GMO’s 4th quarter letter is now available here on line, and should be read.
Both essays are worthwhile, but Jeremy Grantham’s contribution, The Road to Trumpsville: The long, long mistreatment of the American working class is extremely relevant and insightful on the trends and abuses that have driven America (and much of the developed world) to a necessary breaking point today. Some excellent charts too.
The one below showing corporate profits relative to employee compensation since 1947 is a secular glimpse that I have always found useful. The mean reversion of profits (in blue) lower, and wages (in red) higher, has been underway since 2013, but has much further to run–bad news for those buying and holding stocks at crazy rich multiples of profits today.
Yes, higher wages and pension contributions, like adherence to stringent environmental and legal protections, generally reduce corporate profits. That is the price of a sustainable system, rather than one that blows up in chaos and carnage. It seems we will have to learn this time-worn lesson the hard way once again.