?Confidence is the cheapest form of stimulus.? said former Clinton Treasury Secretary, Larry Summers.
Global Market Comments
December 9, 2016
Fiat Lux
Featured Trade:
(TECHNOLOGY OR TOILET PAPER?),
(KMB), (AAPL), (UTX), (TLT), (UUP), (WYNN),
(THE 1% HIT IN THE BOND MARKET),
(TLT), ($TYX), (LQD), (MUB), (ELD)
Kimberly-Clark Corporation (KMB)
Apple Inc. (AAPL)
United Technologies Corporation (UTX)
iShares 20+ Year Treasury Bond ETF (TLT)
Powershares DB US Dollar Index Bullish Fund (UUP)
Wynn Resorts, Limited (WYNN)
Treasury Yield 30 Years (^TYX)
iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
iShares National Muni Bond (MUB)
WisdomTree Emerging Markets Local Debt Fund (ELD)
The world?s largest maker of toilet paper, Kimberly-Clark (KMB) currently earns a net profit margin of 5.45% and trades at a price earnings multiple of 20.68X.
Apple (AAPL), the world?s largest technology company, earns a net profit margin of 22.3% and trades at a price earnings multiple of 13.51X.
These numbers suggest that making toilet paper is 6.26 times more profitable than selling iPhones.
But it isn?t.
So is the future of the world economy in toilet paper? Should we toss out iPhones in the dustbin of history and unload the stock?
That may be the answer, at least for the short term.
Or are we seeing nothing less than a wild mispricing of sectors and shares that will eventually correct itself?
I vote for the latter.
However, financial markets of any description are facing unusual circumstances on every front.
The newly elected president?s disdain for Steve Jobs' creation is no secret.
Only yesterday, he demanded that Apple shut down manufacturing in China and build the world?s biggest factory in the US. That would raise Apple?s labor cost from $3 to $35 an hour.
Needless to say, that is impossible.
To do so would increase the cost of iPhones from $700 to $5,000 which was about what I paid for a Motorola analogue brick phone in 1990 and the service was lousy.
The bulge left in the pocket of my Burberry raincoat is still present and, no, it?s not because I am glad to see you.
The great irony here is that the iPhone has never been made in the US.
It was not a product the manufacture of which was offshored. IPhones have to be made in China or they can?t be made at all. Tens of thousands of cutting edge technology products can be similarly described.
That leaves the hapless company to face the 35% import duty from China threatened by Mr. Trump.
It would be far cheaper for Apple just to pay the duty and then pass the cost on to consumers, which would then raise the cost of an iPhone from $700 to $800. Fewer iPhones would be sold, but not my much.
Apparently, no one has told Trump yet that this arbitrary duty would be illegal under the terms of the World Trade Organization (WTO), an organization created by the United States to enforce international trading rules.
So, what if Trump then withdraws from the WTO? What if he pulls the United States out of the United Nations, another libertarian panacea?
He could do this, since honoring agreements does not seem to be in Trump?s DNA, as his long string of business defaults and bankruptcies attests.
International trade would continue, just without us. That would leave China to take over the rest of the world market. Our economy and stock market would suffer, as well as our defense alliances.
Of course, we really don?t know what Trump is going to do.
But the early indications are horrendous.
He attacked Boeing (BA), knocking 11% off its stock price in minutes which, by the way, has created more high paying jobs exporting aircraft to China than any other American company.
The Carrier bail out means that tax payer money will be siphoned out of the east and west coasts so a company in Indiana, the Vice President?s home state, can build air conditioners at noncompetitive prices.
The union leader then confirmed that it was only 700 jobs that were saved for $7 million, not 1,100, and the president attacked him.
And never mind that the country?s eight other major air conditioning manufacturers are now disadvantaged. Are they in for a handout too?
The president has signed Carrier?s death warrant, making it a ward of the state for a photo op.
This is anything but capitalism.
I?m sure parent company United Technology (UTX), whose stock has soared since the election, is figuring out how to unload Carrier as I write this.
