How I Learned to Hate Mao Zedong and Love U.S. Stocks

The Cultural Revolution is fascinating history because of how bizarre it was, and how long it lasted. No, I am not going to bore you with the nitty-gritties. Let’s just say a lot of people went through absolute hell in order for Mao Zedong to push Liu Shaoqi and Deng Xiaoping aside.

I am currently almost finished with the third of four books I bought about the Great Proletarian Cultural Revolution (Cultural Revolution) in China. Admittedly, this is not the topic of discussion at cocktail parties in my neighborhood, or any other neighborhood for that matter. However, since I quit drinking, I don’t go to a lot of cocktail parties.

So, there is that.

The Cultural Revolution is fascinating history because of how bizarre it was, and how long it lasted. No, I am not going to bore you with the nitty-gritties. Let’s just say a lot of people went through absolute hell in order for Mao Zedong to push Liu Shaoqi and Deng Xiaoping aside and somehow rehabilitate his reputation after the absolutely disastrous Great Leap Forward.

For Mao, it worked fantastically. For everyone else, it was a nightmare.

Be that as it may, I suppose part of my strange interest in the Cultural Revolution is my curiosity as to whether something like it could ever happen in the United States. While I am dubious our culture would ever lend itself to the same type of cult of personality, history is littered with examples of internecine strife.

Essentially, it could happen here. Why not? We aren’t above being mean and intolerant, are we? Who is?

It might seem this newsletter is beginning to border on irrelevancy or pretentiousness. However, the recent behavior of the investment markets in light of, let’s just call it, extremely modest economic data is a little unsettling to me. Just hold your nose and throw your money into the ring. The OBBB is going to cure what ails us. We have a rate cut coming up in September, which will take care of all of our problems. The TACO trade reigns supreme. Why worry?

All of it.

To be sure, a rising tide will lift all boats. However, unlike a rising tide, a rising stock market doesn’t lift all household balance sheets to the same extent. This is where the difference between absolutes and relatives matters.

For instance, assume Investor X has a $10 million stock portfolio, and Investor Y has a $10,000 one. Now, further assume the stock market goes up a whopping 20%. Obviously, X’s portfolio is now worth $12 million and Y’s has increased to $12,000.

While both investors have had a great relative rate of return at 20%, only X has seen any sort of meaningful absolute return. Sure, $2,000 might be a meaningful sum of money to Y. However, $2,000 is still $2,000, and is equal to a little more than one month’s rent. On the other hand, $2 million? That will buy you a pretty sweet house throughout much of the country.

There is no doubt Investor Y is pleased with the investment results. However, nothing has fundamentally changed with their financial situation or even their purchasing power. They can’t run out and buy a fancy new car or take a trip around the world. Perhaps they can breathe easier about next month’s bills, but that is probably about it.

If the testimony John W. Lettieri, the President and CEO of the Economic Innovation Group, gave to Congress back in 2021 is even partially accurate, you could excuse a lot of Americans for not really buying into the system. Consider the following:

The U.S. economy is the world’s most powerful engine of wealth creation and prosperity. In spite of this, the lack of wealth at the bottom remains a troubling and persistent fact of life in this country — one that undermines faith in the basic fairness of our economic system and inhibits the kind of widespread human flourishing to which we aspire as a country.

The numbers are startling: The median net worth for the bottom 25 percent of American families is a mere $310. The bottom 50 percent of families own less than 2 percent of total U.S. wealth. These statistics are, in part, a reflection of the lack of policies designed to help low-income people build long-term savings and investments.

One of the central reasons for the persistent lack of wealth at the bottom is the lack of adequate retirement savings among low-income families. The median retirement savings balance for the bottom 50 percent of American families is $0.

If you follow the link, you will see Lettieri has excellent sources. So, I think the statements above are at least directionally accurate. Then, there was the excellent piece by David Mamet in the Wall Street Journal on August 6, 2025. It was entitled: Sorry, Billionaires – There’s No Escape.

Here is a snippet.

Now comes news that American billionaires have prepared compounds in New Zealand in case of apocalypse. Thoughtfully stocked with all that the group would require — air, water, food, entertainment — they stand ready to receive the ultraprivileged. Well and good, but their fantasy, like mine, is flawed. For what is the size of the group for which they foresee transportation, protection and perpetual care?

The Ottoman Turks raised enslaved Mamelukes to the status first of guards and then of administrators, and all was well until the ‘Lukes did the math and realized they didn’t need the Turks.

… the guards, then, would realize themselves to be the enlightened Mamelukes. If they are the only ones capable of keeping order, and if money is now useless, they have no need of their employer. On the plane he would be dead weight — and in the New Zealand bunker, just a useless mouth to feed. The caretakers, builders, security guards, and so on, of the compound, would insist on being accommodated — if they hadn’t already barricaded themselves in and locked the plutocrats out.

Essentially, when society breaks down, the unwashed win. There simply aren’t enough of the “ultraprivileged,” and they are meaningless when their money doesn’t matter. The masses are a powerful cudgel, especially when they feel as though they aren’t getting a fair shake … as history suggests over and over again.

Therefore, perhaps the surge of mayoral candidates like Zohran Mamdani, New York City; Omar Fateh, Minneapolis; and Katie Wilson, Seattle, isn’t terribly surprising. Let’s call it like it is. Their positions would be extremely attractive to the people Lettieri outlined in his testimony to Congress. Why wouldn’t things like rent freezes and a higher minimum wage entice folks who don’t believe in the current system?

Heck, we don’t need the Russians or Chinese to bamboozle us with “misinformation.” Standard social media is more than adequate to educate folks on the difference(s) between the haves and the have nots in our society. It isn’t just that there is a gap between the rich and poor. There always has been and always will be. No. It is the gap is canyon.

I would perhaps argue we are treading on a fine line between jealousy and acrimony. The former is kind of normal human behavior. The latter can lead to, well, societal disfunction.

OK. This is kind of a depressing piece today. All the more since the markets have been behaving, almost in spite of themselves, and it proves to be a nice weekend in our primary markets. Further, what is the old expression? “Never look a gift horse in the mouth”? There is no need to be a wet blanket.

Fair enough.

I suppose it is normal for the top 10 holdings to make up something like 38% of an S&P 500 fund. For the top 3 to make up over 21%. I guess it doesn’t matter what the economic data is or isn’t. So what if someone will have to pay for these tariffs … somewhere? So what if the labor market data is as nutty as a fruitcake?

The stock market has simply shrugged off all of that pesky stuff, and everything seems to be hunky dory. I should eat, drink and be merry, for tomorrow I might die. That or something along those lines.

Before I get to any of that, I am going to finish book number three of four on the Cultural Revolution. The reason being is “those that don’t learn from history are doomed to repeat it,” and I don’t want to repeat that craziness.

Have a great weekend.

 

Thank you for your continued support. As always, I hope this newsletter finds you and your family well. May your blessings outweigh your sorrows on this and every day. Also, please be sure to tune into our podcast, Trading Perspectives,  which is available on every platform.

John Norris

Chief Economist

Please note, nothing in this newsletter should be considered or otherwise construed as an offer to buy or sell investment services or securities of any type. Any individual action you might take from reading this newsletter is at your own risk. My opinion, as well as those of our Investment Committee, is subject to change without notice. Finally, the opinions expressed herein are not necessarily those of the rest of the associates and/or shareholders of Oakworth Capital Bank or the official position of the company itself.