Tag Archives: retirement advisor

How your 401(k) can survive and thrive in the next bear market

My Comments: Some of you reading this have money in 401(k)s and 403(b)s and cannot simply remove it and place it somewhere safer. Which means you’re completely exposed to the vagaries of the markets and you can only hope for the best.

I learned long ago that HOPE is not an effective investment strategy. So these words from Adam Shell may make your life a little easier. If you want more information, you know how to reach me.

Adam Shell, March 9, 2018

The nine-year stretch of rising stock prices won’t last forever. So now’s a good time for investors to bear-proof their 401(k)s before the next financial storm.

The current bull market, now the second-longest ever and celebrating its 9th birthday on Friday, is most likely in its final stages, Wall Street pros say. That means a bear market will occur at some point, and the stock market will tumble at least 20% from its peak.

What could cause it and when? No one can know for sure. A recession perhaps, or a surge in interest rates and inflation? An unexpected event or investors getting too giddy about stocks and driving prices up to unsustainable levels? All could be the triggers of a big drop in stocks.

Remember, if you have any money invested in stocks, you won’t be able to avoid all the pain that a bear inflicts on your 401(k). While a drop of 20% from a prior peak is the classic definition of a bear market, most drops are more sizable. The average decline for the Standard & Poor’s 500 stock index in the 13 bears since 1929 is 39.9%, S&P Dow Jones Indices says. A swoon of that size would shrink a $100,000 investment in an index tracking the broad market to roughly $60,000.

Prepare ahead of time

“The best way to survive a bear market is to be financially prepared before one happens,” says Jamie Cox, managing partner for Harris Financial Group.

That means not having 100% of your money invested in stocks near a market top. It also means maintaining low levels of debt and having some emergency savings to avoid having to sell stocks in a down market to raise cash, he says.

From a portfolio standpoint, make sure your investment mix isn’t too risky. Are you loaded up on high-fliers that have greater odds of suffering steep drops if the market tanks? Make sure you own some “defensive” stocks, such as utilities, consumer companies that sell everyday staples like soap and cereal, or health care names, which tend to hold up better when markets fall overall.

“Investors should take the time to control the parts of their portfolios they can control,” Cox advises.

If, for example, your portfolio was designed to have 60% in stocks, and that percentage has ballooned to 80% due to the long period of rising stock prices, consider “rebalancing” your portfolio now. Sell some stock to get back to your initial 60% target.

Play defense

The time to be aggressive in the market is when stocks are up, and you can make tactical moves likes cashing out stocks, says Woody Dorsey, a behavioral finance expert and president of Market Semiotics, a Castleton, Vt.-based investment research firm. It makes more sense, he adds, to be defensive when the market is entering or in a period of falling prices.

“Does a bear market mean an investor needs to freak out? No. But it does mean you should be more careful,” Dorsey says. “If the market is going to be difficult for one or two years, just get more defensive. Keep in simple.”

One simple strategy to employ is to get “less exposed to the market and raise cash,” Dorsey says. “Most people are not used to that message, but it’s a good message.” While a normal portfolio might consist of 60% stocks and 40% bonds, a bear market portfolio, he says, might be 30% cash, 30% U.S. stocks and the rest in foreign investments and bonds.

Main Street investors could also consider defensive strategies employed by professional money managers, he says. They can buy things that hold up better in tough times, such as gold. Or add to “alternative” investments that rise when stocks fall, such as exchange-traded funds that profit when market volatility is on the rise or funds that can short the market, or profit from falling prices.

Identify severity of bear

The next bear isn’t likely to be as severe as the epic one following the Great Recession or the dive in early 2000 after the dot-com bubble burst, says Liz Ann Sonders, chief investment strategist at Charles Schwab. Both of those bears saw market drops of about 50% or more.

“The next bear will be a more traditional one that likely comes from the market sniffing out a coming recession,” she explains. “We don’t think it will be caused by a global financial crisis or bubble bursting.”

That means fear levels likely won’t spike quite as high. Investors will also have a better idea of when the bear market might hit, as it will be foreshadowed by signs of a slowing economy.

