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Successful Retirement Secrets™

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Caring for Your Aging Parents: How to Prepare

My Comments: Retirement is the third major time in people’s lives. It follows childhood and adulthood. Well, OK, a retired person is also an adult but retirement is a different stage. I describe it as when you turn off the ‘work for money’ switch and turn on the ‘money works for you’ switch.

Meanwhile, modern medicine is keeping us alive longer and longer. But it rarely happens that someone doesn’t gradually decline. And that gradual decline creates new issues for those of the next generation.

Since we as a society have never actively pushed elderly folks out the door to fend for themselves, all this means is that an infrastructure has to exist or be built, to look after aging parents. And if that applies to you, some preparation is necessary. Hence this article.

By Mike Piershale, ChFC | Piershale Financial Group, September 21, 2018

Caring for aging parents is something you hope you can handle when the time comes, but it’s the last thing you want to think about.

Whether the time is now or somewhere down the road, there are steps you can take to make your life — and their lives, too — a little easier.

It’s Time for a Chat
The first step is talking to your parents. How will you know when it’s the right time to do this? Look for indicators like failure to take medication, new health concerns, diminished social interaction, general confusion or even fluctuations in weight.

What can make things more difficult is when the parents are unwilling or unable to talk about their future.

This can happen for a number of reasons, including fear of becoming dependent, resentment toward you for interfering, reluctance to burden you with their problems, or because they are already incapacitated. Without their cooperation, you may need to do as much planning as you can without them. However, if their safety or health is in danger, you may still need to step in as a caregiver.

If you’re nervous about talking to your parents, make a list of topics that you need to discuss. This will help ease tension, and you will be less likely to forget anything.

If there is some reluctance on the part of your parents, it may be wise to cover your list over several visits so that it doesn’t sound so much like an interrogation.

Get Personal
Once you’ve opened the lines of communication, a good next step is to get as much information as you can to prepare a personal data record. This document lists information that you might need in case your parents become incapacitated or die.

Here is some information that should be included:
1. Bank and investment accounts
2. Estate documents like wills and trusts
3. Funeral and burial plans
4. Medical information
5. Insurance information
6. Names and phone numbers of professional advisers
7. Real estate documents

Be sure to write down the location of documents and any relevant account numbers. It’s also a good idea to make copies of all the documents you’ve gathered and keep them in a safe place.

Explore Living Arrangements
Eventually you’ll need to have discussions on more sensitive subjects like your parents’ wishes on medical care decisions and future living arrangements.

Where your parents eventually live will depend on how healthy they are. As they grow older, their health may deteriorate so much that they can no longer live on their own. At that point, you may need to find them in-home health care, health care within a retirement community or nursing home, or you may insist that they come to live with you.

If money is an issue, moving in with you may be the best or only option. Keep in mind this decision will impact your entire family, so talk about it as a family first.

Make It a Family Affair

The physical and financial responsibility of taking care of elderly parents may fall on several adult children, and usually not all are equally able to bear the burden. The result can be resentment, even hostility, and the breakdown of family cooperation.

The key to keeping harmony is communication. Family meetings on a regular basis are key to keeping tensions down and everyone informed. Families can talk over who can pay for care when it’s needed, and who can do physical work for a parent.

Even if a family member lives at a distance, there are things they can do. Consolidating accounts in one bank, setting up online access to paying bills and overseeing financial management are areas that can be handled from anywhere in the U.S.

Ask for Help
The key is to not try to care for your parents alone. Besides getting the family involved, there are also many local and national caregiver support groups and community services available to help you cope with caring for aging parents.

If you don’t know where to find help, contact your state department of elder care services, or call: 1-800-677-1116 to reach the Elder Care Locator, an information and referral service sponsored by the federal government that could direct you to resources available in your area.

Mike Piershale, ChFC, is president of Piershale Financial Group in Barrington, Illinois. He works directly with clients on retirement and estate planning, portfolio management and insurance needs.

Ten years after Lehman Brothers, spotting the next crisis

My Comments: Known as the Great Recession, to distinguish it from the Great Depression, the financial crisis that ended in the first week of March in 2009 was a multi-generational event. The chances of us having another one before I die in a few years is slim to none.

