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Random thoughts #59

Democrats continue to defend the indefensible with ardor and vigor. They defend males competing in sports against females talking about “trans rights” while forgetting about women’s rights. They defend all the illegals that they brought into the country and now defend against their deportation. They defend Hamas forgetting October 7. Do they think that all their demonstrations will change either Israel or US policy toward Israel? Now they are attacking RFK, jr for telling parents that the Centers for Disease Control and Prevention will no longer recommend the COVID-19 vaccine for healthy pregnant women and children in its immunization schedule. Why the CDC recommended the vaccines for children in the first place is beyond me. Even during COVID there were voices out there backed by scientific research showing that young children should not be vaccinated and certainly not pregnant women. But once again those on the left are taking the position in the words of Elizabeth Warren that Kennedy is taking vaccines “away from millions of mommas and babies.” I thought the left hated Big Pharma? I guess they hate RFK, jr more.

Was there any Covid-vaccine skepticism on the left? If so I didn’t hear any. In fact all of my friends on the left got every shot and every booster out there. Again, I am surprised that when all the bad news about the effects of the vaccines came out, that they didn’t just say it was Trump’s fault to rush the vaccines to the market. Instead they embraced them as they attempted to force the vaccines on us all. I thought it was particularly interesting that so many medical personnel refused the vaccines.

GM’s Mary Barra, while acknowledging that Trump’s tariffs will cost the company $5 billion said “For decades now, it has not been a level playing field for us automakers globally, with either tariffs or non-tariff trade barriers. So I think tariffs is one tool that the administration can use to level the playing field.” Translation: Trump scares the hell out of us. So let’s play nice. I guess Barra must be referring to the higher tariff that the EU has on US vehicles. She probably has forgotten that the US has high tariffs on pickup trucks which has shielded GM from foreign competition (unless they build their trucks here). Note that Barra supported Biden’s EV policies too. But she has to do something to for her $30 million a year salary.

Barra said that the company is still committed to EVs because “I see a path to all EV; it will depend on how much we get the infrastructure ready, but I do believe we’ll get there, because I think the vehicles are better.” Yet GM also in the same breath announced that instead of producing batteries for electric vehicles at a factory in New York, it will instead produce V-8 engines. Aren’t V-8 engines the polar opposite of EVs? Aren’t only some Camaros, Mustangs and Corvettes offered with V-8s? Then again you can get a Bentley, McLaren, Aston Martin or a Ferrari with a V-8 too. 

Denmark has raised their full retirement age to 70 for those born in 1971 or later. Like the US, Denmark was facing a Social Security shortfall. Unless the wimpy US politicians, the Danes passed a law tying the full retirement age to life expectancy. That is a common sense approach so don’t expect it to occur in this country anytime soon.

Fentanyl seizures at the southern border are down dramatically. Is this because of ramped up efforts in Mexico or putting US troops at the border? Regardless this is good news. But remember Harold Black’s First Law that “Any law worth circumventing will be.” Maybe the cartels have figured a work around. Will Trump now lower tariffs on Mexico because of the decrease in fentanyl? Yeah, sure.

Did you see where Martina Navratilova tweeted about two Oregon girls refusing to stand on the podium with a male athlete at a track event? She said “Gender ideology is male entitlement peddled as progressive.” Wow! What do the libs think about that?

Are you watching the NBA? I’m not but I am not a basketball fan. However, I wager that the finals between the Oklahoma Thunder and the Indiana Pacers will be the lowest rated finals ever.

One of the most popular majors at UT is supply chain management. I bet they are reveling in the disruption caused by Trump’s tariffs.

I wonder if Trump will be nice in his tariff negotiations with Japan? Recall that they are the largest foreign holder of Treasurys and could threaten to dump their $1 trillion portfolio if Trump proves inflexible.

Speaking of which, the President’s latest tweet is embarrassing – but obviously not to him. “If the Courts somehow rule against us on Tariffs, which is not expected, that would allow other Countries to hold our Nation hostage with their anti-American Tariffs that they would use against us. This would mean the Economic ruination of the United States of America!” Surely he can’t be serious? But then again, I suppose that he is. A Supreme Court decision cannot come quickly enough to settle this matter once and for all. Although if Trump loses, as is likely, he will try to figure out a work around (HB’s First Law).

Isn’t it about time Trump stopped coddling Putin and treated him like he was Canadian?

