On Sunday, during my adventure in the scrum of Occupy Wall Street, Russell Simmons summed it up like this after I explained how I worked to achieve success. He said that is what the debate is all about. He says we should be a collective because he was "lucky" and somehow paved roads had more to do with him making $100 million in a single year. Of course I disagree, and no he didn't offer me a ride in his Rolls Royce, so in his heart I wonder how much of the rhetoric he believes. But I do think President Obama believes this, and Simmons is right, 2012 will be a battle of two economic ideologies.
Rugged individualism sees strong individuals as components that make for a great nation.
Collectivism sees the group (call, nation, society, state) as the main component, coming before the individual.
I've known for a long time this was the ultimate aim of the administration. In fact, I would take it a step further and say the real goal is a one-world society of equal distribution of wealth controlled by a panel of experts not unlike those that pick peace prize winners. The fallacy of this Utopian idea boils down to human instinct, in fact, even animal instinct, which rewards the fittest with survival. People like to win. People like to achieve. People like to climb higher as they achieve and for many the trophies aren't accolades of academics and elites, but the kind of bobbles that bought the island of Manhattan or weigh down the hand of Kim Kardashian.
It's been tried so many times. It's been tweaked so many times. The collectivism sought by Elizabeth Warren and so many others was tweaked into communism and socialism and systems in between. There have been microcosms of this kind of stuff throughout history that look quaint and successful (see the Amish) but in such cases people that want more simply leave the farm. What happens when the entire country becomes the farm? I don't think we will ever find out on a national scale, but there is a mighty push. Are you ready to put it all into a pot? Are you ready to in effect work for the same as the lazy guy down the hall or that person not working but sitting at home with a bong and favorite video game?
I know for many there is a more quaint idea, something akin to a Voltaire novel, of everyone sharing. The idea that input doesn't have to be equal among citizens, or that one person's risks are nullified because we have (sometimes) paved roads goes beyond logic. Of course finished goods, profits and goodwill should be "fairly" distributed among the masses. This communal idea has been tried so many times and it simply doesn't work. I have more respect for those that have tried the communal stuff; with the pledge to make it one for all and all for one.
However, despite such promises human nature kicks in because we are all not cut from the same cloth. Some people may begin with the best intention, but they soon slip as they realize their portions at evening supper will be the same no matter how hard they work. Just because someone is carrying a hoe doesn't mean they are digging harder than the next person.
From Ebenezer to Refrigerators
In 18th century Germany a religious movement called Pietism emerged that promoted renewal of faith through reflection, prayer and Bible study. They believed God through the Holy Spirit inspired people to speak, and this gift of prophecy was the basis for a group that began meetings in 1714. The group became known as the Community of True Inspiration. Eventually the group, which extolled non-violence was persecuted, which coupled with economic depression drove them from Germany. The hope of religious freedom saw the group come to America in 1843-44.
Members of the group pooled their resources to buy 5,000 acres near Buffalo New York. Sharing the property the community of 1,200 enjoyed a nice comfortable existence. They came to call their community the Ebenezer Society and adopted a constitution to formalize their communal lifestyle. The community grew to the point where more land was needed and eventually found in Iowa which was also rich in fertile soil, wood, water and other materials to expand their communal community. Members took to calling their village "remain faithful" which changed to Amana from the Song of Solomon 4:8.
Amana means to "remain true."
Eventually the village grew to seven including one with access to the railroad in 1855. Resident members received a home, medical care, food/meals and all household necessities including schooling for children. Property was shared. Jobs were assigned by the village council and nobody got a wage. Farming was key to supporting the community, but additional endeavors from making clocks and beer also played a role in generating commerce with the outside world. Craftsmanship became a hallmark. Worship services were held 11 times a week and 50 communal kitchens made three meals a day available. Children attended school year-round, six days a week until age 14.
It all sounds great, but it was tough in so many ways and finally, in 1932, the communal life was put to bed. The farm market was tough, rural life was tough and this interesting thing called individual goals began to emerge. So the whole ball of wax was switched to the Amana Society, a for-profit corporation to manage the farms and establish larger enterprises. By this time the buzz was private enterprise. In the meantime in 1934 George Foerstner started the Electric Equipment company that was sold to Amana Society. Achievements came quickly including the first upright freezer in 1947 and first side by side refrigerator and freezer. The company was later sold back to the founder and other investors.
The Amana Colonies were declared landmarks in 1965 and today attract hundreds of thousands of visitors annually.
I suspect there could be no better effort than the one driven by deep religious beliefs that saw a thriving communal existence last for half a century. If forced upon Americans it couldn't last more than a blink of an eye but the damage could linger for half a century. The Amana folks called the switch to capitalism the "Great Change" and in this case change was for the better.
Housing starts showed a 15% month to month increase to 658k units, hitting the highest level since April 2010, and beating the 590k consensus estimate. The increase was mostly due to multifamily units. New permits for construction were down 5%. That's the second surprisingly strong reading for housing in a row after yesterday's homebuilder confidence index. Housing starts were up 10.2% year over year and permits were up 5.7% year over year.
Message of the Market
There were a lot of things to like about yesterday's session:
> Stocks started lower but turned around
> Defensive names (JNJ, KO, IBM) were down
> Severely depressed sectors (Home builders and banks) were higher
> Industrial companies posted great earnings
Results from Parker Hannifin (NYSE:PH) were highly impressive resulting in the stock climbing $4.44 or 6.1% for the session.
Results from WW Grainger (NYSE:GWW) were equally impressive sending that stock up $11.20 or 7.23%.
Both companies raised full year guidance. We are talking about industrial tools and hydraulic equipment and strong domestic demand. This says beneath all the negative stuff there is a pulse in this country. It's fantastic news and really the best news from yesterday's session. I was also encouraged by action in financials which might have found a bottom- for now. Then there was late scuttlebutt of swelling the EFSF to €2.0 trillion through efforts of France and Germany. (Late after the bell word from France was that such talk was premature.) It was a solid session that could have seen a 200 point drubbing and not raised any eyebrows.
This morning the market is handling the first earnings miss by Apple since 2004 pretty well. Stocks will open mixed which again should be viewed as a victory of sorts. Consumer prices didn't climb as much as producer prices which was expected. There are still not enough signs of "official" inflation, and that keeps open the door for more Fed action.