Let me begin with a quote from the end of the article:

“A lack of payments [from the U.S. government] could eventually force farmers to sell crops to generate cash flow.”

I thought that is what farmers do: sell crops to generate cash flow. Now, the problem may be that export prices for U.S. agricultural products destined for China are forced lower due to the trade war.

Q1: Why can’t these farmers sell their products elsewhere?
A1: Possible answer: We can’t assume that demand generated from China’s population of 1.386 billion people can be easily found elsewhere on the planet in short order.

Q2: Why don’t farmers switch to different crops and sell to other countries demanding these different crops?
A2: Possible answer: I am not a farmer. I can’t even keep a house plant alive. Believe me, I have tried over and over again. So the following is conjecture. Switching crops takes time and money. Couple that with the possibility that unmet demand for these “other” crops may not exist. That is, there may not be significant demand for these other crops to justify the switching cost.

Q3: Did our trade-war mongering administration, including those that voted for this administration, consider the economic ramifications of this trade war on China?
A3: I don’t know. Judging by the hastily put together farm payout, which some consider a bribe for more votes, it sure doesn’t seem like it.

Q4: Japan sure makes nice cars. Are we going to come up with a reason to initiate a trade war with Japan because they continue to sell sedans here in the U.S. while companies like Ford stop producing due to unprofitably?
A4: That seems tough to me. We can’t say Japan’s government gives Toyota, Nissan, Honda, and Mazda (we can even reach over to South Korea with Hyundai and Kia or Germany with Mercedes and BMW, or any other country for that matter) an unfair advantage by allowing them to destroy the environment and underpay labor.

But who knows, we humans suffer from self-attribution: when we do well it is due to our greatness, when we don’t do well we blame someone else. Ford’s inability to produce sedans profitably relative to the Japanese couldn’t be due to Japanese corporations adopting the quality control teachings of American W. Edwards Deming faster than American companies (https://en.m.wikipedia.org/wiki/W._Edwards_Deming).

Or could it?

-Dr. Moore

Update: a bit ironic that the Trump shutdown is due to funding demands for an infeasible and ineffective wall for “border security.” It seems that if a mythical effective wall were constructed and the border is “secured,” which is code for “ban Mexicans and other Latin Americans,” that farmers would have difficulty finding low cost labor to carry out any switching plan. Maybe the funding should be used to help non-criminals attain legal working status here (read: help American farmers) and to help law enforcement weed out criminals. BTW, “criminal” is nationality agnostic. Or maybe invest those funds in education or something here instead .

Farmers Are Worried About Their Aid Payments in Trump Shutdown
https://www.bloomberg.com/news/articles/2018-12-27/farmers-are-worried-about-their-aid-payments-in-trump-shutdown

This article provides interesting perspectives on trade wars, GDP, world reserve currency, the trans pacific partnership Obama started and Trump ended, manufacturing, and more. Definitely worth the read in my opinion.

-Dr. Moore

Get Used to It, America: We’re No Longer No. 1
https://www.bloomberg.com/view/articles/2018-12-18/china-as-no-1-economy-to-reap-benefits-that-once-flowed-to-u-s

“Honesty leads to trust and trust leads to freedom”

This is an interesting commencement speech that speaks to the current state of affairs in Washington. I agree that dishonesty must be held accountable. Without that accountability, chaos and tyranny awaits. This reminds me of a couple verses from the Tao Te Ching:

“When darkness and disorder began to reign in a kingdom, There appeared the loyal ministers.”

“For people who speak falsely, who transgress in this one way, and who reject the world beyond, there is no evil they won’t do.”

Be mindful of where and how you can hold dishonesty accountable. With regards to politicians, the voting booth is one place. With regards to media you can cancel subscriptions and start a blog with truth. With friends and family you can…follow your inner voice? 🙂

-Dr. Moore

Graduates: Here’s an Honor Code for Life
https://www.bloomberg.com/view/articles/2018-05-12/michael-bloomberg-at-rice-university-an-honor-code-for-life

Two things come to mind when I read this article. First, how fortunate we (faculty and staff at Sacramento State and elsewhere) to have access to the annual FAME conference at San Francisco State university. Several years ago we were able to watch Donald Yacktman present Valuing Stocks as Bonds:

https://efficientminds.com/seminars/2013-fame-v-conference-notes/

Why does this come to mind? Yacktman Asset Management at the time managed $13.7 billion with 9 people. Jabre mentioned in this Bloomberg article, in contrast, managed $1.2 billion with 40+ employees in April 2018. We were (are) fortunate to hear from some of the best in the business.

