YOUGHAL, IRELAND – There are three important decisions in life: What you do… with whom you do it… and where you do it. What. Who. Where. Keep it simple.
And you only have a limited amount of time; you want to make sure you get those basics right. Otherwise, you arrive as one of those dying generations… singing a very sad song.
Today, we ramble… and pay attention to where. “Good places don’t necessarily stay good,” we offer as a preview.
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Times Change
When we arrived in London last week, the Queen was nice enough to send out a marching band to greet us. Very thoughtful of her.
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A marching band greets Bill in London
We lived in London twice. Once, when the children were little, in the early 1990s. And again 10 years later. We liked it both times. There was so much to discover.
Coming from the bottom, we were eager to explore the top. We went to fancy restaurants… to Royal Ascot… to the Connaught Hotel and the Ritz. We dined in private clubs, too, such as Whites and the Garrick. The latter was so exclusive, there was reputed to be a 20-year waiting list.
But times change. So do places.
Now, London is almost too chic… too fancy… too busy and expensive. The tourist crowds are overwhelming. As Yogi Berra might have said, no one comes here anymore; it’s too crowded.
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A crowd gathers outside Buckingham Palace
Styles change, too. Our jacket, bought on Savile Row in London 25 years ago, and elegant in a tweedy, old-money sort of way, is now woefully out of style. We might as well be wearing spats.
The fashion now is a jacket that is very short and very small – as though you bought it when you were 16 and are still wearing it after you’ve filled out at 36. And you button up the top two buttons, so you look a little like Chico Marx from the 1920s.
Another off-putting feature of London is that people there have gotten so much younger. When we first visited 50 years ago, almost everyone was older than we were.
How the population came to be so youthful, we don’t know. But now, they are all younger. Tattoos and piercings are ubiquitous.
At least the English still have a healthy regard for family. One night, we had dinner at the Mandarin Oriental in Knightsbridge.
In addition to various business groups and older couples, quite a few older men were dining with their daughters. And there was one that must have been with his granddaughter. It was very heartwarming.
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Prosperity Not Guaranteed
London is also very expensive. In Youghal, to which we returned on Friday, the most expensive room in town is only $150 a night. In London, we pay more than $500 for similar digs.
But prices go up and down. Wealth and prosperity are neither guaranteed nor permanent. Not to people. And not to places.
Here in Ireland, for hundreds of years, the country was dominated by the Anglo-Irish in the Big Houses. For generations, their fields were tilled and their tea was served by the local Catholics. Then, the tables turned. Taxes, terrorism, imprudence, self-indulgence, and self-destruction took their toll.
Today, most of the grand houses are in ruins. Many of those that are left are a little sad. The lords and ladies of the manor take in tourists, struggling to keep a roof on their old pile by serving tea to the new middle class.
In America, wealth has been footloose since the get-go.
Baltimore was America’s richest city in the early 19th century. Later, Pittsburgh took the title. And then, in the mid-20th century, it went to Detroit.
Different economic trends produce different winners and losers. Baltimore had the Chesapeake Bay in front and the Cumberland Gap behind, making it an ideal port for the new republic.
Pittsburgh had its three rivers… and its two families – Carnegie and Mellon – who led America’s Industrial Revolution.
Detroit made autos, trucks, and tanks – the hottest-selling items of the 1940s-1970s.
Today, these cities are a shadow of their former selves. Why? As we have been saying, “financialization” took hold.
In the latter part of the 20th century, the leading economic trend was financialization. The win-win economy of making products for customers was replaced by financial wizardry, powered by some of the lowest interest rates in history.
London and New York were its biggest beneficiaries. America introduced its new, fake money in 1971. Five years later, London’s “Big Bang” – a trend of deregulation in the financial markets in the 1980s – freed up Britain’s financial industry and signaled the beginning of a huge boom.
The U.S. created “money” out of thin air. Americans spent it on tomatoes from Mexico, BMWs from Germany, perfume from France, appliances from Japan, and geegaws from China…
Then, what happened to the money? Much of it went to the financial centers, where helpful people in expensive suits bought stocks, bonds, and property… helping with mergers and acquisitions… and buybacks, too…
And then, the money found its way into the local housing market… into condos and high-rises… and houses in Chelsea or Long Island…
…and into private schools and expensive restaurants…
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Just a Dip?
That trend – financialization – is far from over. But it may be losing its juice. Here’s a recent headline from Bloomberg:
London Property Slide Worsens With Biggest Drop in a Decade.
London continued to lead the U.K.’s weakening property market at the start of 2019, with prices falling the most since the financial crisis a decade ago.
