Friday, August 3, 2018

Change of Address

Long-time readers will recall my negative-love of Google.  They were the first company I recognized whose business model was to monetize your privacy for their profit.  (I marveled and still marvel that nobody cares.)  But Google is like a toilet-paper, a necessary convenience, especially for bloggers.

For years, they have hosted this blog but have now decided to "update" the program.  Therefore, the address changes from the old to:

I apologize to you for this inconvenience, but Google does not.

Thursday, August 2, 2018

When Worlds Collide

When I was doing graduate work at the University of Dallas in international trade, we had to also study cultural distinctions and how such distinctions impact business.  For example, never prop your feet up in the presence of Arabs, as showing the sole of your feet is considered dis-respectable.  Another example is the importance of "face" in China.  In fact, it is so important that it's importance has its own word - Mian zi.  The rules of respecting "face" are equally as complicated.  The difficulty of negotiating with the Chinese is legendary.

But, what happens when Mian zi comes face-to-face with a gigantic American ego?

Wednesday, August 1, 2018

Blaming Bill and Newt

I believe Bill Clinton and Newt Gingrich deserve a good portion of the blame for our poisonous political environment.  They accepted the economic advice from both Republican economists and from  Democratic economists that multi-lateral trade agreements improved the economy of all trading partners.  Bill and Newt then ushered NAFTA into existence.

But, the Republican economists and Democratic economists also advised that millions of workers would be damaged by NAFTA and that programs to retrain and/or relocate those workers were essential.  Bill and Newt only paid lip-service to that economic advice.

Those millions of Americans who were robbed of the America dream became understandably angry.  (Read Hillbilly Elegy by JD Vance.)  They were the "forgotten Americans."  These millions wanted revenge and became Trump's "base."  They wanted to break everything in Washington, and Trump is doing their bidding.  The poison in our political body is the totally unnecessary anger from globalization.

Bill and Newt paved the way for The Donald.

Sunday, July 29, 2018

Made Food Great Again

Sara Grillo is one of my favorite financial writers.  In her most recent, she discusses how convenient it is for commission-paid salesmen of life insurance, annuities and long-term care insurance to emphasize how much longer people can live.  These salesmen prey upon the “worst-case” fear of not dying.  She goes on to point out that 39% of all Americans are obese, which statistically reduces longevity.  The target market of these salesmen is 40-59 years old, where 44% are obese.  This high-commission salesmen are selling products to people who are not likely to need them.  My perspective is that there is always a need or demand for high-margin products — if not to buy, then certainly to sell.

As a society, we tend to be judgmental of people with weight issues.  There are even politically correct words to use.  But, it is more than a simple issue of morality or moral weakness.  It is more than a simple issue of medicine and mortality.  It illustrates one correctable weakness of our “free enterprise” system.

The most powerful industry in the U.S. is advertising.  It tells us what we want, how we vote, and what we eat.  Do you really think McDonald’s would spend billions to advertise high-margin junk food, if it could make as much money on healthy substitutes?  If you are a purist that thinks companies should be able to advertise whatever they like, you would approve of prime-time TV commercials for assault rifles, whiskey, and “escort services.”  The TV networks would love to sell high-margin air time to them.

Maybe, only radical socialists would advocate restrictions on advertising?  But, can we not agree that “sugar kills?”  Yes, it tastes good, but it is unhealthy.  Can we not restrict advertisers from promoting sugar-cereals to kids, at least?  Try buying products not spiked with sugar.  One reason so many foods are spiked with sugar is that it is cheaper, due to huge sugar subsidies to a few American families who don’t need it.  It may be politically convenient to accept campaign funds from the sugar families.  It may also be a sin to approve of such subsidies.

To make America great again, use the funds subsidizing unhealthy sugar to subsidize the purchase of long-term care insurance.  

Saturday, July 28, 2018

Nervous Supply-siders

One important measure of how you are doing financially is the size of your pay check.  That’s no different than economists looking at changes in the Gross Domestic Production or GDP.

For the second quarter of this year, GDP grew at a 4.1% rate, which is good — real good, in fact.  It was the fastest growth in four years.  Bottom Line:  the economy is doing great, with no sign of recession on the horizon yet!

