Is it the 70s or more like the 30s?

Friday, 14 December 2018
London, UK
By Sam Volkering

  • Things have just gotten worse
  • Your regressive government acts again
  • Is it hallmarks of the 70s or the 30s?

Well it’s fair to say things haven’t gotten much better since last week. The UK has decided to apply Australian political methods to their own government. On Wednesday Prime Minister Theresa May had to survive another leadership challenge.

She romped it in 63% for her, 37% against her. Not overwhelming, but still a hefty margin. If you read the UK papers on Thursday, then you’d know they reckon she ‘scraped’ through and just ‘narrowly’ survived. Now she’s saying she won’t lead the conservatives to the next election.

It has all the hallmarks of David Cameron — stuff things up then nick off and leave the rest to figure out the mess. Ah, you can be halfway around the world and find that politics will be politics everywhere.

It’s a reminder that politicians don’t care about you. They only care about themselves and their post-political careers. And there’s a term for this lot…

I love the term and use it regularly. From Wikipedia:

Kakistocracy: kakistocracy is a system of government, which is run by the worst, least qualified, or most unscrupulous citizens.

More on this in a moment, but first…

Markets

Overnight the Dow Jones Industrial Average closed up 70.11 points, or 0.29%.

The S&P 500 dropped 0.53 points, or 0.20%.

In Europe, the Euro Stoxx 50 index finished up 4.20 points, or 0.14%.

Meanwhile, the FTSE 100 dropped 0.039%, and Germany’s DAX dropped 4.73 points, or 0.043%.

In Asian markets, Japan’s Nikkei 225 is down 321.77 points, or 1.56%. China’s CSI 300 is down 0.86%.

In Australia, the S&P/ASX 200 fell 51.50 points, or 0.91%.

On the commodities markets, West Texas Intermediate crude oil is US$67.04 per barrel. Brent crude is US$60.29 per barrel.

Turning to gold, the yellow metal is trading for US$1,241.78 (AU$1,726.56) per troy ounce. Silver is US$14.69 (AU$20.42) per troy ounce.

One bitcoin is worth US$3,251.63.

The Aussie dollar is worth 71.91 US cents.

The Luddites Bill

You don’t have to look far to find different examples of Kakistocracy. There’s one in operation right at home.

In Australia Prime Minister Abbott Turnbull Morrison has managed to get one of the most archaic and regressive laws ever passed through parliament, almost entirely unopposed. Both the Liberal-National Coalition and Labor were happy with the details.

The only problem is the details are unbelievable.

The ‘Assistance and Access Bill’ comfortably made it through Parliament last week. You can also refer this to the ‘anti-encryption Bill’ or the ‘Luddites Bill’. As succinctly explained by The Telegraph:

‘[The Bill] allows authorities to force companies and websites to reduce encryption so that the government can increase surveillance on personal communications.’

As you’d expect (and rightly so) big tech has come out and slammed the bill. Apple, Google, Microsoft (and more) have all ripped the government a new one for this frankly stupid law.

But what else do we expect? The government operates carte blanche over the lives of millions of people. They’ve now adopted two surveillance laws on metadata retention and now anti-encryption so that they can freely intercept your digital communications.

It should make you mad. It should see society’s blood boil. And it appears that might actually be happening.

Add this to the current lack of monetary policy from the RBA. Apparently quantitative easing might now be a ‘tool’ they’ll be happy to use.

Add this to the current US kakistocracy and the Canadian arrest of China tech giant Huawei’s CFO (and daughter of Huawei’s founder).

Add this to the riots in France. And add the crumbling of the Italian financial system, the bickering between the EU and the UK, and the resignation of India’s Reserve Bank Governor.

Phew, that’s a list that barely scratches the surface.

It’s a troubling time. You have almost no control over the things that impact you, your life — and your investments.

You can’t oppose the ‘Luddites Bill’. You can’t vote on whether Theresa May retains leadership. You can’t help the RBA decide on rates or potential future QE. You can’t influence the US’ ‘strategic’ actions to get leverage over the Chinese.

