The cost of MAGA

It is the guiding principle behind the Trump Administration, but to “Make America Great Again” the U.S. may have to break some eggs. Are you ready for that? “MAGA” is much more than a marketing gimmick. Almost every day, we uncover additional evidence of how the President and his supporters in Congress are dismantling regulations, taxes, and on the foreign front, trade deals. For example, while the president professes to have “a great relationship” with China and admires its president, Xi Jinping, at the same time, he is working behind the scenes to apply more pressure to our sometime-friend, sometime-nemesis. This week we will have surely upset China when the House passed two bills that will make it easier for high-ranking Taiwanese officials to exchange visits with counterparts in the U.S. The second bill would promote Taiwan’s participation in the World Health Organization. Mainland China has long held a policy of “One China” (since 1949). The Communist government considers Taiwan a rebel province, which will one day be reunified with the mainland, even if that means applying military force. The U.S. actions this week threaten that stance and could invite some kind of retaliation from the mainland. Certainly China does not separate trade relations from geo-political concerns. To them, it is all one and the same. Therefore their response could be in the economic sphere or in the political realm (less pressure on North Korea). On the trade front, many global trade economists believe that 2018 will be the year when Trump takes the gloves off when it comes to China. In December, Trump unveiled his national security plan...

Will the lights go out?

The deadline looms. There is no deal in sight. Various political factions are jockeying to get their demands met. It is all part of an annual compromise to fund the government for another year. So what else is new? If the government does shut down on Saturday morning, it will be the 18th such occurrence in U.S. history. In every case, the nation has survived, although at times the cost has been great.  There was, for example, a 16-day shutdown back in 2013 that resulted in a $24 billion hit to economic output and caused 850,000 workers to be laid off. We all know it costs the American people more to shut down the government than it does to keep it open. In this age of partisan politics, where compromise is a rare commodity, the drama of a government shutdown goes on year after year. At the eleventh hour, a series of horse trades normally occurs, allowing both sides to kick the can down the road for a little while longer until the next deadline looms. You might have thought that with a Republican-controlled House, Senate and presidency, that passing a spending bill would have been smooth sailing. Far from it, readers may recall that in years past, the Republicans have controlled the House, but the threat of closing the government occurred anyway. That’s because there are so many splinter groups within the GOP that there is always someone or some faction that insists on more or less spending; usually more on defense and less on everything else. In the Senate, although the Republicans hold the majority of seats...

The Bots are coming

One no longer needs to imagine a post-apocalyptic world where humans are hunted into extinction by intelligent robots. While a shooting war may not break out between the two sides before 2030, a new study by the McKinsey Global Institute indicates that as many as 375 million human workers will be replaced by automation. Most readers are already aware that companies using high degrees of automation, such as Amazon, are decimating the brick and mortar method of selling products. Most analysts believe it is inevitable that this trend will extend to all kinds of products. Pharmaceuticals and food are just the most recent items to be transitioned over to the internet. While this will add convenience, lower prices, and speedy delivery to consumers, it comes at a cost. That cost is in the loss of jobs. This new study by the McKinsey Global Institute predicts that this trend will continue. Jobs most at risk will be those that require physical activity. Everything from lathes to tractors will become automated, putting most machinery operators out of work. But it doesn’t stop there. Fast food services of all kinds will no longer need human help. Bank tellers, data collection and all types of processing services will also succumb to automation. Humans involved in back-office processing throughout myriads of industries will no longer be needed. Nor will many financial occupations from mortgage origination, paralegals to maybe even elements of money management. Many of those developments are already happening, but the pace of change will accelerate. One can only imagine the consequences worldwide if workers simply do nothing but await their fate. What...

Why stocks continue to climb

As we approach the end of the year, most investors are both dumb-founded and pleased at the stock market’s performance. President Trump and his followers would like us to believe it is all because of them. Hog wash. There has been no substantive legislation since the new administration took office. Promises can only take us so far. Some say any further upside will be short-lived, because living on hope alone has already taken us too far. And yet, somehow the economy is still growing, even gathering momentum. Recall too, that Donald Trump and the Republican Party gained power on the promise of undoing many of the trade agreements the U.S. has forged over the past forty years. This was perceived by foreigner leaders (and their people) as a huge negative for the world economy. Despite the president’s posturing and his actions to pull the U.S. out of the TPP and now NAFTA, nations like India, China, Japan, most European nations, as well as many emerging markets, have experienced stock market gains that have left the U.S. averages in the dust. This happened despite the President and his tweets. So, if it isn’t Trump, why are stock markets going higher? The truth is that forty-five of the largest economies in the world are experiencing growth at the same time. This has not happened for over a decade. As that growth continues, global equities gather more steam. However, as time goes by, some will do better than others. But before you give credit, make sure you know where and who to give credit to. Don’t look to the world’s elected leaders...

China chips away at U.S. dominance

We are about half way through President Trump’s twelve day visit to Asia. The main event, another meeting between Trump and President Xi Jinping, underscores the importance of how both nations view China-U.S. relations. There is a high probability that China will gain as much as the U.S. in these talks. So far, it has been a year of “wins” for China. And much of these winnings are a result of Donald Trump’s “America First” policies. Trump’s proposed cuts to the United Nations, to foreign aid, to the rejection of the climate control accord, his withdrawal (both real and threatened) to various trade deals like NAFTA and the Trans-Pacific Partnership (TPP) a 12-nation trade deal that had excluded China, have all left an economic and political vacuum. As the U.S. turns inward, China is stepping in to replace the U.S. wherever possible. This year a 300-mile railway in Africa will hopefully revive trade and tourism. The rail line opens between the Kenyan capital of Nairobi and Mombasa, one of East Africa’s largest ports. The $13.8 billion project was financed by the Export-Import Bank of China. It is only one of a series of direct Chinese foreign investments worth over $200 billion. While we threaten to abandon our two largest trading partners (Mexico and Canada) unless the North American Free Trade Agreement (NAFTA) is renegotiated, China is busily rebuilding an ancient East-West trade route from the days of Marco Polo. Begun in 2014, with a $40 billion investment, a spider web of railways, ports and roads linking all the trading centers and key cities between London and Beijing is spreading...

Cracks in the House of Saud

Over the weekend, the government of Saudi Arabia announced multiple arrests of royal family members as well as other governmental officials. The official explanation was a new campaign to root out corruption, but many believe the raid was a power grab by the reigning Crown Prince Mohammed bin Salman. Corruption in Saudi Arabia is as common as sand. It is what makes the wheels run so global observers discounted that excuse. The assumptions ranged from a thwarted coup against the reigning family to a consolidation of power orchestrated by the heir apparent. As a result, gold jumped over $10/ounce, oil spiked 3% and investors held their breath expecting another shoe might fall in the days ahead. Police arrested 49 people, 11 princes, four ministers and dozens of former ministers in the pre-dawn hours of Sunday. There was a fatal shootout between police and one now-dead, Saudi prince, while a mysterious helicopter crash killed several other ministers and a high-ranking member of the royal house. As the smoke clears, it appears that the 32-year-old crown prince, Mohammed bin Salman, is cleaning house, consolidating power, and eliminating any real or imagined rivals within the country. One of those arrested, billionaire Alwaleed Bin Talal, is a well-known global investor with large holdings in American companies. King Salman elevated Prince Mohammed to heir apparent over other, more senior, princes in the royal line of succession, less than three years ago. That didn’t sit well among numerous cliques or factions within and outside of the family. The grumbling grew louder when the young prince announced his “Vision 2030.” A far-reaching economic policy which is...