I can understand why some of the great artists of the market are outraged by our social responses to market crisis. They call it socialism. Yet, no matter which family of theory you belong to--whether fundamental, technical, or E-wave--you are dealing directly with a social movement.
At some level each and every individual choice gets subsumed into a dynamic relation to other choices such that "the market" comes to exist with a life of its own. Every investor wants to know, what will the market do today? So there is something that troubles me about investor perspectives that seem to take for granted that "the market" is the only motive force worth respecting, as if the social reality of our lives could be so one-dimensional.
The investment-class perspective shows through when Cramer discourages higher wages at Wal-Mart. This is a perspective that overvalues existing savings to the detriment of new savings that could be made possible if "the market" were enabling more opportunity for all. If existing savings accounts were willing to take a little less return, perhaps new savings accounts could be more easily started downstream.
In the case of my old neighbor Paul, why shouldn't a worker expect a social order in which every productive life is rewarded with decent wages, benefits, and pensions? But Frederick Douglass long ago advised Americans not to gnash our teeth at spectacles of unfairness. Struggle is the Real Cure.
As corporate capital rebuilds its structure from the current bust to the next boom, why shouldn't some higher expectations of performance be costed in right now? I think I understand how these labor costs will make additional demands upon the structure of recovery, but if decent health benefits and pensions are made a universal condition of corporate earnings perhaps the regeneration of corporate health this time will help to raise up a new generation of investors who understand that money not budgeted toward labor's livelihood is at risk of being gambled away.
Finally, I have an intuition that the bias of the investor class leads to a skewed desire for a gold standard, but I'm not altogether sure about this. It may be that my impression is colored by a context in which most of the talk about gold is by people who are thinking chiefly of wealth in individual terms. In five months of investing I too have gone from "gold, what's it good for" to "give me thirty shares of silver trust please." I'm up eleven dollars thanks to that call on SLV.
In thinking about gold, I have drawn the distinction made by San Francisco economist Henry George who talked about the difference between wealth for personal use and capital that is put back into new tools. The good people at Lew Rockwell point out that if I hold my personal wealth in a Real Bank it will be leveraged into Real Capital, therefore there is no Real Difference between wealth and capital. Yet even if this were also true for holdings in Real Gold, I think we can still distinguish between wealth and capital. But I'm willing to grant that Real Gold held by a Real Bank may be somewhat more productive than fear itself.
As for the assumption that Real Banks will take Real Savings and turn them into Real Capital, I think this is the problem. From what I understand, banks are not producing capital investments at any kind of usual rate. And they are not doing it because of the damage done by the great evil that Henry George warned against-land speculation. Therefore, the dramatic increase in American savings is not now being leveraged into new tools for American workers. The pressures of the current economy will keep labor compensation low on one side while disrupting on the other side the assumption that increased savings by labor should be leveraged into capital investment. Instead, Real Banks are gouging labor further on the debt front. Prechter has more to say about what has happened to Real Banks in his July newsletter.
Which brings us to the last word in successful investing, Warren Buffett. No doubt his influence has sometimes weighed down upon wages from time to time as he seeks to maximize earnings from Dairy Queen or Geico. Last week he admitted that he had to cut the jobs of 500 people. Yet Buffett says that it may be time to think about a second stimulus which would be a Real Stimulus this time. What interests me about Buffett's position--all puns intended--is that he speaks as an exceptionally engaged investor who follows carefully how his wealth, and therefore his capital, has effects on precise productive labors.
If Buffett can stomach the idea of a stimulus then we should raise the question of costing into the new generation of investment a better life for labor in long-term salaries, benefits, and pensions. We are the workers upon whose labor the power of U.S. Treasury notes depends--and we have been valued in this crisis as worthy enough to carry the world's savings accounts on our backs. Therefore cost us in at the full value of a whole life.
Maybe there is nothing that can be done about a future that is already written by the finger of God. Just save yourself if you can. But when it comes to the problems faced by the investor classes and their personal wealth preservation in this sick economy, at least Buffett still talks as if the investor classes are in the same boat with the rest of us and how we need to pull together and share some of the risks. While we're at it, we should not be afraid to discuss the opportunities that this crisis holds out for labor. Discussing it today will be cheaper than discussing it tomorrow.
Based on what I've learned after five months as an active trader, I don't think it's a question of whether hard times are coming. The question is how can we best work on this social trauma individually AND together to address risks and opportunities system-wide? The thing that strikes me about Buffett's position on the second stimulus is this. If the ship's going down, Captain Buffett talks as if he's prepared to go down with it. Any Real Captain would surely toss Real Gold overboard now in order to bring more Real Lives safely to port later.
