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.
Posted in Investment Primer on October 22, 2017
Donald Trump ignorantly said that former Presidents did not telephone the families who lost sons and daughters in hostel action, while serving their country. That, of course is an outright lie! All former Presidents have called or written the families, and many have specifically held functions for the so-called “Gold Star” Families at the White House. But, telling such lies has become routine for Donald Trump.
Over the past week, once again, Trump was bitten by his own version of “fake facts.” He had to be prodded to call the families of four Special Forces sergeants, who were ambushed and killed in Niger. Thus, Donald Trump has once again created a mess; which, given the question of faulty intelligence, has blown the whole Niger issue way out of proportion.
Chief-of-Staff John F. Kelly, a retired four-star Marine General thus entered the fray. General Kelly has known the heartache over military troops killed in battle, from both sides: his own son, Marine First Lieutenant Robert M. Kelly died in battle, in Afghanistan, nine years ago; also, he has walked among the gravestones at the Arlington National Cemetery, knowing that some of those men died, following his orders.
Since the details of the recent blow-up have been endlessly covered by the media, I will not go there. The question that I ask, however, is: When Chief-of-Staff Kelly inserted himself into this brouhaha, was he speaking as a father and a former general, or was he acting as one of Donald Trump’s closest advisors? Kelly had always preferred to keep his family’s loss out of the media, since one soldier’s life is as valuable as any other; however, Trump brought it up assumedly for his own thoughtless purposes.
In a prior post, I cited the fact that several recent Presidents—Kennedy, Johnson and Bush 43—virtually disregarded the Joint Chiefs of Staff. And with Donald Trump, having three generals who answer directly to him—Chief-of-Staff John Kelly, Secretary of Defense James Mattis and National Security Advisor H. R. McMaster—the role of the JCS, in offering military planning and ideas, would be totally up to Mattis. That is, however, if Trump listened to anyone!
Originally, all three of the generals appeared to provide their own advice to Trump, rather than just telling him what he had wanted to hear. Currently, however, by getting involved in this latest flair-up, it appears that John Kelly has taken on the role of answering for the Chief. After 43 years of serving his country, how much longer can General Kelly stomach defending Donald Trump?
ARTIFICIAL INTELLIGENCE IS ALREADY HERE! THE OVERALL DISRUPTION COULD BE WORSE THAN THE GREAT RECESSION (4Q07-1Q09)!
Posted in Investment Primer on October 19, 2017
NOTE: This is a follow-on to my prior post, as well as a response to most scientists, engineers and technologists, who believe that the machines will only be advantageous to humanity.
In 2010, the Federal Government bailed-out GM, Chrysler and their parts suppliers, saving 1.5 million jobs. That action enabled the employees to stay current on their mortgages, pay taxes, and continue contributing to the economy by spending money in national and local stores. Also, let’s not forget the added impact of auto dealership closures and lay-offs, finance companies, insurance companies, etc.
Several states have already authorized self-driving, or autonomous, cars and trucks for usage on their highways, with other states sure to follow. The impact of human drivers being replaced by computers, as they gain acceptance, will eventually have an even greater impact on our economy than the failure of two major employers.
Remember, also, that similar forms of machines are replacing workers in numerous industries throughout the economy. But, let’s look at some potential numbers for just the automotive industry.
There are currently 3.5 million truck drivers on the road, as well as another 5.0 million support staff. For trucking companies, it would be more cost-effective to replace drivers with computers, since the machines can drive 24 hours per day, and they do not receive pay or benefits. Thus the direct impact of autonomous trucks would be approximately six times as great as if two of the Big Three were not bailed-out by the Federal Government.
Now, let’s look at personally owned automobiles and small trucks. American households own, on average 2.1 autos, which spend 95% of the time sitting in garages or parked in driveways, or on the street. As people become more comfortable riding in self-driving cars, entrepreneurial companies will offer year-to-year plans, enabling members to use an App to call for a ride when needed.
Consumers would pocket the difference, between enrolling in a plan, and the expense of personal auto ownership—the purchase price, and maintenance and insurance expenses. It has been projected that family auto ownership would plummet, from 2.1 per household, to 1.2. Over a gradual period, say five or ten years, think of the potential impact on the automotive industry. Oh, and don’t forget the taxi drivers, and their support staffs, who would probably be laid-off, as well.
While scientists, engineers and technologists debate over the pros and cons—of whether artificial intelligence might be beneficial or harmful to mankind—at some indeterminate time it the future, AI is already here! The technicians are missing the point, at least for the present! The overall disruption of the American labor market could be even worse than during The Great Recession (4Q07-1Q09)!