If this is Trump?s new rust belt economic strategy, expect an initial rise in GDP growth as the stimulus hits, and then a collapse when the bill comes due.
That, by the way, is my new economic scenario for the rest of the decade. Higher, artificially induced growth for three more years, and then a recession, with no net gain in GDP. Welcome to boom and bust.
I do fine in this environment, but I?m not so sure about you. Remember, I only have to run faster than you, not the grizzly bear that is chasing both of us.
All of this now raises the question of how to trade and invest under President Trump. He is turning the White House into a reality TV show, and filling cabinet posts with other reality stars, like Linda McMahon.
When Twitter traffic is the primary criteria for policy decisions, what is a sober, long-term portfolio to do?
Since it really is all about creating a false reality, I predict a series of ?pretend? victories on the business front.
Carrier will open a new plant to great fanfare, and then bury the losses in some affiliate. Apple might even open a token factory to build a small number of? ?super premium? iPhones just to make Trump go away.
And now I just heard that China will retaliate against any trade sanctions by clamping down on casino company Wynn Resorts (WYNN) by limiting ATM withdrawals in Macao, instantly vaporizing 11.05% of this company?s market capitalization.
Steve Wynn was a big Trump supporter, but perhaps less so today.
Is this how it?s going to be? Is EVERYTHING now political?
I confess, I can?t write fast enough to keep up with this stuff.
Over the long term, it?s really tough to beat the Law of Supply and Demand.
The last major country that attempted to sidestep it with a closed economy was the Soviet Union, and we know how that worked out; however, it took 70 years to unwind.
The policy that Trump is attempting here is more National Socialism than Republican.
Trump?s bogus economic policies will eventually be exposed for the sham they are. It?s just a matter of time before they blow up. ?
Buying low and selling high based on solid fundamentals will once again become a successful investment strategy.
Until then, that toilet paper company is looking pretty good. And keep selling short Treasury bonds (TLT) and buying the US dollar (UUP).
Not in My Budget
The Future?
It has been a month now since the presidential election, and who has been hurt the most?
No, it is not liberals, unions, Planned Parenthood, or environmentalists.
It is the 1%.
That is because the 1% have the overwhelming share of their wealth parked in the bond market, and it has been heading in a decidedly southern direction for the past four weeks.
In fact, bond market losses now exceed $1 trillion since Trump gained the presidency. Fixed income has turned into a veritable dumpster fire.
The worst is yet to come. If Trump actually implements his vast expansion of the federal deficit, ten-year Treasury bond yields could rocket from 2.42% to 6%, knocking one third off of bond values.
There are many important lessons to be learned here.
For a start, this is not your father?s bond market.
The internal dynamics of the fixed income markets have changed so much in the last three decades that it has become unrecognizable to long term practitioners such as myself.
A big factor has been the takeover of the bond market by the richest segment of the US population and, indeed, the global economy. As wealth concentrates at the top, its character changes.
Let me stop here and tell you that the ultra rich are different from you and me, and not just because they have more money.
I have learned this after nearly half-century-long relationships with the planet?s wealthiest families, including the Rockefellers, Rothschilds, DuPonts, Morgans, and Pritzkers.? I first knew them as important contacts at The Economist magazine, then as clients at Morgan Stanley, then as investors in my hedge fund, and now as subscribers to The Diary of a Mad Hedge Fund Trader.
The wealthier families become, the more conservative they are in their investment choices. Their goal shifts from capital appreciation to asset protection.
They lose interest in return on capital and become obsessed with return of capital. This is how the rich stay rich, sometimes for centuries. I have even noticed this among my newly minted billionaire hedge fund buddies.
What this means for the bond market is that they never sell. When they buy a 30-year Treasury bond, it is with the expectation of holding it for the full 30-year term until maturity.
That way they can avoid capital gains tax and only have to pay interest on the coupon payments. When they die, spouses get the step up in cost basis, and then the wealth passes from one generation to the next.
Taxes are never paid.
