Monday, February 29, 2016

Value Investing – Good or Bad? - Advice for Trump

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Advice for Trump

Armstrong Economics

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Advice for Trump

Blog/2016 U.S. Presidential Election
Posted Feb 29, 2016 by Martin Armstrong

QUESTION: Mr. Armstrong; Why do you not advise Trump as Rubio and the Media demand details from him but not from anyone else as to their economic plan?


ANSWER: I do not advise Trump. If he really wants to make an impact, he should watch the “Solution” DVD. If he demonstrated that we need major reform because we are going broke under the management of career politicians, then he might attract more people who are on the fence. Let’s be realistic. Those supporting Trump distrust government politicians. They really do not care about his message. I would prefer Trump, not for any policy, opposed to any career politician who would bring the same line of thinking to the table. A career politician will not think out of the box and will blast us with more regulation and taxes that will kill the economy. They will continue to hunt money until nothing is left for us but total enslavement, and that does not matter if we are talking about Rubio or Hillary.

Obama stuffed Christine Lagarde in the IMF and that has been far more devastating than any appointment to the Supreme Court. She has destroyed the global economy by threatening countries to hand over their info on everyone (except exempt politicians like her, of course) so they can hunt money absolutely everywhere. They do not look at the net result and only look at the world through their own greedy eyes. I would hope Trump would look at this as a businessman and say, “You people are nuts.”

The standard of living for families is declining — not because the “rich” are making more from investment — because the government continues to raise taxes and rob our savings that they pretend are there for retirement. In reality, they keep lowering benefits because they stole all the money. Anyone in the private sector who did this would be in jail. We are prosecuted for fraud in the private sector, but fraud in public sector is rewarded and called “politics.”

Advice for Trump

Eliminate all taxes whatsoever if you are not present to use such services. Eliminating taxes would allow for greater savings, and citizens would be required to save a portion of their income. Instead of QE for bankers, eliminate taxes and try QE for the people.
We will not raise the minimum wage. Instead, we will eliminate payroll taxes and stop borrowing from the poor as it robs them of interest. Currently, they receive a refund check so they think politicians are fantastic.
No person should have to pay more than 15% of their salary to state and local government. If a government needs more, then something is wrong and they need to reform.
Eliminate property taxes. You should be able to retire without having to cope with rising property taxes.
Eliminate Social Security for those under 50 and pay out those over 50. Replace Social Security with mandatory 401K investment plans.
Eliminate domestic corporate taxation. This will provide the incentive to bring jobs home.

Government spending and policy:
Stop government borrowing. Limit the creation of new money to 5% of GDP (I do not want to hear that will be inflationary since QE failed to produce inflation, which is all about confidence and not the quantity of money). At times, up to 70% of the national debt has been accumulated interest.
All government pensions must be eliminated. Part of the QE process should be the bailout of pension systems for government workers and end the process.
Retire the national debt; stop borrowing federally and competing with the private sector for capital.
Return the central bank to the original design of 1913. Eliminating government debt will do the job. During economic declines, the Fed should buy corporate short-term paper with its “elastic money,” which will compensate for banks when they stop lending. Short-term corporate paper would actually be paid off and that would then contract the money supply back to its original state prior to the crisis.
Merge SEC & CFTC so advisers can provide advice on the best investments rather than just what they have a license for in equities vs. futures.

Judicial reform:
Judicial reform is mandatory. I would retire ALL federal judges and nominate replacements by their legal profession. Penalties for bribes and such would be life imprisonment or death — the person the judge illegally sentenced would choose.
Expand the Supreme Court and make it an ABSOLUTE right to be heard rather than winning a lottery. Moreover, a panel of judges nominated by the legal community shall determine the constitutionality of ALL legislation BEFORE it is enacted. It should never be the burden of the citizen to PROVE the government is acting unconstitutionally. The Constitution is NEGATIVE and was intended to be a “restraint” upon government. ALL LIVES matter — do this and they will.
Reform the Grand Jury process. Both sides should be allowed to present ALL evidence to the Grand Jury and they alone will decide to indict. State prosecutors who protect police should be in prison.
Restitute the Roman position of Tribune of the people. The Tribune would be citizens who prosecute government employees from police up to judges and politicians. Then, and only then, will the system clean out.

