Rounding Up Reality

In order to make sense of the economy, we need to lay out some corner posts and then corral our thoughts inside them.  

Most mornings, you can easily enough pick out four corner posts of the day by simply skimming the headlines.

For today’s Reality Corral, we have selected the following:

“IHS becomes latest company to give up US citizenship for lower taxes.”

“5 Reasons the Retirement Crisis Is Getting Worse for Average Americans.”

“Asian shares wobble as Fed rate talk revives.’

And “Indonesian Taxi Drivers Hit Streets in Protest of Ride-Sharing Apps.”

Sure, we could toss in about the 26 (and climbing) dead from the bombing in Brussels this morning, but passing stories about terrorism are always sprouting up these days.

No, the task for the (partially) sane investor is to slice and dice things in order that they make sense and might be transformed into a basic investment decision.  Since we have been expecting new all-time highs to be along by May, or so, it is also useful to perform a reality-check like this periodically to see if our beliefs about the future have broken loose from their moorings.

1.  The fact is that the US is not a good place for major corporations to be domiciled.  The IRS audit potential – not to mention how they are not fond of crooked books – makes offshore havens much more appealing.  We’ve discussed various ways banks (Grand Cayman  and Grand Turk) have offshored a lot of their dough.  And more and more formerly US companies are doing the same.

The reason is simple:  You can report in a much more favorable way.  And next week, with the Investment Association of the UK announces that quarterly reports should end for the 100 largest companies in England, we expect there will be a similar corporate move here.

The problem comes back to the US not having a tax-equity plan that will actually level the playing field between off-shore made goods and those Made in America.

Until we get that right, we expect the tax exodus will continue – and sure enough, no one seems to be interested in even discussing the lumber for that whole side of the revenue corral.

2.  That Time article on retirement is a good read – if like us you are pretending to be retired.  But in addition, flip over to the Employee Benefit Research Institute page here and download their 2016 retiree survey.

What comes through is that if you have a 401k you’re probably doing alright.  And, due to the fine voting turnout of seniors, the political power is still running with the “grays” to keep Social Security from being dialed back for a long while to come.

The conundrum begins to appear though:  How long can we continue to “have it good” for the average worker by some metrics, yet a “retirement crisis” that is getting worse by Time’s report?

The answer is simple:  Bad tax policy and a failure to tax imported goods to an equivalent cost level of what goods could be made here for.  At some point it all ends badly, but our outlook to the 2017-2018 area remains unscathed.

3.  The short Asian wobble and the bombing in Europe may cool the markets a bit.  Remember, though, we have two realities in background manifesting here.

One is that terrorism is still being taught/preached/ or programmed in a lot of Muslim  countries and until that changes, our future will be filled with exploding people.  Close to home is likely safer and that spells a gradual decline which can be expected for tourism.  For now, cruise ships, rather than jetting off to Europe make a lot more sense to us.  And the Caribbean is a nice place…

My friend Robin Landry and I will be getting together (not coincidentally on April Fool’s Day) to map out whether we should do another UrbanSurvival cruise of the Caribbean.  The last trip on RCCL was a lot of fun…comments on whether you’d be interested are welcome.  No, there’s no sale of anything.  It’s just an excuse to travel and talk markets and not have the damn telemarketers calling us every 10-minutes.

We’re fortunate to have Panama around to watch the place in our absence.

The second reality is that the Fed has jammed on the brakes with creation of M1, while broader measures of money M2 and beyond, are still fairly robust.  This should end the phenomena which has been in place for a good while now, namely things you need becoming more expensive, things you don’t are getting cheaper.

Couple that with the rising price of gasoline, and the Fed will have a difficult time in coming month not raising rates.

Although they stick their heads up their (fill in the blank) insisting that food and energy prices don’t matter, they seem to jet around and eat pretty well, so I don’t understand how far they can press the discussion of “core inflation” which is not likely, as I read it, to drop too much further.  At least in the USA.

The Triple A Fuel Gauge report reckons the price of gasoline is still under last year’s ($2.24’sh versus today’s $1.94) but the prices have firmed 27-cents in the past month and that will eventually pass-through as an inflationary nudge that can’t be denied.

For the whole-year, we’re thinking about 2.8% in terms of real inflation.  No telling what “core is” but it’s a useless number you can’t budget household spending to.  Which is another reason we’re down on it.

In tomorrows www.peoplenomics.com report, we will do our monthly assessment of the overall economic picture – and that, in turn, will color how we look at all those charts we produce twice weekly using our unique way of looking at the world as a whole crooked casino, instead of trying to break out performance of each area of the casino floor like that explains anything.

4.  The last item to note is the taxi drivers in Indonesia because that kind of protest will come here.  At least in the big cities.

What this means – and it is a biggie for Uber and Lyft – is that the new way of being in the hyper-connected world will continue to be resisted by supporters of the old paradigm which have already carved out business models that they are unwilling to change.

Axiom around here is “When business models collide, conflict occurs.”  It’s true in foreign affairs, trade, and even in the streets of big cities.

There.  Nice short encapsulation of data that could matter.

Futures down 50, gold up 10.  Snoozer of a day.

The Politics of it All

Article in the NY Times about how Donald Trump Pushes Serious Image in the Capital is worth a read.

The fact that Trump has come out firmly in support of Israel may precede a media change of heart from the recent serious Trump-bashing, but we shall see.

Also worth reading (regardless of whether you’re a Limbaugh listener, or not) is the analysis piece here outline how the “GOP Establishment Club Plots Guerilla Warfare to Take Down Donald Trump.”

It happens to fit nicely with my view that both political parties have been co-opted and have nothing to do with fidelity to Constitutional concepts.

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On the other side of the aisle, still no indictment of you know who.

But we also note that Elizabeth Warren is looking a lot more Presidential that you-know who.  Enough so that she and Trump are tiffing.

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Keep an eye on disclosure documents as a key state senator in Massachusetts has come out again marijuana law reform in the Bean Town region.

We always find it “instructive” when people once open to pot change views.  In some instances, it’s not beyond the realm of possibility that alcohol lobbying influences have worked in the background. 

The reality is, in all the data I’ve seen, pot is no more dangerous that booze and maybe safer.  But reasonable weed reform seems unlikely here in Texas where punishing users has been a highly profitable business model for the corporation prison operators and the self-righteous pulpiteers.