Deport-o-Rama: N Koreans in Canada

♠ Posted by Emmanuel in at 12/12/2017 07:43:00 AM
On the face of it, this news item is rather dispiriting: what kind of heartless people would deport North Korean refugees? Somewhat more promisingly, it's not as bad as it sounds. Rather, authorities in Canada are looking into those who gained entrance into Canada based on dubious stories. Since North Koreans are granted automatic asylum in South Korea,  it is their belief that they would be "safe" there anyway if Canada refuses their applications:
Hyekyung Jo, a North Korean defector living in Toronto with her husband and sons for seven years, had hoped to remain in Canada as a permanent resident.

Instead, she and as many as 50 other North Korean families residing across the GTA [greater Toronto area] recently received letters from the federal Immigration Department informing them that their requests for permanent residency are poised to be revoked. They face deportation to South Korea — a place that Jo said is hostile to North Korean nationals.

Part of the issue identified in the Oct. 30 letter that Jo and her husband, Myungchul Kang, received is this: the South Korean government automatically grants North Koreans citizenship. Canada recognizes South Korea as a safe haven for refugees.

Another issue: Jo admitted at a Saturday news conference with other affected families that she and her husband weren’t truthful when they arrived in Toronto as asylum seekers in 2010. They told refugee board officials they’d travelled directly from China when, in fact, they’d lived for several years in South Korea.
What's so bad about living in South Korea? Many folks around the world would jump at the chance of living there...but the story is more complicated for North Koreans. Indeed, the North Korean refugees in Canada cite safety concerns as well as discrimination:
Progressive Conservative MPP [member of provincial parliament] Raymond Cho, who is originally from South Korea, attended the news conference. The PC immigration critic and representative for Scarborough—Rouge River said his native country can be a difficult place for North Korean defectors, who often experience discrimination at school and while seeking work.

That occurs partly because North Korean dialects are distinct and set them apart from southern speakers, Cho said. In addition, South Korean documentation, such as social insurance numbers, identifies North Korean nationals on paperwork that employers can see.

“It’s almost impossible to get a good job,” Cho said. “That’s the reality.” Cho told the crowd of about 200 people that North Koreans who don’t thrive in the South look elsewhere, to places like Canada.
Elsewhere in the article, the problem identified is that immigration brokers had told many defectors to lie about their situations to gain Canadian asylum, and those that did so are now facing deportation. It's a hard choice to make, I think: does possibly being led to lie about one's circumstances outweigh the purported discrimination North Koreans encounter in South Korea?

PRC‘s Trump Appeasement: Import Expo 2018

♠ Posted by Emmanuel in , at 11/29/2017 04:42:00 PM
He likes military pomp, but does Trump also like "import expos"?
I almost forgot about this post: In the run-up to Trump's recent swing through Asia, Chinese apparatchiks devised something that they hoped would appease the orange-colored menace. Since he keeps complaining about China's massive trade surplus with the United States, why not host an "import expo" designed for foreigners to show their wares in the mainland? 
In response to questions from Bloomberg News, China’s Commerce Minister Zhong Shan laid out a list of measures being undertaken that could help narrow the $327 billion gap, America’s largest with any nation. China will host its first-ever import fair in November next year, and will roll out tax, fiscal and administrative initiatives aimed at helping foreign firms sell more into what is becoming a big and sophisticated consumer market, Zhong wrote.

Slated for Shanghai in November 2018, the China International Import Expo (CIIE) reflects China’s “sincere wish to open its market to the world and its sense of responsibility as a big country to push for an open world economy,” he said. The “In the coming five years, (China) is expected to import over $10 trillion of goods and services,” Zhong wrote.

The import fair “with its potential to increase exports for countries around the world and enable the trade and economic cooperation between China and the rest of the world, will offer broad prospects for development.” In the past half decade, China’s imports from the rest of the world have totaled about $8.9 trillion worth of goods and services, according to IMF data.
This expo is designed to appease other PRC critics as well. Lest we forget, they are legion aside from the Americans:
U.S. and European trade officials have complained for years that despite China’s promises to open up, tariffs, intellectual property theft, forced transfers of technology and other rules that target foreign companies make doing business there difficult. The access afforded Chinese companies into their own markets provides a further rub.

The deficit “has to come down,” Trump said Monday. “And that has to do really with free trade, fair trade, or reciprocal trade. And frankly I like reciprocal the best of the group.” Still, the countries remain at odds over the causes and impact of the trade imbalance. China blames a “surplus transfer,” which Zhong says is the result of how global trade is organized. China frequently acts as the final link in a manufacturing chain where parts are made in multiple countries before being finally assembled -- and exported -- from there.
Is this trade expo ploy working? Earlier today, the US Commerce Department hit the PRC with a trade investigation concerning aluminum not originating from industry complaints. This is an infrequent occurrence:
The Trump administration, invoking powers the U.S. hasn’t used in more than a quarter century, began a probe into Chinese aluminum imports that could lead to tariffs. The Commerce Department is taking the unusual step of initiating the case itself, rather than going through the regular route of starting an investigation based on petitions filed by U.S. companies. Shares in Alcoa Corp. and Century Aluminum Co. jumped on Tuesday.

The investigation covers imports in common alloy sheet, which totaled more than $600 million last year, and was initiated using authority granted by the Tariff Act of 1930, the Commerce Department said Tuesday in a statement. China responded Wednesday by saying the move was “rare in the history of international trade.”
Go figure. If trade relations worsen further, I'd doubt whether the Chinese would be as enthusiastic about this bit of trade appeasement After all, it's still scheduled to be held in November 2018--a long, long time from now in the ever-changing global political economy.

Trump's Bigotry & Disappearing US Int’l Students

♠ Posted by Emmanuel in , at 11/22/2017 05:25:00 PM
Make America White Again, university without diversity edition. 
Commentators often use "nativism" as a euphemism to describe Trump's apparent self-superiority over non-white people. Often couched by fellow bigots in terms of "preserving cultural identity" or "protecting national security," this irrational fear of others who do not look like you is dragging an entire country into the mud in more ways than one. The United States' global reputation is taking a hit worldwide as only 22% of the rest of the world has confidence in the America Firster. At least Trump knows what his base looks like.

Perhaps unsurprisingly, would-be international students studying in the United States are now keeping away in droves--and this is only his first year in office. I can only imagine how up to (heaven forbid) four more years of Trump's homophobic, racist and xenophobic discourse and policy will affect those previously intending to study Stateside. The cheek of these uppity coloreds aspiring to a tertiary degree, Trump likely thinks...
The number of newly arriving international students declined an average 7 percent in fall 2017, with 45 percent of campuses reporting drops in new international enrollment, according to a survey of nearly 500 campuses across the country by the Institute of International Education. Experts cited an uncertain social and political climate in the United States as part of the reason for the decline in enrollment.

“It’s a mix of factors,” said Rajika Bhandari, head of research for the institute, which collects data on international students in cooperation with the State Department. “Concerns around the travel ban had a lot to do with concerns around personal safety based on a few incidents involving international students, and a generalized concern about whether they’re safe.”
Whether justified or not, safety perceptions are on the wane. For instance, Indian students who've been plentiful in recent years are now thinking twice, especially after the murder of a US-educated compatriot working Stateside:
Dr. Godard said fewer students came from India partly because of a currency crisis in the country, but also because of concerns about the Trump administration’s travel ban affecting Muslim countries. India was not on that list, but Dr. Godard said many of the university’s Indian students were from Muslim areas of the country and were concerned about the ban.