In another Supreme Court decision, this time on deportations, the court ruled in favor of the Trump administration in a 7-2 ruling. Again only Jackson and Sotomayor dissented. A bad sign for Justice Jackson. Sotomayor was clearly a DEI appointment. I had higher hopes for Jackson – although I would have preferred Michelle Childs.

Does ambiguous have only one meaning?

Wrong is spelled wrong in the dictionary.

Tesla, Ben and Jerry’s and Real Chocolate

It wasn’t surprising to see the left’s attack on Elon Musk manifest itself in an attack on Tesla. Not content to simply boycott Tesla, the left took to vandalism. It scratched the cars, torched others and picketed dealerships. Tesla’s sales plummeted worldwide. It got me wondering why conservatives don’t protest Ben and Jerry’s ice cream? That product has been an advertisement for the left from its inception.  If not the conservatives then why are the Jews silent? Recently Ben and Jerry’s board issued a statement calling the Israeli invasion of Gaza “genocide.”  Ben Cohen was actually kicked out of a congressional hearing when he disrupted a senate hearing saying that “Congress is paying to bomb poor kids in Gaza and paying for it by kicking poor kids off Medicaid in the U.S.” Cohen, although Jewish, has been long critical of the Israelis’ relationship with the Palestinians. Remember when Ben & Jerry’s halted sales of its ice cream in Jewish settlements in the Israeli-occupied West Bank, saying selling there was inconsistent with its values? Again not a peep from US Jewish leaders. On a personal note, I do not buy Ben and Jerry’s ice cream and never will. I guess if Ben Cohen had been Elon Musk that the lefties would have tossed the ice cream on supermarket floors and harassed employees at the plant’s headquarters. One could point to Target (trans displays) and Bud Light as successful efforts by those on the right to protest leftist positions by corporations. But why the silence on Ben and Jerry’s? BTW, my favorite ice cream is chocolate chocolate chip.

My daughter and her family took their annual trip to Europe and spent most of their time in Italy with a stopover in Lucerne. They sent me back chocolates from the chocolatier Laderach. I was stunned. It was outrageous. I texted them “so this is what chocolate is supposed to taste like!” It was as far from Hershey’s as a Yugo is from a Ferrari. Seriously good. Why can’t American chocolate be this good? I now understand why Europeans differ from us in the consumption of chocolate. Americans tend to be impulse buyers while Europeans consume chocolate more as a staple with it being a regular item on their grocery lists. “They’ll buy a bar and break off a few squares every day,” says one chocolate executive. If our chocolates were this good I would also break off a few squares every day.

Cocoa prices are rising worldwide and European demand has proven to be less elastic than American demand for chocolate. European companies are better able to pass on the price increases than American ones. But, hey, if our chocolate were as great tasting as theirs, our demand would be less elastic too! Trump’s tariffs will harm American producers since most of the world’s cocoa comes from West Africa. Swiss chocolatiers are finding demand for their product to be relatively inelastic and have been able to pass the price increases in cocoa on to their customers. Not so much in the US market where the cocoa prices and tariffs have caused the stocks of candy makers to plummet. Hershey’s earnings per share has gone done 30 percent and its stock is off 35%. Contrast this with Switzerland’s Lindt whose stock is up 20 percent.

All this reminds me of beer. I had my first taste of beer at my high school’s senior picnic. It was awful. I had an occasional beer in college but never developed a taste for it. Then came light beer and I was aghast. How could something that tasted this awful be so popular? Apparently there was something wrong with my taste – or is it the fallacy of composition? Then I went to the University of Konstanz am Bodensee to write my dissertation. At lunch one day I tasted the local brewery’s signature beer and was stunned. I couldn’t believe the difference in it and American mass produced lagers. I became a one a day beer drinker. But when I came back to the states I stopped and did not start again until micro brews came onto the market. Now a good stout or porter – but never an IPA – is welcomed. So why can’t we have a chocolate equivalent to beer?

Frank Glassner is at it again. Here is his post on EVs – and don’t forget that Frank lives in EV heaven – California. I told him that most of the hate mail that I have received over the years has been on EVs, climate change and green energy. I can just imagine the comments he is going to get on this very brave posting.

https://blog.veritasecc.com/drinking-the-electric-kool-aid-dream

Write on Frank!

Bring back blue books?

Not likely.