Machines have already taken over many low and high-paying jobs throughout the American labor market, and their march is accelerating at an ever quickening pace. The artificial intelligence community needs to set the potential outcomes of the future aside, and work with community groups to respond to any near-term risks, both to society and the economy. Forget the long-term, will we be ready for tomorrow, next month, next year?
NOTE: The linked Pew Research Report describes how many Americans view Labor Market Disruption.
ALSO: In today’s (South Florida) Sun-Sentinel, there was an article about Auto Nation, the nation’s largest auto retailer, forming a partnership with Google’s autonomous driving subsidiary, Waymo Corp. In time, they expect to offer as-needed access to a fleet of self-driving autos. Also, as car buyers become more comfortable with autonomous vehicles, Auto Nation will offer them in its showrooms. Auto Nation’s stock skyrocketed, partially on the news.
WITH THE ACCELERATING ADVANCE OF MACHINES INTO THE WORKPLACE, WHAT WILL THE JOB MARKET LOOK LIKE 10 YEARS FROM NOW? TWENTY YEARS?
Posted in Investment Primer on October 16, 2017
Full disclosure: I am neither a scientist nor a technologist; however, I have researched this topic quite extensively, and am also include somer economic, political and sociological considerations, which I believe are relevant to the topic..
Fifty years ago, ATMs began to appear outside of banks, and “Bar” Codes appeared on most grocery items. Although they quickened a customer’s ability to withdraw cash, or speed through the supermarket check-out line, those enhancements cost some bank tellers and grocery cashiers their jobs.
Around that same time, Gordon Moore, before he co-founded Intel, suggested that silicon chip capacity would double every two years for the following ten years. Well, fifty years later, Moore’s “Law” is still on target, ad widely-cited. Just try to write the number “1,” and double that (compounded) over those 25 time frames. There would not be enough room on the page to write those numbers toward the end.
To put it another way: the capacity of a recently outdated iPhone 4 has the same computing capability of a Cray 2 super computer, which was the world’s fastest computer in 1985. Moore’s Law is an important concept to know in order to appreciate the acceleration of the computational speed, and the capacity of today’s machines.
By Machines, I’m including the total range of computers, from: automation; robotics; algorithm-reading machines; artificial intelligence, etc. Presently, computers are not as “intelligent” as humans; however, as their speed and capacity grow exponentially, they will soon catch up. Then what happens when their mental capacity surpasses ours, and they are able to re-program themselves to accomplish more and more-advanced chores?
In past transformations—from hunter-gatherers to agriculture, to the Industrial Age, to service industries, then the Digital Age–new jobs and industries arose. and now, to whatever increasing-advanced technology brings our way. Will the computers of today be subservient, partner with us, or will they take over—making us their slaves?
Let’s just focus on the growing interest in autonomous, or self-driving, cars and trucks. A few states have approved them for driving on their roads. What will happen to the 3.5 million truck drivers, and their 5.0 million support staff, who might lose their jobs? And, what about the millions of taxi drivers?
Similarly, as the general population becomes comfortable with self-driving cars, the average ownership per household might drop from 2.1 cars, to 1.2. Most autos spend 95% of the time sitting in the garage, or on a road somewhere.
Entrepreneurs would offer some sort of an annual contract that enables customers to call for a ride using an App. Savings on the cost of the car, insurance, and maintenance could be significant. But, just think of the many people in the auto industry, as dealerships close, millions more could lose their jobs—auto manufacturers, parts suppliers, dealerships, salespersons, mechanics, insurance companies, etc?
There have been various studies, which have projected which positions might be the first to succumb to the machines, and which might be among the last. So, what is America’s game plan? The world at large?
Politicians and other leaders need to address this oncoming situation; but, no one seems willing to tackle it, since they don’t seem to think for the long-term. But, it’s not really a long-term problem, and we should be planning for it immediately!
Even many scientists and engineers who are working within the technology industry seem to believe that, after a short disruption, new jobs and industries will magically appear. But, what if that doesn’t happen? Workers need assistance in learning new skills, even while they are still working on their old jobs. Students need to be directed toward the jobs skills that will keep them employed in the years to come. But, someone needs to provide that guidance!
In years past, job disruption generally arose within one major corporation or industry, and many people found that they could just take their skills to another company, or a similar industry. This time, however, the machines will be everywhere. And, don’t expect to take an interim job in a minimum wage job; because, even burger flipping now can be performed by robots.
Also, the technological impact of the machines that can perform many of the routine tasks that, fir instance, an associate attorney does. In fact, machines have also shown that they can read medical charts more accurately, and faster, than most radiologists.