“Although India wasn’t listed as one of the countries, certainly feeling welcome and safe and all those things is important,” he said. “It would be na├»ve to say that wasn’t a contributing factor.” Prospective students from India — interviewed shortly after last year’s presidential election — have expressed fears about the racial climate in the United States, concerns that might have been heightened after the shooting death in February of an Indian engineer in a suburban Kansas City bar.
With so many other options at the present time--Australia, New Zealand, Canada and the "discounted" UK with its weak currency post-Brexit referendum, why go to Trump's America for the privilege of paying top dollar for racial abuse? Sure, there are white supremacists in all those other countries as well, but the difference is that the government isn't actively trying to make you uncomfortable.

Make no mistake: international students paying full fees help keep any number of US educational institutions afloat. Couple the loss of such students from Trump's hardly-concealed white supremacy with reduced funding for universities due to his ongoing "war on science" and I'd bet their global standing will take a hit over the next few godforsaken years.

But hey, there's a bright side to the story: the Canadians seem to be doing rather better as sensible international students go there instead to avoid TrumpLand:
Some of Canada's biggest universities are beginning the new school year with a record number of international students on campus. The steady upswing in foreign applicants began several years ago, then started to spike after the U.S. presidential election in 2016. The challenge for the Canadian government now is to maintain that trend amid competing countries, and to encourage more from the talented pool to stay on as permanent residents.

The University of Toronto, Canada's top draw for international students, enrolled 17,452 international students in undergraduate and graduate programs last year, making up about 20 per cent of the overall student body. That compares to 7,380 international students comprising about 10 per cent of the total student population a decade ago, in 2007.
There's no missing the Trump factor here:
The university's steady increase became a spike after U.S. President Donald Trump was elected." Clearly there are things about the international situation — worries about stability, Brexit and the U.S. political environment — that have changed or increased international students' interest in looking beyond their own countries and beyond the U.S.," said Richard Levin, executive director of enrolment services and university registrar.

"Now in places like that, students are looking for alternatives and Canada is presenting as a good one in terms of stability, safety and inclusiveness." According to data provided by Universities Canada there has been a sharp increase in both applications and website traffic from the U.S. and abroad since the 2016 U.S. election, with many seeing a 20 per cent jump or more in applications.

Norway's $1T SWF & 'Divesting' From Oil

♠ Posted by Emmanuel in , at 11/17/2017 05:23:00 PM
Make no mistake: Norway's gonna cover you in oil for the foreseeable future.
Financial markets are currently in a tizz over Norway's sovereign wealth fund (SWF) investigating the possibility of divesting entirely of its oil and gas stocks. We aren't talking small beer here since it is a $1 trillion fund amassed over the years largely from Norway's oil and gas royalties. Believed to hold an incredible 1.5% of the world's floating stock valuation, it is a relative giant in the business world. With the continuing drive among progressive (read: non-American) countries to move toward renewable energy sources, this announcement is being made out to be the death knell of fossil fuel production--at least in civilized parts of the world not run by reality TV stars and similar riffraff:
Norway, which relies on oil and gas for about a fifth of economic output, would be less vulnerable to declining crude prices without its fund investing in the industry, the central bank said Thursday. The divestment would mark the second major step in scrubbing the world’s biggest wealth fund of climate risk, after it sold most of its coal stocks.

“Our perspective here is to spread the risks for the state’s wealth,” Egil Matsen, the deputy central bank governor overseeing the fund, said in an interview in Oslo. “We can do that better by not adding oil-price risk.”

The plan would entail the fund, which controls about 1.5 percent of global stocks, dumping as much as $40 billion of shares in international giants such as Exxon Mobil Corp. and Royal Dutch Shell Plc. The Finance Ministry said it will study the proposal and decide what to do in “fall of 2018” at the earliest.
It's being portrayed as the canary in the coal mine...or the turtle in the offshore, if you prefer as environmentalists laud the move:
While the fund says the plan isn’t based on any particular view about the future of oil prices or the industry as a whole, it will likely add to pressure on producers already struggling with the growth of renewable energy supplies...

Built on the income that western Europe’s largest energy supplier has generated for more than 20 years, the fund’s investment decisions are guided by ethical rules encompassing human rights, some weapons production, the environment and tobacco. Norway’s fossil-fuel investments are coming under increasing scrutiny from a public that aims to be a climate leader without jeopardizing one of the world’s highest standards of living...

But environmental groups praised the plan. “The world is changing fast, and it’s very risky to put too many eggs in the same basket,” said Marius Holm, the leader of the Zero Emission Resource Organisation. Sony Kapoor, a former adviser to Norway’s government, said the plan is “a belated victory for common sense over the powerful oil and gas lobby in Norway,” calling on the fund to now boosts its “green” investments at least tenfold.  
The rub, though, is that Norway has little interest in shutting down the oil fields its government draws substantial revenues from. As mentioned, a fifth of all state revenues still come from oil and gas. As such, the explanation government officials provide for making this move is actually an honest one. Since the national purse is already exposed to oil prices in a big way, why should it not diversify away from the same industry with its SWF? A true rainy-day fund should not rain on your parade at the same time that economic downturns occur. While the SWF does claim to use ethical criteria in making investments, it would be hypocritical of the SWF to mention environmental reasons for its divestment when the government receives 20% of its revenues from oil and gas.

As such, I would be wary of those portending a Norwegian SWF portfolio readjustment as the "End of Big Oil" or the start of such stocks gradual demise a la Big Tobacco. While there are ethical and environmental reasons bringing us closer to such a point, this move by the Norwegians is probably just another milestone rather than the final nail in the coffin. 


♠ Posted by Emmanuel in at 11/15/2017 02:50:00 PM
If you can't spot the sucker at the trade negotiating table, then it's probably Trump.
Whoa, that's some weird math we've got to deal with in today's international political economy: the fewer countries that are negotiating an FTA, the longer its name becomes. Due to Trump's intransigence on trade, the United States seems set to be left farther and farther behind in terms of economic integration. At the recently-concluded Asia-Pacific Economic Cooperation gathering in Vietnam, the remaining eleven countries decided to continue with efforts to seal a deal.

With the United States out of the picture, though, it looks like it's not going to have the same exact terms. Rather, the parts of TPP that were put in largely at the behest of the United States are going to be put in abeyance for now should a "Comprehensive Progressive Trans-Pacific Partnership" deal be finalized:
The 11 remaining members of the defunct Trans-Pacific Partnership (TPP) on Saturday reached an agreement to proceed with the trade pact under a new name and without the United States, as China, which is not involved, said the revised arrangement would not affect initiatives backed by Beijing.

Vietnam’s Industry and Trade Minister Tran Tuan Anh said on the sidelines of the Asia-Pacific Economic Cooperation summit in Da Nang that following three days of negotiations, ministers from the countries involved had decided to call the new regional free-trade arrangement the “Comprehensive Progressive Trans-Pacific Partnership. We have reached agreement on a number of fundamentals,” he said.

Tran said the spirit of the former TPP agreement would endure, maintaining its high standards regarding trade practices, but the members would suspend certain clauses in light of the new situation. The countries have yet to reach consensus in four areas so a date for signing the new deal has yet to be finalised.

Tran said: “The ministers will have negotiations to discuss the remaining technical issues that have not been agreed yet as well as the legislative matters needed to put the agreement into implementation.” Japanese Economy Minister Toshimitsu Motegi hailed the Da Nang talks as a “success”, saying they had managed to limit the number of suspended items to 20.
Obviously, CPTPP is a misnomer since it would leave a lot of the bits from the original out. An important point is that the Southeast Asian countries participating in the original TPP negotiations, Malaysia and Vietnam, were most eager to participate to improve their access to the US consumer market--still the world's largest. Without that "carrot" on offer, those two and likely the other developing countries were less willing to take the "stick" of accommodating US preferences that were largely of benefit to the United States. 