But that does not mean no more market crashes, some of which will cause people to jump off buildings. There are too many signs that one is just around the corner. And I say that mindful of the fact that I’ve been saying that for three years now. Sooner or later I’ll be right!

My money is positioned cautiously, and I’m never very far away from a sell order. What you do with your money is your business but to the extent you will need most of it if you plan to keep living, I encourage you to be very careful.

by Jamie McGeever | September 11, 2018

LONDON (Reuters) – As financial market participants reflect on the 10th anniversary of Lehman Brothers’ collapse, the consensus is there will be no repeat of the near-death experience, largely because authorities simply will not allow it.

The once-in-a-generation financial meltdown and economic catastrophe was so grave that, to borrow from ECB chief Mario Draghi, they will do whatever it takes to make sure it does not happen again. Painful lessons have been learned.

But the idea that a financial crisis on the scale of a decade ago could not happen again is far fetched, and not a little naive. In fact, many of the roots of the blow-up 10 years ago are still alive and well today.

All we can say with some degree of certainty is that the next crash will probably germinate in a different corner of the financial ecosystem before spreading. Familiar warning signs may flash, but what triggers one crisis may not trigger another.

Financial crashes usually result from one or more of the following: high debt and leverage, across household or corporate sectors; increased risk taking; excessive investor complacency, greed and exuberance fuelled by low volatility; rising interest rates; lower corporate profits.

There are signs that, to varying degrees, these conditions are in place today. Debt levels are higher now than before the Great Financial Crisis. According to McKinsey, total global debt rose to $169 trillion last year from $97 trillion in 2007.

Leverage in the banking system is lower now, but a decade of near zero interest rates and ultra-low volatility has fuelled speculation and risk-taking across the financial ecosystem. Remember, it was barely a year ago that Argentina launched a 100-year bond to much fanfare.

The world economy, markets, and policymaking – both fiscal and, especially, monetary – have changed radically since the financial crisis, symbolized by the U.S. investment banking giant Lehman’s implosion on Sept. 15, 2008.

With interest rates so low, central bank balance sheets so big and national debt levels so high, relatively speaking, policymakers may be running low on crisis-fighting ammunition.

Central banks now have a permanent presence in financial markets, and it is highly unlikely they will return interest rates or their balance sheets to pre-crisis “normal” levels.

Japan’s experience of extraordinary measures including QE and zero interest rates, and subdued growth rates over the last 20 years is a useful guide to what we can expect across the developed world.

“KNOWN UNKNOWNS”

There are also fresh market risks, such as the rapid advance of algorithmic trading, a passive and ETF-driven investment universe that is now worth trillions, the crypto world, and the proliferation of artificial intelligence and big data.

All that is set against an increasingly fragile political and structural backdrop. Populism, the far right, and strong-arm leaders are on the rise, globalization is fading, and public trust in governments and institutions is waning. That is a potentially toxic mix.

Global borrowing costs are rising, led by the Fed. The rise may be gradual but is coming from the lowest base in history, so the context is unprecedented. Higher U.S. rates are rarely good news for asset markets, no matter how slow the rise may be.

The corporate bond universe, particularly China, is vulnerable to higher borrowing costs and stronger dollar. Emerging markets too, especially those reliant on deficit-plugging capital from overseas – look at Turkey and Argentina.

Other emerging markets, such as Brazil, Indonesia and South Africa, have come under increasing pressure but contagion has been pretty limited. Developed markets, puzzlingly, remain largely unscathed.

That may be because economic growth, corporate profitability and asset prices have been inflated by the trillions upon trillions of dollars of liquidity pumped into the system by central banks since 2008. But that is now slowly reversing.

There is a degree of complacency across financial markets – volatility has rarely been lower, ever – and many of the risks and potential flashpoints have been well flagged. In Rumsfeldian terms, they are all “known unknowns”.

They include a corporate bond blow up in China; an emerging market crash sparked by rising U.S. rates and dollar; U.S. corporate profits diving; euro zone break-up; a global trade war; a plunge in oil prices; a sharp rise in inflation.