Every time a hurricane heads toward Florida, the locals stock-up on water, flashlight batteries, canned food, and prepare their homes, boarding-up windows, trimming hanging tree limbs. So, why shouldn’t we prepare for whatever the Technological Age brings our way?
Community leaders—politicians, business, labor, educators, academics, economists and sociologists—should be called together to study the situation and recommend the various possible outcomes. The local population of the various job classifications is most important. Actuaries and financial analysts can than project the range of work force disruption—from worst case to best—with a probability for each.
Additionally, a greater awareness, and understanding, of Artificial Intelligence must eventually become pervasive throughout our society, at least to a basic extent. Otherwise, we would be back to “square one”! For instance: when computers were first introduced into elementary schools, many teachers didn’t know how to use them. And, how can government, school administrators, business and labor leaders, have an appreciation of the potential impact of AI, if they do not understand labor force disruption?
This study should be performed over a period of months, and be assigned a reasonably high priority.
Over the past decade or two, educators have recommended that students focus on the STEM subjects. That approach, however, would not be the magic salvation, since it would make workers more like the machines. By adding some Arts and Humanities—shifting to STEAM—the worker would exhibit such skills as: creativity; intuition; relationship building; flexibility; coping; an ability to work comfortably with change, etc.
No one has all of the answers; but, if we devise a wide-ranging plan to deal with the potential impact of work force disruption, we will have alternative options already in our Game Plan!
NOTE: For additional information, I have listed several books on the Books That I Recommend Tab. The two New Additions and the two listed under Technology, toward the bottom.
Posted in Investment Primer on October 15, 2017
It is common knowledge that Iran finances terrorists and terrorist organizations! There is little doubt, if any, about that fact.
The major nuclear powers, (U. S., China, Russia, Germany, France and the U. K.), referred to as the “P+5,” negotiated with Iran to curtail its nuclear program in return for the lifting of economic sanctions. The Agreement was finally agreed upon—with Iran downgrading most of its enriched uranium, shipping 95% of the centrifuges to a third country, and enabling the IAEA to monitor its activities and make unannounced inspections. The Agreement was finally signed on November 24, 2015.
Israeli Prime Minister Benjamin Netanyahu, had told the U. N. General Assembly, in a speech on November 27, 2012, that Iran was within two or three months of having a nuclear bomb. And then again, in a March 3, 2015, address to a Joint Session of the U. S. Congress, he said that the Iran deal “would all but guarantee that Iran gets [nuclear] weapons, lots of them.” Of course, Mr. Netanyahu did not mention that Israel has had a nuclear weapons arsenal for three decades.
Saudi Arabia, on the other hand, stated that such an agreement would be a positive move. The Saudis are the de facto leader of the more moderate Muslims in the Middle East; however, they also finance extremist factions and terrorism.
Given the length of time involved in addressing just this one—obviously most important—problem, there was no way for the nuclear powers to work-out an all-inclusive solution to all of its contentions with Iran. Accordingly, those other dangerous activities are not part of the Nuclear Agreement.
The Republicans in Congress had never favored the Nuclear Agreement, and when (then) Speaker John Boehner invited Benjamin Netanyahu to speak before Congress, they didn’t even pay sitting President Barack Obama the courtesy of an advisory phone call. Neither did Prime Minister Netanyahu even call to suggest a short visit with Mr. Obama.
Once again, Donald Trump appears ignorant of the importance of keeping Iran from having nuclear weapons, and he cannot understand why its other activities would have to be handled separately. Additionally, while Iran’s nuclear arms program might be somewhat narrow in scope, its many other offensive activities reach far and wide, and certainly could not be dealt with all at one time.
As usual, Donald Trump appears to have learned nothing during his nine months in office. Secretaries Rex Tillerson, of State and James Mattis, of Defense, Chief of Staff John Kelly, and the Joint Chief’s of Staff had all recommended that Trump not change the Iran Nuclear Agreement. Trump, however, apparently ignored that expert advice, and he just might go along with what he had proclaimed on the campaign trail, several years ago!
Posted in Investment Primer on October 13, 2017
Donald Trump and the Congressional Republicans have been hell-bent on Repealing “Obamacare,” (A/K/A The Affordable Care Act) either literally or figuratively. Although today’s Executive Order directly effects small businesses, as it pulls participants from Obamacare, the eventual effect will be to weaken it.
Early polls show that a majority of Americans, based on a poll sample, are leery of their intentions. Personally, I believe that the Order will face a severe Court attack, by a number of state Attorney’s General.
Let me suggest several key health insurance considerations:
1. Health insurance is something that you buy when you are healthy, so that you will be covered when you are sick or injured.
