Friday, December 30, 2005

"Politically Incorrect" article is MIA

Yesterday on there was an article that was fascinating because of how "politically incorrect" it was from a "business" as usual perspective. I saw it in the evening and didn't jot down any notes because I assumed it would still be there twelve hours later. It's gone.

What was it, I hope you ask. It was an interview with a global market strategist at Citigroup. The thoughts presented were as follows: the top 1% of Americans control an immense amount of the nation's wealth, their share continues to grow, and statistics were given to support that; the top 1% of citizens of the rest of the world in the aggregate control an even larger share of wealth, it's also growing, but no statistics were given for that aside; any pressure on U.S. equity markets in 2006 due to reduced consumption by the bottom 99% would be largely but not completely offset by the increased consumption of the top 1%; therefore those who want to do well in 2006 should overweight luxury goods stocks, and examples were given such as Tiffany, Porsche, and three or four others; the article warned that there were some luxury goods stocks that would not work, and gave the example of a manufacturer of private aircraft that unfortunately also had some mundane infrastructure development component within its corporate umbrella; as to the foreign top 1%, much of that wealth is in countries without the capital market depth to absorb their investment needs, so much of it is attracted to the U.S. market and is the primary reason for any seeming aberration in the yield curve.

The facts of the article about wealth concentration are well known, but the magnitude of the concentration indicated in the article is I'm sure debatable as most statistics are(I wish that the article was still up so that the I could reference them and the reader could judge them). The forecast that these concentrations will provide a significant cushion to the impact of broader economic weakness and that the current inverted yield curve is a result of this concentration globally may or may not be right. But the tone of the article was that we could all sleep well because things will work out ok.

This came from Citigroup, the U.S. based global financial services firm with a huge position in the U.S. credit card market and in the low income focused consumer finance market. Was this the strategist from their private banking division? Did he clear this interview with PR? It's a far too candid reflection of the way that segment of the bank may think, but is this wise to say. Does this man still have a job?

Whether the forecast is right or not for 2006, it seems that almost anyone should be able to see that this is not a sustainably healthy situation. It may sound hackneyed, but strong democracies have been built through growing the middle class. We preach that to others. This deal seems headed in the wrong direction. The article was refreshingly "politically incorrect" because it did not reflect carefully considered corporate-speak, and now it's gone.


Anonymous Anonymous said...

John, glad this analysis caught your eye. If you want a fuller context for how strongly skewed the current income distribution is compared to the U.S. historically, read "Wealth & Democracy" by Kevin Phillips. He's not a gripping writer but the stats are stunning.
Jon L.

8:14 PM  

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