I'll take the opportunity to also point out that the United States doesn't exactly "stand still" by sitting out TPP negotiations. Insofar as countries in it will gain improved market access to each other while the United States does not, America stands to lose out. I'm thinking here of the likes of  Australia and New Zealand which may gain market share in burgeoning Asian markets for agricultural products at the United States' expense:
Once the new deal is implemented, American farmers could be left at a disadvantage: The agreement seeks lower tariffs for goods traded among members, the bulk of which are Asia-Pacific nations. That means non-member countries, such as the U.S., will still face high rates when shipping to Asia-Pacific. "It's going to really benefit farmers and agricultural producers here in Asia-Pacific and not the U.S.," [trade specialist Arthur] Okun told CNBC.
Ditto for American SMEs:
American small businesses will also feel the pain, Okun explained. Many U.S. small and medium-sized enterprises depend on the exports of goods and services to Asia. They will likely become less competitive as a result of exclusion from the new TPP, which seeks to facilitate easier access to regional supply chains for SMEs.
So, above all the ways the United States is screwed with Trump, this is probably going to be the cherry on top in the medium- to long-term. Then again, you don't expect the buffoon to be there forever. In fact, he may soon be removed from office due to his dalliances with Russians. If so, Vice-President Mike Pence is an avid free trader by contrast who'd probably complete TPP quickly. The reason why TPP's America-friendly provisions aren't being replaced altogether is partly based on the expectation that there's a good chance that a trade-friendly American leader will assume the presidency and make the TPP whole again. Perhaps during the 2020 elections, but right now, the rest of the world has literally left America behind. 

Brexit, Outmigration & Rotting Cornwall Crops

♠ Posted by Emmanuel in , at 11/12/2017 06:54:00 PM
"Erm, we didn't really mean it, mate."
Surely, this must be the dumbest Brexit headline yet. Cornwall in the United Kingdom is a rural community which has felt left out by the rest of her majesty's realms. Throw in a less-educated populace and you can pretty much guess how it voted during the Brexit referendum: they wanted out. British jobs for British workers and so on and so forth. They must've been in seventh heaven when the Brexiteers won and the UK won back its "independence," whatever that means.

Or maybe not. Recently, Cornwall has been petitioning the government to--get this--bring back the accursed furriners since there's nobody left to do the agricultural work. Having been told to leave the natives behind, it seems the locals aren't keen on, well, rural people engaging in rural livelihoods. In border American states, the saying is that there aren't enough gringos willing to do the backbreaking work. What do we have here? Not enough Anglo-Saxons to do the harvest?
Crops in Cornwall are said to be "rotting in the fields" due to a lack of migrant workers to harvest them in the wake of Britain's decision to leave the European Union. The county council has approached the Government to request it implement area-specific migration laws after Brexit, will help to deliver skills to the area.

Cornwall voted to leave the European Union in last year's referendum by more than 56 per cent, considerably above the national average. The area is home to 17,000 EU nationals, making up 3 per cent of the county's population. But research commissioned by the council found that, since the Brexit vote, staffing levels for farms had dropped to 65 per cent of what would normally be required.
What, now they want the accursed furriners back in? I don't want to say these Brexiteer ingrates had it coming, but this is the thanks the EU gets for trying to improve living conditions in one of Europe's (but for how much longer?) less well-off regions:
Let’s not forget that MPs assured Cornish voters that the levels of EU funding would remain the same if it voted for Brexit – which, just like the numbers on that infamous big red bus, is now known to be another lie. EU money has been crucial to the development of the region, assisting the introduction of renewable energy and new trains. EU funding also benefited our lifeblood, the tourism industry, with money helping build the Eden Project and cleaning up the sea on our beautiful beaches.

The £53m received that was spent on installing super-fast fibre broadband was not only important for business growth but also for connecting communities and individuals in very rural areas who were incredibly isolated (one of the reasons behind the county’s notoriously bad mental health figures.)
My view remains essentially the same: those who voted for Brexit were misled into believing that their interests--economic and otherwise--were better served by leaving the European Union. It appears that they're finding the opposite is true when the UK is still not even outside the EU tent. Although I remain convinced that it's more likely that the UK will not leave once the true costs become even more apparent, think of how much worse things will become outside. 

Fortunately, this whole Brexit idiocy becomes less likely with each passing day that the government does its comedy improvisation shtick with its EU counterparts.

Globalization According to Xi & Trump

♠ Posted by Emmanuel in , at 11/10/2017 04:26:00 PM
China's already done the failed Great Wall schtick, but others are certainly welcome to try.
The purpose of rhetoric has been studied extensively in the social sciences. By saying certain things, what do people intend to achieve? Of course, what people say does not always correspond to what they do. Indeed, people say things they do not mean. That said, the weight of what some people say matters more than others. Today's case in point are the USA's orange-hued leader Donald Trump and China's newly-reinstalled "maximum leader" Xi Jinping.

The commentariat has noted how, since the beginning of the year, Xi seems to have taken up the mantle of the globalizer in the place of an ever-more inward-looking America in the age of Trump. The ongoing APEC meeting in Vietnam was a chance to hear both leaders on this topic back-to-back, and the contrast in rhetoric was fascinating. Xi expanded on his vision of economic integration as one of other countries--especially those in the Asia-Pacific--getting on board the China train. To no one's surprise, Xi did not mention heavy-handed PRC actions to assert dubious territorial sovereignty:
Xi painted a picture of a global order that would bring collective benefits, saying, "let more countries ride the fast train of Chinese development." [...] Xi’s speech glossed over regional unease over China’s rising clout while pledging free trade and stability [...]

Xi [...] said “the concept of globalization should pay more attention to openness and tolerance, while the direction should focus on balance.” China will “continue to build an open economy and work hard to achieve mutual benefits,” he added. “Opening up will bring progress and those who close down will inevitably lag behind.”
So, it was essentially more Xi the Globalist (With Chinese Characteristics). That is, there are hard to reconcile elements of maintaining party authority while fostering greater openness. Certainly, would-be investors in China would beg to differ with Xi's characterization of China becoming more open to unhindered operations by foreign concerns:
The comments signal a continuation of Xi’s drive to cast himself as a champion of global free trade as the Trump administration challenges China’s barriers to access for foreign companies. Earlier this year, Xi launched his push-back against protectionism in a speech to billionaires and government officials gathered at the World Economic Forum in Davos, Switzerland.

Still, while Xi has spoken strongly in support of the global trading order this year there’s been little tangible evidence of Beijing following through. In a January survey of 462 U.S. companies by the American Chamber of Commerce in China, more than 60 percent expressed little or no confidence that China would open its markets in the next three years. China still ranks 59th out of 62 countries evaluated by the Organization for Economic Cooperation and Development in terms of openness to foreign direct investment.

In a major speech aimed at domestic audiences at China’s 19th Party Congress in October, Xi’s language on reform stuck closely to previous pledges while promising to make sure that China’s Communist Party "leads everything."
Now, let's get to Trump the Globophobe. Unsurprisingly for a third-rate businessman whose companies have gone bankrupt four times at last count, he's all in favor of protecting America from foreign competition. Let the WTO bashing begin! Trump is at least honest in making no pretensions about seeking to put America first relative to all potential trade partners:

Trump dwelled on regional flash points while criticizing the World Trade Organization and offering trade on America’s terms. Trump’s speech cataloged the ills of globalization, saying too many countries had flouted the rules for years with impunity, harming American workers and U.S. companies. “We are not going to let the United States be taken advantage of anymore,” Trump said [...]

