Investor CAFÉ

How Important Is Trade? It’s ‘Yuge’!

“No nation was ever ruined by trade… The system of America is universal commerce with every nation; and war with none.” — Benjamin Franklin (1774, 1778)

Two weeks ago, I was a speaker on my first Forbes cruise, hosted by Steve Forbes. Another speaker was Mark Mills, an energy expert from the Manhattan Institute. He made a startling statement: “Trade represents two-thirds of the world economy (GDP).”

Was it really that big? After all, trade in the gross domestic product (GDP) data appears, on the surface, negligible. In general, GDP is defined as the annual value of the domestic production of final goods and services. Net exports (exports minus imports) is actually negative in GDP statistics. Why are imports subtracted from GDP? Because imports are already included in products sold to consumers, business and government and are subtracted out to avoid double counting.

Exports by U.S. firms represent almost 14% of America’s GDP. If you count exports plus imports (since they are done by different firms and individuals), trade represents 28% of the U.S. economy. It is even bigger in foreign countries. According to the World Bank, trade (exports plus imports) amounts to 60% of world GDP!

Another fact: trade between countries has been growing steadily since 1960, from 20% to 60% today. See the graph below.

trade

Source: World Bank, “Trade as a Percentage of World GDP, 1960-2015”

However, at the global level, adding exports to imports is double counting. In reality, exports (or imports) represent 30% of the world economy.

In any case, trade is YUGE, to quote President-elect Donald Trump.

In fact, according to the latest statistics, nearly half of all sales of the products of U.S. firms listed in the S&P 500 come from abroad! See the chart below.

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Most of U.S. corporate sales abroad go to Europe, Asia and Canada, and only a small amount to Mexico.

Lesson: Trade is a major source of economic growth and higher standards of living around the world. If President Trump’s policies interrupt this free flow of goods and services by imposing high tariffs and quotas on foreign goods coming into the United States, it could spell disaster and trade wars.

Benjamin Franklin said it best in 1774: “It would be better if government meddled no further with trade and let it take its course. Most of the statutes, acts, edicts… and placards of parliaments, princes and states for regulating, directing and restraining of trade have been either political blunders or jobs obtained by artful men for private advantage under the pretense of public good.”

Franklin added, “It is said by a very solid writer of the same nation, well advanced in the science of politics, who knows the full force of that maxim, ‘Pas trop gouvener,’ Not to govern too strictly, which perhaps would be of most use when applied to trade than in any other public concern. It is therefore wished that all commerce were as free between all nations of the world as it is between the counties of England: so would all, by mutual communication, obtain more enjoyments. No nation was ever ruined by trade; even, seemingly, the most disadvantageous.” (See pp. 300-301 of “The Compleated Autobiography by Benjamin Franklin,” compiled and edited by Mark and Jo Ann Skousen: https://www.amazon.com/Compleated-Autobiography-Benjamin-Franklin-Two/dp/1596985291.)

5th Edition of “Maxims of Wall Street” Now Available in Time for Christmas

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Good news! I’ve sold out of the 4th edition of “Maxims of Wall Street” and have gone back to press. Maxims has sold over 23,000 copies.

The new 5th edition — with many new quotes — is now available and will be mailed in plenty of time for the holidays. I’ve been collecting these quotations for more than 30 years, and I put them all together by category in this new edition. Alex Green (Oxford Club) calls it a classic. It has been endorsed by Warren Buffett, Bert Dohmen and Dennis Gartman (who keeps it on his desk and refers to it regularly).

Amazon sells it for $24.95, but you can buy it directly from me for only $20 for the first copy, and all additional copies sent to the same address cost only $10. Investors like to buy multiple copies as gifts. And I autograph each book and pay the postage to recipients inside of the United States!

It makes the perfect holiday or birthday gift to friends, relatives, business associates and your favorite broker/money manager. In fact, many have purchased an entire box — all 32 copies autographed — for only $300 postpaid to give to their clients and friends. As Hetty Green, America’s first female millionaire, states, “When I see something cheap, I buy a lot of it!”

To make your purchase, call Harold at Ensign Publishing, toll-free 1-866-254-2057. Or go to https://www.miracleofamerica.com/products/maxims-of-wall-street.

