We’ve All Survived On Rising Assets

I can remember being 14 years old and working at Candy Kitchen in Bridgehampton and making about 60 bucks as a busboy there during a shift. I thought I had hit the jackpot back then. That was over a decade ago, I’m 29 now, and that thought has plagued me when I view what is happening to the American economy.

That busboy job of 60 bucks a shift hasn’t changed much in terms of wages, much like that of all jobs in America, really, since the 70s. Americans have been able to cope with this through the use of rising asset prices, most specifically real estate and equities, which have gone up dramatically. These asset prices, especially real estate, have been largely driven up not by demand, but by more and more lenient debt instruments that ultimately lead to the crisis that we have in America today, and the collapse of 2008. 2008 was four years ago, and all we’ve really done since is participate in activity that led to that collapse, borrow more to pay for what we cannot afford.

So what do we have? We have record inequality in America financially, and we have a system that has solutions that we don’t want. Want more home ownership? Real estate prices have to fall, and they have to fall dramatically in order to get it. Want more jobs? Americans have to be willing to work for less, like they do in China. Want more industry? We need to cut out more regulation.

The baby boomer generation could get jobs and afford things because things cost less, and even though wages were less, it was enough for housing, food, clothes, without having to go into debilitating debt. This same principal was true for the U.S. Government really all the way up until the Reagan administration. But today, and for the last 35 years, what is common sense financial logic has been thrown out the window. The American government (and European governments) as well as most families, borrowed to live, and they continue to borrow to live, putting themselves in debt that is un-payable. Based on what I can tell, the government plans on continuing a series of printing measures, which is essentially borrowing against your own currency, to keep the country financially afloat. It’s sort of like getting one credit card, maxing out, and then getting another and hoping no one will notice.

So here we are. What do I think will happen? Well, growth in countries that are in this debt trap will stagnate until they are willing to swallow the fact that they can’t keep putting off the debt, which they won’t do. So I expect more of the same, and I think we’re all starting to adjust already to new realities—global riots, unstable markets and overall uncertainty. I also expect a third stimulus, and then a fourth. In terms of investing, I like anything that has to do with hedging against growing global debt and companies that will benefit from people who are struggling. I like gold, McDonalds, and even Google makes sense to me, since more people will be out of work and springing into online ventures and need the advertising. Those are my big three right now in my personal trading accounts where I manage all of my money. I’d encourage all of us to really think about the dangers of debt and debt instruments, and how they have gotten us into terrible, terrible trouble when going to the voting booth or when handling your own personal finances.

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Okay, enough finance talk. Before I end my column, I have to mention my joy upon meeting actor Giancarlo Esposito, the star of one of my favorite television shows of all time, “Breaking Bad” in Southampton at 230 Elm on Saturday night. The night benefited the Barnaba Institute, which is a charity that battles sex trafficking. It’s a charity that I’d never heard of before but fully support. I had some great food by Jon Albrecht who is the executive chef at Tutto Il Giorno, as well as unbelievable food from Sen in Sag Harbor and 230 Elm Caterers that completely blew me away. The truffled pheasant from 230 Elm was to die for, and the rigatoni by Chef Albrecht was like being in Italy again. I went with my neighbors Phil and Lana King, both of whom are big fans of “Breaking Bad.” Check out the Barnaba Institute Charity, they, like so many others, need your support.

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