It also suggests the market will likely rebound more quickly than the average bear of 21 months. As a result, employing basic investment principles, such as portfolio rebalancing, diversification and buying shares on a regular basis, which forces folks to snap up shares when prices are cheaper, can help investors emerge from the next bear market in decent shape.

“Diversification and rebalancing are boring to talk about,” says Sonders. “But they are more useful strategies than all the hyperbole on when to get in or get out of the market, which is not an investment strategy.”

Buy the ‘big’ dips

There are big market swings even in bear markets. A way investors can play it is to buy shares on the days or periods when stocks are under intense selling pressure. “There will be lots of wild swings,” says Mike Wilson, U.S. equity strategist at Morgan Stanley.

Investors have to take advantage of stock prices when they are depressed and present good value, he says, even if it seems like a scary thing to do at the time.

“You have to be willing to step in” when market valuations fall a lot, no matter what’s going on in the world, Wilson advises.


Guess How Many Seniors Say Life Is Worse in Retirement

My Comments: After 40 plus years as a financial/retirement planner, I’ve lost count of the number of people who, as they approach retirement, ask whether they’ll have enough money. Or the corollary, when will they run out?

If you expect to have a successful retirement, ie one where you run out of life before you run out of money, you had better have your act together long before you reach retirement age. Here’s something to help you get your arms around this idea. https://goo.gl/b1fG39

Maurie Backman \ Feb 11, 2018

We all like to think of retirement as a carefree, fulfilling period of life. But those expectations may not actually jibe with reality. In fact, 28% of recent retirees say life is worse now that they’re stopped working, according to a new Nationwide survey. And the reasons for that dissatisfaction, not surprisingly, boil down to money — namely, inadequate income in the face of mounting bills.

Clearly, nobody wants a miserable retirement, so if you’re looking to avoid that fate, your best bet is to start ramping up your savings efforts now. Otherwise, you may come to miss your working years more than you’d think.

Retirement: It’s more expensive than we anticipate

Countless workers expect their living costs to shrink in retirement, particularly those who manage to pay off their homes before bringing their careers to a close. But while certain costs, like commuting, will go down or disappear in retirement, most will likely remain stagnant, and several will in fact go up. Take food, for example. We all need to eat, whether we’re working or not, and there’s no reason to think your grocery bills will magically go down just because you no longer have an office to report to. The same holds true for things like cable, cellphone service, and other such luxuries we’ve all come to enjoy.

Then there are those costs that are likely to climb in retirement, like healthcare. It’s estimated that the typical 65-year-old couple today with generally good health will spend $400,000 or more on medical costs in retirement, not including long-term care expenditures. Break that spending down over a 20-year period, and that’s a lot of money to shell out annually. But it also makes sense. Whereas folks with private insurance often get the bulk of their medical expenses covered during their working years, Medicare’s coverage is surprisingly limited. And since we tend to acquire new health issues as we age, it’s no wonder so many seniors wind up spending considerably more than expected on medical care, thus contributing to both their dissatisfaction and stress.

And speaking of aging, let’s not forget that homes age, too. Even if you manage to enter retirement mortgage-free, if you own property, you’ll still be responsible for its associated taxes, insurance, and maintenance, all of which are likely to increase year over year. The latter can be a true budget-buster, because sometimes, all it takes is one major age-related repair to put an undue strain on your limited finances.

All of this means one thing: If you want to be happy in retirement, then you’ll need to go into it with enough money to cover the bills, and then some. And that means saving as aggressively as possible while you have the opportunity.

Save now, enjoy later

The Economic Policy Institute reports that nearly half of U.S. households have no retirement savings to show for. If you’re behind on savings, or have yet to begin setting money aside for the future at all, then now’s the time to make up for it.

Now the good news is that the more working years you have left, the greater your opportunity to amass some wealth before you call it quits — and without putting too much of a strain on your current budget. Here’s the sort of savings level you stand to retire with, for example, if you begin setting aside just $400 a month at various ages:

You can retire with a decent sum of money if you consistently save $400 a month for 25 or 30 years. But if you’re in your 50s already, you’ll need to do better. This might involve maxing out a company 401(k), which, as per today’s limits, means setting aside $24,500 annually in savings. Will that wreak havoc on your present spending habits? Probably. But will it make a huge difference in retirement? Absolutely.