When I told a professor friend of mine who had recently retired that I was going back to teach a course after being retired for the past 13 years, he said “Are you out of your flipping mind?” But he didn’t say “flipping.” My answer was “apparently.” He then told me that my written assignments that were legend – a bi-weekly news report and a term paper – were now useless because the students did not do their own work. He said that AI and ChaptGPT were now writing the students’ papers. Also everything was multiple choice/ true false and machine graded. No more blue books. No more written exams with only essays, short answers and problems. Since I had never given a multiple choice/true false exams in all my years, I wasn’t about to start now. He said that I might have a revolt on my hands.

Sure enough when I announced what type of exams I gave, six students dropped immediately. Then students asked if they could take the exams on their computers. I said no and a couple more dropped. I was shocked when they handed in the first exam – 8 pages long – and every exam was printed! I was told that cursive is no longer taught. How do they sign their names? One student told me that my tests were unfair in that they had never had a test other than multiple choice in their four years at the university and they were not prepared to write out their answers. Yet another thanked me because she was “sick and tired of multiple choice exams.”  Technology had made it easy to move questions from the teacher’s test bank to an exam template, have the computer administer the exam (it even checks for cheating somehow), grade the exams and post the grades to the students’ ledgers. Why would anyone waste their time spending an entire weekend grading exams? Why indeed? Yet I did. I also took off for misspelled words and was roundly criticized for it. One student said that “this was not a spelling bee.” Au contraire. I would not let them use a calculator either. However, after half the class could not answer a question that involved 5% of 10,000, I gave up using problems.

There was an article in the Wall Street Journal that blue books were making a comeback because of AI. I don’t see it. I can’t imagine today’s professors testing using blue books. Not when you can let the technology do it all for you. I was stunned when the class of senior finance majors could not write the present value formula. I was not as surprised when they could not explain why the equation made logical sense. I wonder what skill sets today’s college graduates bring to the job. I would not be surprised if employers have to teach basic skills that once upon a time were expected to be already possessed by new employees.

I personally find all this sad. There were some really smart students in my class. I have little doubt that some of them will become intellectually curious and will be amongst the minority that advances our society come the future. Or at least, that is what I hope.

What Shoddy Chinese Steel?

Pardon me if I am a bit confused. The president in giving the okay to the acquisition of US Steel by Nippon Steel said that he was going to double the aluminum and steel tariff to 50 percent to stop the importation of “shoddy” Chinese steel. Did he misspeak and mean “shoddy” Canadian steel because we import hardly any steel from China. We only import 13 percent of our steel but nearly half of our aluminum. Last year we imported 23 percent of our steel from Canada, 16 percent from Brazil and 12 percent from Mexico. The other two top countries are South Korea and Vietnam. China is 1.8 percent. Fifty eight percent of the aluminum comes from Canada. The UAE is second with only 9 percent. China is at 2 percent. So the president is using the specter of China when his real intent is to put the Canadians out of business. Recall he said that we don’t need their autos, we don’t need their steel, we don’t need their aluminum and we don’t need their lumber. And he was not talking about the Chinese. The question is whether US production can ramp up to meet the shortfall created by the tariffs.

We are all in limbo now that the U.S. Court of International Trade that struck down President Trump’s use of the International Emergency Economic Powers Act (IEEPA) to place tariffs on China, Mexico, Canada, and the rest of the world. Almost immediately that court’s ruling was stayed by another Federal court. The court’s tribunal was made up of an appointee by Reagan, Obama and Trump. The ruling was unanimous. I think the vast majority of legal scholars agree that Trump had overstepped his authority – with the exception of those who work for the president. Consider the press secretary, Karoline Levitt whose job is to lie with a straight face and defend the president regardless of what ridiculous things come from him. Of course this is the calling for all press secretaries – remember KJP? 

Here is what Levitt said “Last night, the Trump administration faced another example of judicial overreach. Using his full and proper legal authority, President Trump imposed universal tariffs and reciprocal tariffs on Liberation Day to address the extraordinary threat to our national security and economy posed by large and persistent annual U.S. goods trade deficits.” “America cannot function if President Trump, or any other president for that matter, has their sensitive, diplomatic, or trade negotiations railroaded by activist judges.” I bet it was a surprise for these judges to hear that they were the ones that had “overreached” and were “activists.”

