I recently retired after 39 years in Financial Services. Along the way, I believe that I learned a lot, not only about Economics and Financial Markets; but, about a number of other topics. In today's World, everything is connected--Foreign Affairs, Politics, Medicine, Education, Technology, etc. Also, with today's ever-changing World, it is important for everyone to keep up with what is going on--both at home and abroad. We have to be very curious.
WHAT COMPETITIVE GROUP WOULD GIVE-UP, WHEN THEIR “BEST” TEAM OF MEN AND WOMEN IS IN THE GAME? DONALD?
Throughout his Presidential Campaign, Donald Trump complained about: the Trans-Pacific Partnership; adverse trade agreements with Mexico and China; the six-nation nuclear agreement with Iran and, of course, any of President Barack Obama’s accomplishments! He often tied the two points together: we negotiated bad deals, because we have bad negotiators.
But, can’t Mr. Trump see that he now has the best possible negotiating team, and the Negotiator-in-Chief is personally available to turn things around! Surely the (presumed) Author of “The Art of the Deal” can bring all of his super negotiating skills to bear. Keep in mind, that if we do leave the TPP—a trade pact, which consolidates the fastest-growing region on earth under one “roof”—we will be offering our seat to China. And, President Xi Jinping will be quite pleased to replace us, and assume our leadership position,
The nuclear agreement with Iran, which was thought to be only a couple of months away from having The Bomb, has truly accomplished its very important purpose! Tehran shipped both 95% of its plutonium and its centrifuges out of the country, in June of 2014, when the negotiations began. So, Israeli Prime Minister Benjamin Netanyahu’s worst nightmare—a nuclear-armed Iran—has not come to pass. Psst: Israel has had an entire nuclear arsenal itself, for decades!
And lastly, remember that New World Order that Trump has been dissing—off and on—whenever it suits his purpose? That’s the UN, NATO, the IMF, World Bank, the WTO, etc. Guess what? Those organizations, established after World War II, have: enhanced the global economic recovery: promoted world peace; and further led to a better functioning world.
As Donald Trump must surely know, the best time to drive that hard bargain is when you are in a position of relative strength! America did not suffer the double whammy, of both The Great Depression and a Major War being fought on U. S. Soil, during the 1930s and 40s. Yes, we fought in the War, lost a lot of good men, and drained our National Treasury. In the end, however, we were in much better shape then either the vanquished, or even the other victors.
America must retain a leadership position when aid, assistance and leadership are needed to: reverse global climate change; provide financial, medical and manpower assistance in combating medical pandemics; and we must remain in the forefront in responding to natural disasters. Helping people in times of distress, helps prevent future wars!
Following any military confrontations, we must act benevolently, if we win, and be thankful if we lose. Outrageous reparation payments should never be assessed on the vanquished. The harsh treatment forced on Germany, by the Allies after World War I, merely laid the groundwork for an even deadlier World War II, just 20 years later. After World War II, however, America instituted the Marshall Plan, by providing $13 billion ($130 billion in 2015 dollars) to help re-build European economies.
Donald Trump should re-consider some of his misguided ideas, and the harsh rhetoric that he has been using to attack a number of global and regional institutions. As long as the U. S. still maintains a level of stature, Mr. Trump should reflect on another Republican President, Theodore Roosevelt, who was often associated with the phrase: “Speak softly, but carry a big stick!”
NOTE: If anyone wonders why I was so easy, on Donald Trump, in writing this post, just read the prior post, where I had questioned whether anyone would want his hands on the key that launches the nukes. In past posts, I have used every name in the book, in referring to Donald Trump.
I took a somewhat different approach this time. Donald says the negotiators on the deals that he wants to replace–mostly everything–were really awful. But now, with His Team, led by him as the Negotiator-in-Chief, I say: Go for it! Donald, it’s time to “Put-up, or Shut-up!”
Donald Trump is a true shyster! From the time he announced his candidacy, back in June of 2015, he has boasted about how truly great each of his promises would be. The best ever! You wouldn’t believe it! And then, of course, the bullshittiest “Just trust me!” RIGHT!
He has used that Pavlovian sales pitch in every one of his performances, in order to have the audience drooling to the point that they would accept anything! But now, it seems that the American people are beginning to see through this Bait and Switch charade! Remember who was going to pay for that Wall? But now///?