Trump too laid out a path for how other countries could boost their economy: He offered economic partnerships with the U.S. but only through bilateral trade pacts, and he pledged never to again join a multilateral deal like the Trans-Pacific Partnership, which would have bound the U.S. to 11 countries as a bulwark against China.

"I will make bilateral trade agreements with any Indo-Pacific country that wants to be our partner and will abide by the principle of fair and reciprocal trade," Trump said. Nations already have doubts about the U.S. commitment under Trump. After Asian countries tied up with America on TPP, Trump tore up the deal -- leaving them wondering if Trump was turning his back on the region as he pursued an "America First" agenda. When the U.S. enters into a trade relationship, Trump said, “we will from now on expect that our partners will faithfully follow the rules, just as we do. We expect that markets will be open to an equal degree on both sides and that private industry, and not government planners, will direct investment. For too long and in too many places, the opposite has happened.”
Insofar as Trump & Co. want to pull a fast one on you straight to your face, is it any wonder that countries in the Asia-Pacific are not exactly lining up to be one of Trump's patsi...I mean, valued trade partners?
“I doubt Trump will have many takers for bilateral deals, particularly given that he defines fair trade as the absence of a deficit,” said David Skilling, director of Singapore-based advisory firm Landfall Strategy Group. “Apart from Singapore, most Asian economies run sizable trade surpluses with the U.S.,” he said.

“It is not a very well thought-out strategy. A transactional, zero-sum ‘America First’ approach won’t do much to advance U.S. interests in the region,” he said.
In some ways Trump is actually more honest than Xi. Trump says the only trade deal the US can abide by is a bilateral one in which the US runs a surplus (that's easier for the US to end if it's displeased by running a trade deficit). That these terms are so incredulous is counterbalanced by the lack of pretensions about fairness. On the other hand, Xi premises economic cooperation based on mutual benefit when, in reality, it mainly seeks to further entrench Chinese interests in the region. Once accomplished, it will be harder to escape the PRC's gravitational pull.

Ultimately, then, both are self-interested: Trump's USA explicitly so, Xi's China surreptitiously so by cloaking outreach in terms of altruism the US itself once used. In many ways, the world has indeed been turned upside down.

Can Trump Increase Japanese Car Plants Stateside?

♠ Posted by Emmanuel in , at 11/08/2017 03:36:00 PM
Actually, Japanese-branded cars "Made in America" are already plentiful. The point is making even more.
Here's a welcome dose of reality--even if just a little--from a person mostly devoid of it: Donald Trump lives a considerable amount of the time in cloud cuckoo land where he hatches his most harebrained ideas--global warming is a hoax invented by the Chinese, the Trans-Pacific Partnership is a backdoor to the PRC conquering the United States, we're going to build a wall along the US-Mexican border and get the Mexicans to pay for it, and so on and so forth.

To be fair, the idea of getting the Japanese and Koreans to buy more US-made automobiles is a bipartisan obsession since Clinton and Obama had the same idea at one time or another. As I've repeatedly pointed out, though, it would help if American car manufacturers actually designed cars meant for these markets. Insofar as they haven't done so, you hardly see any American makes in these countries unlike, say, German ones. On his swing through Asia--why does a guy who pulled out of the Trans-Pacific Partnership meant to draw America closer to the region want to do there anyway--Trump, however unlikely, had a rare moment of insight.

Instead of asking Asians to buy American crapmobiles--which is as silly as it sounds--why not have Japanese carmakers make more cars Stateside and create more (American) jobs in the process as well? It sounds reasonable enough...
“Try building your cars in the United States instead of shipping them over,” Trump implored during a briefing with [Japanese] business executives before asking, “That's not rude?”

Trump's comments echoed his previous jabs, but they were notable because he lobbed them publicly during his visit here. And they’re an indication that he will not let his close relationship with Japanese Prime Minister Shinzo Abe quiet his long-standing concerns about trade and manufacturing.
OK, Trump's phrasing could be improved, but hey, we'll take what we can get when it comes to this guy. As the Japanese Automobile Manufacturer's Association (JAMA) points out--see the graphic above--Nippon's automakers already have a considerable presence making cars Stateside. It's a rejoinder to Trumpist Japan-bashing as if it were the 80s all over again since Trump seems to be stuck in that decade:
The Japan Automobile Manufacturers Association’s (JAMA) U.S. office has released its 2017-2018 Contributions Report. Our 2017-2018 report celebrates JAMA member companies’ 35 year history of investment and innovation in the U.S. and features updated U.S. contributions data showing that JAMA members produced a record-high of nearly four million vehicles in the U.S. in 2016, a more than tenfold increase since the mid-1980s. It also shows that JAMA members provide over 90,000 direct U.S. jobs in manufacturing, R&D, and other roles; an eightfold increase over the same time span.
So I'm not going to split too many hairs here since getting Trump to say something with a reasonable semblance to reality is hard enough. He could have said, diplomatically, that Japanese automakers ought to continue the great job they've been doing of building cars Stateside and do even more of it.

After all, the Japanese will never buy US-made cars in large quantities. 

Nike Automation: Threat to the Asian 'Sweatshop'?

♠ Posted by Emmanuel in , at 11/05/2017 06:58:00 PM
Will automation cause labor's share of production costs to diminish ever further?
I have a whole @#$%load of books I've been trying to find time to read concerning the threat of automation to the future of human work. All the same, I must point out that many of the concerns cited in this literature may be of lesser importance to those of us from developing countries since the perspective most of these authors are coming from is white collar work in the developed world. So, their relevance may be limited.

Still, that's not to say more relevant stuff is unavailable. The International Labor Organization (ILO) has a fairly alarming study noting that up to 56% of all work in populous Southeast Asian countries is at threat of disappearing due to automation. As Western multinationals improve their manufacturing processes to eliminate the need for workers, they can move operations back to their home countries via "reshoring":
Yet, when it comes to implementing new technologies in the workplace, ASEAN enterprises tend to not stand at the forefront. They are perceived as followers of technology adoption rather than innovators. In developed economies, recent improvements in automation is leading to reshoring, in which production is brought “back home” for labour-intensive manufacturing sectors, such as garment and footwear, electronics, and automotive, among others. ASEAN Member States are lagging in their responses to this trend. As aforementioned, the costs of these technologies are rapidly falling and their application is becoming more commonplace. Consequently, ASEAN could experience huge setbacks in development and growth if increased reshoring is not countered.
Footwear manufacture is especially vulnerable. As it so happens, the FT has a new article detailing how one corporation is attempting to, well, just do it. Nike's focus on robotics may render unnecessary all the gluing and stitching work currently being done in making sneakers:
Since its debut in 2012, the Flyknit Racer has been considered a technological breakthrough. Produced with a special knitting machine, it uses less labour and fewer materials than most running shoes. But now the same material has become the basis for an even more radical experiment that has the potential to both upend the sports and leisurewear industry and accelerate an important trend in globalisation...
Since 2015, Nike has been working with Flex, the high-tech manufacturing company better known for producing Fitbit activity trackers and Lenovo servers, to introduce greater automation into the otherwise labour-intensive process of making a shoe. Flex’s facility in Mexico has become one of Nike’s most important factories, responsible not just for a growing slice of the company’s production but also for a string of innovations to be rolled out across Nike’s supplier base, such as laser-cutting and automated gluing.