But, there are some things to watch carefully.  A full point of that 4.1% jump was due to a surge in exports, along with a decrease in imports.  This simply cannot continue with a strengthening dollar.  (Also, the numbers are skewed slightly by the sudden jump in the export of soy beans to beat that tariff.)

Second, the 4% increase in consumer spending, which is 70% of GDP, cannot continue over the long term with 3% annual salary raises, unless there is some sad growth in credit card debt

From a political perspective, our President has predictably declared a victory and further predicted GDP growth could explode to an astronomical 8-9% — as they say, “from his lips to God’s ears”!

From an economic perspective, Supply-side economists are trying to understand why a deficit stimulus plan of a $1.5 trillion tax cut plus a $700 billion spending increase has not bumped a reliable 2% economy any more.  In fairness, any assessment is premature, and we should be patient a while longer, although I am not optimistic.

An Easy “Victory”

Imagine my beloved Dallas Cowboys calling a press conference to declare themselves the winner of the next Super Bowl, just because their former quarterback, Tony Romo, had purchased season tickets!  That’s no more ridiculous than declaring victory in our trade war with Europe, just because they agreed to work toward “zero tariffs.”

Facing an imminent 25% tariff on cars exported from Europe to the United States, the EU bought precious time by allowing our President a photo opportunity to declare victory, simply by agreeing to talk more.  They will use that time to build economic protections from an unpredictable negotiating partner.  It is no more meaningful than buying season tickets to watch future games.

“Victory” means more when history agrees . . .

Friday, July 27, 2018

The Existential Planner

A financial planner works with people to sort through their individual financial problems and opportunities to create security in the long term.

An existentialist is more focused on freedom in the short term.  To a normal borrower, a 30-year mortgage is servitude, but finds it is worth being a servant in the long term.  To an existential borrower, it is 360 different questions.  Every month, an existential borrower will ask “is it still worth yet another month of servitude?”  (They probably deserve lower credit scores.)

The existentialist planner understands the expectation of death tomorrow, that is so common among existentialists, but nonetheless condemns “short-termism”.  You will never hear an existentialist planner say “what, you’ve been making $200 thousand a year for twenty years and haven’t saved a dime??  What’s wrong with you??”

The existentialist planner is far less judgmental.  Nobody is perfect!

Monday, July 23, 2018

No Offense Intended

Let's say I want to control my group or tribe or nation.  I could use charisma, or I could use force, or I could use religion.  I may not have the needed charisma, which is a fickle thing anyway.  I could use force, but killing is just wasting those economic assets known as humans.  So, I would probably use religion, which seems to come natural to humans and could more easily build long-term security for me and my family.

To use religion, I would first create some magical story, history, hierarchy, rituals, etc.  But, to provide that sense of permanence and grandeur, I would also need a proper structure, calling it a temple or church or something.  The bigger and grander, the better!  It is a useful crowd control tool.


I first stumbled across Erich von Daniken's best-selling Chariots of the Gods in the mid-1970's and found it to be mildly interesting.  His theory was that extraterrestrial visitors ("ancient astronauts") had visited our planet, leaving mysteries behind.  As it would require "proving a negative" that his theory was wrong, I remained curious about certain of the mysteries, such as the famous Nazca desert pictographs.

There is now a television show called "Ancient Aliens," which I normally avoid, taking strong issue with their argument that any unanswered rhetorical question automatically proves the theory, e.g., is it possible that UFOs landed in Washington, D.C., and stole 585 brains?  There is no way to prove such a fanciful event did NOT occur.

So, producers of this new TV show have scoured the globe in search of every odd-looking hill to raise silly rhetorical questions, such as "did the government of China cover this huge pyramid that might hold secrets left by UFOs"  My suspicion is that some control-freak two thousand years ago wanted to put his people into religious servitude and built the only thing he could build -- stacks of rocks.  What did you expect control-freaks to build two thousand years ago -- Trump Tower?? 

