Not in denial, in avoidance

Last week, I discussed what I think is clear about the increasing concentration of income in the hands of fewer people in the US. I used a graph of the income earned by the top 5% of US taxpayers as it relates to what party holds the Presidency. For those who didn’t see the graph, here it is once again.

Income share of the top 5% by political party

Roughly thirty years of stability, followed by thirty years of an uphill climb until the proportion of income earned by the top 5% has nearly doubled. If you do the same with the top 1% or top 10%, you get the same basic results.

As I said last week, this graph tells me one thing. It tells me that the party identification or the ideological identification of the governing President made absolutely no difference at all to the proportion of income received by the top 5%.

Of course, that is not what politicians will tell you, but that’s another story. Today, I want to answer the obvious question. If politics and ideology have nothing to do with this, then what does? What is the “cause” of this dramatic shift?

So what happened?

Something extremely important happened and I think it’s obvious. But I realize that what is obvious to me may not be quite so obvious to others who are younger. The shift begins in the 1980’s, a period during which I traveled and worked extensively overseas. Unless you’re at least 50, and that’s a low estimate, you will not be able to remember that period three decades ago as an adult. Even if you are my age (69), the impact of what happened in that decade likely did not affect you half as powerfully as it did me.

Consider the period 1976 – 1991. It began with Mao’s death and the struggle for control of China. In 1981, Deng Xiaoping took control and began the modernization process that led to China’s current economy, beginning the slow, but sure, opening up of China to the outside world. Mikhail Gorbachev became the Soviet Union’s center of attention in 1985, the Berlin Wall fell in 1989, and the flag of the Soviet Union was lowered for the last time on December 25, 1991.

That was the period that saw the end of the Cold War and Mao’s China and the opening up of a truly global market. It did not happen overnight. It was (and remains) a process unfolding over time.

I worked through that period overseas, but I had doing that for more than a decade prior to its beginning. I started in 1967 as a Peace Corps Volunteer in the Philippines and, with the exception of a couple years working on the domestic US scene, the 47 years of my life since then have remained focused on global economic development, working in more than 40 nations in Asia, Latin America, and Africa, many of which are called emerging or frontier markets today.

I could write a book on the weird, wonderful, and disconcerting results of this period for those of us who worked globally. We weren’t even one percent of those who do that today. We felt the changes in so many ways. It turned the world upside-down and inside-out.

One thing is certain. That time, it was different. And it still is today, although some folks seem to have trouble catching on, even after all these years.

So that period was a time of great change, but so what? How could that affect the incomes of the top 5% in the US?

The Transportation Revolution

A part of the answer, one that I want to at least mention in passing, lies in the Transportation Revolution that paralleled the geopolitical changes of that period of our history. In my mind, perhaps the most ignored and unappreciated revolution of my lifetime.

It was not a question of how fast it was to get from one place to another. It isn’t that much faster today, if at all, given how early you have to arrive at the airport these days. No, it had nothing to do with speed. It was all about where you could travel, instead of if you could travel. Over a decade or so, nations with roughly a third of the world’s population became open to visitors from the US. Americans actually could visit Moscow as genuine tourists and get their visas with little or no hassle.

And that was just one of countless nations, regions, and cities open to outsiders for the first time. Amazing! You have to have been there at the time and be a global traveler to appreciate the change. It didn’t happen overnight, but it seemed that way at the time. Suddenly, you could visit a country next month that you couldn’t have visited last month. Yes, you could read about it in the US, but nothing was quite like experiencing it.

The joy of money

If you are in the top 5% in income, you obviously have money and that includes the wonderful category, “disposable income”. When the shift was underway, these were not only people with high incomes, but those among the best educated, the most travelled, the most likely to have lived outside the US, the most likely to own properties outside the US, the most likely to have done business outside the US, and so forth prior to and during this period.

This is common sense. If you need a mass of graphs and statistics to demonstrate that rich Americans had more experience working, living, and investing outside the US than the middle class, you will have to look elsewhere. I simply do not have the time for that. But I can share one of many simple examples.

In the late 70’s and early 80’s, it was raw dental work to get an American business interested in Africa. The Japanese had arrived in the early 70’s and carved out quite a market for themselves. I remember the day I was introduced to this new 4-wheel-drive vehicle, the Toyota Land Cruiser, which was blowing the British Land Rover right off the roads of Africa. I was very impressed.

When I met with the commercial attaché of the Japanese Embassy in Ghana in 1973, he sneered at Americans for being so blind to the business potential. An amazingly rude man for a culture supposedly centered on being unfailingly polite. In 1981, I was told bluntly by the leader of a team from Ralston-Purina (now the Nestlé Purina PetCare Company) that they saw absolutely no market in Africa and didn’t believe they ever would. I am amused they were bought by Nestlé, a company that has marketed in Africa for decades.

When I visited Ghana in 1995 after more than a decade of absence, I found plenty of new hotels, all of them stuffed to the rafters with visiting business people, many of them Americans. I could hardly believe my eyes and ears. The “dark continent” was becoming the “new market”. These Americans were not poor people and, with only one exception I can remember, not middle-class. They may not all have been part of the top 5%, but those are the people who sent them.

