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Wealth, Poverty and Keeping Perspective

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Earlier this year I published my annual investment outlook. Doing so provides me with a great opportunity to look at the “big picture” and major themes we should be following in the markets in 2015 and beyond.

The overall picture seems very bright indeed. The U.S. economy has continued to improve, if not as quickly as we all would want. GDP has remained in the 2–2.5% range with some recent signs of quickening growth. Inflation has dipped below 1%, largely thanks to the tanking of oil prices. The unemployment rate, 7.9% in 2012 and 6.7% in 2013, dropped below 6% in 2014. The economy is doing pretty well in the aggregate.

Stocks were up solidly again in 2014, if not by as much as in 2013, continuing a mostly uninterrupted upward run since March of 2009. The Dow ended the year up 7.52% while the Nasdaq and the S&P 500 rose 13.40% and 11.39% (13.7% if dividends are included), respectively, for the year. The S&P is now up an average of 20.7% a year for the last three years including dividends, its best three-year return since the late 1990s.

Meanwhile, the bond market performed well too. Whether we’re looking at bonds in the aggregate (AGG was up 6% on the year) or at various component parts (LQD, representing corporate bonds, produced an 8.2% return, while EDV, a decent proxy for long-duration U.S. Treasuries, gained a whopping 45.1% in 2014), fixed income had a pretty good year too. Commodities did very poorly (especially oil, obviously; after hitting a peak around $107 a barrel in June, U.S. crude oil futures finished the year at $53.27), while European stocks and emerging markets were spotty, but that’s mostly quibbling, unless you work in the oil industry, and it’s mostly good news for consumers.

More broadly (as Steven Pinker, among others, persuasively argues), in many ways the current world is a huge improvement over what came before. Statistically speaking, tribal warfare was nine times as deadly as war and genocide were even in the 20th century, despite its concentration camps, gulags and killing fields. The murder rate of medieval Europe was more than 30 times what it is today. Slavery, excessive and sadistic punishments, and frivolous executions were unexceptionable features of life for millennia, but are quickly disappearing today (if not nearly quickly enough).

Wars between developed countries have all but vanished, and even in the developing world, warfare kills at a fraction of the rate it did just a few decades ago. Rape, assault, hate crimes, deadly riots, child abuse and more are all substantially less common than they once were. Hunger has been halved in the developing world since 1990. Disease is waning dramatically, allowing most of us to live longer. Things are a long ways from perfect and plenty of problems exist, but the overall picture isn’t half-bad. Not many of us would jump at the chance to switch places with those who lived during other eras.

All of which brings me to my point.

I got home from the East Coast one Saturday evening not long ago after a wonderful holiday with my family. The family—our three children, spouses and grandchildren—was all together for a time of fun and general frivolity. The day we got home was my wife’s birthday so we went to breakfast with the local family members (who had also come home Saturday) the next morning before church and walked at the beach to extend the vacation a little. It was a great day.

Later on, while getting some coffee for my bride, we ran into a woman with a sign announcing that she was a homeless single mother looking for help. She looked desperate, sad and embarrassed by her situation. It’s possible that she was looking to scam us, but I doubt it. The look on her face was too real, too vulnerable, too visceral. I don’t think she was that great an actress.

Just before the police forced her to move on we were able to give her some money. Her eyes filled as she grasped my wife’s hand and kissed it while offering urgent and heartfelt thanks. We cried too and recognized that we almost surely got more benefit from our alleged generosity than she did. Still, it was something.

Good Fortune

For most of us here in the U.S., our lives are pretty good. By world standards they are pretty great. By historical standards they are downright spectacular. And for most of us who work in the finance business, life is especially good. We make up a highly disproportionate segment of those who make the most money too. For lots of practical purposes, we are the 1% or at least a reasonable facsimile thereof.

I’m not here to make a political point (an approach I try to eschew in print) or even a Piketty point except to emphasize that there remain far too many people for whom the American Dream is not remotely plausible. I don’t mean those who are vaguely or not so vaguely dissatisfied with how their lives have evolved or who haven’t accomplished what they set out to. I’m not talking about American exceptionalism or the lack thereof. I’m not thinking in terms of Thoreau’s quiet desperation or of those who think that they have done everything “right” but that life has somehow welched on its end of the bargain, or even of those who “went to emergency” at the hands of Wall Street’s rapacious hellions even if and as none of the scalawags went to jail (with apologies to the Eagles).

I’m simply thinking about people like that poor mother, wondering how she might provide for her kids and hoping against hope that things might get just a little bit better. Nearly all of us in this business have been blessed beyond reasonable expectation and almost surely beyond our talent and effort (raises hand). We need to do more, be more and give back more. It’s simply the right thing to do.

If you’re like I am, it’s far easier to lose empathy for those who are less fortunate than we’d like to think. We all like to believe that our achievements are our own and that our failures are someone else’s fault. But we are almost surely far less skilled than we assume and, even if not, Heisenberg’s uncertainty principle can get the better of us when we least expect it. Rain falls on the just and the unjust alike. Everything can change in a New York minute.

So please, let’s all resolve to pay a bit more attention to those who could use a little or maybe a lot of help. Do it in a manner that is consistent with your conscience and your convictions. But please don’t delay. A better life for many hangs in the balance.


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