Of course, anticipating what may trigger a downturn and making contingency plans for it are two different things. How are you supposed to adequately prepare for the possibility that Italy might, at some unknown point in the future, leave the euro zone?

Rightly or wrongly, investors are simply hoping for the best. If the euro zone avoided Grexit and impending collapse in 2012, it will surely do so again, right? And no one in the White House really wants a full-blown global trade war, do they?

Maybe. But maybe not.

Is Capitalism Killing America?

My Comments: In the minds of many, capitalism is the antithesis of communism. And they are essentially right. In the minds of many, communism and socialism and fascism are one and the same. And they are essentially wrong.

Communism is an economic model where the state owns everything involved in providing goods and services to the members of society. All members of that society are bound by a framework that starts at the state and ends at the state. History has shown this is a fatally flawed model.

At the other end of the economic model continuum is capitalism, where the state has no say in the production of goods and services to benefit the members of society. Everything is determined by the individual first and then slowly upstream as determined by the collective will of many individuals. Rules and regulations are anathema and are to be opposed and vilified at every opportunity.

Into this mix appears religion and other social pressures that have evolved over the millennia to create a mechanism which allows us to survive and thrive. I argue that capitalism in it’s unfettered state is an equally flawed economic model.

Bring all this into the 21stt Century and you have arguments pro and con. How does society find that spot along the continuum between the two models to best meet the needs of ALL OF US? It matters not that it doesn’t have a convenient name. What matters is that we focus our time and energy on the creation of a balance between the rights of individuals and the rights of society. The goal is to preserve society such that both individuals and society can survive and thrive.

We are in the midst of such a discussion today. The emergence of Trump and the push back from the non-Trumps will structure the framework that our children and grandchildren will experience as they travel through life. Without an economically viable middle class, we are doomed to failure. Your voice needs to be heard.

September 18, 2017 by Theodore Kinni

On August 2, 2017, the Dow Jones Industrial Average hit a record-breaking 22,000—its fourth 1,000-point advance in less than a year. That same day, I read the first sentence in Peter Georgescu’s new book, Capitalists Arise! End Economic Inequality, Grow the Middle Class, Heal the Nation: “For the past four decades, capitalism has been slowly committing suicide.”

How does Georgescu, the chairman emeritus of Young & Rubicam (Y&R) and a 1963 graduate of Stanford Graduate School of Business, reconcile the Dow’s ascent with his gloomy assertion?

“The stock market has nothing to do with the economy per se,” he says. “It has everything to do with only one thing: how much profit companies can squeeze out of the current crop of flowers in the garden. Pardon the metaphor. But that’s what corporations do—they squeeze out profits.”

In the latter half of the 1990s, Georgescu shepherded Y&R through a global expansion and an IPO. He has served on the boards of eight public companies, including Levi Strauss, Toys “R” Us, and International Flavors & Fragrances. He also is the author of two previous books, The Constant Choice: An Everyday Journey from Evil Toward Good and The Source of Success. An Advertising Hall of Fame inductee, the 78-year-old adman is still pitching corporate leaders. Now, however, he is trying to convince them to fundamentally rethink how—and for whom—they run their companies.

The fault lines in capitalism

Capitalism is an endangered economic system, Georgescu says. He sees a dearth of demand across the global economy, even as American corporations record their highest profits ever. “How does this magic happen?” he asks rhetorically. “You engineer it. You buy back your stock at 4% and change. Your earnings per share go up and the market says, ‘We like that.’”

What does he mean? He cites the seminal research by economist William Lazonick, who studied S&P 500 companies from 2003 to 2012 and discovered that they routinely spend 54% of their earnings buying back their own stock (reducing the number of outstanding shares and driving up share prices) and 37% of their earnings on dividends—both of which benefit shareholders. That leaves just 9% of earnings for investment in their business and their people.

