Confession of a Wall Street Whiz Kid
“We should all be concerned about the future because
we will have to live the rest of our lives there.”
- Charles F. Kettering
After watching the political infighting that took place and is still unfolding in the late summer of 2011, it is apparent that the American political system is broken beyond repair. We don’t need a tune-up to fix this problem. Instead, this requires a major system overhaul–a strip-‘er-down-to-the-frame-and-rebuild-from-the-ground-up approach.
The partisan bickering and grandstanding during such fiscally important times, in my opinion, is why the Tea Party has become so popular. People—regular folks, politicians, and those previously uninvolved—from both sides of the aisle are beginning to believe that their respective parties are no longer able to do the job. They think our “leaders” in Washington are out of touch, out of control, and out of their minds. That’s why they’re banding together as patriots to do something—anything—to bring about change.
It’s insanity, really. Think about it: We are asking the very people who totally fouled up the system to fix it. It’s like asking the wolves to keep an eye on the hen house while you go away for a week.
So, with a political system that’s hopelessly kaput and a country that’s basically bankrupt, it’s hard to paint a rosy picture. Unfortunately, I think it’s going to get a lot worse and people may consider less-than-peaceful measures to eventually bring about change. All you have to do is look at other areas of the world where people grew tired of broken economic systems and took to the streets. Is what took place in Europe, or even Wisconsin, coming to a neighborhood near you?
History suggests the only way to fix what we’ve broken is radical change. Interpret radical how you wish. Why was there an American Revolution? People didn’t suddenly dislike being British. They were tired of too many taxes while an elite group benefitted. Does that sound familiar? Sounds to me like the typical American’s view of Washington, if you ask me.
By the way, have you seen any politician on a federal level take a pay cut? You know, admit that there’s a problem, roll up his or her sleeves and say, “I’m gonna do more with less, just like the rest of America?” I haven’t. Yet, that’s what they are doing to the American people with Social Security and Medicare: cutting the programs and benefits so you have to do more with less.
In my heart of hearts, I truly wish I could paint a brighter picture for America. But I can’t. Once the greatest country in the world, America’s economic, social, political, and spiritual problems have become so acute that I don’t see a way out. The proverbial can that has been kicked down the road is now up against a wall too high for it to clear. This is not to say that the powers in Washington and the vast majority of Americans won’t try to forestall the day of reckoning, as we’ve seen. Unfortunately, whether it’s months or a few years from now, the troubles recently seen in Europe, the Middle East, and elsewhere will be miniscule to what America will have to come to grips with.
An optimist sees a half-full glass of water while a pessimist sees it half-empty. A “realist” sees a half of a glass of water. Period. I am a realist. I don’t have cabins in West Virginia, dry food or ammo to sell, so my bleak outlook has no incentives. While my Christian faith provides an eternal optimism that neither man nor the evil one can ever change, the enormous problems we’re facing are without a doubt the 800-pound gorilla in the room.
Some people won’t like this but in my mind it’s absolutely true: Our forefathers intended for Almighty God to guide our national conscience, and I believe it’s no coincidence that our country’s downfall comes at a time when we have written God out of everything governmental. The acceleration toward secularism, as Europe has witnessed, is making things worse. Much worse.
In August 2009, I wrote an article on my blog entitled “Holistic Investing, A Primer.” Feel free to look it up in the archives and read it in its entirety. In essence, the piece brought to light what I believe will be a growing concern for the future.
Likely you’ve heard the term “global economy.” When the U.S. mortgage-backed securities destabilized the world banking system, it became apparent that all of the world’s economies were interconnected and, thus, a global economy. I believe that the global economy is actually powered by intelligent “Holistic Investing,” and we now have to consider more than simply the Western methods of investing if we want to stay ahead of the crowd.
While much of America’s media has spent significant attention discussing the potential change in the world’s climate, it has devoted little attention to a change that, unlike global warming, will leave little room for debate. It is slowly becoming apparent to the collective American consciousness that the Judeo-Christian society that built and maintained America’s way of life for its first 200 years or so is now being challenged, if not already partially-dismantled. The compelling reality is that the American investing public does not fully realize the true extent of how far the world as a whole is moving away from this way of life. There are those who believe that by 2040 the Islamic religion and Islamic way of life will have taken hold of the world simply due to immigration and the high rate of reproduction by Muslims and the very low rate of reproduction of the European, Asian, and American societies. This social and religious population shift will simply be a matter of numbers. I truly believe that these facts will come to fruition and the vast majority of Americans will be caught off-guard, just like they were for the most-recent financial crisis of this 21st century.
However, in my humble opinion, the Islamic scenario will eventually impact us far more than this recent economic upheaval. When America finally experiences the Islamic impact, few Americans will have even considered or anticipated the cataclysm that is coming sooner than later from the world demographic change. The time has come to prepare for this eventuality and to learn more in order to prepare for what we should now conclude as real.