My point is simple. From its beginning, those Americans with high levels of disposable income (aka, investment income) were people who had the means and experience to take advantage of the new global market opening up all around them and, as an added bonus in recent years, overseas investments might be less vulnerable to the whims and machinations of American politicians. It took them very little time to figure out that what was going on globally was a huge opportunity and they were not afraid to take advantage of it. The top 5% has been globalized. It is hardly a surprise that they have benefited from that in ways not available to Americans with modest means and modest experience outside the US.

There is a new global upper class that has rapidly developed over the last three decades. They are still very much citizens of their various nations, but they really relate better to each other than they do to the rest of us back home, wherever “home” might be. They are not evil people or scoundrels. What they are doing is perfectly ordinary and simply human, but it has some unintended negative consequences for the rest of us. I will leave it at that for the moment, but I will return to it more than once in future posts.

Back to the future

I will close today by sharing the other graph I included last week, a very simple one I created from US income statistics and nothing new to most of you. It presents the same information as the one at the beginning of this commentary, but without the politics.

Income share of the top 5%

With my background, I cannot look at this graph without thinking of the end of the Cold War and Mao’s China. It is simply too obvious. I know that the graph would look quite different for many European nations, but there is a reason for that. They had empires. And when the empires were gone, many of their business people remained. Their top 5% has been earning income outside their home nations for generations and were not about to give it up voluntarily. For the US it was a beginning. For Europe, it was a major change in circumstances, but not a beginning.

It is one of the things that concern me the most about what passes for “global analysis” in the US these days. Too much attention to monkeys dancing on the stage and too little to the 800-pound gorilla in the back row of the theater.

Americans are not ignorant of the simple fact that that their “world” has changed. Neither were Europeans in their post-colonial period of the last half of the 20th century, but like the Europeans then, too many American analysts today are still failing to come to grips with the reality of the second decade of the 21st century.

They are not actually “in denial” as some might say. They are “in avoidance”. When the gorilla is too much to deal with honestly and forthrightly, you keep your eyes on the monkeys. It isn’t working for Europe. It won’t work for the US either.


This is a personal blog, more of a notebook, unadvertised and without promotion. It is where I jot down thoughts that are important to me and may potentially be used in other commentaries for general publication. I write when time and spirit allow. Should you stumble across it and wish to be notified of new posts, just enter your email address at the upper-right of this page. I have no other use for email addresses. I already have too many in my “address book”. Rest assured, yours will be kept private.

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Lost in the Forest

The excitement caused by Thomas Piketty’s “Capital in the Twenty-First Century” has died down. The futility of implementing his proposed global wealth tax is obvious to all but the most blindly ideological. The argument over how one determines “wealth” will continue.

But I will not deal with wealth here, but focus on income, something easier to quantify and a measure of how much a group benefits at any given point in time, and I will concern myself only with the US. The statistics on US income are not the target of particular controversy. Since the same basic trend can be found among the top 1%, the top 5%, and the top 10% of income-earners, I will use the middle group, the 5%, as my example today.

Using the statistics provided at The World Top Incomes Database created by Mr. Piketty’s team, here is a graph of the percentage of total income in the US earned by the 5% over a sixty-year period beginning in 1953 and the inauguration of President Eisenhower through 2012, the end of President Obama’s first term. This removes the impact of World War Two and any residual impact during President Truman’s tenure. Call this, if you like, the Modern Age.

Income share of the top 5%

This graph and others like it have been so common in recent years that I suspect all of you have seen it or one like it. Clearly, something significant happened in the 1980’s. This graph concerns US income distribution, so it must reflect government policies, at least in good part, right?

Most people’s first reaction to this graph, at least those from my generation (I am 69), is to identify President Reagan’s tax cuts as the turning point. To me, that is too much focus on a tree while the forest stares me in the face. To provide a clearer idea of the forest I saw, here are the same statistics with a little extra information in a graph created by a friend of mine at my request (she is much better at this sort of thing).

Income share of the top 5% by political party

The first 28 years, when the top 5% received just over 20% of the income, represent six Presidencies (Eisenhower, Kennedy, Johnson, Nixon, Ford, and Carter), three Democrats and three Republicans.

The remaining 32 years represent five Presidencies (Reagan, GHW Bush, Clinton, GW Bush, and Obama), three Republicans and two Democrats.

Some were generally judged to be conservative (e.g., Reagan), some moderate (e.g., Carter), and some liberal (e.g., Obama).

Ignoring trees and looking at the forest in this light, what does this graph tell me? It tells me that the party identification or the ideological identification of the governing President made absolutely no difference at all to the proportion of income received by the top 5%.

There is no correlation, none, nada, zilch. If there was, you would be looking at a roller coaster, not a flat plain leading up to a mountainside. Either that, or Presidents Clinton and Obama are secret admirers of President Reagan.

