Category Archives: Economy

Chinese Cheating on Trade

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There should be no doubt in the minds of Americans that China has not been living up to the obligations and continues to ignore the rules of the World Trade Organizations (WTO) on bilateral trade with the U.S. and global trade with Western trading partners. For decades, the Chinese Communist centrally managed capitalist economy has been subsidizing inefficient domestic industries, dumping cheaply produced goods such as steel and iron on global markets, and erecting barriers to protect their domestic markets from foreign goods and services.

And, the U.S. and Western governments and global corporations, for decades, have taken the three monkeys approach to confronting China of “see no evil, hear no evil and speak no evil” to addressing the unfair trading practices. The inept response from governments and large corporations are because of the desire to access the lucrative and rapidly growing Chinese domestic market. Over the decades, this approached has proved an ineffective strategy and has only encouraged additional bad behavior and strong arming by the Chinese.

Despite Chinese Communist Party leaders’ continued denials of the bad behavior, there is no doubt that China is coercing the transfer of U.S. and Western technology, and stealing Western Intellectual Property (IP). Again, over the past several decades, Chinese rapid rise to becoming the world’s second largest economy by GDP and their rapid technological advancements as a global leader in artificial intelligence can be directly contributed to their successful pilfering of IP and forcing technology transfers.

Additionally, for decades, multiple U.S. administrations have avoided directly confronting the Chinese regarding their unfair trading practices and outright theft IP and forced technology transfers. The current U.S. – China trade reality is a result of policies of appeasement by administrations of both parties.

The Chinese have deliberately practiced bilateral and multilateral trade in a manner that have created an un-level and unfair trade environment built on theft, coercion, subsidies of domestic enterprises and dumping excesses below market priced goods on global markets that effectively decimates competition.

Companies Cut Back, but Consumers Party On, Driving the Economy – The New York Times

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American consumers are energetically engaged in a spendathon. American businesses, by contrast, are not.

Businesses and households swim in the same economic soup and their outlooks — gloomy or bright — are usually in sync. But in recent months, the two seem to occupy opposite ends of a teeter-totter, with consumers continuing to spend while business owners and managers are chastened by doubt and uncertainty.

The economic expansion has extended its record run despite this curious divergence. The question is how long it can continue.

— Read on www.nytimes.com/2019/11/04/business/economy/economy-consumers-business.html

2019 is shaping up to be one of the best years ever for investing |CNBC

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This could be the first year ever where stocks, bonds, gold and crude oil all returned double digits, according to LPL Financial.

The S&P 500 has returned nearly 22% in 2019 while gold and crude are sporting returns of 16.1% and 17.8%, respectively. Treasuries are right on the cusp, with the the 10-year Treasury note up more than 9%

Through Wednesday’s close, just 75 stocks in the S&P 500 were down for the year while 361 were up at least 10%.

Assets have gotten a boost from lower Federal Reserve rates as well as generally strong consumer spending.

apple.news/Abj06unJ3Spyw9e2vT69CyQ

Retirement Planning: The Big Lesson of 2016 for Investors | Money

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Don’t let the constant flow of predictions and prognostications about the markets and the economy—no matter how prescient they may seem—divert you from a comprehensive plan designed to achieve success over the long term.

If you’ve ever been inclined to try to improve your retirement prospects by closely tracking the financial news and then shifting your strategy to stay a step ahead of the market’s twists and turns, 2016 seemed to provide a bounty of opportunities.

— Read on money.com/money/4618089/big-lesson-from-2016-retirement-planning-investing/

10 Reasons It Is Never Too Late to Start a Small Business

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Those who start businesses later in life have a better chance of reaching success: Studies have shown that if you’re over 55 years old, you are twice as likely as your counterparts who are under 35 to launch a high-growth startup.

Not convinced? Here are 10 reasons you would make a better entrepreneur now than you would have when you were younger.
— Read on www.thebalancesmb.com/10-reasons-it-s-never-too-late-to-start-a-small-business-4083127

JP Morgan CEO Dimon…U.S. Consumers Remain Strong

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JP Morgan (JPM) released its quarterly earnings yesterday beating The Street estimates.

During the earnings call, JPM Chief Executive Officer Jamie Dimon commented that, “the consumer remains healthy with growth in wages and spending, combined with strong balance sheets and low unemployment levels.” He also indicated that economic growth appears to be in slowing and U.S. – China tensions continue to be a drag on growth. (https://bit.ly/2ML9qO6)

CEO Dimon’s positive view of the U.S. economy and consumer stands in sharp contrast to the prevailing mood on both Wall Street and Main Street regarding the immediate future and direction of the U.S. economy. Many individuals in the financial industry and also retail investors are skittish and fleeing from growth to safety in their investment portfolios.