The Islamic population explosion and immigration impact will certainly change the world as we know it. These ramifications will be felt in the fabric of all social, political, economic, and spiritual life worldwide. I have no doubt that almost every financial advisor will deny it, ignore it, or make light of it. Yet, I believe that these demographic changes will dramatically impact every single investor. By the time the “crowd” on Wall Street inevitably begins to factor this dramatic effect into their projections and investment plans, vast numbers of events will have already occurred or will have been set into motion. And those who are not in front of this will pay dearly for their unpreparedness.
Since the Islamic people have a different approach to interest–on lending, savings, and investing–failure to understand their principles could be costly to investors who will participate in financial markets that will be a combination of Western and Islamic investment approaches. [See the Appendix for a link to the Islamic financial perspective.] It is inevitable that some of these approaches will probably flow into the Western methodologies, which may offer profitable investment opportunities for those who elect to be ahead of the Wall Street crowd.
Dr. Zuhdi Jasser, a Muslim-American and former physician to the U.S. Congress is a well-regarded source about the shifts that will happen. Dr. Jasser has produced a video that you must purchase called “The Third Jihad.” This is not some crazy right-wing video. Dr. Jasser offers a wealth of information critical to this “Holistic Investment” discussion and is even recommended by former New York City Mayor Rudy Giuliani, who called that video “a wake-up call for America.” [See Appendix.]
My mother taught me that saying “I told you so” could make one very unpopular. But, many long-time readers know about my predictions to get out of the market in the weeks just prior to Black Monday, October 19, 1987, when stock markets around the world crashed, shedding a huge value in a very short time. The very next day, that Tuesday, I changed my investment advice and I was encouraging everyone to buy equities because of the massive opportunities that became obvious. My long-time readers know about many other calls that were far ahead of their time generally eliciting ridicule or disregard by the mainstream media and my fellow investment professionals. And, this “Holistic Investment” call may be another one of those times because no investment advisor is even considering, no less mentioning, the Islamic scenario.
Please understand that this discussion is neither a religious statement nor a political statement. I am an investment professional, and I am strongly asking you to consider the “Holistic Investment” strategy and to prepare for the “Islamic Impact” that is certainly and unavoidably in our future.
Several decades ago, Wall Street and Madison Avenue convinced the average American that more money equals more happiness because it allows you to have more stuff. Stuff you don’t need. Excess stuff you buy to keep up with the Joneses. Expensive stuff you get on credit to impress people you don’t even know or like. The root of America’s economic and social problems is TMS—too much stuff.
A now-familiar sight on the America landscape is a symbol for all this addiction to wanting more and more stuff: self-storage facilities.
I never met either of my grandfathers, but if my father’s father had come back for a day in the 90s, when I was a legend in my own mind, I can only image what he’d have thought. Back then, I owned a mini-estate on five acres with a 300-foot-long driveway leading up to a very large house. Bear in mind, my grandfather raised my dad in Hell’s Kitchen in New York City. My dad and his two siblings grew up in a very small apartment warmed by a coal-burning stove.
If Grandpa were to arrive at my home he’d ask, “Why such a large place?” Back in his time, only the Rockefellers had such a large home. Now, of course, 5,000-square-foot homes are common. I would tell him my young daughter needed room to play. I liked being able to hit my sand wedge at the bottom of my driveway and not hit my house. My neighbors were far away, so there were no neighborhood dogs to bother me.
He would probably shake his head at such lavish accommodations, but it would be when I took him for a drive on the local roads that his head would keep turning to one type of business and ask, “What are those places and why so many?” I would tell him about public storage facilities and how people like me and many others with large houses store “stuff” there that we don’t keep at our homes.
Grandpa would go back to Grandma and tell her something was lost between their son and grandson. You see, our parents and grandparents didn’t need public storage because they didn’t have all this stuff. They had what they needed and nothing more.
Self-storage facilities are booming because of America’s addiction to excess stuff. We’re spending and consuming way too much and living far beyond our means. In essence, public storage facilities symbolize everything that’s wrong with our skewed, distorted values here in the USA. We need a 12-step cure for our addiction to TMS.
Until we, as a society, can go into full-blown recovery from our addiction to spending and excess; until we realize that consumption has not left us happier, richer or more fulfilled; until self-storage facilities start closing down for lack of renters instead of breaking ground on new complexes, our economy will never recover.
Look at these self-storage industry facts…
• According to the Self Storage Association, one in 10 US households rented a storage unit in 2009. That number grew from one in 17 in 1995.
