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1.4.2017 - Financial Intelligence Report Bookmark

Exactly!
 
 
As we look across the economic landscape and we joust back and forth about whether Mr. Trump can enact enough programs to keep the US of A from foundering, sometimes I think we need to step back a bit and look at the big picture. There have been and there is to come, structural changes that I’m not sure can be reversed.  For instance technology.


Over the past few years we’ve talked about the incessant creep of automation taking over the chores of working people. Robot’s to coin the phrase are everywhere and spreading into nooks and crannies that were once thought impenetrable.  There’s a lot of chatter that Ford didn’t cancel its plans on building their new plant in Mexico only because of Trump’s call. Some are saying that they’re going to fill that plant with so many robots, that it will be cheaper than even using Mexican labor at like 4 bucks an hour.
 
I’ve looked through dozens of tech magazines, and listened to several lectures about what people are going to do when the robots have taken over half the jobs humans used to do, and I have to tell you, there is NO finite, concrete answer. Some are suggesting that you’ll have a “proxy” robot, sort of like Okay I’m Bob, and this here Machine is me too. So the machine goes to work and I get the money. Others are suggesting the “basic universal wage” where the Governments of the world simply pay everyone a set dollar amount each month...to do nothing, or what ever else you might want.
 
All in all, I find it pretty perplexing and it is something we desperately need to try and figure out, because this is not going to stop.  I just saw a video of a mechanical brick laying machine that can build the equivalent of a two story 3000 square foot building out of block, with NO human intervention once its programmed. Bricklayers have been around since the time of Cleopatra, and even that sacred profession is now in the infancy of being taken over by automation.
 
But there’s going to be a time when we have to re-evaluate some of our stances on things.  The next part of this “economic” discussion is a topic that has bothered me for over 40 years.  Even when people try and better themselves, there’s always some Bureaucrat waiting with a “ticket” to stop them. You’ve all heard of the towns that shut down little kids lemonade stands, or stop the bake sales at church because they’re not “licensed”.  Well the following little exchange is a perfect reflection on that...
 
Down here in Sarasota there’s a part of town called New Town. Its history has been that it’s generally been a poorer part of the city, and its inhabitants are largely African American.  Well, recently a few of the residents attempted to improve their lot in life by doing a few things. Not robbing, not stealing, not mugging, not selling crack.  They were washing cars and selling hot dogs.  Follow along...
 
From abc7 MySuncoast...

SARASOTA, Fla. -- Valerie Buchand of Newtown says the City of Sarasota was wrong to close a make-shift car wash as well as make a woman stop grilling and selling hot dogs on the sidewalk.

"When we're finally creative you tell us to go back in our houses and close our doors, come out when dark comes and sell the people that come off the beach drugs," Buchand said.

But Tim Litchet, Director of Neighborhoods and Development for the City of Sarasota says it's not good to be criticized for enforcing safety laws.

"If somebody gets sick from eating bad food somewhere, the news story is going to be, 'why didn't Tim Litchet shut down that illegal vendor, when he knew they weren't doing the right thing,'" Litchet said.
 
Well there it is. People trying to take the initiative and do something “good” and sure enough there’s some form of Government that says “nope”.  I don’t really care one Iota if you believe me or think I’m full of crap, but it is that very sentiment...that has done more to damage the economy of the US than just about anything.  Decades of that very response from townships, and local governments concerning rules and regulations and approvals and licenses have turned so many people into just “give ups”.
 
Hundreds of the foodstuffs you might buy at the grocery store, from Birds eye frozen dinners to you name it, all started out decades ago by regular people starting off in their HOME kitchen and selling product. Most did it door to door.  But today? HAHAHAH.  Go ahead. Try and make something in your kitchen and sell it on the open market.  You’ll be shut down immediately.  Yes you “can” do it in some states under the cottage food rules, but even they are pretty ridiculous.
A dizzying array of state laws cover home-prepared specialty food products. Issues such as these:
 
• The types of foods you can sell.
• Ingredients you can use.
• Labeling.
• Maximum income you can make.
• Where products can be sold.
• Whether kids or pets can be in the kitchen while you cook.

