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What Labor Gave Us... But Still Doesn't Understand Alexander Green, Chief Investment Strategist, The Oxford Club
 Monday is Labor Day, a public holiday that not only marks the unofficial end of summer, but also honors the American laborer.
We often forget that the labor movement gave us much to be thankful for: child labor laws, the eight-hour workday, workplace safety standards, lunch breaks, weekends without work, paid vacation, unemployment insurance, overtime pay, employer healthcare, military leave and wrongful termination laws.
That's why it mystifies me that Big Labor - and a large percentage of the American public - is on the wrong side of one of the biggest economic, political and investment issues of our day: international trade.
It makes no sense. Trade is an enormous plus for the U.S. economy - and for investors.
Let's start with two basic facts:
- The U.S. is the world's largest economy. (No other country comes close.)
- And 95% of our current and potential consumers are outside our borders.
International trade is killing us?
We are the world's third-largest exporter. Total U.S. exports recently hit an all-time record of $1.64 trillion.
This creates significant amounts of employment. More than 11.7 million people in the U.S. work in export-related industries.
These are also higher-paying jobs. According to the White House Council of Economic Advisers, employees earn $1,300 a year more than workers in non-export-related industries.
We Americans like our imports, too.
We drive Japanese and European cars. We wear Swiss watches. We like Italian shoes and low-cost shirts from Bangladesh and Taiwan. Our morning coffee comes from Colombia or Brazil. Our flat-panel TVs and smartphones are assembled in South Korea or China. Even the produce in the grocery store - especially in winter - comes from as far away as Chile.
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In fact, the U.S. is on track to post the longest stretch of falling food prices since 1960. Or would you prefer to pay more for your groceries?
Some blame international trade for the loss of millions of manufacturing jobs. But the real reason is not low-cost foreign workers. It's automation.
"Well, it's not trade itself," a neighbor told me this week. "The real problem is our lousy trade deals, like the one with China that Trump is always going on about."
That's an interesting perspective. Especially since the U.S. doesn't have a trade "We often forget that the labor movement gave us much to be thankful for...
"That's why it mystifies me that Big Labor - and a large percentage of the American public - is on the wrong side of one of the biggest economic, political and investment issues of our day: international trade." | |
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deal with China. Nor has it ever had one. Not a bilateral one. Not a multilateral one.
Trump is talking about fixing a deal that doesn't exist.
And it's not just Trump. Hillary's nose grows longer every time she talks about bringing back U.S. manufacturing jobs. It isn't going to happen.
According to a recent Stanford University study, manufacturing robots cost the equivalent of $4 an hour... and are getting steadily better and cheaper.
Some Americans want Uncle Sam to slap tariffs on imports. (As if it would be a good thing to pay more for your Toyota truck, Samsung stereo or Grey Goose vodka.) This protectionist economic theory - called mercantilism - was refuted by Adam Smith way back in 1776.
Politicians tried it in the 1930s, and it rapidly worsened a global depression. It's not hard to see why. We placed tariffs on American imports. Foreign governments quickly retaliated with tariffs on our exports. The end result was a world economy that contracted 25%.
This is the economic version of mutual assured destruction.
Of course, one reason some Americans are skeptical of foreign trade is that the losers are so much easier to identify than the winners. When a manufacturing plant closes and moves to Mexico, it makes the evening news. But no one creates a news story when a company staffs up to support an export-oriented business.
Here's the bottom line...
International trade has given us improved quality, lower prices and an enormous increase in choices. But there's a perceptual problem. The benefits are dispersed among hundreds of millions (who take it for granted), while the negatives are concentrated in the much smaller number who lose their jobs.
As FedEx founder, chairman and CEO Fred Smith recently wrote in The Wall Street Journal, "History shows that trade made easy, affordable and fast always begets more trade."
That's a good thing for the rich, the poor, the working class... and investors.
Good investing,
Alex
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The Last Great Source of Income...
Dividends are just about the last source of investment income left in America.
And in 2016, many companies are slashing their payments. We've already seen cuts ranging from 25% all the way to 76% on companies including CenturyLink, Wynn Resorts and Marathon Oil. Click here to learn more. | |
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The rise of robotic factories is cause for bullishness in some markets and bearishness in others. We're examining the winners and losers of automation. Read On... | |
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Over the next four years, an estimated 34 billion devices will be connected to the internet. Are you well-positioned to capitalize on this trend? Read On... | |
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The gloom-and-doomers are warning of the coming "Robot Revolution." Here's why investors shouldn't be quaking in their boots. Read On... | |
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The Oxford Club is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that although our track record is highly rated by an independent analysis and has been legally reviewed, investment markets have inherent risks and there can be no guarantee of future profits. The stated returns may also include option trades. 
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