Over the past several weeks, National Security has been front and center. His Military’s Tomahawk Missile attack on a Syrian air field was so devastating, that the Syrian Air Force was still able to strike that same city, a couple of days later from another air field. Then, “My Military”, as he calls it, dropped a 22,000 pound bomb on caves in Afghanistan. But, when you live in a cave, however, surely other accommodations can be easily located! Donald’s Pentagon” responded to questions about Congressional Authorization, by citing an ancient War Powers Act—for Iraq!
Of course the saber-rattling then pointed toward North Korea, and even true Trumpians would hardly assume that any current attacks could be covered under the 1950 UN Resolution, authorizing that “Police Action”. But, then, to top-off VP Mike Pence’s “Shield and The Sword” speech at the DMZ, the Trump Regime promptly sent the Carrier Group to the wrong ocean. (Syria = Iraq? Indian Ocean = Sea of Japan?)
Honestly, I think that Donald Trump’s two generals—H. R. McMaster, his National Security Advisor, and James Mattis, his Secretary of Defense—are in those positions merely for the cachet that they bring to his personal Tough Guy image. But, it’s not just the McMaster and Mattis who seem to be mostly invisible. In fact, most of Trump’s Cabinet Officers seem to remain out-of-sight, and are only paraded-out when Donald needs them for photo-ops.
And now, some 90 days after his Inauguration, Donald seems to be feeling the heat! Political pundits tend to review what new Presidents have accomplished at the end of their first 100 days in office. It’s sort of a report card; but, in Trump’s case, it is totally blank—other than the many red checks in the Deportment Section. So, he’s trying to play catch-up, with smoke and mirrors!
Perhaps that’s why Donald takes great pride in signing meaningless Executive Orders, and then holding them up; but, angles each one into the TV glare, lest we see its irrelevance to the Affairs of State. In fact, he traveled to the Treasury Department on Friday, and merely signed documents directing Treasury Secretary Mnuchin to do what he has already been doing, and doesn’t need an Executive Order, or a Memorandum to proceed with. For instance:
1. One directs Treasury to review the regulations included in the Dodd-Frank Act, which President Obama signed in 2010. That Law was intended to rein-in banks after The Great Depression (4Q07-1Q09), which deeply harmed the U. S. Economy, and the contagion spread globally. “Dodd” was the necessary response to prevent a reoccurrence!
2. The second directs a review of tax regulations, which Obama imposed on corporations to avert “Inversions”, which are acquisitions of foreign corporation for tax purposes. Ironically, one of Donald Trump’s very mantras—remain and manufacture in America—would seem to benefit completely with that Obama Legislation!
As I watch these meaningless exercises—such as reviewing necessary regulations, with the intent to repeal them—I can only believe that Donald Trump remains committed to eliminate all vestiges of President Barack Obama. Meanwhile, Donald Trump is thriving on the pompous nature his role, which only he could feel comfortable in, and spending most of his time holding: hateful rallies; photo-ops and his frequent trips to Mar-a-Lago.
And those Cabinet Officers? No photo-ops until after lunch, please!
Posted in Investment Primer on April 20, 2017
The Russian economy remains in a shambles as the West’s economic sanctions, imposed after the invasion of Crimea in 2014, continue to serve their intended purpose. Obviously the drop in global oil prices, by 50% over the past few years, didn’t help Russia either. Economic, as well as political concerns certainly led to protests marches throughout Russia. That’s where Exxon-Mobil may come in handy–at least, on the economic front.
Some 45 % of Russian Energy production is exported, and that provides 70% of Russia’s overall earnings. Prior to the section imposition, Exxon-Mobil had intended to transfer state-of-the-art drilling technology, for use in both the Arctic Ocean and the Black Sea. Exxon had applied for a sanctions waiver, from the U. S. Treasury, during the Obama Administration. The company, however, has raised the issue again.
As the very recent Chairman and CEO of Exxon-Mobil, current Secretary of State, Rex Tillerson, had been very much in favor of providing the drilling waiver. Although any decision now will be made by the treasury Department, and he supposedly has recused himself, there will always be the suspicion–rightfully or not–than he had plan a finger ion the sale. Remember that, when he left Exxon-Mobil, he obviously receivers an extremely lucrative severance package.