Sunday, July 22, 2018

Park Thoughts

During long walks in First Landing State Park, I enjoy listening to the podcasts of Freakonomics by Stephen Dubner.  He uses economic reasoning to focus on mundane subjects and always interviews experts on the subject.  Today, it was the question of "choking" or failing to perform when under pressure.

It was not surprising that intelligent people are more likely to "choke" than less intelligent people.  It was only a little surprising that women are more likely to "choke" in a room full of men than men are to "choke" in a room full of women.  The more interesting part was that "choking" is less likely in physical events than cognitive events.  The body handles pressure better than the mind.  For example, one of the worse things a kid's soccer coach can yell in a big game is "concentrate," which is helpful only in practice games.

One method to avoid "choking" is the standard - practice, practice, practice.  Another was to think about your "pinkie toe" - seriously - it is akin to maintaining a swing-thought when you play golf.  And, of course, if public speaking unnerves you, imagine your audience is sitting there naked.  Think about anything other than . . . "will I choke?"

A long walk in a beautiful place should be good for both your body and your mind . . . and it is!

Coming Home To Roost

If you need another reason to be disappointed at our form of government, remember this:

Back in the early 1990's, Congress was considering the proposed North America Free Trade Association (NAFTA).  A steady stream of economists testified in many different hearings before Congress on the benefit of globalization in general and the principle of comparative advantage in particular.

However, virtually every single one cautioned there will always be "winners & losers" to any major government action, but the benefits of globalization greatly exceeded the costs.  That was true, unless you were one of the losers.  The government promised to  provide for retraining (they called it re-skilling back then), as well as relocating those who needed it.  Of course, there was only token retraining and zero relocations. 

You may notice that the areas hit hardest by globalization are the most loyal Trump supporters.  In addition, being relatively unskilled and living in more remote areas, they feel the most threatened by immigration, which reinforces their support for Trump.

Thus, the failure of government to heed the warnings of economists over thirty years ago lead to the election of President Trump. 

The lesson is:  Listen to economists!!

Friday, July 20, 2018

Kudos to Trump

Initial Jobless Claims have not been this low since 1969.  There are actually more job openings than job seekers.  The problem is obviously that the job seekers don't have the skills that employers need.

Quietly, behind the scenes, Ivanka Trump has corralled fifteen large employers to pledge in writing to increase skill training, by expanding apprenticeships, increasing OJT, and training new employees.  Altogether, the companies signing the pledge include IBM, GM, Walmart, Lockheed Martin, and others.  They have pledged to train 3.8 million workers over the next five years.

Our antiquated, hide-bound educational systems have not kept up with the changing needs of employers.  Almost 20% of all job-types didn't exist in 1980.  This is formal acknowledgement that employers now must complete the work that our educational systems did not.

The problem with most programs is the lack of follow-up.  I hope Ms. Trump will hold the corporate feet to the fire.  Maybe, her Dad will even help?

Kudos, Ivanka!

Wednesday, July 18, 2018

Favorite Market Strategist

One of my long-time favorite market strategists is Dr. Jeremy Siegel from Wharton.  His latest commentary shows his belief that the stock market would jump 10% - if the trade wars would suddenly end.

That is consistent with my belief that the market has moved sideways all year, even though corporate earnings continue to rise strongly.  The stock market has not kept up with rising earnings.  It is being depressed by the trade wars.

One difference I have with him is that he believes the low unemployment rate will drive the Fed to increase rates two more times this year, while I believe the Fed will be too afraid of the stock market's reaction to inverting the yield curve and will only raise rates one time.

Tuesday, July 17, 2018

Flatter Yield Curve -- Who Cares?

Wall Street Wags are fretting about the "flat yield curve" but fail to mention that such a yield curve has accurately predicted 14 of the last 7 recessions.

First, the yield curve is the difference between interest rates on 2-year Treasury bonds and 10-year Treasury bonds.  Longer term rates are higher than short term rates for several reasons.  The longer term means more things can go wrong, i.e., the borrower's credit will go bad or inflation may worsen.

Second, short term rates are largely driven by the Fed.  Long term rates are largely determined by the supply and demand for long term bonds.  But not always!