Back in the 1980s, when wealth was more evenly distributed, the top 1% only accounted for 1% of Treasury bond ownership. Today, that figure is closer to 25%.
Add this to the 50% of our national debt that is owned by foreign investors who also tend to hold paper for its full term. Central banks don?t pay taxes either.
China and Japan are the biggest holders, with around $1 trillion each. This means that 75% or more of Treasury bonds are owned by investors who don?t sell.
With bonds very close to 30-year highs, keeping these securities has been the right thing to do. I can?t tell you how many investment advisors I know who have distilled their practices down to only fixed income instruments.
This involves the entire coupon clipping space, including municipals (MUB), corporates (LQD), junk (JNK), and even emerging market debt (ELD).
This is driven by customer demand, the 1%ers, not from any great insights or epiphanies they achieved on their own.
Of course, there is a certain amount of driving with your eyes firmly fixed on the rear view mirror going on here. Maybe the rich will finally sell their bonds once prices fall hard, stay down, and then go down some more.
That appears to be what is in front of us right now.
Inflation rearing its ugly head might also do the trick, which is always bad for bond prices, as it reduces the purchasing power of money.
Selling is certainly what they were doing with both hands in the early eighties, when the ten-year yield hit 12%.
Again, the rear view mirror effect kicked in big time, when bonds were called ?certificates of wealth confiscation?. They are about to become those once again.
There are other matters to consider with the 1% owning so much of the bond market. This is money that is not being invested in startups and creating jobs. It is money that is not being used to engender new economic growth.
One of the fantasies of the last election was the claim that the 1% were creating so many jobs. They weren?t, not as long as their money was parked in a risk-free bond market.
Instead, it is just stagnating. This is one reason why economic growth is so flaccid this decade and will remain so. This is fine for the 1%, but not so good for the rest of us.
The bottom line here is that while bonds are oversold and due for a bounce, it is a bounce that should be sold into.
Bonds are quickly becoming the asset class you don?t want to know, whether you?re in the 1% or not.
Inflation is About to Return From the Dead
Global Market Comments
December 8, 2016
Fiat Lux
Featured Trade:
(WHAT TO DO ABOUT MUNICIPAL BONDS),
(MUB), (TBT),
(THE MARKETS ARE NOT RIGGED)
iShares National Muni Bond (MUB)
ProShares UltraShort 20+ Year Treasury (TBT)
While the entire fixed income space is getting decimated by Trump?s plans to vastly expand government deficit spending, there is one particular sector that is coming in for extra abuse.
That would be tax-free municipal bonds.
This is a big deal, because about one third of the readers of the Diary of a Mad Hedge Fund Trader are professional financial advisors.
The field was one of a few in which advisors could add value for clients, because the idiosyncrasies of these securities often limit tax exemptions to residents of a single state, county, city, or utility or bridge district.
Advisors working at big firms also get special access to new issues unique to their clients? residential requirements.
The end result of a 30-year bull market in bonds is that many of them have saddled their clients with very heavy weightings in munis. Some have even distilled their businesses purely into municipal bond practices.
This was a great strategy going into November 8th. Not so good the day after.
The reasons are very simple.
During a time of raising taxes, such as during the past eight years, muni bonds traded at premiums, and the tax aspect of the securities becomes over valued.
During time of falling taxes, the tax free character of munis is less attractive, and they become undervalued.
On the morning of November 9th, about 2:00 AM the entire $3.7 trillion municipal bond market flipped from undervalued to overvalued.
That was when is became clear that Trump would capture the state of Pennsylvania, making it impossible for Hillary Clinton to win the presidential election.
The prospects of future tax increases under a Clinton administration thus went up in smoke.
The iShares National Muni Bond ETF (MUB) gave up all of its 2016 gains in a matter of days, and then some. It is now off a staggering 7.0% since its July high. Lesser-rated issues have fallen by much more than that.
Approximately $259 billion in muni bond market value has been wiped out in the past month.