For Nike, the shift to greater automation has two huge attractions. By driving down costs, it could lead to a dramatic improvement in profit margins. It would also allow the company to deliver new designs more quickly to fickle, fashion-conscious customers at a premium. A pair of Nike Roshe shoes costs $75 without Flyknit uppers, compared to as much as $130 with Flyknit.
Remember when spoiled Westerners complained about working conditions at Asian "sweatshops" under contract to Nike? Would it be any better for Asian development if Nike stopped employing Asians altogether? I guess we may be finding the answers to those quite soon:
The tie-up with Flex also has a much broader resonance. Over the past two decades, Nike has been one of the pioneers in outsourcing production to the developing world, where it has been the subject of accusations of using child labour and other workforce abuses. Yet many of those countries now fear that robots will deprive them of their shot at industrialisation. If Nike pushes through with a move to greater automation and ends up cutting production in Asia, the company could find itself at the forefront of a different political controversy.
Time marches on. Innovation may cause Asian countries moving up the development ladder to adjust their strategies. Still, I believe that production is only half the picture since these populous developing countries are increasingly lucrative consumption markets themselves with growing middle classes able to afford brand-name sneakers. So, not all manufacturing will probably be headed back for America--or Europe for that matter in the case of Adidas, Puma, etc.

Can Trump Make Koreans Buy US Crapmobiles?

♠ Posted by Emmanuel in , at 11/01/2017 06:10:00 PM
Hmm...why don't Asians like these pimped-out American rides?

The obvious answer is no, but that's never stopped any US president from trying. From Obama to Trump and beyond, the Asians should but American refrain never stops. For the longest time, the United States has been trying to cajole countries it runs large trade deficits with--especially those it imports a lot of vehicles from--to buy more automobiles "Made in America." The problem has always been that while non-American automakers have built vehicles designed for the US market to be sold Stateside [want a biggie-sized Toyota pickup?], the opposite does not hold true. That is, huge, gas guzzling SUVs built by German, Japanese or Korean automakers sell well in America because that's what Yankee customers desire. There are no mysteries here.

However, the opposite does not hold: American automakers have not really bothered to do the market research as well as the development necessary for selling cars in Germany, Japan and Korea. Witness GM leaving Europe entirely, or American automakers continuing troubles selling models in Japan and Korea. This should be an open-and-shut case of "no s--t": American automakers insist on selling virtually the same behemoth gas guzzlers in Asian markets which aren't particularly suited there given narrower streets, smaller parking spaces, and more highly-taxed fuel.

But don't tell that to US Trade Representative Robert Lighthizer though, who thinks we're stuck in the 80s when he was last in government:
U.S. efforts to narrow its trade gap will probably focus heavily on the auto industry, meaning the administration may push to increase the number of American-made cars that can be sold in South Korea, Stangarone said. Currently only 25,000 cars that meet U.S. rather than Korean safety standards can be sold in the country, which is a source of tension considering the U.S. has an $18.8 billion trade deficit in vehicles.
Remember too that Europeans have no difficulty selling in "protectionist" Asian markets.

Totally retro, Lighthizer dude. Maybe these Asians simply regard US automobile products as unattractive? To me that's the main reason for this so-called trade problem.

Climate Exodus, the Caribbean Residents' Dilemma

♠ Posted by Emmanuel in , at 10/22/2017 06:26:00 PM
If these scenes will just keep replaying, shouldn't you leave for good?
The recent hurricanes which leveled vast swathes of the Caribbean islands, Irma and Maria, have raised concerns among residents about how viable it remains to live there. Certainly, others like their big neighbor to the North aren't helping matters. Climate deniers like Trump likely make their future bleaker. Saying global warming is a hoax means denying sea levels are rising and denying warmer temperatures means more water vapor is being stored--both of which make storms even more damaging.

So, not only have many of these countries and territories suffered tremendous damage, but worse is still to common thanks in no small part to global inaction on climate change. What to do? With limited economic prospects at home, Caribbean residents are thinking of the inevitable in leaving for good. What's the point in rebuilding when nearly everything is wiped out almost every other year?
Investors, governments, visitors and the people who have called these islands home for generations now wonder: Has something elemental changed? Might paradise turn uninhabitable? Is it time to go? Devastation is part of the natural cycle of life in the islands. During the past four decades, the region has been hit by more than 200 major storms, which killed more than 12,000 people and caused nearly $20 billion in damage, according to an International Monetary Fund study. About 1 percent of the Caribbean’s gross domestic product is wiped out every year.

“Storms shape the history of these places,” said Joshua Jelly-Schapiro, a geographer and author of “Island People: The Caribbean and the World.” “And people have been leaving these islands for decades,” heading for New York, London, Paris and other more stable places in countries that once colonized the Caribbean.

But in recent years, hurricane season has delivered more intense storms. “A person in the Caribbean generally would experience one Category 5 hurricane in a generation,” said Tahseen Sayed, the World Bank’s Caribbean country director. “In two weeks, we’ve had two Category 5 hurricanes.” The result is not only physical damage and economic strain.

“There’s a new, strong consensus that storms are getting worse and climate change is to blame,” Jelly-Schapiro said. “You didn’t hear that even a few years ago. For the first time, people are saying, 'I love this place, but maybe it’s not a place where we can live.' ”
To be sure, large diaspora communities abroad can help facilitate out-migration:
Like many people in the Caribbean, Roman and her family have a relatively easy way out. The Caribbean diaspora is vast and deeply connected. About as many Caribbean natives live in North America or Europe as in the islands; immigrants from the region make up 20 percent of the population in greater Miami and 7 percent of New York City. Half of Caribbean immigrants around the world send remittances to support relatives back home, and 70 percent belong to organizations on their islands, according to a World Bank study. For Puerto Ricans, who are U.S. citizens, the back and forth is even more fluid.
The details may vary somewhat, but the overall picture is one of economic stagnation that resulted in large-scale departures prior to the hurricanes. That is, there's increasingly less and less left behind:
Puerto Rico’s government is cash-strapped and grappling with an impossible-to-pay-off seventy-four-billion-dollar debt; the island’s poverty rate is over forty per cent; and the number of people relocating to the mainland United States has been rising for a decade. Against this backdrop, many of Puerto Rico’s mountain people live an existence not unlike the people of Appalachia, with a rural life style and economic level somewhere between working poor and lower middle class. Like their mainland counterparts, they cling to a tenuous Second World status. Most of them own cars, though it is rare to see a new one. Their homes are small, flat-roofed, cinderblock structures with grillwork on the windows and little fences around the yards—their owners are house-proud, and paint these homes in a variety of bright colors. Many also keep chickens, and some have horses.
You never want to leave the place called home for no good reason, but mankind's collective inability to confront or even acknowledge in the case of Trump's USA) climate change makes staying a less rational decision than packing up for good among many residents of the Caribbean islands.

