IS IT THE BEST AND WORST OF TIMES?

Charles Payne


It was the best of times, it was the worst of
times, it was the age of wisdom, it was the age
of foolishness, it was the epoch of belief, it was
the epoch of incredulity, it was the season of
Light, it was the season of Darkness, it was the
spring of hope, it was the winter of despair, we
had everything before us, we had nothing before
us, we were all going direct to Heaven, we
were all going direct the other way - in short,
the period was so far like the present period,
that some of its noisiest authorities insisted on
its being received, for good or for evil, in the
superlative degree of comparison only.
-Charles Dickens
Have we entered into a permanent new phase
in America where the rich have it and flaunt it
while the poor simply get by as each day gets
harder and harder? Commonsense says that if
someone was smart enough to become rich in
the first place, they would only be able to add
wealth over time. I have a friend that arrived
in America, penniless with his father from
China, now his wealth is beyond fabulous.
He told me the first “stick” (one million
dollars) was the hardest to earn.
Be that as it may, the masses may not want to
hear that as their individual world sinks
deeper into the economic abyss. Sadly, the
people with power to make a difference have
made it worse and now use the current
economic reality as a rally cry to ditch this
crazy experiment known as capitalism. Of
course, America has never been “rich” the way
Europe used to be rich; our system has
allowed mobility that was impossible in those
rigid societies.
Nonetheless, talk of revolution is in the air.
I think this is the most dangerous moment for
capitalism in America since the height of the
movement in the 1930s and 1940s. It has
different names and mostly no name this time
around, but a lot of catchphrases like “income
inequality” and the newest “work life balance”
designed to discourage the accumulation of
individual wealth and individual effort at
chasing that wealth. In short the idea is to
demonize financial success and then dismantle
it through taxes and other schemes.
The problem is that these schemes are picking
up steam and could become more than a
ripple.
Last week’s op-ed by Nick Hanauer stating he
sees “pitchforks” against “zillionaires”
continues to reverberate. The co-founded or
funding source of more than 30 companies
including Amazon.com says it’s only a matter
of time before the masses attack. Making his
commentary intriguing is that he seems to
welcome such an attack. Speaking “frankly,”
he comments on not being the smartest or
hardest working guy and only being a
mediocre student. He just says he has a
tolerance for taking risk and good intuition
about what will happen in the future.
In other words, maybe he doesn’t really
deserve his billions.
Moreover, intuition says the country has had
enough and wants to get even. I have to note
that Hanauer might suffer a special kind of
guilt, considering that a large chunk of his
wealth comes from selling aQuantive to
Microsoft in 2007 at $6.0 billion. In July 2012,
Microsoft wrote-off the acquisition for $6.2
billion – meaning the company was worthless
in the first place.
Be that as it may, Nick isn’t the only rich
person worried and it’s not just an American
issue. Li Ka-shing, the richest man in Asia,
says he can’t sleep for worry about Hong
Kong’s growing income gap.
Some quotes to students at Shantou University
include:
"The howl of rage from polarization and the
crippling cost of welfare dependence is a toxic
cocktail commingled to stall growth and foster
discontent."
“…Trust, the bedrock of an enlightened society,
is crumbling before our eyes.”
Interestingly, the 85-year-old tycoon wants the
HK government to introduce dynamic and
flexible wealth redistribution policies that
strike the right balance between promoting
equality and economic objectives.
The income inequality issue wouldn’t be an
issue if the same tide was lifting all boats.
Instead, the tide has been a tidal wave with
anti-business rhetoric, regulations and taxes
stalling the greatest economy in the world.
There are 4.6 million job openings, the most in
more than seven years, but people lack the
skills to fill them. If the effort being applied to
stir trouble and hurt feelings and dash hopes
were put into education and knowledge
development, the whole thing would be a
moot point.
The stock market reflects the current tale of
two cities theme.
Low End High End
RCII -25% WSM +22%
DSW -41% TIF +9%
CONN -36% JWN +12%
This morning, Rent-A-Center laid an egg and
the stock will be hammered today. Once again,
the stock market reflects economic reality.
High-end retailers are on fire in a good way
while those on the discount end of the
equation are on fire in the bad way. There was
a time people would have seen this as a
positive sign that the folks were moving up the
retail food chain for better quality stuff- that’s
not conventional wisdom at the moment.