The proverbial elephant in the room is whether the economy is headed into a recession the business cycle that is long in the tooth. According to CEO Dimon, there will be a recession sometime in the the future, but probably not in calendar year 2020 or the next six to eighteen months.

www.cnbc.com/2019/10/15/reuters-america-update-2-jpmorgan-beats-profit-estimates-on-strength-in-bond-trading-underwriting.html

Consumers Won’t Be Able to Save the Economy Much Longer – Bloomberg

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Falling interest rates are likely to deter spending and boost savings rates, further weighing on growth.

A weakening economy may soon hurt consumers.  

 With the unemployment rate at a 50-year low, the hope is that the U.S. consumer will more than offset an otherwise faltering economy. Don’t bet on it.

Clearly, the broad economy is not only weak, but weakening. The yield curve has inverted, with 10-year Treasury note yields falling below two-year yields. Every time that’s happened in the post-war era, a recession has followed if it hadn’t already commenced. No exceptions.

The Federal Reserve Bank of St. Louis reports that the lower real interest rates are at the time of inversion, the longer the recession and the higher the unemployment rate climbs. The real 10-year yield is minus 0.13%, even lower than the 2.2% that preceded the 2007-2009 Great Recession.

— Read on www.bloomberg.com/opinion/articles/2019-10-14/consumers-won-t-be-able-to-save-the-economy-much-longer

Here’s What Warren Buffett Really Thinks About the Economy | Money

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The Oracle of Omaha says the U.S. economy has plenty of runway left before the next recession. “Right now, there’s no question: It’s feeling strong. I mean, if we’re in the sixth inning, we have our sluggers coming to bat right now,” Buffett said in an interview with Becky Quick on CNBC’s “Squawk Box” Thursday morning.

Buffett added: “Business is good. There’s no question about it.”
— Read on money.com/money/5304816/warren-buffett-just-made-a-surprising-prediction-about-the-economy/

Chinese Stock Investors Beware

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Florida U.S. Senator Marco Rubio was recently on CNBC warning American investors and public pension funds who invest in stocks of Peoples Republic of China businesses listed on U.S. stock exchanges to beware. Like Enron and Worldcom, the companies could potentially be fraudulent enterprises, or like they say in Texas, “big hat, no cattle” entities. Essentially, these Chinese “public” companies are not regulated by the Securities and Exchange Commission (SEC) like their American counterparts. And, these listed companies are not currently required to abide by U.S. or Western generally accepted accounting practices (GAAP) standards.

The SEC exists to protect U.S. investors from the shenanigans of public companies. Yet, trillions of dollars of U.S. capital from American investors and pension funds are invested and continue to flow into these highly risky non transparent companies that are not regulated by the SEC.

If there was ever a time for investors or buyers of stocks to beware, it would relate to investments in Chinese stocks. Even the large cap highly own stocks of Chinese companies such as Alibaba (BABA), Tencent (TCEHY), Nio (NIO) and Baidau (BIDU), pose major potential risks to U.S. investors since no independent accounting firm has audited their financial reports or filings to assess their veracity.

Just like the quarterly and annual numbers of gross domestic economic product provided by the Chinese Communist government are viewed as works of fiction by most Western economist, Chinese companies’ financials should be reviewed with similar, if not , more scrutiny and skepticism.

CNBC Mad Money host Jim Cramer has commented on many occasions to viewers that he personally avoids and would not recommend his viewers to invest in Chinese companies stocks. He cites their lack of financial transparency and unknown corporate governance as reasons to avoid all but the largest of these stocks.

Finally, Senator Marco Rubio and Hayman Capital Management founder Kyle Bass, have been sounding the alarm for years about the threat potentially posed to the U.S. financial markets and to the retirement pension plans of millions of Americans by these listed foreign companies. Senator Rubio, along with a bi-partisan group of Senators, have been both sounding the alarm and proposing that all companies listed on major U.S. security exchanges be required to follow the same reporting standards and independent audit requirements followed by U.S. public companies. And, those foreign companies found not in compliance with SEC regulations for public companies should be de-listed from American security exchanges.

Strong U.S. Consumers

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Most economists or financial pundits concede that it is difficult to have a U.S. economic recession in the next twelve to eighteen months with the historically low (3.5%) unemployment rate and strong consumer spending. Essentially, the U.S. consumers, who represents 70% of the U.S. economy, are coming to the rescue the economy.

Eventually, those predicting and appear to be even rooting for a recession prior to the 2020 Presidential elections will be correct someday in the future. Bottom line, since the business economic cycle has not been repealed, recessions are inevitable and a normal part of the cycle.

Business hiring and historical low unemployment rate are lagging economic indicators for forecasting the strength of the economy. Today’s strong U.S. consumers due to hiring and low unemployment rate have buoyed the economy and can mask moderating and slowing economic growth.

China trade talk uncertainty and threat of additional U.S. tariffs on China and the European Union continue to weigh on the global economic growth and health.

No one…repeat no one, is able to forecast the future direction of the economy.