1. Flow With The River, Not Against It
Whe come to investing and blogging, I have a very different approach compared to fellow blogger Calvin Tan. Correct me if I am wrong, Calvin has a tendency to shove things down people's throat. I am different. I prefer to be objective.
Why ? Because based on my observation and experience, NONE of my investment ever make money because I have won an argument against others.
My investment makes money when my view about a company's FUTURE is CORRECT. When the company delivers earning higher than previous year, its share price will go up and I benefit.
(Same principle applies to people who try to badmouth other people's stocks. It doesn't work. I have never lost a single sen in my investment just because somebody launches attacks on the stocks that I hold. Don't believe me ? Just look at Hevea and Robertl. It is the EPS that matters, STUPID)
In other words, there is no point for me to win an argument against anybody. It won't do my wallet any good.
When I look at things from this perspective, the only logical conclusion is that I should use blogging as a platform to sort out my thoughts, to interact with other forum members and to get useful feedbacks - SO THAT I CAN IMPROVE MY ACCURACY FOR EPS FORECAST.
No point keep defending something if you are wrong (Calvin Tan please take note). In stock market, when a ship is heading to Holland, you jump ship, don't try to be a Hero.
THE MARKET IS TOO POWERFUL FOR US TO FIGHT.
2. The Debate About Trump
Two days ago, I published an article called "12 Reasons Why US Cannot Turn Protectionist". This morning, Calvin Tan published an article about Trump's latest move - "Trump Imposing 35% Tax For US Companies Moving Offshore & Sell Back".
First of all, as an investor in export stocks, I am inevitably positively biased towards a "Trump Talks Only, No Action" scenario. Calvin is different. His view is that Trump is serious, US will turn inward and our very own Malaysian export stocks will suffer.
My role as a blogger is to keep track of things and discuss them from time to time. That is why I am starting this article series to update everybody on the latest development. Hopefully you will find them useful.
3. Trump's Latest Threat
When come to government policies, rules and regulations, wordings are very important. Let me quote Trump verbatim :
The US is going to substantially reduce taxes and regulations on businesses, but any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then think it will sell its products back into the US without retribution or consequence, is WRONG ! There will be a tax on our soon to be strong border of 35% for these companies.
Key questions and unknowns :-
(a) It is not clear whether this is applicable to companies IN RETROSPECT. If it only applies to companies who are moving offshore in the future, it will affect US Foreign Direct Investments, not trade.
(b) If this is applicable to companies in retrospect, then it will become a trade issue. For example : Apple will get hit when it ships its iphones back to US to sell. When this happens, there will be a lot of repercussions, the details of which are as set out in my earlier article "12 Reasons Why US Cannot Turn Protectionist". Please go through it again if that interests you.
(c) Come to think about it, the unintended consequence of this latest policy is that it discriminates against America's own companies. An American company that manufactures offshore will be taxed if it exports back to US, but foreign companies won't be affected.
To "level the playing field", Trump will have to impose same amount of tariff on imports. Wow wow wow wait a miniute... we have talked about this before... imposing tariffs on imports will trigger a whole series of negative reactions from other countries. Again, I would like to refer you to my previous article.
The US is a powerful country, but it is not that powerful until it can do whatever it wants.
4.Trump The Genius ?
In the US, many people treats Trump with contempt (I was one of those that belittled him before his victory). However, across the Pacific Ocean, it seemed that Communist China has come up with a starkly different assessment. In numerous occasions, I heard the media describes Trump as a "Very Clever Person".
Come to think about it, Trump is indeed brilliant (of course, he has many shortcomings too, especially his temperament). If you have studied Marketing in University before, you will understand what I am trying to say. The field of Marketing is vast and diverse. But the gist is that if you are able to identify the hidden craving embedded deep inside consumers' heart, your products will sell well.
As a businessman, it seemed that Trump has mastered this art well. He deviated from the traditional narratives of most politicians (both Democrats and Replubicans) and tap into the latent sentiment hidden deep inside voters, especially blue collar workers and those that fret about border insecurity, and finally emerged as the winner.
Trump the businessman read his customers well, and he came up with the right product. As for Hillary, until now she still doesn't know how she dies.
5. Intention Not Clear
In the previous section, I establish that Trump is a very clever person. The implication of such an assessment is that you need to shed your complacency and stop treating him as a populist fool that doesn't know what he is doing.
All of what he is doing now could be part of a clever strategy to shift the burden to his fellow politicians. The shortcomings and weakness of Trump's protectionist policy is so glaring that many politicians have started voicing out against it. And this came not only from the right, but also from the left - Sarah Palin, Lawrence Summer, Bernie Sanders... The list wll only get longer as more details are unveiled.
My guess is that at the end of the day, all these nonsense will be abandoned and things will revert back to normal. Afterall, Amercia is the champion of capitalism and Trump is a businessman.
As for Trump the President, he has honoured his promises to champion the interest of the workers. However, the resistence from the establishment is so strong that he cannot push them through.
"I have tried my best".
6. Concluding Remarks
Readers might have noticed that, faced with the latest development, I have almost instantaneously jumped into conclusion that what Trump is doing is nothing more than posturing. Is that wishful thinking ?
Not really. I adopt such a view guided by my internal compass. The case for protectionsim is so weak and the obstacles so insurmountable that I just cannot imagine how Trump can pull it off.
I have discussed this topic in details in my previous artcile, but I would like to sum up the few important points :-
(a) Economic inefficency - protecitionism will do great damage to American corporations.
(b) Fierce external pushback - retaliations, geopolicital repercussions, WTO obligations.
(c) Ideological incompatability - US is the top capitalist country in the world, and Republicans are pro trade. They control the Congress and Senate now. Trump needs to work with them. And also, Trump is a businessman.
I stick to my view that US is unlikely to turn potectionist. For me, buy export stocks to benefit from the weak Ringgit is still a sound bet.