“Wall Street exaggerates everything.” — Stock Market Maxim
Historically, wars have hurt the stock market. When Europe erupted in the Great War in the summer of 1914, Wall Street was closed for six months — even though the United States did not enter the war until 1917.
The markets also stagnated during World War II, the Vietnam War and the invasion of Iraq.
Wars hurt the economy because they are expensive and because they shift resources from productive investment to killing machines.
While the market wants to go up again, it is facing a new war — Trump’s trade war. And this one looks like it will turn out like how the war in the Middle East has been faring, never-ending with no good results. In the end, a trade war will cost manufacturers, farmers, tech companies, banks and airlines billions of dollars and will inflict consumers with higher prices.
President Trump’s trade representatives have promised that a new trade agreement with China will mean more U.S. exports and stronger intellectual property rights. However, the remedy may be worse than the disease if the negotiations with China ultimately result in permanent new tariffs, which are nothing more than another series of taxes on the people of both countries.
Fear the ‘Tariff Man’
The Smoot-Hawley Tariff was imposed in 1930 and worsened the Great Depression. Now Mr. Trump, calling himself “The Tariff Man,” boldly declared, “When people or countries come in to raid the great wealth of our nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power.”
Mr. Trump may not fully appreciate the benefits of trade as a tariff-driven trade war could set back the United States 80 years and hurt China’s economy as well.
There also is a growing fear that the Fed is raising interest rates too far, too fast. Investors have begun to panic and are buying Treasuries. The fact that the yield on the 10-year Treasury note has fallen back below 3% again raises the prospect of an inverted yield curve. That often portends a recession and a bear market.
Investors seem nervous and emotional these days and are choosing to buy or sell based on the latest news rather than on fundamental economic indicators.
As Ben Graham often said, “The market is a voting machine in the short run; a weighing machine in the long run.”
While this Trump trade war escalates, I suggest you use this opportunity to buy income-producing stocks at bargain prices. As I said in my headline in the December newsletter, “Income Stocks Perform Best During Market Sell-Off.”
A Great Christmas Gift at a Super Discount!
The holiday season is suddenly upon us. Want an ideal gift item that your friends and family will cherish?
I have two books that make great holiday gifts: “The Maxims of Wall Street” is the one and only compendium of financial adages, ancient proverbs and worldly wisdom — now in its 5th edition. It’s Warren Buffett’s favorite quote book!
Now is also the time to order “The Maxims” for the holidays at a special discount. Only $20 for the first copy, and all additional copies are $10 each. Half off! And if you order an entire box of 32 books, you pay only $300. If you order now, it is guaranteed to arrive before Christmas! Plus, I pay postage and autograph each copy.
To order, call Harold at Ensign Publishing at 1-866-254-2057, or go to www.skousenbooks.com.
The second book is “The Making of Modern Economics: The Life and Ideas of the Great Thinkers.” I ran a full-age ad in last week’s Economist (Nov. 24 issue), and the response has been amazing, with orders coming in from all over the world, including Sweden, Australia, Thailand, Brazil, Ireland and Afghanistan!
You can see the ad here: http://mskousen.com/2018/11/the-economist-publishes-new-ad-for-making-of-modern-economics/.
A British professor wrote: “I particularly enjoyed reading your lecture about writing the book. It really is a marvelous contribution. I have your book located right next to Adam Smith’s Wealth of Nations and Theory of Moral Sentiments, just where it should be.”
Another reader has written:
“Mark Skousen has done the impossible. He has made the history of economics interesting. His fascinating side notes bring the great economists to life as real people, and in his easy writing style he clearly lays out the evolution of economic thought over the last two centuries. Of great importance to me was his objective presentation of the dichotomy between big government, Keynesian, socialist, Marxist economic thought and that of small government, laissez-faire, capitalist and Monetarist thinkers. Understanding these ideas is extremely important today. Read this book!!”
One subscriber bought four copies as Christmas gifts. If you would like to order copies as holiday gifts, call Harold at Ensign Publishing at 1-866-254-2057, or go to www.skousenbooks.com. You pay only $35 per copy, and I pay the postage and autograph each copy. It is the ideal gift for students or anyone interested in politics, money and the great economic thinkers.