These are the sharpest moves down in munis since analyst Meredith Whitney made her fateful prediction on CBS 60 Minutes in 2010 that some 2,000 muni bond issuers would default on their bonds during the coming year.
In the end I think only two actually did it.
The next day, the Mad Hedge Fund Trader put out a long term ?BUY? on muni bonds, especially those issued by the State of California, and they have been stellar performers ever since.
Until now.
This is a massive move for this normally sedentary corner of the financial markets.
Beleaguered financial advisors have been besieged by calls from clients asking what to do about their substantial muni bond holdings.
As I have been through this cycle a few times before during my half century in the markets, it is time for me to hand out some sage advice on what to do. Here are some options:
1) Panic and Sell Everything. This is usually a terrible idea. While coupon interest payments are tax exempt, the capital gains incurred if you sell aren?t.
If you have been holding your paper for any amount of time, like decades, the taxable gain could be enormous.
If you absolutely HAVE to sell for cash flow or other reasons, at least wait until next year, when capital gains taxes will almost certainly be cut.? At least then you won?t have to pay the taxes for 16 months instead of 4 ?.
2) Do Nothing. This is almost always the best option for long term, risk averse investors.
By launching a huge jobs program with jobless claims at a 43 year low and unleashing the demons of inflation, Trump has unwittingly planted the seeds of the next recession.
That will be caused by a severe interest rate spike that could happen in as soon as three years.
Then rates will crash, possibly making your muni bonds more valuable than they are today. And in the intervening three years you can keep happily clipping your coupons for tax-free income.
3) Hedge. Those who have the facility to do so may want to hedge the interest rate risk in their muni bond trades to reduce the volatility of their portfolio.
The easiest way to do this is to buy the ProShares Ultra Short 20+ Year Treasury Bond Fund (TBT), a 2X ETF that rises at roughly 1.5 times the rates that US Treasury bonds fall.
Look at the charts below, and you see that the 7% decline in the (MUB) since July was matched by a commensurate 42% rise in the (TBT). So the natural market neutral hedging ratio here will be about 6:1.
These are rough figures only, as they fail to account for differences in management fees and expenses.
The turmoil seen in the municipal bond market is going on in all asset classes at the same time as a result of the presidential election.
I will continue to hammer away in the Diary of a Mad Hedge Fund Trader ?at the short and long term implications for each one as soon as I figure them out.
Wow! Look at Those Muni Bonds Fall!
I recently read? ?Flash Boys?, Michael Lewis?s bestseller about high frequency trading.
In it, Lewis claims the markets are ?rigged? for the ordinary investor, and they are getting ripped off, in effect, paying a giant ?tax? to Wall Street to get their trades done.
Nothing could be further from the truth.
I have known Michael for 25 years, back when he was a wet behind the ears bond salesman at the former Salomon Brothers (now owned by Citigroup).
When he published an autobiographical recitation of his year there in 1989, a lot of people thought that I was him publishing under a pseudonym. It was only after he started making media appearances that this misunderstanding was resolved (he is a lot shorter than me).
Michael is first and foremost a storyteller. His previous books were about baseball (Moneyball), fatherhood (Home Game), and Silicon Valley (The New New Thing), as well as an assortment of financial topics, all entertaining endeavors.
The important thing is that these are stories intended to entertain. They are not documentaries. ?Flash Boys? has a coherent story line, a timeline, a good guy, lots of bad guys, and even a happy ending. Michael has certainly honed his craft over the decades.
The hero, Canadian Brad Katsuyama of RBC, embarks on a crusade to discover the truth behind HF trading. He discovers a viper?s nest of greedy, dishonest, and often foreign programmers lining their pockets at the public?s expense.
He comes to the revelation that if he created his own exchange where everyone was honest, victimized customers would flock to it in droves. He does, they do, and the angels sing. The Investor?s Exchange becomes a runaway success. Bring on the closing credits.
I calculate that Lewis should earn about $22.5 million pretax on this venture (5 million books X $30 X 15%), which explains why he has such a nice home next door to me in the Berkeley Hills.