However, what is interesting is that if you take the French approach, maybe you can get things done. All it requires is a few hundred thousand people willing to commit mass acts of violence and thuggery.

Seemingly that’s the only way to get politicians to listen. It worked on Macron.

Perhaps we should get the citizens of Australia to randomly loot, destroy and vandalise the major cities for a week or two to get the ‘anti-encryption bill’ repealed?

That’s not something we suggest you do, of course. But what we’ve seen in France is an indication of what society is now prepared to do when they finally realise that their so-called leaders don’t care about them. With increasing social unrest due to multiple kakistocracies around the world, the ‘French model’ might soon be getting some momentum.

Scary as it might sound, this is now starting to have hallmarks of the 1930s. A decade of seemingly endless despair. A decade of recessions and the great depression.

While the economy isn’t quite in depression, it’s certainly looking like it may be heading towards recession. And while we might not have 1930s style unemployment, we certainly are starting to see more instances of civil unrest.

What’s most alarming is the rise of nationalist political agendas. The increasing power of ‘the right’ and a widening gap of wealth inequality and purchasing power.

An article from CNN earlier this year made the point:

Some hark back to the 1930s, when the aftermath of economic crisis, protectionism, hostility to minorities, the collapse of international institutions and a sense that democracy had failed, allowed fascism to take root.’

Now, we’re not seeing fascism take root. But the whole Brexit confabulation in the UK certainly does bring democracy into question. After all, if the government can’t complete the results of a referendum then we must question how alive democracy really is.

With continuing decisions not based on the will of the people but the will of a centralised, elite few, we only see more unrest brewing away.

We think this is also going to lead to a trend towards more privacy-focused technologies. Avenues that lead to investors cloaking or obfuscating their wealth and assets from those who wish to take them away.

They’ll be looking at companies developing digital privacy services and products. Ways to protect your communications, your actions, your whole digital existence.

The trend is brewing towards society pushing back. That’s going to create tension between power and the people. But we also think it will create opportunity in these technologies for investors.

We may be trending towards the 30s, but things aren’t that dire…yet.

Livin’ in the 70s

There may be elements of the 30s brewing. But as we said last week, there are elements of the 70s about things too. Last week we asked you to write in with your 70s life experiences, to give those of us who weren’t around then a bit of an insight.

Well, we asked and you replied. Here’s one we got from Mat about his experience of the 70s.

Dear Sam,

I can remember the 70s quiet well as a young kid going to school, not seeing my Dad until at least once a fortnight when he came home for the weekend to see us and then once again depart for another fortnight or potentially longer. He worked on the Department of Main Roads out Western NSW helping building roads and bridges. We were quiet poor, mum would wash and iron clothes for people, we had chooks for eggs, a cow (not ours – that used our yard to feed) for milk and cheese and we would walk along the highway and pick up coke bottles and sell for 5c which would help pay for our meals. Wages were incredibly low. As Dad told me when I got older, our rent was paid half with cash and the other with meat. Dad and a mate would kill a sheep, pig or calf, skin it, cut it up and deliver the meat and we would half the offal which was the remainder for dinners. Yep, the good old days.

Tough times, which build tough and resilient kids who can do it tough it tough times come around again, and to be honest, my gut feel is that it is coming faster than people think. Over the years, I have learned to save hard, only buy what I/we need, not what we want, get a mortgage and pay as much as you can to own it as quick as possible. Save hard again, buy what you need with cash, no loans. I am now in a very comfortable position and invest only what I/we can afford to lose, however, due diligence done before I jump in. I think I have been well educated, taught and learned life’s tough lessons which will prepare me well for the looming tough times.

My short blurb,

Mat

There’s some great insight to take from that — particularly if you were born after the 70s or have kids or grandkids born after the 70s.

We also agree with Mat. Maybe the tough times are coming around again faster than we realise. But as we know, even after tough times can come good times. It all depends on how prepared you are for it, and how much resilience you have.

We wonder if the world has enough resilience now. We think the idea of resilience is perhaps lost in the younger generations. Maybe that also impacts how markets behave as they become investors themselves. More importantly, maybe it also dictates where and how you can capitalise on opportunities when they land?

Until next week,
Sam