Posted in Investment Primer on April 19, 2017
As is often the case, during the Global Financial Melt-Down, which began in 2008, excess global cash flowed to the US Dollar. The dollar is widely perceived as the strongest reserve currency, and the US Economy as, by far, the most liquid. Some cash did flow to other reserve currencies—the Euro, Pound Sterling and Yen–as well. But, when it comes to significant market swings, the US is the only economy that can accommodate large currency movements, both on the in-flow and the out-flow.
In the intervening eight years, since the Recovery began, a large portion of that flight money has recently been transferring–both to other currencies, and other markets. In this blog post, I would like to suggest a somewhat simplified process for investors to add one more element of diversification to their investment portfolios—global investing.
Regardless of where you live, most people have their money primarily invested in their home country. They are more familiar with the companies, and to negate any concern for foreign exchange risk. But, it is worth noting that the European and U. S. economies each have only 25% of the world GDP. So, by diversifying the geographical range of securities, the overall investment risk can be reduced.
There has been a huge shift of investment transactions, at least in the U. S., out of actively-managed securities, and into either exchange-traded funds or indexed mutual funds. Some $1 Trillion has been added, mostly to ETFs, over the pst year alone.
Since ETFs are based on indices that rarely change, the expenses are quite minimal. Also, a number of economists have demonstrated that the stock markets are quite irrational. So, why pay to beat the markets when few managers do so, at least not on a consistent basis.
Diversification is one of the most basic concepts of portfolio investing. Distribute the risk among different types of securities: stocks and bonds; large companies versus small; both dynamic “Growth” as well as more stable “Value” companies; and invest in securities in, at least, several different industries. Global investing just adds one more dimension in the overall diversification process.
Although I have readers from a number of different countries, the overwhelming number are from America. Since ETFs are available on the stock markets of many nations, foreign readers may modify these idea, as you wish. My basic approach is still to suggest adding that global dimension to your existing portfolio. Also, even though you might only care to expand your focus, say to your local region, the benefits will still ensue.
I would first consider some type of global developed markets ETF, such as one that replicates the EAFE (Europe, Australia and the Far East) Index (Symbol: EFA). I have also added a Pacific-excluding Japan Index (EPP), since that is the fastest growing region of the world. And then, I have added a Diversified Developing Markets ETF (EEM). You might prefer different ETFs for these ideas, prefer to add more to Europe or Latin America, or individual countries.
To research for yourself, and I hope that you do, I would suggest two web sites as places to start. Obviously, there are many more ETFs and many more web sites. Those two sites are: iShares, by BlackRock, and Stock-Encyclopedia, which provides a wealth of knowledge on exchange-traded funds. Whatever you do, be sure to check the “Fact Sheet”, which provides a good summary, and get used to checking the ones that you do invest in, on a regular basis.
WHEN WILL WE GET AN UPDATE ON THAT INFRASTRUCTURE PLAN THAT DONALD KEEPS SAYING WILL BE THE MOST “HUGELY” GREATEST EVER?
Posted in Investment Primer on April 17, 2017
Michael Bloomberg characterized Donald Trump quite accurately, when he referred to him as “A Con (Man)”, at the Democratic National Convention, last July. Trump’s initial Infrastructure Plan, which he revealed last October, was just another version of Corporate Welfare. It was a complete scam at the time and, although he keeps touting it in his current rambling monologues, he seems afraid to reveal what changes have been made, if any.
Prior to November’s Election, economist Peter Navarro, who is now a Special Advisor to the President, and Wilbur Ross, Trump’s Secretary of Commerce, had drafted a Plan, which, seeming to explain it, appeared to be intended more to obfuscate by using obtuse numbers and financial illusions. There seemed to be no attempt to explain it so the average American might understand it. Their final analysis, released on October 27, 2016, was titled: “The Trump Private Sector Financing Plan”.
The gist of Trump’s Infrastructure Plan, as far as I can see, can be explained from what is cited, in four paragraphs, on Page 4.