If you want to learn about high frequency trading, you will pick up a few salacious details.
You will learn that a company backed by Netscape founder Jim Barksdale spent $300 million to lay a fiber optic cable from Chicago to New York just to shave a few milliseconds off order execution times.
One HF firm hasn?t had a losing trade in five years. Oh, and they tend to say F*** a lot on Wall Street. Big revelation!
But you will gain anything but the history, the broader picture, or how HF trading actually works. There are far better books around that do that, such as ?Dark Pools?, by Scott Patterson. But it?s a boring read.
In fact, the stock markets are miles away from being rigged. The Wall Street tax is the smallest it has ever been. When I first started in the business in the early seventies, it cost 25 cents to get one share done.
Today the cost is infinitesimally small. It was the collapse of order execution costs that made services like the Diary of a Mad Hedge Fund Trader possible. My strategies don?t work with the big-ticket commissions of yore.
Wall Street has been shrinking dramatically for the past eight years, faster than almost any other American industry, except for maybe newspapers and coal. The profits are just not there to support the enormous staffs of the past.
If you don?t believe me, just try to get your kid a job in the industry. No one will touch them without five years of experience.
Notice that the brokers don?t have the yachts anymore. Today, they are all owned by hedge fund managers and private equity guys, and the boats are a lot bigger.
I think the whole HF thing has been wildly exaggerated by the media. It was a slow news day when the book came out, and the networks were desperate to say anything. Vladimir Putin invading another country is not exactly new news.
No one really knows how much these people make. The current rumored figure for the bunch is anywhere from $1-$10 billion a year. This compares to the present market capitalization of American equities at $23 trillion.
In other words, it?s peanuts. We?re really looking at a tempest in a tea cup here.
There are no public firms where we can dig into financials, and the big banks hide all their HF income under a ?miscellaneous? item in their income statements (I looked). Who knows what goes on in dark pools? That's the point.
If these firms were really the printing presses they claim, where are all the listed companies? Wouldn?t owners want to claim the IPO premium and sell out for a high multiple of book value?
Virtu Financial was just about to go public, but the deal was postponed when the market fell apart.
I was offered an opportunity to back a start up that was a precursor to HF in the nineties. Back then, they were exploiting trapdoors in the exchange execution software that had been inadvertently left open by the original designers. I studied the business model carefully.
They needed $15 million in up front capital, and an additional annual operating budget of another $15 million. There was a risk that the anomaly they were exploiting could disappear at any time. The regulators could declare their activities illegal.
Congress could tax them out of existence if they attracted too much attention, as they did in Japan. The Internet could go down, trapping them in losing positions. Or someone could just accidentally kick the plug for the computer out of the wall socket.
Having lived through multiple technology collapses here in Silicon Valley, I can tell you that used high-end computers fetch about 20 cents on the dollar. Used desks fetch about 5 cents. The safety net is a long ways down.
All of this to earn 0.1 cent on a trade? If I have the ability to earn 100% on a single trade, which I do, then why commit enormous amounts of capital and weather unknown risks just to make 0.00001%?
In the end, I decided that you would only want to engage in HF trading if you couldn?t do anything else to make money in the markets.
I passed.
The bottom line here is that high frequency trading carries far more risk than is portrayed to the public, and than they may even understand themselves.
Just ask the former owners of Knight Capital, who lost $442 million in a single day due to a software glitch and had to be diluted out of existence to keep from going under. That?s a lot of tenths of cents.
A software glitch! When I have a software glitch, my TiVo doesn?t work or my alarm clock doesn?t go off on time. I don?t lose well into 11 figures, get financially wiped out, and threaten the stability of the financial markets!
The sad thing here is that when the big exchanges went public in 2006 their focus shifted from serving the public to satisfying their own shareholders. The interest of the little guy got tossed out the window. There really is no one looking after the welfare of the general public in the marketplace today.
It?s every man for himself.