You Blew It! How the Average Investor Can Profit with the Super-Rich

“Deals like Hostess [Twinkies] helped make the men running the six largest private equity firms the highest-earning executives of any major American industry.” — New York Times cover story, “How the Twinkie Made the Superrich Even Richer,” December 11, 2016

Last Sunday, the New York Times reported how Apollo Global Management, a well-heeled private equity firm, made $2.3 billion by bringing back the Twinkie from bankruptcy in 2012. Apollo management forced the company to lay off workers, downsize and take on leveraged debt. CEO Leon Black and other executives were paid millions of dollars. Black earned $211 million between 2013 and today. They were paid largely through dividends from Apollo, rather than a salary of only $100,000 a year.

The newspaper also recounted in painful detail how union workers and other employees lost jobs as part of the downsizing required to bring Hostess back to profitability.

But the newspaper hardly mentions the fact that Apollo Global Management is a publicly traded company (symbol APO) that allows investors of all sizes, including those owning a few shares, to participate in this turnaround success story. Since refinancing Hostess, Apollo Global Management has paid out huge dividends every quarter. Since 2012, they’ve paid out over $9 in dividends, including more than $3 in 2013. This year, the stock is up 30%.

This is what we call democratic capitalism.

In case you missed it, I encourage you to read my e-letter column from last week about how the golden age of stock investing still lives on.

Upcoming Conferences

Join me for the MoneyShow Orlando

One of my first speaking appearances in 2017 will be at the MoneyShow Orlando, February 8-11, 2017, Omni Orlando Resort at ChampionsGate. Use my priority code, 042311, and mention it when you call 1-800-970-4355 to register.

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Steve Forbes, Jo Ann and Mark Skousen hold up last year’s issue of the Forbes 400 Richest People in America list with President-elect Trump on the cover. Mr. Trump spoke at last year’s FreedomFest.

My wife Jo Ann and I met recently with Steve Forbes (see accompanying photo), our conference ambassador, and he is excited about our 10th anniversary. It also happens to be Mr. Forbes’s 70th birthday that week, and we plan to celebrate his life and work. We hope you will join us for this most memorable FreedomFest.

To sign up, go to www.freedomfest.com. For the fabulous Danube river cruise, go to http://www.globalfinancialsummitcruise.com/?scode=035323.

The Year of the Businessman at FreedomFest 2017

Forbes, Fisher, Karlgaard

O WOW! Forbes Billionaire Ken Fisher and Publisher Rich Karlgaard to address FreedomFest for the first time! Next year will be the 100th anniversary of Forbes magazine, and we’re celebrating. Come join the festivities! B. C. Forbes, Steve Forbes’s grandfather, started the magazine in 1917. We’re going to have a special session on the impact that the founding Forbes had in business and investing with his grandson Steve Forbes and these experts: Ken Fisher holds the record for writing a Forbes column for 33 years, and is now a member of the Forbes 400 Richest List. Rich Karlgaard has been publisher since 1998. It will be their first time at FreedomFest, and you won’t want to miss meeting them.

Also joining us will be top financial gurus Jim Rogers, Doug Casey, Nicholas Vardy, Adrian Day, Alex Green, Dennis Gartman and many more. Keynote speakers confirmed include William Shatner (Hollywood’s entrepreneur), Robert Frank (New York Times columnist), Deirdre McCloskey (top economist and author), Conrad Black (Canada’s top publisher), Marc Eliot (Hollywood’s biographer) on his latest book, “Charlton Heston,” and, of course, our co-ambassadors Steve Forbes and John Mackey. Mackey will be speaking on his new book, “The Whole Foods Diet.” The event is not to be missed! For more details, go to www.freedomfest.com.

This is going to be our biggest and best FreedomFest ever, so now is the time to plan a trip to Vegas in July. We are expecting a record turnout, so I encourage you to sign up now and take advantage of our “early bird” discount — save $100 per person/$200 per couple over the registration fee — which ends on Jan. 15.

Our registration page is now up and running, so go to http://freedomfest.com/register-now/. You can also registered by calling our toll-free number 1-855-850-3733, ext. 202, and by talking to Jennifer, Amy or Karen. Call today!


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