In New York, too, high-end properties are moving lower. CNBC has more:
Manhattan real estate had its worst first quarter since the financial crisis, capping the longest losing streak for sales in over 30 years, according to a new report.
Total sales fell 3 percent in the first quarter, according to the report by Douglas Elliman and Miller Samuel. That marked the sixth straight quarter of declines, which is the longest downturn in the three decades that the appraisal and research firm has been keeping data.
The drop stems from an oversupply of high-end apartments, a lack of foreign buyers and the new federal tax law that has hit real estate in high-tax states.
Just a dip? Or has the peak of prosperity already passed?
It will be years before we know for sure.
Regards,
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Bill
MARKET INSIGHT: THE TRADE WAR COST IS MORE WIN-LOSE
By Joe Withrow, Head of Research, Bonner & Partners
The cost of U.S. tariffs to consumers will skyrocket this year…
That’s the story of today’s chart, which compares the cost of tariffs in 2018 to the projected costs this year.
The 2019 projections are based on penalties on Chinese imports jumping from 10% to 25%… which happened on May 10.
Remember, tariffs are simply levies placed on imported goods. The American companies receiving those goods pay a higher price upfront. But the cost is ultimately passed on to everyday Americans in the form of a higher price on consumer goods.
As you can see, tariffs cost U.S. consumers $52.8 billion in 2018… And that number will more than double this year. Tax payments on tariffs are expected to drop 25%…
But deadweight loss is expected to explode 371%.
Deadweight loss occurs when firms buy goods from a less efficient source to avoid tariffs. For example, a U.S. importer sourcing a product at $100 per unit from a Chinese manufacturer may switch to a $110 product from a different source just to avoid the tariffs.
Tax payments go down when that happens… But the added cost doesn’t disappear. It just moves. Ultimately, the consumer ends up paying a higher price as a result.
And as today’s chart shows, the total cost as a result of the ongoing trade war is substantial: $106 billion.
It’s more win-lose, as Bill would say.
– Joe Withrow
FEATURED READS
China’s Next Move in the Trade War
President Trump’s decision to blacklist Chinese tech giant, Huawei, could cause a major backlash. U.S. companies that rely on China for a major part of their growth, like Nike and Apple, now have targets on their backs. If and when China retaliates is unclear… It’s now a waiting game.
The Census Oversight That’s Holding Rural Counties Back
Rural populations in America have been declining for the past decade, struggling to keep up with their urban counterparts. Or have they? A new study shows that the way we classify counties may be misleading… and this method may be rigging the game against a neglected group of Americans.
The Right Way to Trade
Trading options is often misunderstood. While it can make you a lot of money, it won’t happen overnight. But, if you do it the “right way,” at least you won’t have to choose between reducing risk and making big profits…
MAILBAG
Today, a provocative suggestion from the mailbag gets another response from a dear reader… while others disagree with our take on Trump…
Ah, where to start? First of all, many of us get exactly what we want from Bill’s Diary – his honest opinions, clarity of thought, fearlessness, etc., etc. God knows, the world is filled with Trump promoters and apologists.
My only question is why this particular reader even bothers with dissenters such as Bill, when he could easily get what he wants for free? To suggest that producers of products focus exclusively on what people want is truly a measure of the general ignorance of how the economy works best when it is actually working.
Creativity and quality in products offered to the public is only ever unleashed when the producers follow their own dreams and create the best products they know how. The world is filled with “me-too” products, and they all have one thing in common: A short shelf-life.
– Dave H.
I have been enjoying your articles for over a year now, and do agree with most of your economic points. I am really shocked that you are anti-Trump. My question is: “If you are not with him, then you are against him,” correct? You really then think that the 23 liberal, anti-capitalist, socialist spenders are your choice instead of Trump? I don’t get your logic. Yes, I see he has a lot of “print and spend” in him. But you cannot straddle the fence any longer!
– Doug B.
I tire of your Trump-bashing. Trump has feet of clay, for sure, but he has done more for religious freedom in our land than any other president in the last couple of decades. Also, he is appointing conservative judges who follow our Constitution. These two issues are why I support Trump. The Democrats are just despicable, but your Trump-bashing gives them a leg up with some shallow-thinking readers.
– Dave L.
IN CASE YOU MISSED IT…
The man who called the 2008 financial crisis now predicts that the U.S. stock market could crash on October 21, 2019.
While most investors will lose it all, he’s personally looking forward to it… That’s because, if you see it coming, you could make a fortune.
He’s put together a presentation where he details his full analysis. But you only have until tonight at midnight to watch it. Read on here before it gets taken down.