How to *Really* Fix Massive US Trade Deficits

♠ Posted by Emmanuel in at 10/16/2017 04:58:00 PM
And the award for best trade villain goes to...
Trumpian idiocy is endangering perfectly good trade deals with Mexico and Canada [NAFTA] as well as with South Korea [KORUS FTA]. The anti-heroes here are two economic illiterates, the vulgarian ignoramus Donald Trump and his Reagan-era trade "enforcer" Robert Lighthizer. To them, the reason for massive US trade deficits is so easy to understand: other countries taking unfair advantage of "gullible" US leaders. For them, the golden age of America--when its manufacturing was strong--is just some kind of protectionist policy away:
For the administration, the core belief is that the trade deficit has caused widespread manufacturing job losses in the US and stagnant wages, which would be reversed by closing the deficit. The administration has set reducing the $64bn annual goods trade deficit with Mexico in particular as the main goal of the renegotiation of the North American Free Trade Agreement now under way. Mr Lighthizer, similarly, is pointing to a persistent bilateral trade deficit with South Korea as he seeks to renegotiate an agreement with Seoul that took effect in 2012. 
Economists possessing any intelligence, however, understand that massive US external deficits are more the products of the US dollar's unique position in the international monetary system and America's lack of savings. Once more, the US current account balance reflects a shortfall of savings relative to investment caused especially by government dissavings (expenditures far exceed income) and low household savings. In a highly integrated world economy, American firms which have become intertwined in global productions chains also stand to lose if Trump gets his way in walling off the US from international trade:
Anne Krueger, who served as the top US official at the IMF and as the World Bank’s chief economist, argues that the dollar’s status as the world’s reserve currency bears more responsibility for the current account deficit than any trade agreement. Also to blame, she says, are the US’s low savings rate and its persistent government budget deficits. The situation is made more complicated by the globalisation of supply chains, which has helped drive down the cost of complicated manufactured goods such as cars.

More than half of US imports are either parts or raw materials, making them crucial to exports. That means cracking down on imports — such as those of steel or auto parts — can hurt US manufacturers and exporters further up the value chain. “If we cut off our deficit with Mexico by cutting off imports of auto parts, then we’re going to be cutting off our own exports,” Ms Krueger says.
This "low savings" argument is well-known and is continually repeated by Stephen Roach. Krueger adds color to this argument by reiterating that, instead of blowing up the US budget deficit further with massive, unfunded tax cuts, Trump should aim to belt-tighten the government purse or--good heavens--raise taxes to narrow the external deficit:
If the trade deficit is the Trump administration’s primary concern, the better option, she argues, would be for Mr Trump and his administration to do the opposite of what they are planning to do and focus on incentives for consumers to save or to improve the US fiscal position — either by raising taxes, cutting spending or a combination of the two. Instead, the administration last week unveiled a plan for tax cuts that most economists expect to weaken the US fiscal position.

The frustrating reality for economists like Ms Krueger has long been that the politics of trade usually run counter to what they see as the obvious economic truths. But Mr Trump may be confronting a new lesson on the link between politics and economics. Nine months into his presidency his attempts to rewrite the rules of global commerce have done more to increase the US trade deficit than to cut it. And for that there may well be a political price.
It's the simplest of single-equation economics. Some people just don't get it...and probably never will.

Mexico, Screw Trump: Only Congress Undoes NAFTA

♠ Posted by Emmanuel in ,, at 10/11/2017 06:41:00 PM
Mexico should put Trump and his protectionista Lighthizer in their place by getting the US congress to stop this idiocy.
I make no bones that I am far more sympathetic to Mexico than Trump's USA at the ongoing North American Free Trade Agreement (NAFTA) "renegotiations." What US Trade Representative Robert Lighthizer is attempting to do is actually beggar-thy-neighbor masquerading as an "update" of NAFTA. Let's not mince words here: No self-respecting nation would agree to such one-sided stipulations--especially to replace ones that aren't so lopsided.

Among other things on the American negotiators' wish list:
  • A US proposal to protect its seasonal produce;
  • A sunset clause floated by the US that would kill NAFTA after five years unless the three parties renegotiated;
  • US insistence on using the pact to cut its $64.3bn trade deficit with Mexico;
  • US desire to see higher US [50%!] and North American content [85% from 60%], so-called rules of origin, in car parts
  • Also, a 5-year "sunset clause" if an extension is not successfully renegotiated
The last three are especially egregious for what is ostensibly a "free trade" agreement: Isn't the market supposed to determine where things are made by whom to sell to others? Moreover, why should a regional trade agreement have stipulations for minimum content from one country and not the others instead of having just regional rules of origin? Maybe they should rename it the NA4USAFTA if the Mexicans and Canadians are dumb enough to agree to such unfair giveaways. The sunset clause makes no sense to the others since it's only meant to facilitate piling on more stipulations favorable largely or solely to the US.

In short, the US wants the others to swallow "poison pills" that are thoroughly unpalatable for its benefit--the very definition of mercantilism. What, then, should Mexico do? I've written about the options it can use before, but also consider who will make the ultimate decision on behalf of the United States to leave NAFTA. That's right, it's not Trump but Congress according to international trade law specialist Joel Trachtman:
Many members of Congress work under the fundamental misunderstanding that the president has the power, on his own, to terminate NAFTA. They are unaware that under the Commerce Clause of the Constitution, while the president is the negotiator and signer of trade agreements, he is not the “decider.” Power to approve, and to terminate U.S. participation in, trade agreements is assigned to Congress[...]

And yet, the Supreme Court has said, in the 1994 case of Barclays v. California, that “the Constitution expressly grants Congress, not the president, the power to “regulate commerce with foreign nations.” If the president, acting alone, were to terminate U.S. participation in NAFTA, he would be imposing regulation on commerce, without congressional participation.
Having assented to these agreements, only congress can undo them. Indeed, the legislature should probably make it eminently clear to Trump that he should not pretend to be able to exit NAFTA using executive power:
While Congress can make specific delegations of powers to the president in the field of trade, it has steadfastly avoided delegating power to the president to terminate trade agreements. So there is little basis for an argument of implicit delegation by virtue of the inclusion in these agreements of clauses allowing the member countries to withdraw.

If President Trump proposes to give notice to terminate NAFTA without congressional approval, U.S. exporters, and U.S. consumers, and perhaps also U.S. members of Congress, should sue. Before we reach that point, Congress could pass legislation specifically denying the president authority to terminate these trade agreements, in order to avoid uncertainty. It has the power, and the responsibility, to do so. The Founders wisely determined that Congress, not the president, is the “decider” in the field of trade.
The Mexicans are right to lobby US firms with continental operations. However, they should also lobby lawmakers to assert their primacy on matters of undoing trade agreements. It is unlikely that a majority wound want to kill NAFTA, so Mexico should start the ball rolling in this respect, too. The Canadian President Justin Trudeau is doing so already even if his country has less to lose for reasons I'll discuss more in another post.

Aside from refusing to be force-fed Trump's s--t, they should appeal to those whose voice really matters for this issue.

Deport-o-Mania 3: Houston's (Non-)Rebuilding

♠ Posted by Emmanuel in , at 10/10/2017 08:32:00 PM
Trump voters ain't gonna fix this destruction.
There's an insightful op-ed in the Washington Post on why Houston's rebuilding is well off-track. Simply put, there are not enough construction workers at the current time. With Trump's various immigration-unfriendly policies in progress, things aren't going to improve anytime soon. The net result is that instead of aiding the reconstruction of the United States' fourth-largest city, Trump is putting it off indefinitely.