Third, for the last 18 months, the Fed has been raising interest rates in the short term.  Since Quantitative Easing began, the Fed began stimulating the economy by buying long term bonds, driving down those rates.  In other words, the Fed has flattened the yield curve, not the economy.

Fourth, virtually all other economic data indicates a strong U.S. economy.

Fifth, fret not!

Sunday, July 15, 2018


Many pundits are going crazy, trying to figure out the relationship between Trump and Putin.  One even remarked that their relationship is the greatest mystery of this century.  Actually, I think the answer can be found with Trump's shock when he learned that Vice President Pence had never earned more than $200 thousand a year and had only $15 thousand of cash in the bank.  (Nobody can ever forget how often Trump bragged about his own wealth.)  Trump questioned how Pence could be any good, if he never made any money.  Knowing Pence could nonetheless deliver the evangelical vote, Trump hired him anyway.

Now, with an estimated $200 billion of wealth, Putin is easily the wealthiest person on the planet.  Trump may or may not anticipate needing Putin's money in the future, but I think Trump sees Putin as someone to worship, because he worships wealth.  Unfortunately, like most worship, it clouds Trump's judgement.

If Putin is the wealthiest person in the world, then surely he also deserves the most respect.  Well, doesn't he?  Your President thinks so . . . .

Sugar Man

Sugar man, won't you hurry
'Cos I'm tired of these scenes
For a blue coin won't you bring back
All those colors to my dreams

Silver magic ships you carry
Jumpers, coke, sweet Mary Jane

Sugar man met a false friend
On a lonely dusty road
Lost my heart when I found it
It had turned into a dead black coal

Silver magic ships you carry
Jumpers, coke, sweet Mary Jane

Sugar man you're the answer
That makes my questions disappear
Sugar man 'cos I'm weary
Of those double games I hear

Sugar man, Sugar man, Sugar man, Sugar man
Sugar man, Sugar man, Sugar man

Sugar man, won't you hurry
'Cos I'm tired of these scenes
For the blue coin won't bring you back
All those colors in my dreams

Silver magic ships you carry
Jumpers, coke, sweet Mary Jane

Sugar man met a false friend
On a lonely dusty road
Lost my heart when I found it
It has turned to dead black coal

Silver magic ships you carry
Jumpers, coke, sweet Mary Jane

Sugar man you're the answer
That makes my questions disappear
Cold Facts
(C) 2008

Saturday, July 14, 2018

Fear Not Inflation

Let's assume you get a 100% VA mortgage for a new house.  Let's further assume that, ten years later, your mortgage is down to $80 thousand, and your home is now worth $125 thousand.  Originally, the loan-to-value of your mortgage was 100%.  But, that dropped to a much safer 64% ten years later (80/125).  My point is this:  there are advantages to inflation.

Debt can either be repaid or inflated away.  Our national debt was over $21 TRILLION.  Do you really think we're going to repay that in your lifetime?

The latest data from our Producer Price Index is up 2.7% on year-over-year basis.  The Consumer Price Index is up 2.9%.  While that seems modest in comparison to the Reagan era, remember it was only four years ago that the Fed was worried about deflation, when values decrease -- a much more pernicious problem.  The Fed had been praying for 2% inflation, and we have now blown past that goal.

There are two types of inflation: demand-pull and cost-push.  Demand-pull inflation occurs when increased demand for a product/service pulls up the price.  That is NOT the type of inflation facing America today.  Instead, we are facing cost-push inflation, where the increasing price of inputs causes final product prices to increase.  Today, with our capacity-utilization about 80%, there is very little excess production capacity.  One of the most important inputs is labor, and there is very little unemployment to draw into the workforce.  Salaries have started to rise and can be expected to rise faster.  Lastly, don't forget that tariffs also increase costs.

Inflation is coming!  Rejoice!!   