This financial legerdemain obscures two fundamental fault lines in capitalism, and particularly in the US economy, according to Georgescu. The first is a lack of investment by companies in their own futures. “Our companies are not competitive because they don’t invest in themselves,” he says. “Total R&D investment is down. Total basic research, which is the precursor of innovation, is down dramatically. Investment in infrastructure has fallen to critical levels.”

The second fault line is the lack of investment by companies in their employees. “Innovation is the only real driver of success in the 21st century, and who does the innovation? Our employees. How are we motivating them? We treat them like dirt. If I need you, I need you. If I don’t, you’re out of here. And I keep your wages flat for 40 years,” says Georgescu, who points out that growth in real wages has been stagnant since the mid-1970s.

The engines of capitalism are sputtering

The lack of investment by US corporations in their businesses and people is not only causing the engine that powers innovation gain to sputter, but also slowing the engine of demand that produces topline growth. Why? Median household income in the U.S. is less than 1% higher today than in 1989, according to the Census Bureau. “There’s no middle class, and the upper middle class has very little money left to spend, so they can’t drive the economy. The only people driving the GDP are the top 20% of us,” Georgescu says.

In Capitalists Arise!, Georgescu shows how these issues are impacting the American public. Nearly 60% of American households are technically insolvent and adding to their debt loads each year. In addition, income inequality in the U.S. is reaching new peaks: The top layer of earners now claim a larger portion of the nation’s income than ever before — more even than the peak in 1927, just two years before the onset of the Great Depression.

Georgescu lays the blame for all of these conditions on the ascendency of the doctrine of shareholder primacy. “Today’s mantra is ‘maximize short-term shareholder value.’ Period,” he says. “The rules of the game have become cancerous. They’re killing us. They’re killing the corporation. They’re helping to kill the country.”

Back to responsible capitalism

Georgescu is convinced he knows how to beat this cancer, and he’s pitching it to corporate leaders across the country. “The cure can be found in the post–World War II economic expansion. From 1945 until the 1970s, the US economy was booming and America’s middle class was the largest market in the world,” he says.

“In those days, American capitalism said, ‘We’ll take care of five stakeholders,’” he continues. “Then and now, the most important stakeholder is the customer. The second most important is the employee. If you don’t have happy employees, you’re not going to have happy customers. The third critical stakeholder is the company itself — it needs to be fed. Fourth come the communities in which you do business. Corporations were envisioned as good citizens—that’s why they got an enormous number of legal protections and tax breaks in the first place.”

In Georgescu’s schema, shareholders are the last of the five stakeholders, not the first. “If you serve all the other stakeholders well, the shareholders do fine,” he says. “If you take good care of your customers, pay your people well, invest in your own business, and you’re a good citizen, the shareholder does better. We need to get back to that today. Every company has got to do that.”
We welcome your comments at ideas@qz.com. This post originally appeared on Insights, by Stanford Business.

Source URL: https://www.gsb.stanford.edu/insights/capitalism-killing-america

How Well is American Capitalism Working?

Tony’s Comments: I’m becoming a Social Capitalist in my old age. On the one hand I embrace capitalism as the most viable economic model for us to follow while on the other hand know that in it’s purest form, it can be as evil and unworkable as communism at the other end of the spectrum.

Given the current polarization of civil discourse, and the fundamental lack of understanding by most people about economics, it’s a given that many people feel threatened and become responsive to politicians whose goal is to incite fear as a motivator.

Somewhere between the extremes of pure capitalism and pure communism is a workable solution that supports the strengths and advantages of capitalism and the concurrent need for society to overcome it’s failings. The solution for all of us is acknowledge that society has an obligation to itself that cannot be realized with pure capitalism.

People who have a knee jerk reaction to the word ‘socialism’ need to be educated. This article by Philip Kotler is a good start.

Philip Kotler | 10/27/2017

The answer to the question depends on who you ask.

If you ask America’s corporate executives, their answer is that American Capitalism is working well and would even work better if there were fewer government regulations and if taxes were lowered.

If you ask America’s middle class, their answer is that American Capitalism worked better in the past but now it is harder to finance a middle class life style given the high costs of sending students to college and taking care of their parents who failed to save enough money for their retirement.

