Barron's was spot on with their headline article in this week's issue (6/20/20). While those who have been afforded enormous advantages feel insulated from growing problems, those advantages are destined to cause long-term problems for those who benefit from them.
The bottom line in wealth management is that securities markets are driven by earnings and those earnings are largely determined by the majority of the population who are middle or low income/wealth. If those folks have little discretionary income to spend, the result will be diminished overall earnings.
Like the sorting cap in Harry Potter, the advantages are given to a limited section of the population in short order and last a lifetime. Buffett refers to this as the “ovarian lottery”. Other advantages are bestowed because someone gets accepted to the “right” school, such as an ivy league school. Still more are provided by being associated with people in positions of influence and power.
The book “The Myth of Capitalism” explores many of the inequities which have grown steadily since the 1970’s. During the current pandemic, many of the problems of a lopsided social and economic environment are becoming loud and clear to those who have been disadvantaged by it.
For those who believe they are insulated from these trends, think again because, while there will always be inequities in human society, the differences are quickly becoming such an abyss that social unrest is inevitable and such unrest drives instability at the roots of American society and capitalism.
