You Can’t Have One Without the OtherSubmitted by RetireWiseCFP on July 9th, 2018
Without oxen a stable stays clean, but you need a strong ox for an abundant harvest. Lately, the concern of pundits has been U.S. agitation for fairer trade rules and better access for American goods in Europe and China and—perhaps more important—for China to stop demanding that American companies hand over technology in order to sell their goods in China. The short-term oriented folks don’t want America to rock the boat too much, although they agree that there need to be structural changes. Well, my friends, I don’t know how to have a change in the game unless you actually change the game plan. You can’t have one without the other!!
Where are we now?
I am happy to report that I, your humble financial advisor, was correct not to overreact during the recent Facebook hysteria. Not everything is perfect in paradise, nor are Facebook and other social media entities completely in the clear. My view remains that this was merely growing pains and that the world was not going to end over the data breach. The fundamental purpose and utility of social media companies is the networking and the community they provide users. Human beings are social animals. They intrinsically seek communities. This is such a simple investment thesis, but unfortunately many people overthink it.
Where do we go from here?
Right now, the BIG issue America and other global economies face is how to accommodate the structural changes in trade that America is asking for. Are China, the European Union, and Canada going to agree to changes without first playing hardball, or they will agree to the changes fairly easily without first causing a recession or a slowdown in trade? I may not agree with their tactics, but I do believe that the Trump administration is indeed correct to stand up for American workers and companies and demand a fairer trading environment. This is not political for me—it is about what type of economic opportunities and jobs will be available to the next generation. Are we willing to stand up for that now, or are investors not willing to look beyond the prism of this or next quarter?
On fixed income and alternatives:
As expected, the Federal Reserve Bank raised interest rates again, and more important, they indicated that they will not raise rates so fast that they choke off the economy and cause a recession. This is good news and will be great—if they can actually be patient and not rush to judgment. The Federal Reserve’s primary concern is runaway inflation. In a delicate balancing act, they attempt to stop inflation before it starts. I understand it, but it is a thankless job. It is like being arrested for a crime that you’ve not yet committed but you are thinking about it.
On Bitcoin: Same as my last letter—still falling and falling. The mania may be over. I am cognizant that it may come back. I’ve done nothing. Speculative higher oil prices may be the next self-induced mania.
What should we look out for?
Same as last letter but slightly amended: How is the fair trade confrontation with China, Europe, Canada, and Mexico going to play out? Are we going to stand united as a nation, as we normally do during military confrontations, or are we going to be so focused on short-term profit that we stand down on the unfair trade practices? They say nobody wins a trade war. Well, my friends—that is just not true! China has been fighting and winning the unfair trade war for a long time; until now, it has been an issue that America has chosen to ignore. I believe America can and will win the fight to level the playing field for fair trade if we stand united.
We all want a great economy of bountiful harvest for America that is in fair harmony with the rest of the world’s great economies. But we must realize that it is going to take some hard bargaining to get other countries to give back some of the unfair trade advantages they currently enjoy and feel entitled to enjoy in perpetuity.
Femi T. Shote, MSF, ChFC, CFP®
Accredited Investment Fiduciary®