Washington Lawyer on Free Trade

I am currently licensed as an attorney in both California and Washington, D.C. It's not as impressive as it sounds--there are procedures for mutual cooperation between the two bar associations, so you can waive into D.C. if you meet certain criteria. The D.C. bar publishes a magazine called Washington Lawyer. This month's cover feature a story on free trade, by Sarah Kellogg:

http://www.dcbar.org/for_lawyers/resources/publications/washington_lawyer/december_2008/free_trade.cfm

While the majority of Americans favor trade, that majority has been shrinking. Fifty-three percent of Americans had a positive view of free trade in 2008, according to the Pew Global Attitudes Project, a public opinion survey of the Pew Research Center. That’s down from 59 percent last year and 78 percent in 2002. What’s shocking in the numbers is that the United States ranked last among developed nations in terms of public support for free trade. The next closest nation was Egypt at 57 percent.

Trade’s financial benefits and costs are constantly being debated, but there’s no denying exports play an important role in the U.S. economy. In 2007 exported goods and services accounted for 12 percent of the Gross Domestic Product. One of three U.S. acres is planted for export, and manufacturing exports have increased by 128 percent since the last multilateral- trade round more than a decade ago, according to the Office of the United States Trade Representative.

Wall Street to Reid: Cool Down

Senate Majority Leader Harry Reid was featured on every news channel last night, talking about how Wall Street would collapse this morning because the Senate rejected the auto bailout.

Well, the stock market was steady early this morning, and the Nasdaq was actually up around 8:00AM.

The White House just said it might step in to assist the car-makers, causing the market to move higher:

http://news.yahoo.com/s/ap/20081212/ap_on_go_co/meltdown_autos

Goshdarn it, if there's one thing Americans should know by know, it's that whenever George W. Bush gets involved, efficiency, financial stability, and prosperity follow. Right? Right?

Michael Malone in the Santa Clara Magazine

My alma mater's publication, the Santa Clara Magazine, continues to impress. This month's issue had a great essay by Michael Malone, who believes America's future depends on its continued willingness to encourage entrepreneurs:

http://www.scu.edu/scm/winter2008/entrepreneurs.cfm

Half of all new college graduates now believe that self-employment is more secure than a full-time job. Eighty percent of the colleges and universities in the United States now offer courses on entrepreneurship. Sixty percent of Gen Y business owners consider themselves to be serial entrepreneurs. And, most tellingly, 18- to 24-year-olds are now starting companies at a faster rate than 35- to 44-year-olds.

Don’t think that the rest of Generation Y is still dreaming of a gold watch: 70 percent of today’s high schoolers intend to start their own companies.

It looks like the new college grads aren't buying into the seniority paradigm. That's what I like about Santa Clara County--with all the new people here from so many different places, corporate seniority is less respected. Results, not tenure, are what count, which is the way a meritocracy ought to work.

Of course, I had to pick the one profession, law, where seniority does count. Sigh.

Where does America get its oil?

If you think America gets most of its oil from Saudi Arabia or the Middle East, you are wrong. ExxonMobil ran an ad in yesterday's WSJ (12/10/08, A10-11) showing the sources of America's oil imports:

55% = North American (includes Canada, Mexico)
16% = Africa
14% = Middle East
12% = South America (includes Venezuela)

The remaining 3% comes from Russia/Caspian, Europe, and Asia-Pacific (includes Indonesia).

Last time I checked, the top three suppliers of American oil were Canada, Mexico, and Venezuela.

Scott Burns on Social Security

Scott Burns on Social Security--skip the first question and go to the second one:

http://assetbuilder.com/blogs/scott_burns/archive/2008/12/10/what-others-are-doing-with-their-401-k-money.aspx

I didn't know how the Social Security system really worked until I read Mr. Burn's response to the second question.

The Poor, Poor American Dollar

I have a treat for my readers--The Atlantic's (December 2008, p. 62) interview with Gao Xiqing, who oversees and invests $200 billion of China's $2 trillion U.S. dollar holdings. This interview is one of the best ones I've ever read because of the government official's openness:

http://www.theatlantic.com/doc/200812/fallows-chinese-banker

Below are my favorite two parts from the interview, one about the American dollar, and the other about derivatives:

Everyone is saying, “Oh, look, the dollar is getting stronger!” [As it was when we spoke.] I say, that’s really temporary. It’s simply because a lot of people need to cash in, they need U.S. dollars in order to pay back their creditors. But after a short while, the dollar may be going down again. I’d like to bet on that!

I have been converting my dollars into Canadian dollars recently. I already have euros (FXE) and some Swiss francs (FXF). We'll see in a year whether my decision was the right one. I felt compelled to diversify my U.S. dollar holdings, because they were earning around 1% in interest, while competing currencies had much higher interest rates and the possibility of greater upside.

As for derivatives, here is what Mr. Gao had to say:

If you look at every one of these [derivative] products, they make sense. But in aggregate, they are bullsh*t. They are crap. They serve to cheat people.

Mr. Gao explains derivatives by comparing them to multiple mirror reflections of one actual product. It's such a perfect analogy, I'm surprised no mainstream American publication has mentioned it until now.

Kudos to The Atlantic and Mr. Fallows for publishing this interview.

Investment Outlook

My personal sentiments regarding the stock market are similar to Jim Rogers'. Basically, I am overweight commodities and just bought a Commodities ETF (DBC). I also added to my Canadian dollar position (FXC), as an indirect play on commodities.

I disagree with Mr. Roger's assessment of American stocks being too expensive--many "blue chip" technology stocks appear cheap because of their high net cash holdings and market share. T. Rowe Price holds my 401(k), and around 17% of my 401(k) is in its Science and Technology fund (PRSCX). This particular fund has a relatively high percentage of its holdings in semiconductor companies.

The information on this site is provided for discussion purposes only and does not constitute investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities or make any kind of an investment. You are responsible for your own due diligence.