This will only be settled by the Supreme Court. But don’t expect a 6-3 decision to favor the president. I would not be surprised if the decision were unanimous against him. I also expect the ruling on birth citizenship to be unanimous against the president. Then he will rant and rave some more – along with Levitt. I actually do hope the rulings are unanimous for Trump will be hard pressed to call Thomas and Alito “overreaching activist” judges.

Speaking of ranting and raving, the president has attacked the Federalist Society and its former chair Leonard Leo. The Federalist Society had recommended judges to the president to be appointed to the federal bench. After one of his appointees ruled against him on tariffs, Trump said of Leo that he was a “sleazebag” who “probably hates America.” Trump tweeted “I am so disappointed in The Federalist Society because of the bad advice they gave me on numerous Judicial Nominations. This is something that cannot be forgotten!” Here is Leo’s response “I’m very grateful for President Trump transforming the Federal Courts, and it was a privilege being involved.”  “There’s more work to be done, for sure, but the Federal Judiciary is better than it’s ever been in modern history, and that will be President Trump’s most important legacy.”

Well at least one participant in the exchange has some class.

Canada, O Canada

Trump won’t give up the notion of forcing Canada to become the 51^st state. He is saying that they can have the protection of his golden dome missile defense system if they just give up their sovereignty. President Tweeter tweeted “I told Canada, which very much wants to be part of our fabulous Golden Dome System, that it will cost $61 Billion Dollars if they remain a separate, but unequal, Nation, but will cost ZERO DOLLARS if they become our cherished 51st State. They are considering the offer!”

Not likely.

I cannot figure out why he wants Canada to join the union. There are 40 million Canadians which would tie it with California for being the largest state. So it would have two senators. Would it have 52 representatives like California. That I don’t know since the number in the House is set at 435. But regardless, they would have the same number as California. Over 60 percent of Canadians live in Quebec and Ontario meaning that most of the representatives would be liberals as would likely be the two senators. I think Trump knows this.

How are new states added? The admission of new states is governed by Article IV, Section 3 of the Constitution:

“New States may be admitted by the Congress into this Union; but no new State shall be formed or erected within the Jurisdiction of any other State; nor any State be formed by the Junction of two or more States, or Parts of States, without the Consent of the Legislatures of the States concerned as well as of the Congress.”

That means that Congress would have to agree to add the new state of Canada provided the Canadian legislature petitioned for admission. Do you really think that the republicans in the Congress would vote for admitting Canada, even if threatened by the president? Even in the unlikely that it passed the House, I seriously doubt if it would pass the Senate. It would be filibustered and no way would there be 60 votes to end the debate. Republicans would be more amenable to admitting Alberta and Saskatchewan but not Ontario and Quebec. However, the democrats would resist that.

Did you see King Charles’ speech to the Canadian parliament? He said in part “By staying true to Canadian values, Canada can build new alliances and a new economy that serves all Canadians.” Pow! Take that Donald Trump! New alliances, eh? Yes, in the world of Trump, our allies are now our adversaries and they seek to build alliances sans the US. Of course, in three years all that will change when Trump exits the scene. The king further stated “The system of global trade, while not perfect, has helped to deliver prosperity for Canadians for decades — is changing. Canada’s relationships with partners is changing.”

Lastly, the king burnishing his woke credentials included in his speech a land acknowledgement. He said “I would like to acknowledge that we are gathered on the unceded territory of the Algonquin Anishinaabe people,” “This land acknowledgment is a recognition of shared history as a nation. While continuing to deepen my own understanding, it is my great hope that in each of your communities, and collectively as a country, a path is found toward truth and reconciliation, in both word and deed.” As I have written before on the land acknowledgments of the woke left including universities, if the occupier of “unceded” and/or “stolen” lands is so guilty, then give it back – provided you can figure out who to give it back to. We need to ask the king if the Algonquin Anishinaabe people were the original occupiers of the land or just the latest occupiers. Is it possible that they “stole” it from some other people?

O Canada! Our home and native land!
True patriot love thou dost in us command.
We see thee rising fair, dear land,
The True North, strong and free;
And stand on guard, O Canada,
We stand on guard for thee.

God save the King!

Trump versus the Fed: redux

President Trump keeps badgering the Fed’s Jay Powell to lower interest rates. He has even threatened to “fire” Powell. Pardon me for being confused. Doesn’t the president know that if the Fed lowers interest rates, the cost of financing the debt is likely to rise? After the Open Market Committee met in May, the headlines blared that the “Fed keeps interest rates unchanged!” Well if that is true then why did the Treasury bond rates go up? More on that later.