Now, let me be clear. I see no sense in demonizing people who earn more money than I do. Nor am I a fan of demonizing people who are paid a lot more money than I think they are worth, as long as it’s not my money. If it’s my money, than I am the demon. But this is not the issue that concerns me today.

What concerns me is that we are now entering the intense period of yet another election year. Once again, I have no doubt Republicans will be criticized, even demonized, as the ones responsible for the results shown above. Once again, I have no doubt Democrats will insist they are the only people standing between the greedy corporate hoard and the innocent public. To me, the graph above puts the lie to all that.

I am an independent and am thoroughly unimpressed with both political parties. Their leadership is uninspired and uninspiring, and I am not alone. The results are clear in the polls. But neither am I a fan of political manipulation.

I am an American and intend to remain one until my death, but I live and work outside the US. I look back with sorrow on my home nation. The level of semi-hysterical emotionalism from our political “leadership” is unnerving. The world has changed and I believe they know it, but they seem unable or unwilling to deal with it on its own terms. After all, it’s not about reality, it’s about votes. To make matters worse, it seems most economic and investment analysts are every bit as blind, frightened, and lost. After all, it’s not about reality, it’s about money.

However, what really aggravates me is that this is so simple and so obvious. Two graphs, exactly the same with the exception of one additional piece of information in the second graph. Do you find it so hard to see? Why is it so hard for the analysts to see that it goes ignored?

Our current leaders, both political and economic, of what I call the Old World of the North Atlantic are so trapped in the failure of their own analyses in past decades that they are unable to look clearly at the present for fear of the future, especially their future. I am left to believe that either they have no clue as to what is happening and what should be done about it, if anything, or if they do, they are too frightened to speak honestly to their public.

I will be discussing what I believe is underway in weeks to come as I say at the end of each commentary, “when time and spirit allow”. I will be spending less time on American politics which I find boring, predictable, thoughtless, and incoherent, but I cannot completely ignore it.

Like it or not, the more than seven billion of us who keep things running on this planet must depend on leadership that has a clear idea of where we are, where we should be, how we should get there, and then be able to communicate that to the rest of us successfully. That leadership does not exist today, most clearly not in North America or in Europe, but the problem is global.

Until it does, we are all lost in a global forest. And pardon me for saying so, but I smell fire.


This is a personal blog, more of a notebook, unadvertised and without promotion. It is where I jot down thoughts that are important to me and may potentially be used in other commentaries for general publication. I write when time and spirit allow. Should you stumble across it and wish to be notified of new posts, just enter your email address at the upper-right of this page. I have no other use for email addresses. I already have too many in my “address book”. Rest assured, yours will be kept private.

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Time to listen to Yogi once again

In 1938, it was the annexation of Austria, followed by the Sudetenland, followed by 1939 and disaster. As our old friend Yogi Berra put it, “It’s déjà vu all over again”.

I am glad that Bill Clinton has spoken up. Sadly enough, he may be the one “global leader” left who has sufficient respect to make national leaders in both North America and Europe stop talking, think hard, and truly stand together. Putin’s approach is much too reminiscent of Adolf Hitler in 1938. Now we must answer the same question faced by Britain’s Prime Minister, Neville Chamberlain, 76 years ago. What will we do about it?

I cannot answer that question today, my friends, but that is why we elect Presidents, Prime Ministers, and Chancellors. But there is certainly one requirement. They must stand together and be very, very clear in their response. You should never negotiate with a fascist from a position of self-created weakness. Can Putin be called a fascist? He is earning his label, one way or another. Let Putin be Putin; there is no escaping that anyhow. But let us remember the past and focus on how we are to be labelled in the future. “Indecisive” and “ineffectual” are not good choices.

It has been a long time since I have written here at Future Brief. It will not be the last time. Appearances may still be rare, but I am back.


I write when time and spirit allow. If you wish to be notified of new posts, just enter your email address at the upper-right of this page. I have no other use for email addresses. I already have too many in my “address book”. Rest assured, yours will be kept private.

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The Good, the Bad, and the (Really) Revolutionary

I have three “trends” or situations I would like to raise and discuss briefly today. They are not inter-related in any direct sense, are of relevance to different people, and have very different consequences, so each should be considered separately. I will not go into a great deal of detail on any one of them at this point, but as time allows, I will expand on them in days to come.

1) The first is positive and relates to investing in “emerging” and “frontier” economies, as opposed to “advanced” economies. Those terms are amusing and clearly created by people in what I call the Old World of the North Atlantic. “Advanced” means nations where North Atlantic investors live, even if it includes many nations up to their eyeballs in debt and with little to show for it in terms of economic growth. “Emerging” refers to those other nations whose stock markets are big enough for the “advanced” folks to regularly trade. “Frontier” refers to nations whose stock markets are too small to be traded by the “big guys” in investment, but where there has been substantial growth and the potential for much more.