Thursday, July 12, 2018

A Lesson From Tragedy

Since my father told me about his experience in World War II, seeing a freshly liberated Nazi concentration camp, I have been very interested in the Holocaust.  Recently, I had the opportunity to tour the Richmond Holocaust Museum, which I highly recommend.  While I am steeped in the horrible atrocities committed against the Jews, I've become interested in the aftermath, after the surviving Jews were put into Displaced Persons (DP) camps.  Unfortunately, there was no plan after that, and hundreds of thousands of people were forced to just languish in these camps, sometimes for years.  From concentration camps to DP camps, they were still not free.

So, here are many thousands of good, decent people who just want a better life.  Is there a lesson for us today?

Various Jewish organizations in the U.S. saw the problem and tried to help.  They sent teachers to teach local languages to the Jews, who mostly spoke Yiddish.  They sent teachers to teach sewing, baking, carpentry, etc.  It was not a major coordinated program by all Jewish organizations.  Each synagogue sent whomever was willing to go, to teach whatever they knew.  By all accounts, these teachers were a big help in helping the survivors adjust and find work.

Now, draw a comparison to the flood of refugees from Latin America.  Rather than a revolving door at the border, why don't individual Hispanic organizations send whomever is willing to go, to teach whatever they know, to the various refugee holding areas in this country?  They could teach English, keyboard skills, car mechanics, etc. 

It just seems wasteful to buy plane tickets for people to leave, when we have 6.8 million unfilled jobs?

If Jewish organizations could help their refugees after World War II, without government involvement, why can't Hispanic organizations do the same today?

Wednesday, July 11, 2018

T - I - G - H - T

In your lifetime, how many times have there been more job openings than people looking for jobs?

Today, there are 6.6 million unfilled job openings and only 6.0 million people looking for work.  More precisely, there are 6.6 million openings for skilled workers and 6.0 million unskilled job applicants.  The "skills gap" has never been greater.

Another indicator of a tight job market is the number of people quitting their job.  Workers don't usually quit their job, unless they believe they will find another job quickly, often at higher pay.  The percentage of the workforce who quit their jobs last month was 2.4%.  That is the highest since 2001!

Most economists agree that one of the primary constraints on our GDP growth is our inability to grow our workforce.  Republicans take the easy route of blaming Americans for being lazy, ignoring the "skills gap."  Pulling more unskilled workers off the couch and into the workforce will NOT help.

As growth is largely inside smaller companies, those companies are unable to fund apprentice training programs.  Also, since government, at every level, cannot afford to educate the workforce, that burden just falls onto young people and their families.  If they cannot or will not fund job training, they might as well stay on the couch.  There is no agreement on how we bridge the gap between companies who need skilled labor and workers who want to learn skills.

Bring on the machines . . .

Tuesday, July 10, 2018

Two Special Places In Hell

Few of us maintain our mental sharpness until the end.  Mental fuzziness should be a final luxury at the end of life, not open season to be preyed upon.  Unfortunately, I just read about yet another Ponzi scheme, stealing $102 million from about 600 seniors in Florida, and I hope there is a special place in Hell for those who prey upon the vulnerable. 

However, there is something unusual about this case.  When a financial advisor retires, it is not uncommon for him/her to sell their "book of business" to another advisor.  That is how the crooks in this case acquired senior investors to fleece.  I think financial advisors should bear some responsibility for selling their "book" to an unsavory advisor.  The selling advisor should conduct reasonable due diligence that the buyer is not a crook.  That is the fiduciary thing to do!

The tricky part is which authority should have jurisdiction?  If the selling advisor is retired, neither the SEC nor FINRA have direct jurisdiction.  If local law enforcement has jurisdiction, with their minimal financial training, how can they determine "reasonableness" of due diligence?  The selling advisors should also have their own special place in Hell.

Sunday, July 8, 2018

Prayers To Thailand

Although I seldom do it anymore, I have been a scuba diver for most of my life.  In 1975, I had the opportunity to dive a cave off the Suwannee River in the Florida Panhandle.  That was enough to convince me that cave diving is vastly more difficult and dangerous than regular open water diving.  I learned my lesson and never did it again.

Watching the rescue of the Thai boys is spell-binding for me.  Already, a Thai Navy Seal has died.  While four boys have been rescued, I am praying for the rest and ALSO for the divers.  One, cave diving is dangerous enough but, two, working with a kid who may panic at any second represents another major danger to the divers.  I hope the boys are somehow tranquilized, for the sake of the divers.