In fact, if you were to save $24,500 a year for just 10 years and invest that money at the aforementioned average annual 8% return, you’d be sitting on $355,000 to fund your golden years. And that, combined with a modest level of Social Security income, is most likely enough to help alleviate much of the financial anxiety and unhappiness so many of today’s seniors face.

Retirement is supposed to be a rewarding time in your life, and you have the power to make it one. The key is to save as much as you can today, and reap the benefits when you’re older.

Here’s Why Markets Will Head Downward

My Comments: Now that I’m in my mid 70’s, I’m far more worried about the ups and downs of the markets than I was 15-20 years ago. My ability to pay my monthly bills shrinks exponentially when the market crashes and my retirement money is exposed to that risk.

Ergo, I either do not have much money exposed to that risk, or I’ve repositioned it such that if there is downside risk, I’ve transferred that risk to a third party, ie an insurance company. You should consider doing the same.

BTW, QE means ‘quantitative easing’ and refers to the approach by the Federal Reserve to lower interest rates and to keep them low. That has  ended since the Fed is now slowly raising interest rates.

Clem Chambers,  Feb 12, 2018

I’m completely out of the markets in the U.S., Europe and the U.K. It seems as clear as it can be that the market is in for a huge down.

Now there are permabulls and permabears and if you read my articles over the years calling higher highs in the Dow you might think I am a permabull. But I am not, and if you hunt enough you will find my articles calling the credit crunch back in 2006-2007 here on Forbes and again the post crash bottom to buy in.

I can, and do, go both ways.

It has to be said, calling the market tops and bottoms is a tricky business and you can’t always be right, but there is only one thing you need to know and only one thing you have to know when investing and that is, “which way is the market going. ”

It sounds simple, almost asinine, but it isn’t because most people have no view on market direction, or if they do it’s automatically ‘up.’ As such, most people do not know which way the market is going and as such are at more risk that they need to be.

So where are we now in the markets?

Well, here is history:

This is a terrifying chart for anyone who is long.

Why? Well, first off you can see the very characteristics of the way the market moves have changed for the first time in years. Up close it’s even clearer:

The market has been going up like an angel for a year, the volatility has fallen to nonexistant. Forget the tendency for the price to go parabolic, it’s the day to day footprint of the price action that’s even more important here. Now this style has broken. Something has smashed the dream.

This giant burst of volatility tells us that there is huge uncertainty in the market.

So ask yourself what that involves?

It involves a change of investment environment and the participants in the market fighting that change.

“Buy the dip” is the brain dead mantra that has harvested lots of profits through the era of QE ever-inflating stock prices. What if that stops working? The crowd ‘buys the dips’ but the negative environments rains on that parade and the market begins to shake as the two conflicting forces meet.

Who do you put your money on? The crowd or a new market reality?

I bet against the crowd every time; you cannot fight market systemics.

So what is this new reality? What is causing this? The pundits are unclear, spouting all sorts of waffle that would have been true last year but weren’t and must somehow now be the reason.
Amazingly, few can see the obvious. Where are the headlines?

QE made equities go up. Does anyone disagree?

‘Reverse QE’ is making it go down. Reverse QE is where the Federal Reserve starts to sell its bond mountain for cash. It pushes up interest rates, it sucks money from the economy and straight out of the markets.

Is that ringing any bells?

Reverse QE started in September and month by month is ratcheting up. By next September it will hit $50 billion a month from the starting point in September of $10 billion.

The market is crashing because reverse QE is biting and it is going to bite harder.

There is trillions of dollars of reverse QE to come. Years of it.

Now I suppose it is hoped that U.S. fiscal loosening, tax cuts and overseas profitability repatriation will counterbalance this huge liquidity hit, but for sure this new cash will not flood straight into equities. I’m sure a strong economy is meant to pump liquidity into the loop via profits too, but will these do anything but hold the stock market at a flat level for many a year?

However, this is ‘unorthodox monetary policy’ in reverse. Do you remember when QE was called ‘unorthodox?’ Well, we are back in unorthodox territory again and this is not the happy slope of the mountain of cash, this is the bad news bloody scrabble down the other side with trillions of less money all around.