To buy??Flash Boys: A Wall Street Revolt??at Amazon, please click here.
?The best thing in life is to have a piece of work worth doing, and then to do it well.? said America?s 23rd president, Theodore Roosevelt.
Global Market Comments
December 7, 2016
Fiat Lux
Featured Trade:
(THE DECLINING AMERICA MYTH),
(AAPL), (MSFT), (BA), (WMT), (MCD), (GM), (F)
Apple Inc. (AAPL)
Microsoft Corporation (MSFT)
The Boeing Company (BA)
Wal-Mart Stores, Inc. (WMT)
McDonald's Corporation (MCD)
General Motors Company (GM)
Ford Motor Company (F)
Seems it has become fashionable to bash America these days. As I travel around the country hosting my strategy luncheons, I hear a lament that has become all too familiar.
America has peaked as a civilization, the story goes, and will follow the British, French, Roman, and even the Egyptian empires into the dustbin of history.?
Our standard of living is falling, technological prowess is fading, and military strength is weakening.
It will be just another generation before the Chinese take over the world and we will all be forced to learn Mandarin in high school, or somebody worse will take their place.
Such bouts of doubt, angst, and self-loathing occur every generation in America.
I received a big dose after the US withdrew from Vietnam in 1972. My dad felt the same after Pearl Harbor was attacked in 1941. So did my grandfather when the Lusitania was sunk in 1917.
The outbreak of the Civil War in 1861 was considered the country?s darkest day. And then there was the British burning of Washington in 1812. I remember it like it was yesterday.
I say horse feathers, bullpucky, and balderdash to all this talk.
When speaking to foreign governments, military leaders, and central bankers during my global travels I keep hearing a recurring theme.
The United States is still the great shining example on the hill. We are dominant in technology and increasing our lead at an accelerating rate. All I hear about are our country?s strengths.
Our economy can evolve faster than anywhere else on the planet. This is because no one can beat us at creative destruction.
Some 26 years into Japan?s stock market crash, they are still maintaining companies on life support at enormous expense, some 20% of their stock market capitalization. We cleansed our system in about six months.
And try downsizing outdated unions in Germany. We have cut the union share of labor from 35% to 15% in 30 years. Where else can someone with no money, but good ideas, become a billionaire in a couple of years?
Since I am a numbers guy, let me throw a few out there just to make my case. With a $16.8 trillion GDP, ours is triple that of contenders number two and three at $5 trillion, respectively China and Japan.
We are nearly four times Germany?s size at $4 trillion. Our per capita GDP is a staggering twelve times China?s. That means it takes 12 Chinese workers to produce an hour of output compared to our one.
This is why America?s per capita GDP stands at $53,041, compared to only $6,807 in the Middle Kingdom, and many Chinese have to work a 70 hour week to take that home.? They are supposed to be overtaking us? Even the Chinese laugh when I tell them this.
Some 18 of the world?s 50 largest companies are still US based, like Amazon (AMZN), Facebook (FB), Apple (AAPL), and Boeing (BA). But this understates the true picture.
Ours occupy far and away the highest end of the value added chain. Many of the rest scrape by copying or pirating our products. You never get ahead that way. Look no further than Apple which pays workers a minimal $15/day to build US designed products for sale at home with enormous profit margins.
It?s hard to find a strategic industry that we don?t dominate. US companies invented ?fracking? which has untapped vast new energy supplies, making the Middle East irrelevant. Saudi princes come here for their health care, not England or Japan. ?Globalization? has in fact become the polite word for ?Americanization?.
I was standing at Piccadilly Circus in London this summer when a bus stopped and unloaded 50 gorgeous high school girls. I couldn?t for the life of me figure out their nationality. They could have come from anywhere.
The teacher had a big rear end so I though maybe they were American. Then a kid lit up a cigarette and no one cared. Aha! French. They turned out to be the winners of a national English language essay-writing contest and the prize was a trip to the Olympics.