First, why insist that Powell lower interest rates? It is the Fed’s Open Market Committee that makes these decisions. The Fed chair – although the most important member of the committee – has to convince the other eleven members to support his position. That committee zealously guards its independence, as does the chairman. Maybe Trump wants to fire the entire committee. But since the reserve banks are private corporations, Trump cannot fire the reserve bank presidents. Trump’s tweeting vindictives only makes the committee dig in its heels to tell the president to go pound sand. Of course, Trump could threaten to fire the entire Board of Governors – much like he has done with two of the three members of the National Credit Union Administration board. But there would be an adverse market reaction and Trump would likely lose in court given the Humphrey’s ruling by the Supreme Court.

Second, the Fed operates in the short end of the Treasury market. Lowering its fed funds rate may lead to other short term rates falling but it will be at the price of an increase in the money supply. The result would be higher inflation. Does Trump really want to see prices rise even more than they are rising given his tariff policies? The threat of higher inflation will then lead to an increase in bond yields as long term investors protect the real value of their investments. It is this threat that is contributing to the rise in the yields of Treasury bonds. Trump’s policies have caused both the 20 Treasury and the 30 year Treasury to climb over 5 percent. So isn’t it ironic that Trump’s policies also make financing the national debt more expensive? Thus, if the Fed did lower short term rates it would increase inflationary expectations and then lead to an increase in the yields on Treasury bonds and increasing the national debt burden. Surely if Trump doesn’t know this, his so-called economic advisors should – although that may be doubtful since they were educated at Harvard.

The Fed’s Open Market Committee met in May and has voiced concerns that the tariffs will be inflationary. The committee said “Participants agreed that uncertainty about the economic outlook had increased further, making it appropriate to take a cautious approach until the net economic effects of the array of changes to government policies become clearer.” Translation to Trump: go pound sand. The committee meets again in June and is taking a wait and see attitude. The indication is that they are in no hurry to fool around with rates. In fact, Fed officials have uniformly said that the committee is setting a very high bar with regard to changing rates. Fed economists have lowered their forecast for economic growth and increased their inflation forecast. It is probably a bridge too far to ask the president to shut up. But shut up he should. His policies are creating uncertainty in financial markets. His policies are creating inflation and unemployment. A decrease in interest rates by the Fed will exacerbate the problems, not ease them. But what me worry? Trump will try to blame any of his economic difficulties on the Fed. But I have the feeling that the public will know who is really to blame.

By the way, I am one of many who cringes when it is said that the Fed keeps “interest rates unchanged”. Obviously interest rates change daily. What is unchanged in the target range of the Fed funds rate. Again, the fed funds rate is the rate that the Fed charges on fed funds which are excess reserves traded in the banking system overnight. Currently, it is set at 4.33% within the target range of 4.25 – 4.50 percent.

I know there are Fed haters out there – that includes one of my good friends. However, what’s the alternative? Do you really want the Fed subservient to the wishes of the politicians who know little about economics and seem to care less of its consequences. Again, the only law that politicians rush to repeal is the law of supply and demand. Thus far, the politicians have always lost.

Happy Memorial Day

I personally hate that traditional holidays have been made into Monday holidays in order to give government employees an additional vacation day. Memorial Day is May 30^th and I will celebrate it on that day rather than on May 26 this year. I admit that I thought that Abraham Lincoln originated Memorial Day at his speech at Gettysburg in November 1863 saying “we cannot dedicate – we cannot consecrate – we cannot hallow – this ground. The brave men, living and dead, who struggled here, have consecrated it, far above our poor power to add or detract.” Yet it was not Lincoln but Union General John Logan who imitated the holiday to commemorate Union dead. He proclaimed May 30,1868 as Decoration Day – a day at which the graves of the Union soldiers would be decorated with flowers.

Why May 30^th? Lee surrendered to Grant at Appomattox on April 9,1865 but the war was not officially ended until August 20, 1866. Logan broached the idea of a Decoration Day on May 3,1868 and said that it should be observed on May 30^th. All of the Union states soon adopted May 30^th as the date to honor the fallen soldiers that wore blue. Logan said “Their soldier lives were the reveille of freedom to a race in chains, and their deaths the tattoo of rebellious tyranny in arms. We should guard their graves with sacred vigilance.” So obviously, he was excluding southern dead. 

