On Monday the U.S. markets were closed while Toronto was down 0.1%.
Linamar was down 3.5% to $55.65 on concerns that Trump’s protectionist policies will be harmful to non-U.S. based auto parts companies. That is a risk. However, I am not changing my thinking on Linamar on that basis. It looks like good value to me.
Wealth Disparity
There was much news today about the concentration of wealth at the top. Apparently the richest 8 people have wealth equal to the bottom half of the world’s population. And apparently David Thomson and Galen Weston have as much wealth as the entire bottom third of the population of Canada.
That is concerning. Governments are not in any way “required” to to maintain a system that flows too much wealth to too few people. It’s more the case that western governments tolerate this extreme wealth disparity because it is believed that the incentives that it creates has produced the best overall benefits to all citizens. A purely equal distribution of wealth would provide insufficient incentive to work harder and to save and invest and so the total economy and GDP per capita would be far smaller. The existing system has generated a large GDP per capita but if it is judged that the distribution of wealth is just too extreme, then changes should be expected.
Investors should be concerned about wealth disparities that are too great. Most of the richest people in the world derive their wealth from owning profitable corporations. Their wealth derives from “the wages of capital”. Investors are able to participate somewhat in getting a share of the wages of capital as well. But if too much of the output of the economy is seen as flowing to the owners of companies and too little to labour then we should expect governments to make changes.
The good thing is that the top rich people are in no way consuming half of what the world produces. Warren Buffett, as an extreme case, has always consumed a very tiny fraction of his typical annual increase in wealth. But this too is part of the problem in that as the very wealthy consume far less than they could, they are in effect saving and lending the ability to consume to others who then owe future consumption to the rich. Once a person is wealthy enough that they need consume only a tiny portion of their increase in wealth each year, then their wealth compounds upward at a high rate. Warren Buffett’s entire Berkshire fortune will be donated. (He lives on a vastly smaller but still large amount of wealth that he has outside of Berkshire). But some vastly wealthy people intend to pass on their wealth to their heirs. Society will need to consider if more of that wealth needs to be taxed away upon death. Or if taxes on income and wealth from capital need to be increased.