Let me just toss a few more tidbits out there:
*The biggest selling luxury car in China is a General Motors (GM) Buick
* iPhones, Ford Mustangs, and Katy Perry songs are pouring into a newly freed Libya
*Cubans and Iranians are erecting illegal satellite dishes so they can watch Law and Order
*Travel around Eastern Europe and all you see are blue jeans
*Over 70% of the drinkers of Coca-Cola are outside the US
*McDonald?s (MCD) has 10,000 hamburger stands abroad
*Microsoft?s (MSFT) Windows operating system runs 90% of the world?s computers
*London has 19,000 people a month joining Match.com
*100,000 readers a day pirate The Diary of a Mad Hedge Fund Trader, and even record a Mandarin version on YouTube
While the US has run big trade deficits for 50 years, we have a perennial surplus in services that goes unnoticed.
We remain the force to reckon with in banking and finance, thanks to the reserve currency status of the dollar. Transfer dollars from the UK to Japan and it has to go through New York. This isn?t changing in my lifetime.
The world?s wealthy and well connected have long sent their children to American universities. Six out of ten of the world?s best schools are here, matched only by Oxford, Cambridge, Tokyo University, and Beijing University.
You may be concerned about our rising level of national debt. Aren?t we under saving and over spending?
The credit markets beg to differ with you. With 30-year Treasury bond rates at 3.08%, the world is literally throwing money at us as fast as they can. With the long-term inflation rate probably at 2%, this means that our government can borrow money nearly for free!
Foreign individuals and institutions regularly take down more than half of our monthly government debt issues. With Europe in trouble, this trend is accelerating.
You have heard me talk a lot about demographics over the years. The US still has a modestly positive slope to its demographic pyramid which is the best in the developed world.
This means that we can expect an ever larger number of young consumers to drive economic growth, largely driven by immigration. This will lead to a new Golden Age for America in the 2020s which I believe will be a repeat of the 1950s.
Japan, Russia, and Europe suffer from a diabolical demographic outlook. China doesn?t look so hot either, thanks to its abandoned ?One Child? policy. They?re just not making young people anymore.
Since I am also an old and grizzled Marine combat veteran and stay well connected with the military establishment, let me tell you a few harsh realities.
Our military technology is the most advanced in human history, unbeatable, deeply feared, and is improving at breakneck speed. The American soldier is the best trained and most lethal ever deployed into the field.
Did you know that no Air Force fighter pilot has been shot down in 25 years, despite being almost continuously at war during this entire time? The next generation of US fighters won?t even have pilots, with drones carrying much of the heavy lifting in today?s combat.
The US now provides for the active defense of about half of the landmass of the world, double that protected by the British Empire at its 1914 peak.
Two decades after the end of the Cold War, the United States has no enemies of any real consequence.
According to the CIA, Al Qaida has been worn down to a mere 200 active members. The futility of their efforts, confining explosives to shoes and underwear show
how badly things have gone for them.
We have been doing this with ever declining amounts of money. The military share of US GDP has plunged from 50% in 1943 to 6% at the end of the Cold War in 1992 to 4.7% today.
Cyber warfare and drones are much cheaper than carrier groups and advanced fighters. If we spend less on weapons, the rest of the world will too. In a year, expect to start hearing about this a lot on your dinnertime news.
What about China you may ask?
They have had the blueprints of our most advanced defensive systems for many years now. But having a picture of a weapon is a long way from building one. They lack the technical expertise and the machinery even to copy what we already have.
In any case, everyone knows China is indefensible. Torpedo one foreign grain ship, and the country will be starving in six months. China will never pose a threat as long as they can?t live without us and we have all of their money.
The next time I hear we have the world?s highest tax rate I am going to scream!
I moved a company here from Europe 20 years ago because the actual taxes paid are low to non-existent. Just ask General Electric (GE) which pays a 3% tax rate. But hey, if this was easy, it would pay minimum wage, not ten figures, so I?ll take things as they are.
And the next time someone tells you that the US is history, consider that person a great short.
It is they who are headed for the dustbin.