Actually, there's plenty of capital sitting on the sidelines but not enough labor to get the construction work going. This is one industry where automation won't be of much help for the foreseeable future:
Even before Hurricane Harvey made landfall, 69 percent of Texas contractors had trouble filling jobs. Now, it’s estimated that 200,000 Houston homes will require work or complete reconstruction. Who will build these houses? What about the commercial infrastructure and public schools, highways and bridges that also sustained so much damage?
We go back to the same old problem: instead of ramping up immigration to help (re-)build America, the Trumpian set is busy doing the opposite:
One way to do that is to completely overhaul our broken immigration system. The last comprehensive reform was in 1986. Our visa system fails to match supply with demand. Congress must rebalance the numbers and even consider increasing legal immigration so we can attract all the workers we need — high skill, low skill and no skill. As Sen. Jeff Flake (R-Ariz.) said in a recent op-ed, we can’t forget that the ability to work hard sometimes is the only skill a job requires.
The problem is that the likes of Trump and his supporters have the opposite perception: coloreds and other foreigners are "stealing" their jobs. The honest answer is, again, that gringos simply don't want to do construction work in sufficient numbers [1, 2]--otherwise you wouldn't have this problem to begin with. Ultimately, I do believe that Trump is setting the stage for lower potential US economic growth through these racist/protectionist measures.

Just wait and see as Houston remains literally underwater.

Euro Transport Consortia: First Airbus, Now "Railbus"

♠ Posted by Emmanuel in at 10/09/2017 06:19:00 PM
They are the European champions, my friend. They'll compete with the Chinese till the end...
Despite the imminent [?] withdrawal of the United Kingdom from the European Union, its time being considered a part of it can count as a clear success in at least one respect: Its participation in the pan-European aerospace consortium Airbus has more than lived up to expectations. British Aerospace together with France's Aerospatiale as well as their German and Spanish counterparts combined to produce a European powerhouse in civilian commercial aircraft with the resources to compete with American titan Boeing yearly for top sales honors in this lucrative business.

More recently, we've had a "one good turn deserves another" deal with European railway manufacturers Alstom (France) and Siemens (Germany) attempting to become a "European champion" in mobility. As with most mergers among manufacturing concerns nowadays, this attempt to increase scale stems from trying to compete with the upstart Chinese. Enter "Railbus":
Siemens AG and Alstom SA are expected to sign off on a merger of their rail equipment activities to create a new European champion, according to Bloomberg News. A deal has appeal for the German and French companies’ shareholders but governance, antitrust and cost-cutting could yet disrupt the journey. While a combined entity would control only about 14 percent of the 110 billion euro ($130 billion) rail equipment market, according to my rough calculation, the footprint would be bigger in parts of Europe.
An interesting argument in favor of activist European antitrust authorities permitting the merger is that, well, the Chinese have already merged together another rail mega-conglomerate in CRRC:
So will Europe’s antitrust authorities block it? That depends. After the 2015 merger of two Chinese rolling stock companies, the new entity CRRC Corp. dwarfs its international peers. Rail Giants CRRC has won rail contracts as far afield as Chicago and Kenya and China’s Belt and Road initiative will bring yet more international business its way. The fear is that the Chinese company's size plus access to cheap finance will let it crush rivals unless they bulk up too. In absolute terms, CRRC spends seven times more on research and development than Alstom, notes Morgan Stanley.

But it isn't unbeatable, at least not yet. International customers accounted for only 8 percent of CRRC sales last year, when its railway equipment sales declined. The Alstom and Siemens train businesses have performed quite well in the meantime, as rapid urbanization spurs demand for less polluting mass transit.
The great game is on in railways as the Europeans vie for business worldwide with the Japanese and now the Chinese. As with more efficient forms of transportation, sustainability may be the ultimate victor here compared to relying on more polluting road and air transport.

Can US Stocks Rise Still Despite Buyers' Strike?

♠ Posted by Emmanuel in at 10/02/2017 12:50:00 PM
Are companies flush with high-yield bond proceeds buying back stock no matter what?
There's an interesting article over at MarketWatch that brings up all sorts of questions about what really buoys the stock markets and who investors really are. The conventional understanding is that bonds--debt issued by corporations--move in the opposite direction of stocks since the former are regarded as relatively safer assets while the latter are riskier assets. However, bonds and stocks may not be coupled in this manner. Instead, large institutional investors, namely pension funds, tend to shy away from risky investments like equities. So, they buy high-yield corporate debt in large quantities. With many retirees to account for in the near future, they have few options nowadays:
Unlike so-called smart investors, who worry about fundamental influences including the economy, politics and even natural disasters, the nation’s public pensions trustees only care about one thing: “Their sole focus is on making 7.5% through the credit market,” [Cannacord's Brian] Reynolds wrote in a recent note to clients. “They are going to focus on that whether the economy speeds up or slows down, whether there is tax reform or not and whether the Fed raises rates more or has to bring them back down.”

As Reynolds explains, 7.5% is generally what pension trustees have to earn on assets to cover the gap between what pensions have promised to pay out and what they actually have. The general perception among pension trustees is that equities are too risky, and safe 10-year Treasury notes are currently yielding just 2.31%. And since their biggest worry is to not be too careful, pension funds have been gobbling up higher-yield corporate debt and credit instruments.

Through August, high-yield bond issuance reached $1.21 trillion, already just shy of the full-year record of $1.23 trillion in 2016, according to data provided by Fitch Ratings. Institutional leveraged loan issuance hit $1.07 trillion through August, already breaking the 2016 record of $973.1 billion. Assuming the pace of flows remains the same, the puts high-yield issuance on track to exceed $1.8 trillion and leveraged loan issuance to top $1.6 trillion.
Corporations issuing high-yield paper are therefore flush with cash from selling all this high-yield debt. For a long time now, many have chosen not to invest the proceeds, but rather buy back their shares on the open market. Therefore stock investors may understandably quit the stock market at these incredibly elevated valuations, but companies will continue buying back shares. It's said that "real" investors haven't been the main buyers of stocks since the end of the Great Recession, but rather companies buying back stock using bond sale proceeds:
Companies have used that cash to be the primary buyers during the current bull market, while what Reynolds described as the “main investors” have been net sellers. “Main investors” include mutual funds, insurers, hedge funds, households, foreign buyers, broker dealers, pension funds and exchange-traded funds.

Since the S&P 500 index hit its bear-market bottom in March 2009, it has soared nearly fourfold, even though “main investors” have sold a total of $9.89 billion worth of stock, Reynolds said, using Bloomberg data. That’s because the cumulative total of corporate stock repurchases has been about $3.2 trillion, he said.

And since the credit market has grown by $3.3 trillion since the credit crisis, Reynolds sees it as nearly a one-to-one correlation between the credit boom, share buybacks and the bull market.
I have my doubts about this version of events as to why stocks can thus keep rising indefinitely. Many of the gainers are not the sorts who issue boatloads of high-yield debt, but rather blue-chip corporations issuing investment-grade debt like components of the Dow Jones Industrial Average 30, the larger Standard and Poors 500 components, and giant tech stocks on the Nasdaq Index like Facebook, Amazon, Apple, Netflix and Google. If high-yield issuers were indeed the main beneficiaries, then you would expect smaller, less creditworthy companies to outperform large ones. However, that has not really been the case with the Russell 2000 index being outperformed by the aforementioned indices over this time frame.

It's food for thought, though, and shines a light on the role played by stock buybacks in buoying the market.

Trade War! Boeing vs Bombardier, US vs Canada & UK

♠ Posted by Emmanuel in at 9/29/2017 05:47:00 PM
Will Delta really fly Bombardier CS100s? Of Canada has trade "friends" like the US, who needs enemies...
When it comes to capital-intensive businesses, commercial aircraft is among the most demanding of sheer funding. Especially when it comes to developing all-new models, the level of research and development required equates to a lot of money spent. Today's case in point is Canadian jetliner manufacturer Bombardier. Its niche is jets smaller than the smallest offerings of the industry titans Boeing [737] and Airbus [A320]. You'd think that not competing directly with them puts it in a safe spot, but no:
Boeing’s beef with Bombardier concerns the CS100 jet, which has slightly more than 100 seats, a market niche that Boeing executives were once pretty sniffy about, possibly with good reason. Bombardier ran into all kinds of financial difficulties developing and trying to sell the innovative C Series, which led to a $1 billion bailout by Quebec in 2015. Bombardier persisted, yet no sooner had Delta thrown it a lifeline by placing a firm order for a few dozen C Series jets, Boeing fired off a complaint to the U.S. government.