The second thing that came to mind is what Mattie Von Turk, retired finance professor from U.C. Berkeley, told me during Berkeley’s CDAR Symposium: market efficiency is not an absolute truth, rather, it is a benchmark to judge asset manager performance. As such, “beating the market” on a risk adjusted basis net of fees is hard work.

In the Bloomberg article below we see a growing list of experts in the field exiting the hedge fund business due to difficulties in achieving superior risk-adjusted returns net of fees.

I’ll add to what Mattie told me: yes, beating the market is hard work. You’ve got to work harder and smarter than the market participants to be successful at this game. Or just buy index funds. 🙂

Enjoy the journey,

-Dr. Moore

Another Hedge Fund Veteran Is Quitting a Brutal Market
https://www.bloomberg.com/news/articles/2018-12-13/hedge-fund-jabre-capital-to-return-capital-to-investors-jplw0j14

The goal of a firm is to maximize shareholder wealth. The author of the Bloomberg article suggests activities that are a better use of funds than stock repurchases. While activities such as sniffing out hoaxes and better protecting user data are noble ideas, will those maximize shareholder wealth more than stock repurchases? Perhaps repurchases are shortsighted. Perhaps Facebook has a roadmap already in place to clear up the issues noted in the article, and accelerating that roadmap may not have the ROI (or ROE) for shareholders.

Facebook is down about 35% since July 25th though…

Facebook Has Better Uses for Its Cash Than Stock Buybacks
https://www.bloomberg.com/view/articles/2018-12-11/facebook-has-better-uses-for-its-cash-than-stock-buybacks

Nice opinion piece that ends with a simple and well known lesson: “If something is too good to be true, it usually is.”

Yep, Bitcoin Was a Bubble. And It Popped.
https://www.bloomberg.com/view/articles/2018-12-11/yep-bitcoin-was-a-bubble-and-it-popped

I found this an interesting article regarding active vs. passive investing. Funds that “hug” a passive index by holding that index plus a few low conviction picks may be weeded out. Why? The fees to manage what is essentially a passive portfolio will likely outweigh any minuscule risk-adjusted return performance boost over the index itself.

Perhaps the old core (75% index) and explore (25% active picks) approach needs to be either 100% core or 100% explore. Now, how does one develop an alternative index (core) or the right number of high-conviction stocks (explore)…

Wall Street Needs More Market Indexes. Seriously.
https://www.bloomberg.com/view/articles/2018-12-10/wall-street-fears-the-wrong-index-bogeyman

This article makes several good points. I hope everyone out there takes a few minutes to read the article.

Where Is Americans’ Outrage Over Huawei Arrest?
https://www.bloomberg.com/view/articles/2018-12-07/arrest-of-huawei-s-meng-wanzhou-should-outrage-americans

I also agree that, in the name of transparency, it would have been nice to see Apple continue the practice of reporting unit sales. But, Apple is the largest or second largest corporation on earth. They must be doing some things right.

However, Apple’s decision to withhold unit sales data provides an opportunity for someone to infer unit sales from other publicly available data.

How many current and former students out there would like to take on that challenge? Could be an interesting research project…

-Dr. Moore

Apple’s iPhone Subtraction Demands Some Addition
https://www.bloomberg.com/view/articles/2018-11-29/apple-s-iphone-subtraction-demands-some-addition

As I read this article, I thought of my son. My son, now a college freshman, has never had a job. This is one thing I wish I had pushed harder for over the years. But, being across the country, there’s only so much letters, phone calls, and infrequent visits can do.

So now we have a generation or two not accustomed to working. Corporations, in order to build shareholder wealth, now recruit from retirement homes, churches, and AARP. Who would have thought it?

Well, hopefully my son reads this post. Son: you better get good grades because school is your only job now. If you perform poorly, do not expect me to further subsidize the endeavor. At that point you will have to do the unthinkable: get a job to pay for your own food and shelter.

-Dr. Moore

Senior Citizens Are Replacing Teenagers as Fast-Food Workers
https://www.bloomberg.com/news/articles/2018-11-05/senior-citizens-are-replacing-teenagers-at-fast-food-joints