It would be an honor to salute those divers!


Q.  Do I believe the Russians tried to influence our 2016 elections?
A.  Yes

Q.  Do I believe it was authorized by President Putin?
A.  Yes

Q.  Do I believe Putin wanted to help candidate Trump?
A.  It was far more important to Putin that Clinton lost..

Q.  Why did Putin hate Clinton so much?
A.  He believes she tried to interfere with HIS election in 2014.

Q.  Did she try to interfere with Putin's election?
A.  Yes, but only with her comments, not with any cyber warfare -- a major escalation.

Q.  Did Trump collude with the Russians?
A.  I would be surprised if he did.

Q.  Did Trump's campaign collude with the Russians?
A.  I would be surprised if they did not.

Q.  Is the current relationship between Trump and Putin unhealthy?
A.  Yes, but not as unhealthy as his relationship with our allies.

Q.  Is President Trump is a threat to our national security?
A.  Yes

Q.  Do I still believe President Trump will leave office before 2020?
A.  Yes, "the wheels of justice grind exceedingly fine" and Mueller has been grinding a long time.

Q.  Do I suspect President Trump obstructed justice?
A.  Reflecting his lack of respect for norms, I would be pleasantly surprised if he did not.

Q.  Is it possible to understand Trump's "base" without reading Hillbilly Elegy by JD Vance?
A.  No

Saturday, July 7, 2018

Q2 Column

To read my latest column for Inside Business, go to: 

Thursday, July 5, 2018

Oversold ?

According to Goldman Sachs, the smartest people on Wall Street work at Goldman Sachs.  Indeed, their research department actually deserves that accolade.  Their latest analysis suggests commodities will benefit strongly from the stronger dollar.  More significantly, they believe there is too much angst over the current trade war, calling such fears "oversold."  I hope they are right!

My concern is that we have entered a very strange new world.  There is no person alive who has ever experienced a worldwide trade war.  Plus, economists have been getting migraines trying to build an econometric model of such complex worldwide change.  The fine analysts at Goldman Sachs are not concerned, but I still "toss & turn" at night . . .

Wednesday, July 4, 2018

The Courage To Be Free

There are economic systems, and there are political systems.
Examples of economic systems include capitalism and socialism.
Examples of political systems include democracy and dictatorship.
Of course, there are degrees of each.

The combination of capitalism and democracy is called free enterprise.
The combination of socialism and dictatorship is called communism.
You can have the combination of capitalism and dictatorship, such as today's China.
You can have the combination of socialism and democracy, such as early Israel.

On July 4th, 1776, we declared our independence from Britain.
Nobody said Happy We're-Not-Brits Day.
Nobody said Happy Democracy Day.
Nobody said Happy Capitalism Day.

Now, we just wish each other Happy Independence Day.
Then, we look for sale items . . .
Does anybody remember Patrick Henry's words on March 23, 1775?
"Give me liberty, or give me death!"

He didn't say "give me capitalism, or give me death."
Nor "give me free enterprise, or give me death."
Nor even "give me democracy, or give me death."
Maybe, he just meant "the Brits gotta go?"

Saturday, June 30, 2018

A Bloodless War

I was talking with some fellow students of economics.  We started discussing the 0.2% drop in estimates of Q1 GDP growth, but that quickly morphed into a discussion on politics.  With a bunch of economic nerds and with a rich assortment of economic datapoints, why were we talking about politics?

As we talked through that, it became apparent that, despite the overwhelming majority of the economic datapoints being positive, we were all experiencing a heightened anxiety, due to the current trade war.  That is an enormous economic variable, and nobody has much experience modelling such a war.  The history of trade wars is more confusing than instructive.  Besides, no country has ever declared a trade war against so many other countries at the same time.

So, the minor drop in Q1 GDP growth can be interpreted either as some developing weakness in the economy or, more likely, as simple noise from the collection of data.  There!  We discussed economics.  Now, what's the latest data from the front lines in our trade war?  And, why is it being run by politicians instead of economists?