There is a lot of talk about contrarian thinking and contrarian investing, but there are very few people who actually practice it. It has long been true in money management that it is better for career management to be invested roughly in the same way as the rest of the crowd even if you lose money than to be out on a limb and be right and make a killing. This is sad, but true. Although this is no way to please your clients or to become John Paulson rich, it is certainly the best way to cover your ass and save your job. It provides the “everyone else was doing it so how could I know” defense. Indeed, when the financial system is at risk of collapse (e.g. Long Term Capital Management and its aftermath, Lehman Brothers and its aftermath, etc.), a practitioner of this method is unlikely to be one the unlucky few to be made an example of and so will generally be exonerated and not end up in jail or even pay the price of losing his or her job for terrible decision making. There is also virtually no accountability for poor oversight and bad management these days. How else can one explain why many of the individual managers at Wall Street firms have generally not suffered at all and losses continue to mount at firms such as UBS that somehow managed to blow through over $2 billion in 2011as its managers remain immune to consequences?
Thus, it is understandable why there is public anger directed toward managers who work on Wall Street. But although there are a host of problems with Wall Street and much could be resolved with better (not necessarily more) regulation (i.e. get rid of Sarbanes Oxley and bring back the Uptick Rule and much of The Glass Steagall Act), bankers are not a cause of one of biggest problems that the US faces; they are merely one of many agents acting in their own self-interests. Bankers are perhaps more high profile recently than many other groups, but we could lump pharmaceutical industry executives, oil and gas industry executives and a host of others into the same categories. One of the biggest problems we face as a nation is that our government is no longer regularly responsive to its own citizens. It responds to K Street and not to Main Street. Instead of occupying Wall Street, I suggest the citizens in Zuccotti Park and elsewhere should occupy K Street.
I think this is unfortunately not very likely to happen, however. The Occupy Wall Street crew in Zuccotti Park in NYC is not a particularly articulate, organized or terribly intellectual bunch. And today, the real bang for the corporate investment buck is entirely in lobbying and this is a great tragedy. Where else in this market can one get a 6X return on investment? There is practically no better return on a corporate investment dollar than on K street and it does not matter whether a Democrat or Republic is in control of the White House or Congress. This is an incredibly sad state of affairs and if we want to take back our country, it is where we should focus our reform efforts.
Unfortunately, the Occupy Wall Street battle is probably merely a prelude to an even greater battle that we are only beginning to touch upon in the US. Many sympathizers with the Occupy Wall Street movement skew young and I believe that there is an undercurrent of the coming demographic war that we are facing in the US. As the young graduate with overpriced, unsustainable university debts (and are often poorly trained) and face a job market that does not provide them with sufficient economic opportunities to service those debts, they begin to question the transfer of wealth from the working populations to the retirees of this country who receive these unprecedented transfers because they now have net worths far greater than younger households than ever before. Indeed, households headed by a person 65 or older have a median net worth 47 times greater than households headed by a person under 35, according to a new analysis from the nonpartisan Pew Research Center. In dollars, that gap amounts to a median net worth of $170,494 for older households, compared to $3,662 for those under 35.
Government policies make this situation possible and it is not sustainable for the long term. Wall Street certainly has its own problems, but K Street is causing Main Street real angina. I suggest the protesters Occupy K Street instead.