Amen of the Week
From Jack Ma, founder and executive chairman CEO of Alibaba, on the flawed logic behind today’s brewing trade war:
“The U.S. has a structural trade deficit with China because of the market forces of comparative advantage: Economies produce what they are best at making and import other things… American economic policy for the past 30 years encouraged U.S. companies to outsource labor-intensive manufacturing to China and other Asian countries while retaining the most valuable parts of American ingenuity: innovation, technology and brand… As a result, China became the world’s largest exporter, with a significant trade surplus. American consumers benefited from low prices and American corporations made giant profits.
There’s no better example of a beneficiary of this symbiotic relationship than Apple. The company designs the iPhone and develops proprietary chips and software in California… While countries like South Korea and China collect revenue from selling components and assembling the final product, Americans make almost all of the profits. Apple’s $48 billion of profits in fiscal 2017 will not make it into the balance-of-trade calculation.”
Bonus Runner up
From Peggy Noonan, one of Reagan’s speechwriters:
“Often when I speak people ask, at the end, about Ronald Reagan. I often say what I’ve written, that a key to understanding him was that he saw himself in the first 40 years of his life—the years in which you become yourself—as an artist. As a young man he wrote short stories, drew, was attracted to plays, acted in college, went into radio, and then became a professional actor. He came to maturity in Hollywood, a town of craftsmen and artists. He fully identified with them.
The thing about artists is that they try to see the real shape of things. They don’t get lost in factoids and facets of problems, they try to see the thing whole. They try to capture reality. They’re creative, intuitive; they make leaps, study human nature. It has been said that a great leader has more in common with an artist than with an economist, and it’s true.”
Chart of the week
I'm not sure this image does justice to the striking numbers underlying it. Since 2008, the population of age 65 & older Americans has increased by about 25%. It's the aging of the Baby Boomers. Meanwhile, we're having fewer babies.
Stat of the week
People over 65 years old will outnumber children by 2035. (Per the US Census Bureau)
Why this matters: If the population of productive workers slows – or worse, shrinks – this creates a tough headwind to the economy. That means productivity must increase by more than enough to compensate. I’m an optimist that longer term this can happen with the proper policies in place, but it’s sobering to see that productivity has also stagnated since 2008. So we need to either work harder/smarter, have more babies, or do more to open our borders to the world's best and brightest. A mixture of all 3 sounds like a good recipe to me!
Yours in the Field,
Frank Byrd, CFA
Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein.