hire new employees and expand their businesses while the bankers and investors who took the risk of believing in their business model would make a sizeable return. Because of the magnitude of the dollars involved, these returns (and subsequent bonuses earned) would be in the millions or hundreds of millions of dollars.
And we all know what would happen if bankers returned to business as usual – the Occupiers would be outraged that the bankers made so much money, even though hundreds of thousands of people would now be working for these companies that now had the working capital to expand their businesses. However, over time most of these young Occupiers would get jobs and hopefully contribute to society and not have the time to protest any more.
This clearly left-wing liberal movement was embraced by the mainstream media, labor unions and many democratic politicians. However, it flopped because they were never taken seriously by a citizenry which did not camp out, had jobs, bathed regularly and did not believe they were entitled to free stuff. The real grassroot movement which Occupy so desperately tried to emulate was the Tea Party. The Tea Party was birthed in the Fall of 2009 after federal debt began to grow out of control due to the passage of the $800 billion economic stimulus package passed as one of the first acts of the Obama administration and the super majority controlled democratic congress. The Tea Party though had a clear message which was outlined in a ten point plan (Contract from America) and hinged on the federal government getting smaller. Their message resonated with voters and supporters in rapid fashion and by 2010 there were 138 candidates for Congress with significant Tea Party support.
I would say that the republican party was on the verge of losing many members, but alas all it needed was a cup of tea. Take that occupiers. When a OWS backed candidate wins an election, then I may start to take the movement seriously (but still probably not …).
I am not a jealous person at all. I do not begrudge an investment banker making millions. They worked hard to get where they are, serve a legitimate function in the private sector and took risk and were rewarded. I also do not begrudge an athlete or actor who did the same thing. Every walk of life has a 1%. This is also a ridiculous statement as it is really the 0.01% who the OWS leaches are jealous of. I know many Wall Streeters, and unfortunately we are not all ultra rich.
The downfall of living in the New York City area is that an annual income of $500,000 to $1 million does not go very far. I doubt anyone would shed a tear in Missouri, but most modest homes in the NYC area (2,500-4,000 sq feet) will be $700,000 to $2 million. Property taxes run another $18,000 to $25,000 and state income tax is 8%-10%. Also, don’t forget the federal income tax (and AMT hit) of 28%-30%. Before you know it that $500,000 income is down to $230,000 (taxes and mortgage payments) before you even decided to send your kids to private school, dance lessons, etc. What I am trying to say is that the cost of living is so high in Wall Street suburbia that a family living in many other parts of the country could have an equal or even better standard of living with 40% less income.
Another Occupier complaint I have is the thought that these people did not earn their millions/billions. Sure they did – as long as it was earned honestly. I have no problem with Tim Cook the CEO of Apple making $378 million as head of the largest and most innovative company in the world. I have major reservations with the federal government handing out a $500 million U.S. taxpayer loan to failed solar company, Solyndra. Now, if Solyndra succeeded on their own, and their solar technology ended up being a market leader then I would have no problem with their CEO making $500 million. But it did not and for government leaders (most of whom have legal backgrounds not private sector) to think so highly of themselves that they can pick the winners and losers in a dynamic free market capitalist society is a joke.
Let them invest their own money. Quite frankly, that is one of the traits of Mitt Romney I like. At Bain Capital, he used investor dollars to pick winners and losers in the free market. Some of these companies are bloated –over employed – focused on the wrong strategy. As a private equity investor, because it is your investor money (if you succeed then riches, if you fail you are on the unemployment line) you conduct the proper due diligence, make the optimal decisions and monitor the operations daily. I laugh at the democrats who say Romney was evil because some of the companies he took over he had to lay people off. Give me a break, when most of these companies ended up at the Bain Capital doors they were close to going out of business. So, instead of 1,000 employees laid off, there would have been 5,000 laid off because the company would have gone out of business. Do you want 100% of nothing or 80% of something?