The least well-understood of any of these nations are the frontier economies. With the occasional exception, Mark Mobius of Franklin Templeton comes to mind, most of the “big names” in investment advice simply know little or nothing about these markets. They might visit one or more for a brief time, but reading their commentary on frontier markets in which I have lived and/or worked clearly demonstrates how poorly informed they are. I suspect they depend on statistics alone, plus commentaries by others like themselves, to make their judgments, pretty much like an ordinary person. I don’t mean to criticize them unfairly. I understand. They are known as experts in global investing, they are famous, it’s a major source of their income, and they show up constantly at global investment gatherings where they are faced with questions about frontier markets. Naturally, they want to respond and they do their best, but I wouldn’t use them as my investment advisors. Their real knowledge is too shallow.

I live in one of those frontier nations, Panama, and have lived and/or worked professionally as a development advisor in others for more than four decades. They may be aware that Panama’s GDP corrected for inflation has more than doubled in the last decade. They may be aware that it has ranked in the top-ten fastest growing economies in the world for several years now, including last year. They may even be aware that Panama is considered an “upper-middle income” nation sandwiched among low income nations starting from much lower GDP levels, thus making its growth even more impressive.

Fine, but all that does not help much in determining how or in what you might invest. The “global investment experts” are of no more help than anyone else who tries to understand a nation from a great distance and based on very limited, often out-of-date, information. If small outside investors are referred to as “computer jockeys”, the experts are not much better, if at all. For frontier nations, the Internet provides some information, but often very little more than a commercial pitch or advice based on a political agenda, neither of which is sufficient. Yet, it can lead people to believe they know what they are doing when it is clear to resident analysts that they do not. There is a price to pay for that.

I have experienced this directly as I have some land for sale here, but I have had to ignore investors from the North Atlantic. They come convinced they know what to do, based on their “research”, but it becomes rapidly clear that they are total newbies without a clue as to what is actually going on and how to deal with it competently. Worse yet, they don’t take practical advice. They don’t think they need it. Just as frustrating, it takes me an hour or more just to provide the basic background because they are starting from zero or worse. That is too much for them to accept from a seller. I understand that too, but I will not sell to them because I want the area developed successfully as it is where I intend to remain active for years to come. So I focus on people who have experience at least in Latin America and can be brought up to speed fairly quickly. What I have long known from observation, I now know from direct experience.

So what should a smaller investor do who is seriously interested in investing what for him or her is a substantial amount of money in a frontier market? The answer is simple to state, but not so simple to implement. Relocate. Choose your nation, pack your bags, and move. Expect to take at least three years and get to work. This brings me to the trend. This sort of relocation is underway and has been for several years. I discussed it in two articles at Barron’s, one in 2007 and the other in 2011, following our surveys of Americans on their interest in relocation outside their new nation. The 2011 article and survey results can be seen at our website at America Wave as a public service (no ads, no sales, completely free). We have let it sit since we are too busy actually doing what we talk about others thinking of doing, although we are now beginning to add to our Facebook page as time allows.

I see the results all around me. Not only is the expatriate community (not just American, but from many nations) growing here, but their investments are growing too, at least those who live here and invest directly. Many of the most successful are those under 40, some in their early 20’s. Age is not a necessary factor, but the young do tend to stay in more urbanized areas where the demand exists as opposed to retirees who frequently live in rural areas where demand is much harder to find. After my 2007 Barron’s article on this topic, Jay Tolson, then a senior staffer at US News and World Report, wrote one Friday, said he was arriving the coming Monday, and could I set up some interviews with several American entrepreneurs under 35? Totally taken by surprise, I said, sure. When he arrived 72 hours later, I had half a dozen for him to interview and that was before many of today’s young Americans had yet to arrive.

In any case, some of these entrepreneurs (few, if any, with MBAs) have done exceptionally well and for up to a decade. Excellent. It will take awhile, but eventually they will come to the notice of a Mark Mobius or someone else in a similar position and be able to provide experience-based investment advice to others, or they will simply come together and do it themselves. Ten years from now, these folks plus others who are older, but also successful entrepreneurs, will be in much better shape than their age counterparts who sit in New York or London earning good salaries, but who will not be able to compete well in the future. In any case, it is a healthy trend and, at 68 with 46 years of professional experience globally, I am very impressed. Not only by Americans, but by so many expat nationalities who are building their futures here and in other frontier markets. Finally, a trend that works to the advantage of investors everywhere, but one that is almost totally ignored today.

2) – The second is far more important currently to many people. I have already discussed this in detail at an earlier essay, We’ve Got The ‘Population Problem’ Upside Down, so I will not spend much time on it here. In a nutshell, I argue that any “population problem” is much more likely to be related to the growing numbers of retired people living ever-longer lifespans than it is to babies being born. The apparent lack of any serious research on this matter by those who are funded to study population changes is simply unacceptable as it can greatly distort the situation and the “problem” requiring attention, if indeed there is a population problem.

3) The third is the big one, at least for the future, and its consequences are likely to not only be both positive and negative, but quite literally change everything. It is an extremely sensitive topic when raised in regard to the issue that I think to be most important by far. I am referring to “genetic engineering”, a term that might not be pleasing to the ear in years to come.