Somehow this ‘unorthodox’ unwinding of liquidity is aiming for a smooth transition. Well, they are going to need good luck with that and it looks like the process is having a rough start.

So reverse QE could stop. The Fed could halt the program. However, it seems unlikely they would pull the plug on the whole program that fast and then what? First they’d have to take the blame for crashing the market, then they would have to tacitly admit they are stuck with mountains of debt that they will have to roll forever.

That means reverse QE is going to have to punch a far bigger hole in the market than we have seen before it hits the headlines. So where is that? 20,000 on the Dow, 18,000?

Well that’s my feeling, which is why I am cashed up.

So take a look at the chart and remember that reverse QE is here and until further notice the Fed is shrinking its balance sheet, which means one thing… The market is going down.

All of a sudden knowing which way the market is going doesn’t seem so asinine.

A Time for Courage

My Comments: In past blog posts I’ve shared the words, and wisdom, of Scott Minerd. He’s one of the principal brains at Guggenheim Partners, a major player on the world stage when it comes to investing money. (BTW, this pic of Scott is from 12/21/2015)

Right now many of you are rightly worried by the fall in equity prices on Wall Street, if not across the planet. Don’t equate a crash on Wall Street with the American economy. What it means is there are strong feelings about the high valuations that we see in the DOW and the S&P500.

Is it time to bail out and wait for the bottom to appear? Probably not. But don’t take my word for it. Read below what Scott is saying and then sit back. From a strategic perspective, you need to decide how much of your overall portfolio is exposed to the markets and how much of it should be protected against severe downside movements. There are insurance policies available that make this possible and the price is reasonable.

By Scott Minerd, Chairman of Investments and Global CIO – 02/06/2018

In what otherwise might have been another quiet Monday with investors lulled to sleep by the low volatility world of the past year, I was surprised to be suddenly overwhelmed with a deluge of calls late in the day from clients and the media asking for an explanation of the collapse in equity prices. My answer in a word was simply “rates.”

The backup in bond yields has been significant, with the 10-year Treasury rising 23 basis points in the last month, and hitting a recent peak of 2.88 percent. The tax cut euphoria drove stocks up at an unsustainable pace, but concerns have been building about bond market supply congestion following the Treasury Department’s refunding announcement, and Friday’s employment report has increased speculation that the Fed may need to become more aggressive to head off potential inflationary concerns.

Contributing to inflation worries is impressive wage growth. Hourly earnings were up 0.3 percent in January and upwardly revised for December to 0.4 percent, supporting the concept of wage growth of 4 percent or more for 2018. These data are trending up even before we fully digest changes to the minimum wage and the effect of wage increases and bonuses related to the new tax plan. These are likely to give a lift to consumption, which will reinforce more labor demand, and thus drive unemployment lower.

Dare I say that some in the market are becoming concerned that the Federal Reserve may be falling behind the curve, especially as evidenced by the recent steepening in bond yields? This is also a possibility. The consensus for future rate hikes, was moving to four rate increases in 2018, and possibly more.

I think that the setback (the largest one-day point decline in history) is not over but we are approaching a bottom. This correction is a healthy development for the markets in the long run, and the equity bull market, while bloodied, is not broken. The lower bond yields will help but the curve steepening speaks more of flight to safety in times of market turmoil than concerns over the economy.

Ultimately, my previously held market views are intact. I still hold the opinion that the favorable economic fundamentals that are in place, where we are in the business cycle, the breadth of the market, and levels of current valuations are supportive of equities. Buying here will probably make investors happy campers later in the year, but the tug of war between stocks and bonds is just getting under way. This may be the big investment story for 2018.

History says the bull market is ending

My Comments: Paranoia is an elusive thing. Just because you’re paranoid, it doesn’t mean there’s no one out there intent on putting you down. It’s much the same with the stock market. Just because we’ve not had a market correction now for almost nine years, it doesn’t mean there is one just around the corner. Or does it?

I’m writing this in an attempt to justify my position that for the past three years, I’ve been warning clients and whomever will listen that a market correction of significance is ‘just around the corner’. Is it paranoia or is it real?

Personally, I hope it happens soon. That way we can get over it and move on for the next several years. I just want to be able to start the next upturn from a higher point than the depths of the next collapse. How about you?