I am a huge fan of the concept of competitive destruction. Let the free market fight it out. Sure, there will be individual companies who go out of business or downsize dramatically. But as the dust settles, new, better and stronger companies will emerge which will employ many more people who were laid off. In fact, these jobs will be higher paying and better quality as the basic functions will be outsourced to the emerging world. The emerging world employees will see these jobs as a step up from their prior ways of life. The pay will be better for them and in return they will turn around and buy goods and services from the United States. This is a “Win Win” scenario.
If you don’t believe me, here are a couple of top of real life events to think about.
In 1900, 41% of the population was employed in farming and today it is 3% yet we produce even more food. The onset of the modern industrial revolution transformed the workforce from the farm to the factory.
Earlier this year, Kodak filed for bankruptcy. For decades, the Kodak name was synonymous with picture taking – how could they ever go under and more importantly, would we ever be able to take a picture again? The answer of course was yes, we are taking more pictures as a society than ever before and a myriad of newer technologies.have more than filled the demand.
Apple has been in the news because they have outsourced much of the manufacturing of their iPhone production. Why aren’t these jobs in the U.S.? Well, first off, almost all basic manufacturing and production is done in the emerging world because it is cheaper. Secondly, Apple has in turn spawned a new industry of high paying jobs – the application sector. Guess what, all of the thousands of these high paying jobs are located in the United States and would not have been possible without Apple.
More can be read via my two novels, Cameron Nation: Going All-in To Save His Country and Columbus Avenue Boys: Avenging the Scalamarri Massacre. www.cameronnation.com.
First, these staged, organized and coordinated Astroturf events which started popping up first on Wall Street, then to other U.S. cities, then around the world failed miserably to achieve their stated objective. In fact, if you ask ten Occupy veterans, they would all give you ten different answers about what they were protesting. I actually believe the premise of the Occupy movement was misdirected from the start but originated with a noble message. The goal was goad the government to get off both the right and left halves of its partisan butts and do something, anything, to extricate the nation from this financial crisis. That quickly morphed into a jumbled message from all of the fractions within (a hundred different messages, or 100 x 1% - a lot of noise with no clear leader). The protests were a disaster. Arrests & violence highlighted the real message of the participants – which was “let’s have a party and try and get some free stuff”.
They hated the bankers, but did not see the forest through the trees. The real culprit was economic uncertainty due to government intervention including most recently the passage of Obamacare and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Bankers lend money when economic and political conditions are clear. In our current state, our times are anything but clear so why should a banker take the risk (and risk losing their job). In the right economic and political climate, bankers want to do their job and that is assist the growth of private industry by lending money or putting corporate CEO’s in touch with well-healed investors to take a stake in the equity of their private enterprise. In return, these companies will invest capital, hire new employees and expand their businesses while the bankers and investors who took the risk of believing in their business model would make a sizeable return. Because of the magnitude of the dollars involved, these returns (and subsequent bonuses earned) would be in the millions or hundreds of millions of dollars.
And we all know what would happen if bankers returned to business as usual – the Occupiers would be outraged that the bankers made so much money, even though hundreds of thousands of people would now be working for these companies that now had the working capital to expand their businesses. However, over time most of these young Occupiers would get jobs and hopefully contribute to society and not have the time to protest any more.
This clearly left-wing liberal movement was embraced by the mainstream media, labor unions and many democratic politicians. However, it flopped because they were never taken seriously by a citizenry which did not camp out, had jobs, bathed regularly and did not believe they were entitled to free stuff. The real grassroot movement which Occupy so desperately tried to emulate was the Tea Party. The Tea Party was birthed in the Fall of 2009 after federal debt began to grow out of control due to the passage of the $800 billion economic stimulus package passed as one of the first acts of the Obama administration and the super majority controlled democratic congress. The Tea Party though had a clear message which was outlined in a ten point plan (Contract from America) and hinged on the federal government getting smaller. Their message resonated with voters and supporters in rapid fashion and by 2010 there were 138 candidates for Congress with significant Tea Party support.
I would say that the republican party was on the verge of losing many members, but alas all it needed was a cup of tea. Take that occupiers. When a OWS backed candidate wins an election, then I may start to take the movement seriously (but still probably not …).