I was sitting with a woman recently who was especially upset with Monsanto and its genetic engineering of seeds. She is not alone. It’s a very hot topic with many people. I told her that, important though that issue may be, it was nowhere near as important as a related issue, the genetic engineering of human beings. She was completely shocked. The thought had never occurred to her.

The development of all living things, plant and animal, is based on their genetic code, typically known to most of us as DNA and RNA. Every living cell was created on the basis of its genetic code. No one with any real knowledge of this topic has suggested that the DNA of one species can be engineered, but another cannot. If we can (and do) have genetically-modified seed corn, we can (and will) have genetically-modified humans.

The life-saving and life-enhancing benefits of this are frequently discussed and rightly so. Millions of people, perhaps billions eventually, will owe a great deal to this new field of genetics. But as is true of all human endeavors, there will be a downside right along with the upside.

Here’s a question. To what extent is human behavior genetically determined? This question is being researched by scientists all over the world. The research is necessarily in its “early stages”, but the direction is obvious, as is the question. It is important to know, so we are determined to know. One unintended “victim” of this scientific inquiry may turn out to be our concept of “free will”. Every time science finds another clue that genetics impacts our behavior, free will becomes a little more limited. Will we get to a point where little or nothing is left to our traditional concept of free will? Will we have to give that concept up, as we have so many others over past centuries? Talk about an existential crisis!

This issue is not unknown, but it is rarely discussed in the general media, or even in future-oriented publications. Recently however, McKinsey & Company published a 176-page report, Disruptive technologies: Advances that will transform life, business, and the global economy, which discusses twelve of these technologies, including “Next-generation genomics”.

It discusses the many positive benefits that can flow from this new field, but mentions the uncomfortable, if briefly. They say, “This could lead to novel disease treatments and new types of genetically engineered products (such as genetically engineered biofuels), while enabling the nascent field of synthetic biology—designing DNA from scratch to produce desired traits. (my emphasis).

Elsewhere, it adds that one company “…is working on developing the biological equivalent of a high-level programming language with the goal of enabling large-scale production of synthetically engineered organisms.”

Its final paragraph on this topic is clearly relevant. “Ever since the creation of Dolly the sheep in 1996 proved that cloning is possible, genetic engineering has inspired both visions of a better world and concerns about the risks of such advances. Recently, scientists revealed that they have successfully inserted mitochondrial DNA into the egg cells of women who have had trouble conceiving. The procedure has been used in 30 successful pregnancies, producing babies with genes from the child’s two biological parents and the mitochondrial DNA donor; in effect, these children have three biological parents. This particular modification was performed to aid in conception, but it could also represent the first step on the path to manipulating human DNA to produce babies with “desirable” traits.” (again, my emphasis)

This is an excellent overview of twelve important “disruptive technologies” written to inform their clients and the public on important issues. What I share above is definitely taken out of context, but not unfairly so in my opinion. I encourage you to read the full report yourself. And I salute McKinsey & Company for being frank and raising the uncomfortable along with the comfortable potential results.

My purpose in raising these three topics is not to provoke fear or pleasure or any other emotion, but to provoke thought. The big break-throughs, crises, events that bring on a cascade of other events, and so forth may seem to “suddenly” occur, but in truth, they unfold over time. Only our perception of them changes suddenly, and that because we simply did not notice them in their early stages. I am exactly the same as anyone else. I have to have them brought to my attention by someone or something. The first two above come from decades of personal professional experience. The last results from my long-time interest in the research underlying terms like “genetic engineering” and “gene therapy”.

So with that in mind, I offer these three trends to you for your consideration.


I write when time and spirit allow. If you wish to be notified of new posts, just enter your email address at the upper-right of this page. I have no use for email addresses. I already have too many in my “address book”. Rest assured, yours will be kept private.

Posted in Global analysis, Investing, migration/relocation | Leave a comment

The global crisis summed up in a single word

It has been seven months since I last posted here and most of you have probably decided I passed away, fell off the edge of the earth, or some such fate. But there has been a reason, a very simple reason.

I am going to do something a bit odd. I am going to return to a commentary I wrote here two and a half years ago in October of 2010. It was the very first post to this blog. But instead of just providing a link to that earlier commentary, I am going to present it here again and in full. Although it is dated, the election it refers to is gone and has been superseded by yet another, I can’t say that I feel any differently today than I did then, except more strongly. Two and a half years and I can add this. I am fed up. That commentary isn’t long, so before I add a few additional comments, here it is.

Two Tea Parties?
October 4, 2010

Two Tea Parties in less than three years. Who predicted that? Two, you say? Yes, I would argue that the first Tea Party was the movement that brought Barack Obama to the Presidency. To avoid confusion, let’s call the first Tea Party, the Obama Party, and consider the parallels.

  • Both can be considered “grassroots” movements.

  • Both reject the traditional leaders of a major party.

  • Both can legitimately claim to be fully “insurgent movements”, surging against not only a party establishment, but against the opposition as well and simultaneously.