If you want a way to participate in the inevitable upside and avoid the inevitable downside, reply to this post or send me an email. I have an answer for you.

(This comes from http://stansburychurchouse.com)

If history is any guide, the good times are about to end for the U.S. stock market.

It’s been one of the longest-running bull markets ever…

Over nearly nine years, or 105 months, the S&P 500 has returned 368 percent (including dividends).

That’s the second-longest bull market the U.S. has ever seen… just behind the nearly 9.5 year-long, or 113 months, bull market that started in 1990.

You can see the S&P 500’s past bull markets in the table below… it shows the date they began, their overall return and how long each lasted. On average since 1926, bull markets have lasted for 54 months, and resulted in returns of 160 percent.

After the 2008/2009 global financial crisis, interest rates around the world plummeted. In the U.S., the Federal Reserve cut interest rates from over 5 percent to zero in the course of just over a year.

Coupled with that, we saw an unprecedented surge of money printing as the Fed expanded its balance sheet (by creating money and buying assets) from a little over US$800 billion to over US$4.4 trillion today, along with a wholesale bailout of the banking system.

We also later have seen a “Trump rally” where investors expected President Donald Trump’s tax reform and infrastructure investment election promises to boost the economy.

But the gains can’t go on forever

Take a look at the following chart. It shows when and why each of the bull markets above eventually ended.

For example, in 1990, the U.S. market entered its longest-running bull market on the back of the Internet boom. The S&P 500 soared over 400 percent in nine years. But in March 2000, the market peaked – and went on to fall 49 percent over the next 2.5 years.

In 2002, the market soared back. It went up over 100 percent in five years. Then the global financial crisis hit in 2007, and the S&P 500 fell 57 percent over the next 17 months.

The bull market/bear market cycle keeps repeating… thanks to mean reversion. Markets (along with most other things in life) tend over time to reverse extreme movements and gravitate back to average.

It’s like a rubber band… stretch it and when you let go it returns to its original shape. So after a period of rising prices, securities tend to deliver average or poor returns. Likewise, market prices that decline too far, too fast, tend to rebound. That is mean reversion, and it works over short and long periods.

And mean reversion isn’t the only reason we think the U.S. bull market is winding down…

Overpriced equities

By many measures, U.S. stock market valuations are high.

One of the best ways of measuring market value is to use the cyclically-adjustedprice-to-earnings (CAPE) ratio. It’s a longer-term, inflation-adjusted measure that smooths out short-term earnings and cycle volatilities to give a more comprehensive, and accurate, measure of market value.

As the chart below shows, the CAPE for the S&P 500 is now at 33.6 times earnings. That’s higher than any time in history, except for the late ‘90s dotcom bubble. It’s even higher than the stock market bubble of the late 1920s.

High valuations don’t mean that share prices will fall. High valuation levels can always go higher, at least for a bit. Or they could stand still for a while. But mean reversion suggests that at some point, valuations will fall, one way or the other.

And as we showed you recently, the U.S. economy could also be about to see a slowdown in growth – which could also dampen market sentiment and hurt share prices.

It’s not just the U.S.

Now, this is all in the U.S. But we’re seeing a similar situation in global markets.

As we told you in November, the MSCI All Country World Index (which reflects the performance of global stock markets) has seen an unprecedented streak of gains over the past year. And it’s up 8.4 percent since we last wrote about it. As we said earlier, nothing goes up forever.

Plus, if the world’s biggest market (at around half of the global market cap) is in trouble, the rest of the world could be too.

So what should you do?

Look to diversify your portfolio. Regular readers will know that we’re big fans of diversification.

We’ve written before about the importance of not just investing in different sectors and asset classes… but in different markets and countries too. That’s because spreading a portfolio around the world reduces risk. After all, gains in one market can offset losses in another.

And while the gains in some markets are nearing an end, they’re just getting started in markets like India, Bangladesh and Vietnam. These are three of the fastest-growing markets in the world.
So do yourself a favour and diversify your portfolio.