1. “For infrastructure construction to be financeable privately, it needs a revenue stream from which to pay operating costs, the interest and principal on the debt, and the dividends on the equity.” This quote seems to suggest that only projects, with revenue streams—toll roads, bridges, tunnels, etc.—would be included. Side road repair, clearing impassible waterways, environmental clean-up, obsolete levies, etc. wouldn’t.
2. “…we are assuming that, on average, prudent leverage will be about five times equity. Therefore, financing a trillion dollars of infrastructure would necessitate an equity investment of $167 billion, obviously a daunting sum.” That means the private companies, who would cumulatively be buying complete control of the projects, including the long-tam revenue streams, will provide only one-sixth of the equity in the total Capital Structure. But, it gets even more interesting in Numbers 3 and 4.
3. “…to reduce the cost of the financing, government would provide a tax credit equal to 82% of the equity amount. This would lower the cost of financing the project by 18% to 20% for two reasons.” The true numbers will be revealed in #4.
The Treasury will provide a “Tax-Credit” for the bulk of the corporations’ Equity Capital—their investment exposure. Keep in mind that, unlike a tax-deduction, which merely provides benefits at the tax-rate, a tax-credit is fully deductible—dollar-for-dollar—from the final taxes payable. Now, see #4.
4. Now, here’s where it can all come together. “First, the tax credit reduces the total amount of investor financing by 13.7%, that is, by 82% of [the]16.7%. The elegance of the tax credit is that the full amount of the equity investment remains as a cushion beneath the debt, but from the investor point of view, 82 percent of the commitment has been returned.” Plain as mud, huh? Let me put those numbers into a more-understandable format:
U. S. Treasury sells $1,000 Billion to finance entire Project.
in Project: $Taxpayers Debt Exposure833 Billion — 83.3%
Corporate Equity (financed by Treasury): $167 Billion — 16.7%
Treasury absorbs Corporate Tax-Credit: $137 Billion — 13.7%
U. S. Treasury Debt equals Taxpayer Debt: $970 Billion — 97%
Cumulative Corporate Debt to Treasury: $30 Billion –3%
In summary, America is literally giving away valuable revenue streams ON MONOPOLIES, perhaps in perpetuity, assumedly without any control about future prices, continued maintenance, and there is nothing mentioned which requires that American workers be used, with regard to re-construction, on-going maintenance, or the long-term operation. Now, perhaps Donald Trump and Speaker Paul Ryan are making this more digestible; but, I sure would like to see a summary of the particulars before I hear how “hugely” great it will be, or anymore.
And as Donald always says: “This will be Budget-Neutral. Just trust me!”
Posted in Investment Primer on April 15, 2017
Who can be certain that North Korea’s Supreme Leader, Kim Jong-Un, can restrain himself from escalating the current tension with the United States? But then, can we trust Donald Trump to attempt a peaceful solution either? Each man has lived his whole life in a privileged environment, is conceited, and appears to love the exhilaration of power. Also, both have surrounded themselves with loyal Yes-Men!
Given Donald Trump’s recent outlandish attacks on Syria and Afghanistan—both of which were unconstitutional, and violations of the UN Charter—I am concerned that, he believes he’s on a roll! A very dangerous one, at that! China, on the other hand, has appealed to both sides to show restraint, and it has reportedly cut-off coal shipments to North Korea. I can only believe that it is a sorry state of affairs when I can take more comfort in what Chinese President Xi Jinping might do, as compared to our own “Fearless Leader”.
The Korean Peninsula is a dangerous region, at present. The Kim Dynasty has purposely kept anyone, but the Kim line, from leading the country. And yet, some sort of re-unification of the Two Koreas—similar to Germany in 1990—would never work. The Soviet Union had collapsed by then; so, the German re-unification was successful.
China doesn’t wish to assume responsibility for a failed North Korea, if it were to invade it. Similarly, I doubt that some sort of U. S. military attack on the North would work either, since Mr. Kim just might begin firing missiles. Also, President Xi doesn’t wish to become America’s next door neighbor, nor should we want that. either. But, the Trump Regime doesn’t plan ahead for such contingencies.
China is North Korea’s only source of (mostly) humanitarian goods; but, it has recently stopped the shipment of coal. Food and medicine can hardly be denied to the North Korean People. The American deployment of a Carrier Task Force, led by the USS Carl Vincent, accompanied by three guided missile destroyers and support ships, hardly diffuses the situation—especially given Mr. Kim’s apparent instability. So, what is the solution?