If you ask working-class Americans, their answer is that they haven’t improved their earnings since the 1980s but their expenses have risen dramatically and they can only survive with a credit card and rising indebtedness.

If you ask the 15% of our population living in poverty, their answer is that they can’t find a decent job and they survive on food stamps, food kitchens, clothing handouts, and cheap housing or even homelessness.

Markets, left to themselves, do not always lead to efficient or equitable outcomes. Free-market capitalism can lead to monopolistic or oligopolistic industry domination–witness Google, Facebook, Amazon, and Apple. It leads to a growing concentration of income and wealth. The average income for the top 0.01 percent of households grew 322 percent, to $6.7 million, between 1980 and 2015. As of 2015, the data shows that half of all US income went straight into the pockets of the top 10 percent of earners. Thomas Piketty, the economist, predicts that eventually 60 percent of income will go to the top 10 percent of earners.

American Capitalism is largely Free-Market Capitalism where businesses are in private hands and companies are relatively free to make decisions on what to produce, where to produce, what to pay employees, where to sell, and what intermediaries to use in distributing their products and services. Businesses are subject to some regulations to ensure product quality and safety and no harm to the environment.

Capitalism takes on different forms in different countries. Consider two other forms of Capitalism – State Capitalism and Social Capitalism. Ask: what would work better for the majority of Americans?

State Capitalism

Two examples of state capitalism are Russia and China. Both are capitalist systems without democracy led by autocratic rulers. We’ll focus on Russia here.

Since the Russian Revolution in 1917, the Russian economy operated as a complete Communist economy until recently. The State owned all the land and businesses, decided on the industries to build and operate, and managed the macroeconomic instruments of taxes, credit and the money supply. The State produced most of the jobs, determined the pay, and set quotas for the annual outputs in most product areas. The Communist economy, instead of producing growing income for the proletariat, ended up producing a wider sharing of misery.

The Cold War ended in 1985 when Mikhail Gorbachev assumed the reins of power in the Soviet Union. Gorbachev introduced the policies of glasnost and perestroika to the USSR. GLASNOST, or openness, meant a greater willingness on the part of Soviet officials to allow Western ideas and goods into the USSR. PERESTROIKA was an initiative that allowed limited market incentives to Soviet citizens.

This started a period of Russian Capitalism culminating today in Putin’s Russia. The Russian government controls about 65% of the Russian economy through state-owned enterprises and state owned banks. The Russian government’s role in other industries vary from 50% in oil production, 27% in electronic hardware, 15% in telecommunications, down to 0% in steel production. Putin has promised to reduce the government’s role in the economy by privatizing state-owned enterprises. But paradoxically, Russia is currently consolidating other industries and buying back some privatized companies.

Private business companies in Russia are monitored by numerous federal, regional and local bodies for tax-collecting and law enforcement. Bribery is extensive. There is very low business confidence, especially among small entrepreneurs. Russia now has 96 billionaires. Russian businessmen keep their money abroad even as Russia desperately needs private investment for upgrading industries and infrastructure. The owners of Russian oligopolies keep top state officials on their payroll or make them confidential beneficiaries of their businesses.

This system has not led to producing better lives for most Russians. A few gained extreme riches and the many live with low pay and great uncertainty.

Social Capitalism

The Nordic community – Sweden, Norway, Denmark and Finland – practice a form of capitalism known as Social Capitalism. This includes a combination of free market capitalism with a comprehensive welfare state and collective bargaining at the national level. The four characteristics of Nordic Capitalism are:
· A commitment to widespread private ownership, free markets and free trade. Most of the production and distribution system is in private hands.
· The government supports individual autonomy and social mobility. It support its citizens in developing a healthy lifestyle free of hard drugs and alcohol and positive on exercise and nutritious eating. The government greatly supports preserving the environment and clean air and water.
· The Nordic model involves a tripartite arrangement where representatives of labor and employers negotiate wages and labor market policy mediated by the government.

This type of Capitalism leads to a more educated and satisfied citizens but it comes at the price of higher taxes, especially for the middle class and rich. A common misconception is that the rate of economic growth in the Nordic economies may be lower than it would be with American-styled Capitalism. The irony is that Sweden was just ranked #1 as the best country for business.