Boeing’s fear, as its legal complaint makes clear, is that one day Bombardier will become a much stronger competitor. But Boeing’s aircraft sales are eight times larger than Bombardier's today. Taking legal action makes Boeing seem like both the playground bully and the class snitch.
Interestingly enough, it appears the first major trade war of the Trump administration will not be against China or Mexico, the usual targets of his anti-trade rhetoric. Instead, it will be against supposedly friendly Canada. To make a long story short, Boeing (which doesn't make the same-sized jets, again) complained to the US Commerce department that Bombardier received substantial subsidies in launching its latest mode, the CS100. Being then asked that tariffs be applied on Bombardier CS100s being sold Stateside. In this activity they were more than successful:
The U.S. Commerce Department’s decision to tag Bombardier Inc.’s newest plane with retaliatory tariffs of more than 200 per cent[219.6% to be exact] was a blatant abuse of power. The complainant, Boeing Co., had asked for only an 80-per-cent penalty. Wilbur Ross, the commerce secretary, went bigger to remind the world that he could. “The U.S. values its relationships with Canada, but even our closest allies must play by the rules,” Ross said in a press release.
You read that right: the Commerce department almost tripled the tariff Being sought since it wanted to make an example of these Canadian trade miscreants:
Ross’s move was the equivalent of the schoolyard tough smearing a Cheez Whiz sandwich on the face of an innocent. He used the Bombardier press release to remind that his department had initiated 65 trade-related investigations since Inauguration Day, a 44 percent increase from the same period a year earlier. Economic historians have a term for this sort of behaviour: beggar-thy-neighbour. It comes from the Great Depression, when countries resorted to tariffs to “protect” jobs and only ended up making things worse.
Note that this is just an initial ruling; the ultimate tariff applied (if any) may be lower. However, rest assured that the Canadians are understandably outraged. At stake is an order for 125 CS100s ordered by the US-headquartered Delta Airlines. We're entering trade war territory as Canadian government figures are threatening to rescind a defense contract to buy 18 F-18 Super Hornet jet fighters from Boeing:
[Canadian Foreign Minister] Freeland also repeated the threat to cancel the Liberal government's planned sole-source purchase of Boeing Super Hornet jet fighters. The Liberal government has been clear that this case "very much has a bearing" on the decision to buy the warplanes, said Freeland. "The government of Canada cannot treat, as a trusted partner, a company which is attacking our aerospace sector."

Prime Minister Justin Trudeau was even more blunt. Speaking two weeks ago beside British Prime Minister Theresa May, Trudeau said the fighter deal is all but dead. "We won't do business with a company that's busy trying to sue us and trying to put our aerospace workers out of business,'' he said.
I mentioned that it's not only the US against Canada, but also the US against the UK. You see, Bombardier has wing assembly operations in Northern Ireland, and Ulster would lose a lot of economic opportunities if the US mega-tariff holds. With May's government relying on the support of Northern Irish lawmakers--and her attempts to build a relationship with Trump--in mind, the result is disappointing:
It’s no wonder Theresa May says she’s “bitterly disappointed” by the U.S. Commerce Department’s decision to impose punitive import duties on Bombardier Inc.’s new jetliner. It hurts the U.K. prime minister in several ways at once. First, it’s a blow to a big employer: More than 4,000 work for the company in Belfast, Northern Ireland, where the plane’s wings are built. Second, Northern Ireland is a sensitive area for British politics: It is only because May’s Conservatives have the support of 10 lawmakers from the region that she’s able to govern.  

Third, it’s a personal embarrassment: After spending political capital at home to try to build a close relationship with Donald Trump, she raised the issue with him both by phone and in person, with no obvious result.
Going forward, the UK is said to be reconsidering awarding more defense contracts to Boeing:
British defence minister Michael Fallon has also criticised Boeing. He ruled out cancelling existing orders with Boeing for nine P-8 spy planes and 50 Apache helicopters, but added the U.S. firm was seeking other UK contracts. 

Boeing has risen since 2000 from a relatively minor defence supplier to become one of Britain’s top five following the purchase of C-17 transporters and Apache attack helicopters, according to defence analyst Francis Tusa.
The game commences. Whether Canada and likely the UK take the US to the WTO for a complaint will depend on what tariff is ultimately applied to the Bombardier CS100 Stateside.

Did Xi, Macron & Merkel Make US Stocks Great Again?

♠ Posted by Emmanuel in at 9/26/2017 05:58:00 PM
It's probably not Trump, or Invader Zim for that matter, making the world economy great again.
There are any number of mysteries as to why US-listed stocks are reaching all-time highs early in the presidency of Donald Trump. As business media always explains, markets abhor uncertainty. With Trump you certainly have very little certainty. In trade, he's killed the Trans-Pacific Partnership (TPP), and threatens to pull out of the North American Free Trade Agreement (NAFTA) and the Korea-US Free Trade Agreement (KORUS). For good measure, he's spoken about pulling out of the World Trade Organization (WTO) over his disdain for multilateralism. Nor has he delivered yet on massive tax cuts for corporations, so it makes you wonder what's buoying US stocks.

One argument is that Trump is simply coasting on favorable economic conditions his predecessor Barack Obama created Stateside. Another is that, actually, it was other global leaders responsible for creating such profitable conditions worldwide which attract investors. And, since S&P 500-listed companies derive about 43.2% of their revenues from outside the US, they are able to capitalize on improvements in the business climate elsewhere.

Sebastian Mallaby brings this argument forward by bluntly stating that it's other countries' leaders making American stocks great again and not Trump:
Last year, in the wake of President Trump’s election, financial markets took off on a wild sprint, apparently believing his promise to make America great again. Ten months later, the financiers are wiser: The president’s immigration clampdown alarms them; his divisive response to Charlottesville appalls them. Despite the heady expectations of this past winter, there has been no sign of an infrastructure plan; few expect serious tax reform given the bungling of health-care legislation, not to mention the sidelining of Gary Cohn, the tax plan’s chief Sherpa. And yet, as if by a miracle of levitation, the Standard & Poor’s 500-stock index is still about a fifth above its level on the day of the election. What’s happening?

The short answer is that foreign leaders have done a surprisingly good job of making foreign countries great again. From Xi Jinping’s China to Emmanuel Macron’s France, politicians are delivering policies that businesses want. As a result, the world economy is growing faster than at any time since the post-crisis bump of 2010. The yuan and the euro have risen sharply against the dollar. A more competitive greenback and the prospect of strong exports have supported U.S. stock prices. A Chinese communist and a French technocrat have done more for American business than Trump has.
In the remainder of the op-ed, Mallaby goes into the specific actions the leaders of China, France, Germany and so on have taken to improve their countries' economic conditions--and the rest of the world economy as a result. I too am in the camp believing that US stocks are being buoyed by the rest of the world economy rather than by anything Trump has done. If anything else, American companies are doing well in spite of instead of because of his term. Ironically, his ineptitude is aiding corporations by pushing down the value of the dollar, making foreign earnings appear larger after converting them back to USD.