• At year-end 2009, there were roughly 50,000 self storage facilities in the United States. That’s 2.35 billion square feet of space for our excess stuff, equivalent to three times the size of Manhattan.
• In 2007, gross revenue topped $20 billion.
We’ve literally begged, borrowed and stolen from our children’s and grandchildren’s future in order to live and have as many things the world tells us we need to be happy. The fact is, this big lie has led to more unhappiness and unfulfilled lives than any other generation in America’s history.
Living beyond our means has not been limited to just families but has been a way of life for decades in Washington. When Ronald Reagan became President, America’s total debt was one trillion dollars. In 30 years, that debt has grown to $17 trillion (up 17 times) while our gross domestic product (GDP) has only grown four times. The $17 trillion doesn’t include unfunded liabilities; include them and the total debt estimate is at $75 or $100 trillion or more.
The insane Washington behavior is neither a Democrat nor Republican problem as both are responsible for the mess and both don’t or won’t have the balls to do what’s really needed to finally address this dire situation. As the world’s largest debtor nation, it won’t be long before our lenders conclude we’re past the point where we can be trusted to pay off our debts and are going to demand either much higher interest rates to keep lending, more assets to secure the debt, or both. Like it or not, this is coming. The only question is when. We’ve already seen our country’s stellar AAA rating downgraded for the first time in history. Who’s to say what’s next?
So, you ask, how is this going to affect me, the Average American?
Understand that you’re going to have fewer services, pay more for them, and be taxed at a higher rate on them. As I discussed in the last chapter, there are currently more people in America over the age of 65 than there are under 18. The single largest voting bloc is now seniors. Eighty-percent of the wealth that remains in America is controlled by people 55 and over. As things get tougher, more and more pressure will be put on politicians by various groups defined by age, wealth and other factors. With entitlements out of control on the federal and state levels, the people with the most to lose in the inevitable restructuring of entitlements are the biggest single bloc of people who control the most money. Can you say “war of the classes?”
Over the past few years, I have been a strong supporter and proponent of the philosophies of David Walker, former Comptroller General of the United States. He was and is one of the few true financial experts whom I admire and follow “religiously.” I believe two videos of Walker are mandatory viewing: his appearance on ABC TV’s 20/20 and the trailer for I.O.U.S.A. The Movie. Please watch them and realize that he’s got nothing to gain except helping America get on sound financial footing. Walker is also heading up two organizations, The Comeback America Initiative and the No Labels Movement. Check them out, too. I suggest you read everything you can on and by David Walker because I believe he is a modern day financial wizard…and that’s big praise coming from me! [See Appendix for David Walker links.]
What else can you do to lessen the severity of the coming financial Armageddon?
First and foremost, get rid of your debt. Not just credit cards, with the mother of all interest payments, but all debt. Yes, I know that financial professionals will tell you there’s good debt and bad debt. I’m telling you that if the financial future I envision comes to pass, you will want no debt. Nada. Debt will become more and more expensive to have and become harder and harder to pay. When this is all said and done, it will be more expensive to be a borrower and the dramatically low rates we are currently seeing will be thing of past. It will ruin lives more than it already has.
When people pay off debt, I never hear them say, “I shouldn’t have done that.” Actually, they grow accustomed to living with less, find it wasn’t all that bad, and are in a great saving habit. So pay off your debt.
Second, recognize that this is truly a global economy and the U.S. is no longer the engine that pulls the world. If you’re going to invest in stocks, look at markets outside of America—places like India and China where the biggest growth is going to be. In my opinion, India is the next China and those who missed China in the early stages can get on board with India.
Finally, learn that less is more and live with what you need, not what you want. I know I’ve said that time and time again, but it’s really and truly what got us into this mess to being with. Our standard of living is going to have to take several steps back for us to get on an even financial keel, and unfortunately, most people want no part of that philosophy.
Don’t keep track of what kind of vacation your neighbor or brother-in-law is taking. Don’t mind that your kid’s friend lives in a six-bedroom house and you’re in a modest rancher. The friend’s parents probably own darn little of that house; the bank own most of it. Resist the temptation to buy a new car when the two-year-old model somebody else traded in is half the price and still under warranty.
Learn the difference between what you need and what you want—something you crave or desire, but which isn’t necessary. And do your children the favor of teaching them the same. Lead by example. If you’re buying things you can’t afford and eating out in places that are way too costly, you’re setting them up for the same trap you’ve fallen into. Teach your kids that money doesn’t buy happiness and debt only causes stress, sorrow, and worse.
I’m not saying that McMansion homes and expensive dinners are evil, but the only people eating at Chez Expensive should be those who are paying cash. When considering a purchase, we no longer ask, “Can I afford it?” but “Can I make the payments?” The true answer is that if you can’t afford to pay for it with cash, you can’t afford it and shouldn’t buy it.