  • Both offer ill-defined slogans, allowing each to be many things to many people. How does “Yes We Can!” differ from “I Want My Country Back!” in substance? Yes we can…what? And what do you mean by “my country”?

  • Both began with a tabula rasa on which their supporters could write what they like, while avoiding their internal differences prior to holding power.

  • Both demonize their opposition and canonize themselves.

There are differences. The Obama Party is focused on a single personality. Sarah Palin may aspire to the same position with the Tea Party, but she still has much more to accomplish before she can claim that. And of course, the Obama Party won real power, not just some party primaries, while the Tea Party awaits the November results. The Obama Party’s tabula rasa has now been written on, indelibly, while the Tea Party’s remains covered with the chalk scrawls of millions.

There is one remaining major difference. The Obama Party won power, but lost its way. Disappointment and confusion have replaced inspiration and a call to action. Will the same occur should the Tea Party and its supporters feel they have won in November, only to feel they have lost their way a few months later?

It is no surprise that during a time of national crisis, an insurgency challenges incumbency. But I suggest the Obama Party is not yet truly an incumbent party, but rather a failed insurgency. In effect, a new insurgency faces a failed insurgency and should it fail as well, what do we have left?

At times of great financial distress threatening the futures of tens of millions of Americans, great leaders have risen. You know that Franklin Roosevelt and Ronald Reagan were great leaders because both could claim majority support of the public when they needed it, despite a minority that saw each as a grave danger to the republic. With the circumstances they both faced, damaging deflation for Roosevelt and damaging inflation for Reagan, both may have been extremely controversial figures, but no one could deny that both led. You did not have to ask “Who’s in charge?” It was obvious who was in charge. Love him or hate him, he was a leader.

The greatest potential threat facing this United States today is not poor leadership, but no leadership. No one is in charge. We deserve better than that.

32 months later, here I sit, fed up and disgusted. There is only one small, mean, pathetic “comfort” left. It is worse in Europe. I read today of riots in Sweden. Riots in Sweden?! That is beyond “sad”. I don’t have a good word for it, just bad ones that I will keep to myself. In any case, that is no excuse for the United States of America. But it does help me explain my point today.

I have spent 46 years of my adult life (I am 68) working in one sector of economic development or another in nations all over this earth, sometimes living in them for extended periods of time as I do now. In decades past, the US was in the center ring of the human circus. Sometimes it was amazing, sometimes it was not, but most of the time there was no doubt in my mind that it was the class act, the center of envy and attention for good reason. Today, it it is in a smaller ring, off to one side, seemingly intent on ending up as a sorry excuse for a sideshow outside the Big Tent.

I do not care if you call yourself a Republican, a Democrat, a liberal, a conservative, a Tea Party supporter, a libertarian or whatever other category suits you today. I am as much an Independent as I can be. And I have given up trying to understand which of a dozen versions of “liberal” or “conservative” is worth supporting, none of them are sufficiently convincing, so I have no choice but to be a “moderate”, despite the difficulty of defining that term. Above all those insufficient labels, I stick to the one that is the most important. I am an American.

For decades, I sat on the “American” side of the table in nations in Africa, the Middle East, Latin America, and Asia and worked with people of every religion, ideology, and sensibility to help them understand the global system that America had done so much to create. I worked in many disciplines from agriculture to to nutrition and public health to business development and more. In those days, you had to be a “Jack of all trades” to deal with the multiple problems these “developing nations” faced as they struggled to adapt. I stressed two fundamental concepts – financial responsibility and managerial competency. That is what I represented. Many of these nations are now referred to as “emerging markets” and “frontier markets”. They caught on. They adapted. They are the centers of growth today.

Now I sit on the other side of the table in just one of the many frontier markets. I am an American citizen and have every intention of remaining one, but Panama is where I call “home” today and happily so. Now I look across the table and what I have seen for the nearly six years since the term, “sub-prime” (aka, “high risk”), hit the global headlines? I see financial irresponsibility followed by managerial incompetency.

This may upset you, but you can only imagine how much it upsets me. I am so happy to see some of the nations where I once worked make substantial, year on year, progress. If I had some tiny part (and it would be tiny, I harbor no illusions) in their progress, than it brings me satisfaction. Through good times and bad, I had faith they would rise up economically, socially, and politically, and they have. But it never occurred to me through all those decades that both sides of the North Atlantic would go to such great lengths to tear up the very rule book they wrote and bring themselves down.

I will pull back now from focusing on the US and include all of the North Atlantic, both sides of the Big Pond. I have no time to demonize. I will leave that up to the screamers and shouters up north. I have worked in nations with real dictators, both civilian and military, as well as one-party nations that hid their authoritarianism behind a distorted image of democracy. Much as some in the north may disagree, I assure you that the men and women elected to lead nations on both sides of the North Atlantic today are nowhere near as bad as they could be.

But they are also nowhere near as good as they should be, given the gravity of the global situation that seems only to become ever more grave and ever more threatening to themselves and everyone else on the planet each week, each month, year after year after year.

