American social networking innovations such as Facebook, Twitter, and Google (NASDAQ:GOOG) have played, and continue to play, important roles in the social movements for change in Tunisia, Egypt, Bahrain and other countries around the globe. The question today is: When will these tools, invented and incubated here in America, be used by U.S. citizens to effectively protest in mass against perceived unjust, unfair, and unwise policies in the United States? For Seeking Alpha readers and investors, a more relevant question is: How could such civil demonstrations in the United States affect investment decisions?
I’ll answer the second question first by contending that unwise energy, fiscal, and monetary policy is at the root of America’s severe economic problems and high unemployment. It is no coincidence the S&P 500 is flat over the last decade, while oil and gold prices have soared; the U.S. dollar has been devalued; the U.S. is bogged down in two wars; and in 2008 we all witnessed an almost complete unraveling of the financial “system."
It is also clear (at least in my mind) that U.S. government policy has negatively affected the investment returns, the value of savings, and the standard of living for average middle-class Americans. By any measure one chooses to look at, wealth in the United States is increasingly being concentrated in the hands of the richest 1% of Americans. While fascism may be too strong a word for some, it is clear the government of the United States is being used, especially over the past 10 years, by a small group of very powerful people to abuse the wealth of this nation for the benefit of the few (themselves) at the great expense of the many (the middle class).
As history shows us, it is impossible to have a strong and peaceful country without the existence of a strong and healthy “middle class.” I would argue it is impossible to have a strong and healthy S&P 500 if there is no middle class.
It is clearly time for a change, and it is also clear that neither Republicans or Democrats are capable of doing so. Perhaps the social networking tools that are working so well across the world should come home to roost. Let’s take a few specific examples of issues that could (or at least should) galvanize the majority of Americans into taking action.
When will the American people protest en masse against taxpayer bailouts used to pay bonuses to the already wealthy executives at Goldman Sachs (NYSE:GS), AIG, Citigroup (NYSE:C) and many of the other financial companies who themselves were responsible for the mess we found ourselves in? When will the American people demand that members of Congress abide by their oaths of office and uphold the U.S. Constitution? Although the Constitution gives command of the nation’s armed forces to the Executive branch (the President), it is clear the framers of the Constitution wanted to balance this power by requiring the legislative branch (Congress) to decide when the United States goes to war. Yet today, the United States is involved in two wars without a declaration of war!
The framers of the Constitution surely never envisioned such a weak Congress, and in fact wrote volumes on why the balance of power written into the Constitution was absolutely necessary. The framers of the Consitution obviously trusted the judgment of a broad Congressional vote over the opinion of one President when it came to war.
When will the American people demand Congress transition back to Constitutional money and abolish the Federal Reserve? It is clear the Constitution only authorizes monetary notes backed by gold and silver. I believe this issue to be at the root of all the unwise monetary, fiscal, and military problems the U.S. faces today. Without the ability to print money out of thin air, how could the U.S. “pay” for all its military involvement around the globe, its $1 billion dollar a day foreign oil addiction, or the out of control fiscal policies?
The U.S. is not forced to pragmatically deal with any problem as long as the Fed can simply print money in order to ignore it (at least this works in the very short term). We must break the stranglehold a small group of people have to print money out of thin air and distribute it to their friends with absolutely no oversight whatsoever. We must end the monopoly of the Federal Reserve to completely control interest rates and credit. This is not what the framers of the Constitution envisioned -- and in fact is exactly what they warned against.
The last example, but a very important one: When will the people of the United States demand access to the NGVs that both Ford (NYSE:F) and GM make but refuse to sell in the U.S.? When will the people demand the freedom to refuel their vehicles in their garage with a clean domestic fuel (natural gas) for less than half the price they are paying for gasoline derived from foreign oil? That is, when will Americans hold the President and Congress accountable for their promise to end U.S. addiction to foreign oil, or at least make an attempt to address the problem with the only domestic fuel capable of being scaled up to significantly reduce foreign oil imports (natural gas)?
When will the U.S., which used to be an engineering- and technology-driven country, begin to manufacture the superior (and well known) natural gas/electric hybrid vehicles that are the cleanest, most economical, most reliable solution to our foreign oil crisis? For that matter, when are we going to get the politicians (mostly lawyers) out of the energy policymaking role and put engineers in charge?
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The impact on investing, were these changes to take place, would be huge. With any civil unrest there is a period of “adjustment,” and sometimes things get worse before they get better. It was that way during the American Revolution and it will probably be that way in Egypt. But like the American Revolution, and hopefully in Egypt as well, the struggle was worth it. Real democracy can lead to unsurpassed prosperity – not just for the ultra-rich, but for anyone who works hard and applies his or her talents.
What investments would benefit? Obviously the social networking tools and gadgets themselves would: Google with its search and Android OS products; Apple (NASDAQ:AAPL) with its cool and trendy must-have gadgets. Next, the pre-IPO valuation of companies like Facebook, Twitter, and Zynga would be positively affected, as more cause-based social networking would mean more clicks and thus more advertising revenue.
But in the bigger picture, if social unrest in the U.S. would cause positive change with respect to the issues mentioned above, we could set the stage for an age of American prosperity few today can even imagine. Natural gas transportation, if applied to middle class Americans' cars and trucks, has the ability to reduce foreign oil imports by 5,000,000 barrels a day within five years. This is almost half a billion dollars a day, which would be kept inside the country.
The economic multiplier effect would be huge. American adoption of natural gas transportation on a large scale would cause me to recommend investing in the S&P 500 for the first time in a long, long time. (That said, I would recommend staying out of the S&P 500 today.) Ironically, Exxon Mobil (NYSE:XOM) would be a great company to invest in. Exxon will not only continue making gobs of money by producing oil, but also by being the largest producer of natural gas in the U.S., it would benefit from any transition to use that fuel in the transportation sector for decades to come. The same can be said about Conoco Phillips (NYSE:COP).
In summary, the U.S. has a lot of room for policy improvement. Social networking might be the only way to achieve it.
Perhaps a Google executive here at home is reading this article right now.
Disclosure: I am long COP.