In Florida, which is a food friendly state, you can only sell direct to a consumer. No retail, no internet. So that limits you to roadside stands, but then the city will shut you down for no permit. You can do farmers markets, but you can’t make more than 15K a year, and the list of things you can’t sell far exceeds what you can.  But hey at least you can “try”.  In my old state of NJ, there is no cottage food rules. You simply CAN NOT sell homemade food. Period.
 
The reason will always be the same... ”it’s for the public’s safety”.  And so, it doesn’t matter that you’ve baked cherry coconut cookies with a chocolate dollop in the center for 50 years and no one got sick. Start selling them without having your kitchen approved, and you licenses applied for and yes folks, you’ll be shut down. Period. Hey I get it, I really do. No one wants to get poisoned. Yet that push to keep everyone perfectly safe and sterile...has certainly shut down a lot of folks and pulled the entrepreneurial spirit right out of them.  
 
How many people in the last 20 years might have had a great idea, a great new food, a great new recipe, only to find that it might cost them too much, or the regulations aren’t worth the hassle? Many, trust me. I’ve seen it personally in my own family.  Or take that gal above from New Town. Grilling hotdogs for folks, and down she goes. Do you think she’s going to try anything else? Nope probably not. Poor folks can’t fight city hall.
 
In an age where Robots are going to be replacing humans, it seems to me that at some point, humans are going to have to relax some of the excess red tape in our society.  So as we see Mr. Trump come into his Presidency, I don’t expect him to strike down laws against lemonade stands, lets be real here. But that said, if he does start at the top, with some of the incredibly tight regulations on business, maybe, just maybe some of it can trickle down.
 
The small business man made America. In her glorious past, tens of thousands of those businesses started in kitchens, garages and backyard sheds. Today, in the supposed “land of the free” there’s always someone looking to make sure you can’t carry on that tradition. Yet it is my opinion that in the future; as automation replaces people, being able to make and sell things is going to be a very important part of keeping the lights on.  The US didn’t stand out and become the land she was by everyone being sterile. A simple mixture of common sense and ambition did the work. We should try it again.
 
The Market...

The question coming into the new year was this....would the people that wanted to take profits from the “Trump rally” do it on day one, or...would they keep the momentum going and try and milk it for all they can get?  On Tuesday the answer wasn’t terribly clear. After blasting out of the gate and gaining 100 points in the first half hour, the steam hissed out and by noon we were barely staying out of the red. We wandered for quite a while before a late session boost pushed us back up nicely.

Today was somewhat of a repeat of that, but not quite as dramatic. We opened strong and we were posting something like + 70 DOW points quickly. But like yesterday the air came out and for a while we were up just  a handful. But they came in and rescued things once again.  By the time the final bell rang, we had gained 60 DOW points and 12 S&P’s.
 
The mood of the analysts is rosy. Day after day I’m hearing about how wonderful things are. And I’m being told that the market is fine to “buy right here”.  Okay, maybe it is. But for how long? I still think they want to get that DOW 20K number at least for a couple days so they can bring out their silly hats and high five each other. But I also think that what we’re seeing here is a bunch of 401K new year money being deployed and they do have a habit of trying to spread that stuff around in a rising market. Once they’re all deployed...then what? Is mom and pop with their e-trade accounts going to keep pushing us higher?
 
I think we’re safe until about the inauguration. After that we’ll really be hearing earnings reports and we should see some of this froth blow off the glass.  So, we’re trying to pick up some trades and go with the flow.  But I’m not ashamed to say that I’m not a big believer in this market. This market is expensive. Yes stocks can and do go up longer than you might think. Yes there’s more “hopium” right now than I’ve seen in many many years.  But how much exposure to this thing do you really want?

A few weeks back, we bought into some SPY and DIA. The SPY went up and up and up for us and we sold it on the last day of 2016 for an 8 dollar a share gain.  After a week of soft trading, we didn’t know if the market would soar come Tuesday or if it would fall victim to tax selling. Well so far it has soared and still wants its DOW 20K hat.
 
With the sector rotations as they are, it might just be wisest to buy the big ETFs in here. Once again, if the desire is that big fat 20K number, the DIA has to rise some. The SPY should move in tandem, especially if oil moves higher. I think that’s safer than individual stocks right now.  Take advantage of this, but don’t start to believe that pullbacks aren’t coming. They are.  Take care all!

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