Read the original article on Stansberry Churchouse Research. This is a guest post by Stansberry Churchouse Research, an independent investment research company based in Singapore and Hong Kong that delivers investment insight on Asia and around the world. Click here to sign up to receive the Asia Wealth Investment Daily in your inbox every day, for free. Copyright 2018. Follow Stansberry Churchouse Research on Twitter.

Trump’s Looming Bust-up with China is Bad News for 2018

My Comments: Having more money to spend in retirement requires a delicate balance between living cautiously and making sure your funds are growing properly. If you stay alive, the money to pay your bills has to come from somewhere.

All that is to say that global economics is going to play a role in your future financial affairs, whether you understand it, like it, or don’t give a hoot about it. My efforts to help my friends and clients is to try and provide insights to help you get it right and have more money rather than less money.

Trump has already conceded economic hegemony to China on the global stage by refusing to participate in the Trans-Pacific Partnership. That alone is going to limit your financial future over the next several decades. Don’t say I didn’t warn you.

by Edward Luce / January 3, 2018

Flattery gets you everywhere with Donald Trump. But only while it lasts. Like any addiction, it needs regular boosts in higher doses. Amid fierce bidding, China’s Xi Jinping won first prize as 2017’s most effective Trump flatterer. All it took was a lavish banquet in the Great Hall of the People. In return, Mr Trump forgot to raise America’s trade complaints or human rights. Mr Xi easily outflanked the US at the Asian summits following Mr Trump’s China visit. If the key to seducing him is a dish of Kung Pao chicken, what’s not to like?

The problem is that Mr Xi must continually feed Mr Trump. At a certain point, the ratio of Trump flattery to loss of self-respect will be too high. Would another flurry of trademark approvals for Ivanka Trump break China’s bank? Probably not. What about giving the go-ahead for a Trump Tower in Shanghai? Possibly. Another red carpet reception is unlikely to cut it. The law of diminishing returns applies to favors already bestowed. In 2018, it is likely to turn negative. China has always been in Mr Trump’s sights. Massaging his ego buys only brief respite.

The other ego is Mr Xi himself. China has acted with caution for more than a generation. For Washington’s “never Trumpers”, Beijing’s restraint gave it honorary membership of the axis of adults that would curb Mr Trump’s instincts. If Mr Trump was a loose cannon, China could be counted on to behave responsibly. In the opening months of Mr Trump’s presidency, Mr Xi did just that. China, not the US, is now the darling of the Davos economic elites. Mr Xi can lecture on Ricardian trade theory with the best of them.

But China’s age of forbearance is over. In October, Mr Xi opened a bolder chapter in China’s foreign ambitions. Deng Xiaoping, China’s great moderniser, spent his last years with no official role other than chairman of China’s bridge association. Hu Jintao, Mr Xi’s predecessor, was happy with just being president. Mr Xi, by contrast, has grabbed every title going and immortalized his own thought in the party’s constitution. Mr Trump has competition, in other words. For the first time since Mao Zedong, China has a living personality cult. US-China relations are now in the hands of two gargantuan egos.

That is bad news for 2018. Added to this are two bigger clouds. For the first time since the cold war, the US has an explicit competitor. Mr Xi’s China has set itself the target of becoming the world’s top dog within a generation. Unlike the Soviet Union, China can sustain technological rivalry with the US. America’s dominance in the Asia Pacific is no longer a given. Mr Xi’s aim is to achieve military parity. Second, America’s president thinks in hourly increments. China’s leader plans in decades. The battle between these two egos is one-sided. Mr Xi holds a telescope. Mr Trump stares at the mirror.

The scope for misunderstanding is growing. Too much attention has been paid to the spectre of a nuclear conflict between the US and North Korea — too little to the looming fallout in US-China relations. That is in spite of Mr Trump’s latest tweet boasting that he had a bigger nuclear button than Mr Kim.

The US president still believes China can disarm Kim Jong Un on America’s behalf. No one else thinks that is likely. Last week, Mr Trump said his patience with China was running out. Mr Trump’s advisers have so far curbed his protectionist impulses. But Mr Trump is rarely muzzled for long. His one consistent belief is that the US is being ripped off. China, whom he has repeatedly accused of raping America, tops the list. “If they don’t help us with North Korea, then I do what I’ve always said I want to do,” he told The New York Times. We should expect 2018 to produce US trade actions against China and Beijing to fight them at the World Trade Organization. There will also be more nuclear tweets.

