Posts tagged ‘Hillary Clinton’
Don’t Fear the Free Trade Boogeyman
Are you having trouble falling asleep because of a ghostly nightmare? Donald Trump, along with a wide range of pundits and investors have been afraid of globalization and the free trade boogeyman. Donald Trump may or may not win the presidential election, but regardless, his inflammatory rhetoric regarding trade is way off base.
Free trade has been demonized as a job destroyer, however history paints a different picture. I have written on the subject before (see also Invisible Benefits of Free Trade), but with Americans digesting the current debates and the election only a month away, let me make a couple of key points.
Standard of Living Benefits: For centuries, the advantages of free trade and globalization have lifted the standards of living for billions of people. There is a reason the World Trade Organization (WTO) has united more than 160 countries without one country exiting since the global trade group began in 1948. Trade did not suddenly stop working when the Donald began lashing out against NAFTA, TPP and Oreo cookies. Trump rails against trade despite Trump ties being made in China.
Job losses are easy to identify (like the Oreo jobs moved to Mexico from Chicago), but most trade benefits are often invisible to the untrained eye. As Dan Ikenson of the Cato Institute explains, if low-wage labor was not used offshore to manufacture products sold to Americans, many amazing and spectacular products and services would become unaffordable for the U.S. mass markets. Thanks to cheaper foreign imports, not only can a wider population buy iPhones and use services like Uber and Airbnb, but consumers will have extra discretionary income resources that can be redeployed into savings. Alternatively, the extra savings could be spent on other goods and services to help spur U.S. economic growth in various sectors of our nation.
It doesn’t make for a nice, quick political soundbite, but Ikenson highlights,
“The benefits of trade come from imports, which deliver more competition, greater variety, lower prices, better quality, and new incentives for innovation.”
Strong Companies Hire and Grow: Plain and simply, profitable businesses hire employees, and money-losing companies fire employees. Business success boils down to competitiveness. If your product is not better and/or cheaper than competitors, then you will lose money and be forced into stagnation, or worse, be forced to fire employees or shut down your business. Free trade affords businesses the opportunity to improve the cost or quality of a product. Take Apple Inc. (AAPL) for example, the company’s ability to build a global supply chain has allowed the company to offer products and services to more than 1 billion users. If Apple was forced to manufacture exclusively in the U.S., the company’s sales and profits would be lower, and so too would the number of U.S. Apple employees.
Fortunately, no matter who gets elected president, if the rhetoric against free trade reaches a feverish pitch, investors can rest assured that the president’s powers to implement widespread tariffs and rip up longstanding trade deals is limited. He/she will still be forced to follow the authority of Congress, which still controls the nuts and bolts of our economy’s trade policies. In other words, there is nothing to fear…even not the free trade boogeyman.
Other Trade Related Articles on Investing Caffeine:
Jumping on the Globalization Train
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs) and AAPL, MDLZ, but at the time of publishing had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.
Politics & Your Money
Will you be able to retire, and what impact will the elections have on your financial future? Answering these questions can be a scary endeavor. And unless you have been living in a cave, you may have noticed we are in the middle of a heated U.S. presidential election campaign between Donald Trump and Hillary Clinton. Regardless of which side of the political fence you stand on, the prospects of your retirement are much more likely to be impacted by your personal actions than by the actions of Washington politicians.
Even if you despise politics and were living in a cave (with WiFi access), there’s a high probability you would be overloaded with detailed and dogmatic online editorials from overconfident Facebook friends. Besides offering self-assured predictions, these impassioned political pleas generally itemize the top 10 reasons your favorite candidate is a moron, and another 10 reasons why their candidate is the greatest.
Your friends’ opinions may have pure intentions, but unfortunately, rarely, if ever, do their thoughts alter your views. A reference from a recent Legal Watercooler article summed it up best:
“Political Facebook rants changed my mind…said nobody, ever.”
Nearly as ineffectual as political Facebook opinions on your politics is the ineffectual influence of presidential elections on your finances. For example, over the last four decades, stock prices have gone up and down during both Republican and Democrat presidential terms. The picture looks much the same, if you analyze the fiscal performance of conservatives and liberals since 1970 – debt burdens as a percentage of economic output have risen and fallen under both political parties. No matter who wins the presidency, many investors forget the ability of that individual to affect change is highly dependent upon the political balance of power in Congress. If Congress holds a split majority in the House and Senate, or the opposition party commands the entire Congress, then the winning presidential candidate will be largely neutered.
Rather than panic over a political loss or celebrate a candidate’s victory, here are some tangible actions to improve your finances:
- Organize. Typically individuals have investment and saving accounts scattered with no cohesive accounting or strategy. Get your financial house in order by gathering and organizing all your accounts.
- Budget. Spend less than you take in. Or in other words…save. You can achieve this goal in one of two ways – cut your spending, or increase your income.
- Create a Plan. When do you plan to retire? How much money do you need for retirement? What asset allocation and risk profile should you adopt to meet your financial goals?
If you have difficulty with any of these actions, then meet with an experienced financial professional to assist you.
Politics can trigger very emotional responses. However, realizing your actions have a much more direct impact on your finances than political Facebook rants and temporary elections will benefit you in achieving your long-term financial goals.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds and FB, but at the time of publishing had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.
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