No, they are not as bad as they could be nor as good as they certainly should be as leaders. They represent something in-between. They represent mediocrity.

So there you have it, the global crisis summed up in a single word. These “leaders” do not deserve to be called the best or the worst, just plain mediocre will do. Really awful leadership can kill a nation’s future like a gun to the head. Mediocrity kills by slow, agonizing strangulation.

Will this be followed by more at Future Brief? I make no promises. I am not sure anyone is listening anyhow, but I do feel a responsibility to add more than just criticism. Time will tell.

For the moment, I will end this commentary as I ended my very first at Future Brief. although it now truly qualifies as understatement.

We deserve better than that.


I write when time and spirit allow. If you wish to be notified of new posts, just enter your email address at the upper-right of this page. I have no use for email addresses. I already have too many in my “address book”. Rest assured, yours will be kept private.

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Investing Inside Frontier Markets

In a past commentary, I discussed a redefinition of three related terms: the First, Second, and Third Worlds. The old definitions reflected a reality of the 20th century, but fail to reflect the reality of the second decade of the 21st century. If, as so many agree, we need “outside the box” thinking to deal successfully with today’s world, then we must begin by re-examining the terminology we employ when it remains in common use, but is no longer useful.

I want to expand on that theme today. However, terminology again needs redefinition. In this case, I am concerned with three newer terms: Developed Markets (DMs), Emerging Markets (EMs), and Frontier Markets (FMs). At first glance, these may appear to be simply replacements for the three “Worlds.” To the extent they are used in this fashion, they are simply a new coat of paint on an old shack. They have one value however: They allow people in North America and Europe to continue to think of themselves as superior.

The term Developed Market is certainly misleading. Like its predecessor, “developed nation,” it implies finality. There is nothing more to do. The nation is developed. What more can it be? The hubris is obvious. At least in one respect, the DMs are indeed developed. They have developed huge debts. They have combined these huge debts with a lack of domestic consensus, a failure to forthrightly confront their debt recessions, a dependency on central banks for anything approaching real action, a failure to identify a common goal allowing for a common DM response, and the resulting weak domestic and international leadership.

Seen from outside, they are sad at best, pathetic at worst. We are now entering our sixth year since public awareness of another term, “sub-prime,” and the beginning of a crisis first felt in the US mortgage sector that spread to engulf the North Atlantic. As the years pass with one promise of near- or mid-term recovery after another failing to be realized, their embarrassment becomes humiliation, whether they have the good sense to realize that or not.

Europe has taken this to an extreme that would have bordered on pulp fiction a decade ago. It is painful to watch. It is beyond melodrama. It is a tragedy unfolding before us today. There is nothing any of us outside Europe can do about it, with one possible exception for investors. Trading stocks and the euro on the basis of this week’s official announcement of progress is no way to earn a living if you want to sleep at night. I think it is best to simply step aside and wait for whatever results are delivered. Until then, it is a gambling den for those foolish enough to think they can predict an unpredictable future and who, as a result, serve Lady Luck.

The US, as many have noted, looks good only in comparison to Europe. It also has a big plus in the exploitation of shale oil that is already having a substantial positive economic impact, one that will likely grow throughout this decade. But Americans have one problem very much in common with the European Union and the eurozone. The nation is divided and has been for at least a decade. I believe the similarities between George W. Bush’s policies and those of Barack Obama are several, but there is one similarity that is especially striking and based on hard fact.

Both presidents were in serious trouble when they ran for reelection and their oppositions launched something skin to a “holy crusade ” in an attempt to defeat them. Both were reelected. But the really striking similarity is seen in the popular vote. George W. Bush received 50.74% of the popular vote. Barack Obama received 50.85% of the popular vote. Both presidents overcame serious obstacles to win reelection and both succeeded, but neither received a mandate for change. They were simply given permission to try again, and barely so at that. Lady Luck has her hands full.

I won’t belabor the EMs. My prior commentary regarding the “New Second World” will suffice. In brief, these are large nations with large populations and large potential, but also with large problems. Their primary challenges are to deal with domestic pressures for more, more, more, while dealing with pressure from the DMs. In their all-absorbing desperation to survive the crisis they have created for themselves, the DMs will tend to drag the EMs down with them. But for today, an additional suggestion I would make is to be the first in your neighborhood to understand that “emerging” is the wrong word. They have emerged. Deal with it.

This brings me to the Frontier Markets. These are the nations where investing is most difficult. Many of their stock markets are too small, too illiquid, and too rarely followed to be of any use to DM investors whose “trading floor” is their computer monitor. Their companies that do trade locally are too small. In my new home nation, Panama, the local stock likely to draw attention from the DMs is COPA Airlines (NYSE:CPA), a rapidly-growing and very profitable regional airline, but you can trade COPA on the NYSE. Everything else gets ignored.