Good investing, AEIOU,
Cuba is hot as a destination! All cabins aboard the five-star Oceania Insignia for our November 9-16, 2019, cruise (next year) have sold out EXCEPT ours. And we have to turn back any cabins not sold by the end of December. I urge you to sign up now before it’s too late. This week-long trip to Cuba is special — we will be given a private tour in Havana by a free-market economist who actually lives in Cuba and will show us parts of “communist-controlled” Havana that no one else sees. This cruise is not to be missed!
Greg Galloway and I will be speaking on investing. Dave Phillips, president of Estate Planning Specialists, will be talking about estate planning in response to the Trump tax cuts. I also will be giving a talk on the important economic and cultural differences between Latin America and North America.
Plus, my wife Jo Ann, an English professor, will speak on Ernest Hemingway and Cuba. This will be a small private conference with ample opportunity to interact with the speakers and attendees. We’ve already sold over 20 cabins.
Please call Nicole at the MoneyShow (which is organizing the cruise), toll-free at 1-844-225-5838 for a free color brochure, which you can also access here as a PDF. Make your deposit NOW. Cabins are available as low as $2,399 per person/double occupancy, and the price includes airfare from getaway cities, free Wi-Fi and even a $400 shipboard credit. But you must act NOW if you want to join us.
You Blew It!
This President Made Us All Cynics about Politics
By Mark Skousen
Editor, Forecasts & Strategies
“Read my lips, no new taxes!” — George H. W. Bush, 1988
Amid the many accolades shared about the late president George H. W. Bush, let us not forget that he, more than any other president, made me and other people cynical when it comes to politicians choosing to make promises that they later ended up breaking.
It’s true that politicians before Bush often broke their campaign promises. President Woodrow Wilson got re-elected in 1916 partly because he swore he would never get America involved in the Great War. He changed his mind a few months after the election.
Lyndon Johnson warned America that Barry Goldwater was a warmonger and would get us into foreign wars. Johnson did exactly the same thing after he was elected in 1964.
Ronald Reagan was a tax cutter in 1981 and said he would not raise taxes. He then did so in 1982 with TEFRA.
The way George H. W. Bush made his pledge to not raise taxes in his acceptance speech at the 1988 Republican Convention seem like a personal commitment or a handshake in a business deal. There’s an old saying, “A man’s word is his bond.” Watch what he says before his famous words, “Read my lips, no new taxes,” and you’ll see what I mean: https://www.youtube.com/watch?v=CdX_lGn6GRY.
Bush was elected the 41st president, largely on his campaign promise not to raise taxes. Then, he did exactly the opposite in 1990. He signed a bill into law that raised multiple taxes and betrayed the American people.
No doubt it would have been tough for President Bush to stick with his promise and refuse to cooperate with Democrats who demanded tax increases. But he could have said, “I’m sorry, gentlemen, but I made a solemn commitment to the American citizens not to raise taxes. I cannot in good conscience violate that sacred loyalty to the American people. If that means no deal, so be it.”
Sadly, he made no such statement. Instead, he compromised. Not surprisingly, he lost in 1992. He violated his personal trust with the citizens of this country. Bill Clinton ran this very effective ad in the 1992 campaign: https://www.youtube.com/watch?v=Rr9rQGalFB4.
Clinton won, partly because of Bush’s betrayal.
President Bush’s decision in 1991 to raise taxes showed him to be a flawed individual, after he broke his pledge of “no new taxes.” Critics could claim he was neither a principled man, nor a genuine statesman.
Lest We Forget: The “read my lips” incident was mentioned prominently in cable news and even at Bush’s funeral yesterday (by former Senator Alan Simpson). Last Sunday, the New York Times published a six-page “special section” telling the long life and presidency of George H. W. Bush. The back page was devoted entirely to a New York Times announcement that its mission is “telling the full story on every topic.”
The full truth? The report by Adam Nagourney in the “national newspaper of record” focused almost entirely on Bush’s foreign policy work, and completely omitted any mention of Bush’s betrayal to the American people about taxes. Not a line. The incident had seemingly fallen into a “black hole” of history.