2. Just “having insurance” is not enough if it doesn’t cover a wide range of potential health problems.
3. Insurance companies set their premiums through an actuarial analysis of the “risk pool”—the demographics of the total number of plan participants. Such statistical analyses become more accurate as the pool size increases, thus reducing the wide swings in health problems covered, as well as the cost. Furthermore, premiums will also generally rise and fall as the demographics—average age and projected health—change.
As with any Trump policies, this Order has been wrapped in secrecy, and virtually devoid of specifics. But, based on assumptions by tax analysts, the following comments are relevant regarding what we know so far.
Small companies would be able to band together, forming “association health plans” throughout the country, and buy insurance outside of Obamacare. This would constitute a dual-tiered national health care plan, which could possibly add to the participants out-of-pocket expenses.
Association health plans would also permit the purchase of low-cost, limited, and short-term plans. Low cost, and limited, plans appear to take us back to the pre-Obamacare days, when coverage was quite limited—including maternity and mental health—and “pre-existing conditions” was often used to deny coverage.
Insurance, as noted earlier, should not be considered as a short-term investment. Yes, investment! Generally, when you buy any type of insurance, you are hoping that you will never have that serious injury or illness, auto wreck, house fire, etc. Accordingly, short-term health care plans are insane!
Tax-advantaged Health Savings Accounts are also included. HSAs have traditionally been available only to somewhat higher-paid employees, employed by corporations, and the money grew tax-free until used.
If the new association health plans pull participants out of Obamacare, they would generally be the younger and healthier workers, who might prefer the lower premiums, as compared to the consumer protection guarantees under Obamacare.
Donald Trump has been, little-by-little, weakening Obamacare and, then, blaming it for its own demise. So far, the American People are pleased with Obamacare and, hopefully, they will convey that message to their representatives in Congress!
NOTE: Aside from today’s Executive Order, Trump will also terminate the insurance subsidies—funded by health insurers—for low-income participants in Obamacare.
Posted in Investment Primer on October 11, 2017
Last Tuesday, Donald and Melania Trump jetted into San Juan, Puerto Rico, supposedly to survey the situation. He held court with Commonwealth, Local and Federal officials, in which he did most of the talking. During the photo-op, he reminded the People of Puerto Rico that they were lucky not to have suffered a Real Hurricane, like Katrina in 2005.
The Federal Government has failed miserably to respond to the needs of the American Citizens who live on Puerto Rico, as well as the US Virgin Islands. But Donald Trump, in his delusion, boasted of what a great job he and his Regime had done.
Then, Trump also suggested that the clean-up—skipping over the immediate need for basic human needs—will cost his budget quite a lot of money. Wouldn’t that be an issue for him to take up with Congress, rather than with people who have nothing—few working ATMs to get cash, nothing available to buy, and no jobs!
Donald and Melania then traveled ten miles from San Juan, to a very upscale, gated community, where there was only negligible damage. If the Trump convoy had only traveled another ten miles, where the average Puerto Ricans live, he would have seen the real horror that is Puerto Rico, and no doubt the Virgin Islands, today!
As U. S. Citizens, the residents of Puerto Rico and the Virgin Islands are free to migrate to the Mainland. Florida has one million Puerto Ricans, only surpassed by New York; however, many of those (up north) had arrived several decades back.
Florida, on the other hand, has become a mecca for Hispanics—predominately in Miami and Ft. Lauderdale—but, 500,000 Puerto Ricans also live along the I-4 Corridor, the East-West highway, connecting Tampa, Orlando and Cape Canaveral.
The major Florida air and seaports each have processing centers, to provide for the basic humanitarian needs for the new arrivals, and to offer a voluntary health screening to determine what, if any, health care needs the incoming Puerto Ricans might need. Consider some of the problems which need to be identified:
1. Besides the voluntary Q & A screenings at arrival points, all health care providers, as well as social service workers and educators are encouraged to identify problems to be referred to doctors or hospitals.
2. In the aftermath of violent storms: bacterial infections; puncture wounds; and diseases spread by mosquitos and animal bites can be harmful, and even contagious.
3. Some chronic conditions, such as flu and scabies, can become chronic conditions when not treated due to a lack of power. They can also spread easily in communal shelters.
4. Herpes B is of particular risk due to the release of a group of captive macaque monkeys in Puerto Rico during the storm, and they could spread the disease through bites and scratches.
With the predominance of senior citizens and children on the island, the usual conditions of dehydration, malnourishment, head wounds, fatigue and depression should also be considered.