Education reform:
Forgive all student loans and end subsidization for college. Without competition, the education is worthless anyhow.
Restore the Roman system of apprenticeship. In Switzerland, less than 10% of students go to college. They enter an apprenticeship in the field they desire. Learning in the real world is far better than theory.

Healthcare reform:
Reform lawsuits that cap jury awards to reduce medical costs
Introduce artificial intelligence systems that can provide reliable diagnoses. Hospitals are turning into big corporate businesses that reduce family doctors.
Eliminate medical expenses as a liability so they cannot take someone’s home or put them into bankruptcy (opposite of what Clintons did to students). This will cause healthcare to have a normal business cycle. The current healthcare system is an extortion that is like government consuming a larger proportion of disposable income. Return hospitals to their Hippocratic Oath and FIRST take care of anyone irrespective of money (i.e. end Obamacare).

Eliminate TSA at airports. You would be cleared as to whom you are, and there would be no need for x-rays or strip searches if you are known to be a normal citizen. Foreign visitors should go through TSA if they do not have prior clearance.

This is the start of my short list of policies that I would advise Trump to adopt. Then he just might beat everyone in history with the percentage of the popular vote exceeding 65%.

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Value Investing – Good or Bad?

Armstrong Economics

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Blog/Basic Concepts
Posted Feb 29, 2016 by Martin Armstrong

QUESTION: Do you think value investing is viable in today’s chaotic markets?

Much appreciated


ANSWER: No. Value investing has been a recipe for wild swings. If you do not have the stomach for long-term then it is not something to get involved in. It should also be noted that it resulted in bankruptcy pre-World War II for it could not cope with the Great Depression. The town I grew up in had a Main Street. My father’s friend mostly owned it. Why? He had cash at the bottom of the Great Depression and bought it all up at distressed prices. With time, it was a great trade. However, he bought the low and most people buy the high and cannot survive the swings. We are entering the most chaotic period in our lifetime. Surviving this is more than just putting gold coins in your sock drawer. The strategy has to be comprehensive and you MUST understand what is going on globally to come out the other end.

Here is the opening paragraph from a 1997 transcript of a conference we held in London:

“For most people the real issue at the moment is are the stock markets too high? How do we determine value? Back in 1994, I met a lot of value investors in Europe and said that our models were showing the market was bottoming and we were looking for the Dow to go to 6,000 by 1996 with an outside chance that it would go to 10,000 by 1998. They thought we were crazy and said the US markets were overvalued at their 1994 level. Some of them went into cheap assets in Russia and South East Asia and subsequently lost up to 70% of their portfolio. So the question of value appears very subjective but it is critical to understand. Really the question of value is defined by the monetary system within which we operate. Throughout history we have had broadly two types of system – a fixed exchange rate system and a floating rate system. The current floating rate system was born in 1971 but it is by no means the first time we have had such a system. Gold bugs argue that the only way we will survive is to return to the gold standard but this has not prevented panics in the past. Money is really the language that allows the transfer of wealth back and forward through commerce. Value is more to do with the tangible assets.”

I seriously doubt that value investing will work for the average person in the period ahead. It has been part of the theory that gold rises with inflation when it does not (see Forbes study). Do not get me wrong. Since the S&P 500 penetrated last year’s low, we are setting up for the Slingshot to the upside. Such moves unfold as confidence in government and central banks collapse. The computer will pick the timing and the Global Market Watch may pick the pattern. Then it will be time to jump in for the ride.

We still see the Dow at the 23,000 and exceeding that area with the potential to reach 40,000 remains viable for 2020-2021. You must understand, however, for that to unfold confidence must collapse in government. We are witnessing this trend unfolding. I posted an interesting article in Forbes that shows that people are starting to trust the private sector more than government. This is why Donald Trump is soaring in the polls. This is all about government losing credibility, which will cause private assets to soar and public to decline.

Categories: Basic Concepts

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