Tuesday, November 22, 2016

Next year all these phonies will claim they wanted this all along.

Every time I hear someone call Trump an isolationist I go over and look to see what the dollar is doing. And I just laugh inside and wonder if they are ignorant, or willfully ignorant. I'm guessing both.

For a few months(maybe since summer), I've been saying that I thought the dollar would become very strong if Trump won. And that seems to be playing out. This economy has been basically plagued by a vote of no confidence with the Obama Administration. And that is all about to change. I think the dollar becomes much stronger. But while this sounds awesome on the surface. The reality is that when the dollar is so strong our exports take a hit. 

Globalism isn't an infinitely expanding pie. Unless the Middle East all of a sudden decides they want to work. Only then will Globalism will take another step  forward. Americans were sort of okay with all of their jobs being off shored because we got cheaper goods from abroad. It sort of tricked them into not caring as much that their wages were not going up  because their paychecks were still going farther than they did before. But China is becoming a mature economy. The benefit of off shoring plateaus and this is where we find ourselves now.

I think when Trump "forces" companies to stay here it will be a huge sigh of relief for most of corporate America. And I say "force" a bit tongue is cheek because it's sort of a con. And I will tell you why. 

First of all, if he does manage to reduce the tax rate. He isn't going to have to force anyone to do anything. They will be falling all over themselves to set up shop in America. (which also BTW will cause the dollar to strengthen more)

Second - since I go to a lot of emerging technology talks I hear a lot of horror stories involving China. Just this year I heard someone guy talk about how the failure rate of Chinese goods is still very high. I should have a number to quantify that, but basically my brain explodes with - how is that still a problem? China has been doing manufacturing for a really long time now. And then I forget to mentally take notes on the numbers. But anyway, I think manufacturers would die to onshore. And Trump gets to talk tough, while letting people do what they naturally want to do anyway.


  1. We buy from China and our failure rate tends to be about 3 percent for electronic circuit boards. Not great, but at 25 percent of the US cost, it's not bad. The quality of the components like capacitors and resistors is 100 percent as far as I can tell. From my standpoint, the 15 percent rate will be yuge. Because LLC income flows to the individual tax return now (s corp) Our net income us essential taxed at a middle class bracket. If the LLC pays the 15 instead it will cut my tax bill in half. Seems like this structure would encourage small startups and partnerships over the larger corp structures because once you have too many partners the s corp won't work. Of course the devil is in the details, but if individuals and small groups are incentivized to form, I'm not sure whether that helps the economy of will hinder it. I think it's an open Question for now, even if it definitively helps my personal economy. DF

  2. I'm curious why do you think it could hinder it?

    I think nothing in the world would be better than startups - starting up. That is the air Silicon Valley lives on. All these big companies have nothing but sharp elbows. Their unnatural influence on the market right now is toxic. They are loving it because they can do anything they want. What are you going to do about it? If you don't let the little guys in - the big guys call the shots and no one can bring them down.

    For example this bullshit trend of us not owning our devices anymore. Samsung
    went from downloading "essential OS" updates to thinking they can download Shazam and Yelp for me any time they want. WTF is that? And no - I can't even keep my phone OS out of date if I want to. They can only do bullshit like that because there is very little competition. These companies own us in ways that are completely unnatural. Let the small guys flood in. The world will be nothing but better for it.

    It seems to me that if you got a 15% tax rate and a better failure rate - maybe you
    could hire a guy to do your deliveries. But I don't know what your particular situation. On paper I'd be giddy if that were my future.

    There are a lot of "if's" in there. But at least it's better than the pound sand we were getting before.

  3. I hear the Chinese failure rate is usually based off order size and how unlikely you are to be able to sue them. If the agreement is in Chinese law your only option is to take them to civil court and sue them. So if you aren't a huge company you probably can't afford to take them to task. So say you place and order that sends them $40,000. That Chinaman is only going to make like $10,000 the whole year doing his job. He takes your money and runs you probably aren't going to be able to do anything about it and he made way more than he was going to being honest. That's what I've read anyways.

  4. I can't speak for others, but our company has been a killer for our competition. Because we're lean and mean, we've been able to offer our product at a fraction of the price. Great for us, but a value destroyer for a big business. If you run a law firm with 200 attorneys you can afford all kinds of perks. If your attorney start spinning off into comper it or and take your clients because they can be independent and taxed at 15 or work for someone else and pay 45, they will pick lower taxes and offer services at a lower price. In the macro view, I wonder if this wI'll be bad for the overall economy. I also think you get a higher flame out on the startups and a lot of money would get wasted. I'm not entirely convinced it would be bad, I just don't know if economists would think it was good or bad to incentive people to work for themselves instead of the collective. DF

  5. Dashing -

    Huh. That's an interesting comment. Silicon Valley seems to be hip to that because it sounds to me like all these orders are insured now. The little guy doesn't need to sue them because large insurance companies will do it for you. So while you are ~eventually~ made whole, you waste a ton of time. I've heard of whole batches needing to be redone. To me it looks like insanity.

  6. DF -

    Well, frankly, economists are often narrowly bright. If the small guy is putting big business - out of business - that company is either going to learn to be more efficient or die. Being more productive makes our economy stronger not weaker. By definition if you are putting the big guy out of business - that company is not efficient enough and the small guy is better for the economy. It doesn't matter the size of the company, it only matters how efficient you are.

    The big guy can pound sand if he can't hack it. And the more big business uses their sharp elbows to keep the small guy out, that company can become less and less efficient because of lack of competition.

    Just remember - there is ALWAYS a young buck waiting in the halls to prove how more efficient he can make things if he ever gets the chance. That is the cycle of life.

  7. Talk of economists reminds me of this:


    Principles of economics, translated
    Stand-up Economist

  8. I like that one. I have just been really frustrated with Economists since the recession.