Unlike major hurricanes on the Mainland, there are no major highways available to bring supplies and assistance overnight. Also, the San Juan International Airport was not fully operational. With SOUTHCOM, the military command having responsibility for Latin America and the Caribbean located in Miami, just 1,100 miles from Puerto Rico, a military airlift would have been relatively simple.
Over the past several decades, as major corporations had closed their facilities, many of the younger workers had moved to the Mainland. With an inordinately older, non-working population of 3.4 million, just half of what it had been, Puerto Rico no longer needs some of the infrastructure and utility capacity financed by Commonwealth and Utility bonds. The debt service, however, continues to be due and payable!
Last Thursday, Donald Trump’s trip was choreographed, so that he would only see what he wanted to see, speak with whom he wanted to speak, and basically confirm what he already “knew” to be true. Unfortunately, the horrific devastation—both currently and it’s lasting after-effects—were just not on his agenda.
For a more in-depth description of the potential long-lasting effects of Hurricane Maria, on Puerto Rican’s Health, these recent articles–from the Miami Herald, and The New York Times–provide on-site descriptions.
Posted in Investment Primer on October 9, 2017
When Bill Clinton passed the keys of the Oval Office to George W. Bush, on January 20, 2001, the American Economy was in great shape! Clinton had just balance the Federal Budget for the first time since 1964. The Unemployment Rate sat at 4.40%, somewhat lower than what the Federal Reserve deems “Full Employment,” at 5.00%. (The 5.00% is an assumption for those between jobs, changing jobs, recent lay-offs, etc.)
George Bush then took the Economy and devastated it, in order to accomplish ideological goals. He commenced to take the country into two never-ending wars, first, in Afghanistan, in 2001 and, then, Iraq in 2003. Both wars are still going on, which causes one to wonder what our Mission Statement was. Were they necessary? Will we ever leave?
Also early in his First Term, Bush decided to implement a series of Tax Cuts, which were primarily skewed toward the very wealthiest Americans. Why? Generally, a nation doesn’t lower taxes when it has one war to finance, let alone two! Also, tax cuts for the wealthy do not usually encourage consumer spending. On January 1, 2005, just after he had won his re-election, the Unemployment Rate was 5.30%, and the National Debt had increased from the tax cuts.
That rate began to edge up as the Economy began to stagnate. Banks, which were undercapitalized had been taking undue risks. Sub-prime mortgages were sold to homeowners who could least afford them. Even worse was the packaging of these questionable loans, which were sold to unknowing bond investors as AAA-rated mortgage-backed securities. And in the end, many of the banks, insurance companies, auto makers, etc., had to be bailed-out by the Taxpayers.
That Banking Crisis, which is commonly referred to as “The Great Recession” was first made public in October of 2007, when George Bush forced the very largest banks to take tens of billion of dollars, at virtually no interest. He described the scenario as such: “America is looking down into a Financial Abyss.” If you hadn’t been deeply concerned during the fourth quarter of 2007, when this all began, you certain became so after Bush’s announcement!
The Unemployment Rate of 5.00% at the beginning of 2008 quickly rose to 7.80% at the beginning of 2009. The Bush Tax cuts, coupled with financing two wars caused the Federal Budget to spike, and the interest on the, now higher, National Debt absorbed a larger slice of the budget, as well. Lay-offs reduced the tax polls, consumer spending declined considerably, and many small businesses closed their doors. And credit became virtually non-existent.
Just after Barack Obama took office, on January 20, 2009, the Dow Jones Industrial Average dropped to 6,500, from the prior high of 14,015 in October of 2007. Unemployment continued upward to 10.00% in early 2010.
The Obama Administration did the reverse of what George Bush did by allowing the Bush Tax Cuts to expire; but, he lowered rates for the middle class who, unlike the wealthy, spent their excess cash, thus giving new life to small businesses—the real job creators! Obama’s combination of Monetary and Fiscal Stimulus began the economic recovery, which continues to this day. The Unemployment Rate stood at 4.80%, when Obama left office last January.
Let’s consider how the two prior presidents—before Donald Trump—managed the American Economy. George W. Bush took over a nation, which had balanced its budget, and he ran it into the ground—turning the budget surplus to a deficit, lumping the expense of ineffective tax cuts and two unnecessary wars, doubling the Unemployment Rate and halving the stock market.
Barack Obama took a completely different stance. He almost balanced the budget, allowed the ineffective Bush Tax Cuts for wealthy to expire while lowering taxes for the middle class—the consumer class, put many small businesses back on their feet, tried to withdraw from the two Middle East wars in a gradual and rational manner, and he halved the Unemployment Rate while doubling the stock market.
Donald J. Trump seems dead set on following President Bush’s scenario. Are we ready for another Great Recession?