And yet, there is a lot of money being made now and yet to be made in many FMs that make them as attractive or more attractive than the EMs or DMs. Some people think that FMs are dirt-poor by definition. Wrong. In Panama, our 2011 per capita GDP (PPP) was $14,100. Brazil? $11,800. China? $8,400. India? $3,700. Only Russia leads us ($16,700) and, you can definitely trust me on this, no one in Panama is interested in trading economies or our young, modestly growing population with their aging, declining population, among many other things. Our continued double-digit GDP growth rate doesn’t hurt either. Panama may be better off than many FMs, but it is not alone. From Mongolia to Sri Lanka, there are many options and they are bustling.

So how do you invest in FMs for maximum return? You don’t. You invest inside an FM of your choice. You research, you visit, you choose, you move, you live where you will invest. If you are not part of the first wave, you can be part of the second and learn off the first. As I mentioned in my last commentary, my firm’s surveys clearly indicate that you will not be alone as far as relocation is concerned. However, if you are a real investor, you will still be in a small minority and the potential can be far greater than in the DMs or EMs. But it is not a walk in the park.

This requires real work. If trading on a monitor is your sole approach to investing, this is not going to work for you. If your time frame for making the big bucks is measured in weeks or months, best to stay at home. If you can look out at least three years, preferably more, you greatly increase the odds of success. You are not there for the weather or the cost of living, you are there to personally research, visit, and inspect potential investments and still be there afterwards to monitor their progress. You are there to live and profit, but you have to contribute. For their sake and everyone else’s, armchair analysts should remain firmly rooted to their armchairs.

There are certainly risks involved in investing inside FMs, but if you think you live in a risk-free environment now, think again. And the risks are declining as many FMs grow. The really good news is that with the profound ignorance or, at best, out-dated 20th century understanding of the FMs on the part of so many in the DMs, the competition is nowhere near as severe as in the DMs and EMs. As a result, the odds of an excellent return on investment are declining more slowly.

That’s another way of saying that if very few of you decide to seriously consider this approach, I will shed no tears. The fewer who follow this advice, the greater the rewards for those of us who do. But if it sounds intriguing enough to act on, you’re welcome to join us.

Posted in Global analysis, Investing, US economy, US politics | 1 Comment

e pluribus, plures

The more things change.

I think George Friedman of Stratfor summed it up well in his paid-subscription newsletter of this morning.

The United States held elections last night, and nothing changed. Barack Obama remains president. The Democrats remain in control of the Senate with a non-filibuster-proof majority. The Republicans remain in control of the House of Representatives.

The national political dynamic has resulted in an extended immobilization of the government. With the House — a body where party discipline is the norm — under Republican control, passing legislation will be difficult and require compromise. Since the Senate is in Democratic hands, the probability of it overriding any unilateral administrative actions is small. Nevertheless, Obama does not have enough congressional support for dramatic new initiatives, and getting appointments through the Senate that Republicans oppose will be difficult.

There is a quote often attributed to Thomas Jefferson: “That government is best which governs the least because its people discipline themselves.” I am not sure that the current political climate is what was meant by the people disciplining themselves, but it is clear that the people have imposed profound limits on this government. Its ability to continue what is already being done has not been curbed, but its ability to do much that is new has been blocked.

It’s hard to add to that. All I can say is that the future is unpredictable. Friedman’s forecast is very reasonable, but as he also says, I have argued that presidents do not make strategies but that those strategies are imposed on them by reality. The US can no more unilaterally determine the future than any other nation. Thus reality may lead to a different outcome in the next couple years, but we have no choice. We must wait for future reality to disclose itself.

From E pluribus, unum (From many, one) to E pluribus, plures (From many, many)

The election is perfectly in line with the last decade of American politics. We are an intensely and all-but-equally divided nation. As Friedman suggests above, we are likely to remain that way until such time as we cannot, for reasons beyond our control. The major American parties are, as always, coalitions of disparate groups with disparate goals. Just as the Republicans have disputes between social conservatives and libertarians, the Democrats will have their disputes between environmentalists and trade unions, as one example. The process of extracting oil from shale (fracking) is one of those issues where Democrats may find unity difficult.

Whatever, the party names mean little today, as has been true for a very long time, but the other popular labels, liberal and conservative, are also more and more dysfunctional. All these labels are easy to define in glittering generalities, but difficult to define in practice.

The US will eventually work itself through this period, although there is no guarantee that the results will be useful. The parties may slowly redefine themselves internally, or decline and perhaps the two major parties of the future will be the Libertarians and the Greens. But that would leave no room for the social conservatives, among others, so multiple parties may contest. I don’t know, but it will make for interesting theater at the least, a rebirth of a national consensus at the most. But getting from here to there, wherever “there” ends up being, will not be an easy task.

Despite so many narrow margins yesterday, there was one solid victory. The status quo is alive and well. There will be no court cases or recounts to trouble us. We can get on with it, whatever that may mean.


I write when time allows, about once a week, perhaps twice. If you wish to be notified of new posts, just enter your email address at the upper-right of this page. I have no use for email addresses. I already have too many in my “address book”. Rest assured, yours will be kept private.

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