Expecting rational thoughts or actions from someone, like Supreme Leader Kim, whose very being is treated as godlike, is hard to comprehend. He doesn’t seem to be especially concerned about his People, since they are barely given a semblance of human needs as it is. I firmly believe that, if Kim were asked the proverbial Guns vs Butter question—the balance between Military vs Consumer needs—Mr. Kim would surely respond: Butter?
Although I have no experience in National Security, there are several things that I would suggest: stop the shipments of military supplies; deny North Korea access to all manufacturing equipment and supplies; and also eliminate the import of any luxury supplies, which Mr. Kim and the privileged class receive from somewhere. And then, surround the Korean Peninsula with a U. N. flotilla, plus aircraft, including AWACS!
The blockade armada could be deployed under a U. N. Resolution. Besides acting as a blockade against all incoming supplies, other than humanitarian necessities. The global armada would also eliminate any rational “Fields of Fire”, for North Korean missiles. Lastly, have the Chinese Navy, as a North Korean Ally, take the lead, in order to provide additional buy-in from Mr. Kim.
NOTE: Since this action would be under a U. N. Resolution, Congressional Approval of U. S. participation should be easily approved.
NOTE #2: Welcome to my visitors from Israel and Trinidad & Tobago, and of course the U. S.
NOTE #3: WHOOPS! It now appears that the Carrier Task Group had not been deployed to the Sea of Japan, as the White House first announced. Rather, it had been deployed into the Indian Ocean, for joint naval exercises with the Australian Navy. The ships are, however, now headed in the right direction–the Korean Peninsula, some 3,500 miles away.
A more in-depth description this last Trump Regime misadventure, is provided by a NY Times article
Posted in Investment Primer on April 14, 2017
On Thursday, Donald’s Trump’s (not ours, anymore) Military dropped a GBU-43, a 22,000 pound bomb, on a series of suspected ISIS caves, in the Achin district of Nangarhar Province, Afghanistan. Various Jihadist groups—such as al-Qaeda, ISIS and the Taliban—have located their training camps in such areas over the years. Perhaps, Donald feels that he displayed some humane restraint by not going all-out, and using the even larger GBU-77, which weighs 30,000 pounds.
The benefit of this area, near Pakistan, enables the terrorists fighters to cross the border, when they are feel threatened. And then, they return to their caps, once the danger has passed. Thursday’s show-of-force serves no purpose–besides enabling the generals to play with their “Toys of War. Meanwhile, when the Big Show subsides, the residents of those caves will merely find similar accommodations nearby.
Terrorists organizations, and perhaps ISIS more than others, operate as independently controlled cells, located around the world. Like the Hydra of Greek Mythology, when the head of one is cut-off, the hydra just grows two more. And in this case, there is no one head or one cell, to begin with. So, as we found in literally every war since Vietnam, superior firepower can “Win the battles, but lose the War!”
In fact, such outlandish demonstrations generally accomplish little when the assumed audience remains mired in the age of donkeys and mud huts. And, while Thursday’s absurd detonation will possibly provide ISIS with valuable recruiting propaganda, it is most important to remember that those donkeys can traverse the hills of Afghanistan, while our tanks cannot! In fact, such demonstrations of firepower do little to enhance our image, or win friends, in the Developing World!
The next Federal Budget hasn’t been finalized; however, the Trump Regime had suggested slashing the State Department and Health and Human Services, while increasing our Defense Budget, which is already as large as those of the next ten countries combined. Just think how cost-effective it would be to spend that same money, through State and HHS, to: build hospitals and schools; fight malaria and tuberculosis; and provide clean water and electric power. In other words, we could get more bang-for-the-buck, and enhance our reputation–by doing Good!
Donald Trump has a reputation for: his ignorance about complex issues; excessive hubris; and surrounding himself with Yes-Men. Although he boasts about having generals in his Cabinet, I seriously wonder whether he even listens to them! But, I am still concerned about what this fool might do next! And now, Mr. Trump has, once again, raised the issue of a pre-emptive strike on North Korea. Need I say more?
NOTE: This video is analogous to Donald Trump’s personal reaction to his BIG BANG! Once again, he just played through it!