A couple recent stories I read, both seemingly unrelated, got me thinking.
Is it possible nowadays that a trade war could turn into something even nastier than it has in the past? Something closer to real war, like cyberwar?
Here’s what I saw.
First, recently New York City was hit with outages at 6 a.m. followed by outages in Los Angeles and San Francisco later in the morning. The San Fran outage was blamed on a “substation fire.” They were widespread outages that affected transit systems.
Second, the Trump administration announced that it is exploring whether steel imports represent a threat to national security. A conclusion of “yes” would mean steel tariffs or even embargoes on foreign steel. Trump’s administration has already said it will impose an anti-subsidy 20 percent tariff on Canadian soft wood lumber.
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There’s a lot of talk about the coming disruption of the Robot Age.
But the thing is, robots are here. They’ve been here for a while now, even though most of us don’t see them on a day to day basis. Finding them may be easier than just looking at an auto production line, which is the standard media example of robotics in action.
However, that’s the standard because automation is at the heart of robotics, so a “robot” might not be a machine that looks somewhat human. It may be a complicated machine that can replace what humans have been doing.
For example, I recently wrote a couple articles on the transition of dangerous manual labor in the oil and coal industries. Basically, automation is taking over the jobs that used to be the domain of brave workers risking life and limb in a mine or on a rig.
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We moved out of the big city a number of years back to a smallish city in central Virginia.
Every year, as spring returns, I notice a big difference between home now and home back then. There is a balance of nature that goes on now.
The bugs come out, and the bats come out to eat them. The mice and voles are born, and the snakes, fox and owls are there to greet them. Black snakes keep away the copperheads and water moccasins (and keep the mice out of my house).
On many occasions living in the suburbs, I would walk outside in the evening into my backyard and be eaten alive by mosquitoes. There were no bats, no barn swallows. It was a monoculture of about three types of trees, six bushes and two grass types.
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I tend to find myself, in this “Internet Age,” wandering off on tangents when I have the luxury to read. I’ll start with one article and then think about a connection, then another and another until I’m so far afield I can’t remember where I started.
But these journeys into the electronic woods of information are also very helpful because they help clear my mind of directly looking for something, retrieving it and moving on. I can see relationships better and get a deeper understanding of the forest as well as the trees.
So, on two recent adventures into the e-woods, I stumbled across two very interesting spreads that don’t look very good for the U.S. economy or stocks in coming months.
Dow’s Rule No. 4
The first I discovered after a conversation with a colleague about Dow Theory.
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I stumbled across a very interesting chart the other day.
Apparently, this graph was put together by Jon Gabriel using U.S. Treasury and Congressional Budget Office data, so the numbers are about as credible as you can find (which may not be saying much).
If you have had a sinking feeling for the past number of decades about why it has felt like the U.S. economy wasn’t really moving in the right direction even before the financial crises in 2008, this will fill in that feeling with facts. Very disturbing but inescapable facts.
Here it is:
And this is just up to 2013. It has gotten no better since then.
Sure, worry about the deficit. Argue about entitlement programs.
The owners of all this consumer and commercial debt are happy you’re not looking at the real problem because now they don’t have to do anything about it but profit from it.
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There’s an old Buddhist story about leadership. A student approaches the Buddha and asks how should one lead most effectively.
The Buddha replies that there are three ways to lead. One is in front like a general leading his men into battle. The second is as a ship’s captain, who goes with his crew on the journey. Third is like a shepherd, where the flock is the priority and the shepherd follows them to keep the flock together.
The Buddha then says that a wise leader knows when to use each of these approaches.
Recently, after the bombing campaign in Syria, there’s a lot of talk about Trump deciding to lead us from the front as opposed to leading us from behind, as his erstwhile predecessor did regarding Syria and other military hot spots.
But as an investor, my interest is more where we are being led to, rather than the position of the leader.
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The Organization of Petroleum Exporting Countries (OPEC) is witnessing its final hurrah on the world energy stage.
In late 2014, OPEC made a bold move that in retrospect will be the historic turning point in the oil cartel’s command of the global oil markets. This will also hold significant implications for U.S. dollar, but for now, let’s look at where we stand in the energy patch.
OPEC basically brought together all the Middle East oil producers, along with a few countries from South America and Africa. Three decades ago the cartel made a lot of sense since it was the main commodity that these countries could sell to the developed world.
And because few first world nations had much interest in developing their own reserves, it was good relationship for both sides. The oil embargo in the 1970s started to change that view, especially for the U.S.
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