What Model of Capitalism Will We Choose?

Robert Reich reminds us that “we can make the economy work for us, rather than for only a few at the top.” Unfortunately, the American economy is rigged “by those with the power and resources to buy the politicians, regulatory heads, and even the courts.”

Obviously, most Americans would not want American Capitalism to drift into the State Capitalism model in Russia or China. It would lead to a great reduction of freedom and worsen the economic life of most Americans.

Should the American economy move closer to the Nordic model of Social Capitalism? Opinions would vary greatly among American groups. The wealthy class would curse this development, especially because it would involve significantly higher taxes and require paying higher wages to American workers.

The middle class might be divided. Their taxes would be higher but their benefits would also be higher. Those who aim to start businesses or achieve high management positions might be happier leaving things the way they are. The American Dream is to acquire wealth. Those middle-class Americans who would prefer a better health care system, a better educational system, free college education and cleaner air and water would lean toward Social Capitalism.

The working class would largely favor Social Capitalism where the government will strive to provide enough jobs for everyone and a living wage. The poor would favor Social Capitalism because the objective is to eliminate the condition of living in poverty.

Bernie Sanders recently posited that higher taxes would lead to lower health costs, higher education and a better environment.

My guess is that over time our free-market ideology will morph into the Nordic model of Social Capitalism. It’s time now to start fixing our Capitalism.

Source article: https://www.huffingtonpost.com/entry/how-well-is-american-capitalism-working_us_59f2c98ce4b06ae9067ab7bc

The Longest Bull Market In History And What Happens Next

Tony’s Comments: What is often overlooked by those writing about the impending doom of the stock market is the age of the reader. What I mean by this is that if you are trying to accumulate money for your eventual retirement, and you have 20 or 30 years between now and then, much of what is going on now is irrelevant.

However, if you are likely to retire in the next few years, or are already retired, then it’s a very different story. Once you turn off the ‘working for money’ switch and turn on the ‘money is working for you’ switch, an end to the current bull market is very relevant.

Many people can expect to live 25 years or more in retirement. And for each of those years, one way or another you’ve going to have bills to pay. And that money needs to come from somewhere. No one is going to suddenly show up at your front door and hand you the keys to the kingdom.

August 18, 2018 by Lance Roberts

Depending on how you measure beginnings and endings, or what constitutes a bear market or the beginning of a bull market, makes the statement a bit subjective. However, there is little argument the current bull market has had an exceptionally long life-span.

But rather than a “siren’s song” luring investors into the market, maybe it should serve as a warning.

“Record levels” of anything are “records for a reason.”

It should be remembered that when records are broken that was the point where previous limits were reached. Also, just as in horse racing, sprinting or car races, the difference between an old record and a new one are often measured in fractions of a second.

Therefore, when a “record level” is reached, it is NOT THE BEGINNING, but rather an indication of the PEAK of a cycle. Records, while they are often broken, are often only breached by a small amount, rather than a great stretch. While the media has focused on record low unemployment, record stock market levels, and record confidence as signs of an ongoing economic recovery, history suggests caution. For investors, everything is always at its best at the end of a cycle rather than the beginning.

The chart below has been floating around the “web” in several forms as “evidence” that investors should just stay invested at all times and not worry about the downturns. When taken at “face value,” it certainly appears to be the case. (The chart is based up Shiller’s monthly data and is inflation-adjusted total returns.)


The problem is the entire chart is incredibly deceptive.

More importantly, for those saving and investing for their retirement, it’s dangerous.

Here is why.

The first problem is the most obvious, and a topic I have addressed many times in past missives, you must worry about corrections.

“Most investors don’t start seriously saving for retirement until they are in their mid-40s. This is because by the time they graduate college, land a job, get married, have kids and send them off to college, a real push toward saving for retirement is tough to do as incomes, while growing, haven’t reached their peak. This leaves most individuals with just 20 to 25 productive work years before retirement age to achieve investment goals.

