Editor‘s note: Today, Bonner & Partners editor-in-chief, Chris Hunter, explains how the system is rigged against you, if you are middle class and American.
He also tells you how to escape the middle-class trap, by putting to use one surprisingly simple lesson.
Why Being Middle Class in America Is a Deadly Trap
By Chris Hunter, Editor-in-Chief, Bonner & Partners
A new study by Princeton University political scientist Martin Gilens and Northwestern University political scientist Benjamin Page, reveals that the US is no longer a capitalist democracy. It’s an oligarchy.
You might not like it, but instead of Washington responding to your concerns, it responds to the concerns of rich people.
Gilens and Page analyzed 1,779 policy outcomes over a period of more than 20 years. And they reached the following conclusion:
In the United States, our findings indicate, the majority does not rule – at least not in the causal sense of actually determining policy outcomes. When a majority of citizens disagrees with economic elites and/or with organized interests, they generally lose. Moreover […] even when fairly large majorities of Americans favor policy change, they generally do not get it.
And the problem is only getting worse. You’ve probably heard the statistics. The top 1% in America own 43% of the country’s financial wealth. The bottom 60% own just 2.3% of the country’s financial wealth.
A Different Kind of Wealth Redistribution
I don’t tell you this because we are proposing some form of government wealth-redistribution program. It isn’t anyone else’s business how much someone else has… or earns.
But you may be interested in a different kind of wealth redistribution: one that helps you get your hands on more of that wealth. Accumulating capital is the best way to achieve what Bill calls “financial escape velocity.”
Put simply, “financial escape velocity” is the point at which you no longer rely on wage income to live the life you want to lead. But to achieve it, you have to break through what our publisher (and Bill’s eldest son), Will Bonner, calls the “invisible barrier” to wealth.
As Will wrote in last week’s Weekend Edition, that “invisible barrier” is: “the barrier of publicly accepted ideas about money and success.” As he put it:
If you are a slave to these conventional ideas, you simply won’t have a shot at wealth, financial freedom, “financial escape velocity”… whatever you want to call it.
This is a hugely important point. At Bonner & Partners, the small publishing business Bill and Will set up last year, a “bit strange” is crucial if we are to help you in your mission to build lasting wealth.
That is why you won’t just hear us talk about stock chart patterns… P/E ratios… and earnings calls. And it’s why we continue to remind you that stock picking alone won’t make you rich.
It’s not that we don’t believe you should own stocks… or pick ones you believe have the best chance of delivering high returns with low levels of risk. But we believe you should do so in the context of a wider wealth-building plan.
Depending on what stage you’re at in your wealth building, you’ll want to learn about the importance of things like asset allocation, stop losses, and position sizing.
Purely focusing on stock picking alone is, frankly, a path to the poor house.
Chained to an Oar
We also believe you should be aware that both Wall Street and Washington have rigged the system. As Bill put it yesterday:
Want a middle-class lifestyle… with middle-class finances… and middle-class attitudes? Forget it. Trying to enter the middle class is like trying to get a job as a galley slave. You get chained to an oar. You sit. You row… until you drop dead.
It’s a trap – set for you by the oligarchs and “poligarchs” (people whose votes can be bought cheaply) who control Washington and its major industries.
And if you’re young, you face a lifetime of backache… trying to keep up the pace. You will be forced to pay for the most expensive health care in the world… the most expensive military in the world… and the most expensive education system in the world. All while your real income falls.
Frankly, we don’t think you stand a chance of reaching “financial escape velocity” without first understanding that neither Wall Street nor Washington are here to help you.
That’s the most important lesson to learn if you are serious about building wealth: You’ve got to go it alone.
Not only is the conventional wisdom nearly always wrong, but also every dollar in fees you pay over to your broker or money manager makes you a dollar poorer.
And there’s no better way to learn how to build wealth than to roll up your sleeves and start to invest. You can seek advice… read books… and subscribe to newsletters. But there’s no substitute for personal experience.
As Fred Schwed, who wrote one of the funniest and most lucid books on the culture of Wall Street, Where Are the Customers‘ Yachts, put it:
There are certain things that cannot be explained adequately to a virgin either by words or pictures. Nor can any description I might offer here even approximate what it feels like to lose a real chunk of money that you used to own.
I’m not saying you must lose a “real chunk of money.” But I do recommend you learn to rely on your own judgment when it comes to your wealth-building plan.
It’s the only way to unchain yourself from that galley oar…
P.S. Drawing attention to how the system is rigged against the little guy is in the Bonners’ DNA (both father and son). For example, in 1986, when he was seven years old, Will sued the US secretary of the Treasury over the US national debt.
Will lost the case. But he learned an important secret about how to escape the rigged system. If you’re fed up with the unfair playing field mapped out by Washington and Wall Street, and want to learn how to build wealth in a truly unconventional way, read Will’s full report here.