X Factor

7 Feb

The one global geo-political constant you could count on up until around 2000 was that there was a general move towards the  political center. In country after country, and even countries where democracy was not predominant such as China, we saw a basic softening of hard left and hard right ideologies towards some level of general compromise. However, in the aftermath of a global financial system that was pushed to the brink, ostensibly with very little long term after affects for those that both precipitated and facilitated the ensuing bailout, the center no longer exists.  The situation as it stands now appears to be a complete polarization of the electorate in all of the G7 countries and seemingly everywhere else that holds “free” elections. While the battle between haves and have nots is nothing new, this new battle seems to be solely driven by punitive and retributive measures. If the election of The Donald is symbolic of a permanent shift in the electorate (as we suspect it is) then the battleground will look much different going forward with the associated investment implications therein.  In short, don’t discount the ground swell of support that is occurring for socialist and “socialist lite” type movements in this country and elsewhere. The reason for concern is that the “kick the can” issues such as the Federal deficit and entitlement spending become much more problematic with a torch carrying electorate. I have attached a link to a speech that famed investor Seth Klarman gave at Harvard in which he address the pitfalls of capitalism, seems really timely given some of the discussions lately about corporate governance, etc..

https://www.alumni.hbs.edu/stories/Pages/story-bulletin.aspx?num=6818

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