This is where the problem is. There are periods in history, where returns over a 20-year period have been close to zero or even negative.”

Currently, we are in one of those periods.

CONTINUE READING HERE…

Trade Wars: Stop Hyperventilating, It’s All About the Dollar

My Comments: Since this article first appeared several months ago, the current administration has doubled down on the idea of import tariffs. For some reason, it thinks that trade wars are what is needed to ‘Make America Great Again’.

A reverse analogy that comes to mind are the gas price conflicts that used to appear in town when some gas station owner decided to lower the price by a few cents, only to have the station across the street do the same thing. Before long, gas was being sold below cost.

As consumers we got to enjoy a price break, but the gas station owners got to lose a lot of money until someone said ‘enough’ and it was over. Tariffs wars between nations simply raises the price on what we buy and we as consumers ultimately lose. At what point do we declare ‘we’ve won’ and life goes back to normal?

By Krishna Memani | March 07, 2018

So, I’ve been reading a lot of articles, such as the one by Noah Smith on Bloomberg titled: “What Trump’s Trade Guru Doesn’t Get About Economics.”

In this article, Smith, a really good blogger who tends to boil things down to simple stuff, goes on to explain to us in detail why trade wars are bad economics.

Of course, I fully agree with him on this. As someone who grew up in the 1970s and 80s—especially in an industrially insular India—I experienced firsthand the bad economic policy of protectionism.
I know, I know. Tariffs won’t meaningfully reduce the trade deficit. For that matter, I also know that, for a country with a low savings rate, eliminating or reducing the trade deficit may not be the best thing for near-term growth. Furthermore, one would have to sleep through an “econ 101” class to not see how tariffs could reduce productivity growth and act as an indirect tax. Also, it is quite obvious that other countries are likely to respond to Trump’s trade provocation, a scenario that of course will cause the steps laid out in this paragraph to happen all over again.

While I don’t know this for sure, I am quite certain that Peter Navarro, the loudest proponent of this protectionist policy, who I believe happens to be an economist by training, gets all of this, too. The point I’m trying to make is that this policy, in my view, has nothing to do with economics. Instead, it’s all about politics, which, as we all ought to know very well, happens to be messy.

Arguing on the economics of this topic as a market participant is a useless exercise because it does not bring us to any conclusion. Trump got elected on a protectionist agenda—and to placate his base he is moving forward on that agenda. And no amount of pleas by the commentariat on the economic principles is likely to help.

So, I have accepted the fact that while it may be bad economic policy, some form of tariffs on some imported goods are likely to be passed. But it’s not the end of the world or a risk to the outlook for the financial markets from my perspective.

To carry forward the political argument a bit, I believe it is also true that if the Trump Administration further intensifies the trade conflict, the real damage to the economy will be quite substantial. The same base that is cheering him on right now may not be so enthusiastic later—and no one understands that more than Trump, in my judgment.

Further, while limited tariff policies make us uncomfortable and create all sorts of bad outcomes and dislocations (remember the “voluntary” auto restraint agreement of 1981 and numerous other such initiatives?), the impact on the longer-term growth potential of the economy would be modest at best. Further, protectionist policies prove themselves over time to be bad and eventually get unwound. I suspect they will be no different this time.

They will certainly create near-term issues with the markets. However, given the momentum in the global economy and the deficit-financed “oomph” to the U.S. economy, my expectation would be that markets will stabilize and move forward after a short hiatus, at worst.

With that being said, the risks to the market cycle and the markets have increased. And that increase has nothing to do with the tariffs themselves. Instead, these increased risks are coming from the almost certain prospect of a weakening dollar. It is this potential weakening of the U.S. currency that has the potential to change things dramatically. If the dollar weakens a lot, thereby indicating that financing flows to the United States are slowing, inflationary pressures will rise and bring the current market cycle closer to an end. I hope somebody emphasizes that consequence to Trump rather than talking to him about the benefits of trade.

So, let us all stop talking about the economic logic of trade because it has no bearing on the debate. Instead, we can focus on the politics and hope that the dollar doesn’t weaken too much while we are waiting for this to pass.