But the US-China fog extends far beyond the Korean peninsula. As does the potential theatre of confusion. Last year China opened its first overseas base, in Djibouti. A Chinese aircraft carrier made its first visit to the Mediterranean. Mr Xi also stepped up China’s installations in the South China Sea — a subject on which Mr Trump has yet to comment.

Mr Trump has not uttered the word “Taiwan” since he spoke to its leader after his election. His first tweet of 2018 was to accuse Pakistan of “lies and deceit”. China rushed to Pakistan’s defense. “China and Pakistan are all-weather partners,” said Beijing after praising Islamabad’s “outstanding contribution” to fighting terrorism. Mr Trump was far closer to the truth. But there are few gulfs of perception wider than that.

In a stand off between Mr Trump and Mr Xi, who would blink first? There is no way of knowing. However, China is giving hints of over-confidence. From the Iraq war to Mr Trump’s election, China has been reaping one windfall after another. His disdain for democratically elected leaders plays straight into Beijing’s hands. But its luck cannot last for ever. Mr Xi should remember that Mr Trump launched missile attacks on Syria when the two were having dinner in Mar-a-Lago. Many in China believe Mr Trump is a paper tiger. They may be right. But it would be rash to test that theory.

The Danger From Low-Skilled Immigrants: Not Having Them

My Comments: To Make America Great Again, the presumably well intentioned mantra for those leading the GOP these days, someone has to overcome ignorance of economics and start paying attention to reality.

A positive corporate bottom line is the driving force for a healthy US economy. To reach that goal, we need people willing to spend time in the trenches doing whatever grunt work is necessary. Despite machines that increasingly automate the grunt work, a supply of young people has to match the demand created until artificial intelligence takes over.

The supply of labor is not going to miraculously appear. A greater number of us are old and fragile, and fertility rates among young men are declining. Exactly who is going to look after all us old folks because we refuse to hurry up and die?

We should be encouraging immigration and refugees. Yes, there is a potential security threat, which implies applying resources to screen and maintain a reasonable level of security. And yes, someone is probably going to get killed or maimed or whatever when someone nefarious sneaks through.

The laws of supply and demand are well known. Right now we have an increasing demand for labor, which can only stabilize with either more people being allowed into the country, or a large increase in the cost of labor to force more of into the trenches. Either that or starve, in which case you die. Some would have that happen since dead people are less likely to vote against those wanting to restrict immigration.

Eduardo Porter \ August 8, 2017

Let’s just say it plainly: The United States needs more low-skilled immigrants.

You might consider, for starters, the enormous demand for low-skilled workers, which could well go unmet as the baby boom generation ages out of the labor force, eroding the labor supply. Eight of the 15 occupations expected to experience the fastest growth between 2014 and 2024 — personal care and home health aides, food preparation workers, janitors and the like — require no schooling at all.

“Ten years from now, there are going to be lots of older people with relatively few low-skilled workers to change their bedpans,” said David Card, a professor of economics at the University of California, Berkeley. “That is going to be a huge problem.”

But the argument for low-skilled immigration is not just about filling an employment hole. The millions of immigrants of little skill who swept into the work force in the 25 years up to the onset of the Great Recession — the men washing dishes in the back of the restaurant, the women emptying the trash bins in office buildings — have largely improved the lives of Americans.

The politics of immigration are driven, to this day, by the proposition that immigrant laborers take the jobs and depress the wages of Americans competing with them in the work force. It is a mechanical statement of the law of supply and demand: More workers spilling in over the border will inevitably reduce the price of work.

This proposition underpins President Trump’s threat to get rid of the 11 million unauthorized immigrants living in the country. It is used to justify his plan to cut legal immigration into the country by half and create a point system to ensure that only immigrants with high skills are allowed entrance in the future.

But it is largely wrong. It misses many things: that less-skilled immigrants are also consumers of American-made goods and services; that their cheap labor raises economic output and also reduces prices. It misses the fact that their children tend to have substantially more skills. In fact, the children of immigrants contribute more to state fiscal coffers than do other native-born Americans, according to a report by the National Academies.