With apologies to Overstock.com, our latest musing is all about ‘The O’. The O in this case is Ownership.

Bill Gross of PIMCO fame is today’s target. We’re not arguing with his track record. He clearly is a skilled fixed income manager. But we’ll throw caution to the wind and commit the ultimate blasphemy – we’ll criticize the bond guru.

Our difference of opinion with Bill stems from the conclusion he reached in his May 2006 commentary. While his analysis was as insightful as usual, his conclusion seemed to miss a crucial point.

America has been and always will be about ownership. The ‘workers of the world unite’ speeches don’t play well to American audiences.

From the time of the ‘discovery’ of the American continent by Western European explorers, inhabitants of this rich land have sought to carve their niche in the world. Religious freedom be damned – America represented an opportunity to own land and break free of the crushing power of European aristocracy.

America is the land of the free? We’re all equals? Nonsense! What we want and have always wanted is equality; but equality in terms of the chance of differentiating ourselves. Settlers of the New World weren’t in search of religious freedom – they sought economic opportunity. Need proof?…just how long did it take for Americans to recreate the European aristocracy? Mercantile towns such as Boston and Charleston were certainly quite different from the frontier.

So what does this have to do with Bill Gross? Let’s have a look…

Bill’s argument is that GM’s problems are a microcosm of the US economy. He writes, “I think it is important to recognize that General Motors is a canary in this country’s economic coal mine; a forerunner for what’s to come for the broader economy. Their mistakes have resembled this nations mistakes; their problems will be our future problems.

What’s his beef? “If the U.S. and General Motors have similar flaws and indeed symbiotic fates, they appear to be conjoined primarily by the uncompetitiveness of their existing labor cost structures and the onerous burden of their future healthcare and pension liabilities.”

He continues, “The current attempt on the part of GM to address the high cost of its labor draws a comparison to potential future U.S. efforts to do so via currency devaluation.”

Where’s he headed with this? “Look for an eventual abandonment of our stated mantra of a ‘strong dollar policy’ (and) at some point in America’s future, a rather drastic rebalancing of wage rates…will be required.”

That’s not Bill’s only solution. “Another way the U.S. could escape the burden of its future liabilities is to ‘grow’ its way out, much in the same manner GM is attempting to make its models more attractive and relevant to current car buyers. We could do that by accelerating relative productivity gains, by emphasizing innovation, and upscaling education. Other nations however, understand the same rules and it will be difficult to ‘grow’…with our manufacturing and service base being increasingly hollowed out by foreign competitors…”

So Bill, what’s all this mean? “…an increasing propensity for higher inflation…Higher taxes, as well, are just around the corner. Finally, currency devaluation…should be the coup de grace…inflation (will) erode…global purchasing power…as the dollar sinks.”

We’re OK with Bill up to this point. Again, he’s as insightful as ever.

But Bill seems to focus on the plight of the American worker. That’s fine and dandy but it misses the point.

The point is that America is not now nor never has been driven by labor. We don’t seek to minimize the importance of labor but the driving force is, has been and always will be the productive capacity of our capital base. Capital Bill – capital.

Econ 101 tells us the productive factors are land, labor and capital.

We’ve all got land, we all have labor – the deciding factor is the deployment of capital.

Need more proof?…90+% of America’s wealth is owned by the top 10% of its population. We can all be unhappy about declining benefits, diminished job opportunities, etc. but is anyone worried about the economic viability of the Kennedy’s? And when was the last time you saw a Carnegie or a Rockefeller next to you on the assembly line? Come on Bill, it’s not about returns to labor – it’s about returns to those who rent labor – what we call the Ownership Class.

We’re not alone in our view. Famed Wharton professor Jeremy J. Siegel is barking up the same tree. In his upcoming book entitled “The Global Solution”, Siegel argues that American viability is maintained by the Ownership Society to the extent we are willing to partner with the world. Chasing CNOOC away from Unocal wasn’t the way to go he might say. He might argue we should share our toys and not be the kid who takes his ball and goes home when he’s not winning.

Want to get out of the ivory tower? Fine – even Robert Kiyosaki of “Rich Dad Poor Dad” fame espouses ownership as the means to wealth and security. (Editor’s Note: That guy strikes us as part pitchman and part snake oil salesman – think George Forman meets P.T. Barnum.)

And this brings us to our point. We’re not cold and heartless. We’re not ignoring the plight of the American worker. But what we are doing is focusing where we ought to. Yes Bill, higher inflation and taxes may be down the road but the emphasis of legislation, policy and strategy ought to be on the deployment of capital – on those who own it, control it and strategically use it.

Let’s get rid of the Internal Revenue Code (anyone want to say ‘flat tax’?), free up capital constraints and focus on funneling money from those of us who have it to those of us who can best utilize it. Let free markets be free – let them work as designed.

And how does the American worker benefit? Better, higher-paying, knowledge-intensive jobs replace blue-collar factory work. 401(k)’s replace pensions. Private savings replace social security. An investor class is born and wealth is created – and it’s all about the ‘O’.

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We’ll write to you again soon. Keep visiting our site for frequent updates. Keep those comments coming. We love hearing from you.