I am not a jealous person at all. I do not begrudge an investment banker making millions. They worked hard to get where they are, serve a legitimate function in the private sector and took risk and were rewarded. I also do not begrudge an athlete or actor who did the same thing. Every walk of life has a 1%. This is also a ridiculous statement as it is really the 0.01% who the OWS leaches are jealous of. I know many Wall Streeters, and unfortunately we are not all ultra rich.
The downfall of living in the New York City area is that an annual income of $500,000 to $1 million does not go very far. I doubt anyone would shed a tear in Missouri, but most modest homes in the NYC area (2,500-4,000 sq feet) will be $700,000 to $2 million. Property taxes run another $18,000 to $25,000 and state income tax is 8%-10%. Also, don’t forget the federal income tax (and AMT hit) of 28%-30%. Before you know it that $500,000 income is down to $230,000 (taxes and mortgage payments) before you even decided to send your kids to private school, dance lessons, etc. What I am trying to say is that the cost of living is so high in Wall Street suburbia that a family living in many other parts of the country could have an equal or even better standard of living with 40% less income.
Another Occupier complaint I have is the thought that these people did not earn their millions/billions. Sure they did – as long as it was earned honestly. I have no problem with Tim Cook the CEO of Apple making $378 million as head of the largest and most innovative company in the world. I have major reservations with the federal government handing out a $500 million U.S. taxpayer loan to failed solar company, Solyndra. Now, if Solyndra succeeded on their own, and their solar technology ended up being a market leader then I would have no problem with their CEO making $500 million. But it did not and for government leaders (most of whom have legal backgrounds not private sector) to think so highly of themselves that they can pick the winners and losers in a dynamic free market capitalist society is a joke.
Let them invest their own money. Quite frankly, that is one of the traits of Mitt Romney I like. At Bain Capital, he used investor dollars to pick winners and losers in the free market. Some of these companies are bloated –over employed – focused on the wrong strategy. As a private equity investor, because it is your investor money (if you succeed then riches, if you fail you are on the unemployment line) you conduct the proper due diligence, make the optimal decisions and monitor the operations daily. I laugh at the democrats who say Romney was evil because some of the companies he took over he had to lay people off. Give me a break, when most of these companies ended up at the Bain Capital doors they were close to going out of business. So, instead of 1,000 employees laid off, there would have been 5,000 laid off because the company would have gone out of business. Do you want 100% of nothing or 80% of something?
I am a huge fan of the concept of competitive destruction. Let the free market fight it out. Sure, there will be individual companies who go out of business or downsize dramatically. But as the dust settles, new, better and stronger companies will emerge which will employ many more people who were laid off. In fact, these jobs will be higher paying and better quality as the basic functions will be outsourced to the emerging world. The emerging world employees will see these jobs as a step up from their prior ways of life. The pay will be better for them and in return they will turn around and buy goods and services from the United States. This is a “Win Win” scenario.
If you don’t believe me, here are a couple of top of real life events to think about.
In 1900, 41% of the population was employed in farming and today it is 3% yet we produce even more food. The onset of the modern industrial revolution transformed the workforce from the farm to the factory.
Earlier this year, Kodak filed for bankruptcy. For decades, the Kodak name was synonymous with picture taking – how could they ever go under and more importantly, would we ever be able to take a picture again? The answer of course was yes, we are taking more pictures as a society than ever before and a myriad of newer technologies.have more than filled the demand.
Apple has been in the news because they have outsourced much of the manufacturing of their iPhone production. Why aren’t these jobs in the U.S.? Well, first off, almost all basic manufacturing and production is done in the emerging world because it is cheaper. Secondly, Apple has in turn spawned a new industry of high paying jobs – the application sector. Guess what, all of the thousands of these high paying jobs are located in the United States and would not have been possible without Apple.
More can be read via my two novels, Cameron Nation: Going All-in To Save His Country and Columbus Avenue Boys: Avenging the Scalamarri Massacre. www.cameronnation.com.
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