But what about the southern states? They did not observe Memorial Day as a holiday. Rather growing up in the segregated south, in Georgia we “celebrated” Confederate Memorial Day on April 26 and did not recognize the Union one. Imagine that. In our all-black schools we were supposed to celebrate southern dead. Rather we celebrated the south’s losing the war. I remember our outrage when Georgia changed its state flag to incorporate the rebel banner after the Brown v. Board of Education decision in 1954 which declared racial segregation in public schools unconstitutional. Georgia was saying “Segregation now. Segregation forever.” In Atlanta, I don’t recall the new state flag ever flying at our schools.

I have somewhat mixed feelings. Although I hated segregation and despised the confederate battle flag, both of my mother’s great grandfathers were white and one served in the 6^th Georgia militia. He is buried in a confederate cemetery in Atlanta one mile from my home house. My mother told me he never was a slave holder and was an honorable man who visited his black son every other Sunday for Sunday dinner and took his black grandchildren into town the following Monday to buy them stuff. Although he had a white family he never disowned his black son and grandchildren. That is to be admired especially in rural Georgia in the 1800s. So a part of me doesn’t mind when the celebration of Memorial Day started to include all American dead, not just Union Dead.

Yet, returning to Lincoln, no finer words have been said to commemorate those who have served and those who gave the ultimate sacrifice.

Four score and seven years ago our fathers brought forth on this continent, a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal. 

Now we are engaged in a great civil war, testing whether that nation, or any nation so conceived and so dedicated, can long endure. We are met on a great battle-field of that war. We have come to dedicate a portion of that field, as a final resting place for those who here gave their lives that that nation might live. It is altogether fitting and proper that we should do this. 

But, in a larger sense, we can not dedicate — we can not consecrate — we can not hallow — this ground. The brave men, living and dead, who struggled here, have consecrated it, far above our poor power to add or detract. The world will little note, nor long remember what we say here, but it can never forget what they did here. It is for us the living, rather, to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us — that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion — that we here highly resolve that these dead shall not have died in vain — that this nation, under God, shall have a new birth of freedom — and that government of the people, by the people, for the people, shall not perish from the earth.

Abraham Lincoln
November 19, 1863

Happy Memorial Day

More tariffs and rational markets?

Ho hum. Trump threatened the EU with a new 50% tariff and Apple’s Tim Cook with a 25% tariff on iphones. Trump wants iphone production to be moved to the US while Cook has talked about moving it from China to India. Trump said that the new tariff would apply to all smartphones. It seems to me that if he wanted Apple to move its iphones to the US then he would only impose the new tariff on iphones. Wouldn’t that put more pressure on Cook who said that a US manufactured iphone would cost $3,500? This is disturbing to me and is against basic conservative principles. Has a president ever before threatened one company and one particular product before? Is this even constitutional?

Trump obviously wants the EU to do his bidding and is not open to negotiating. He has said “I’m not looking for a deal – we’ve set the deal.” Ironically, one of the main sticking points is that the EU wants tariffs cut to zero while Trump insists on preserving his 10 percent universal tariff. Trump also wants the EU to raise tariffs on China, which the EU refused to do. The EU’s trade “negotiator” responded “The EU’s fully engaged, committed to securing a deal that works for both. EU-US trade is unmatched & must be guided by mutual respect, not threats. We stand ready to defend our interests.” Lots of luck with that. There are 27 countries in the EU and Trump has different tariffs on each one of them. So how are they going to divide up who buys what and how much from the US? Lastly, at its core trade is between private parties and not governments. Trump rails about trade deficits but in the absence of demand from citizens how are those deficits to be addressed? Maybe he wants governments rather than their citizens to buy more US manufactured goods? Boeing jets anyone?

Pardon me if I find all of this tiresome. Apple is not going to move its iphone production to the US. It will cost over $30 billion over three years just to shift 10 percent of its production to the US. Apple will wait out Trump. It would be foolish to do otherwise and Tim Cook is no fool. The EU is not going to bend to meet all of Trump’s demands either. It is going to somehow have to manage its 27 members. It is not going to back down on its ban of GMO produce and hormone infused poultry and beef. It is not giving up its value added taxes either. A less strident Trump would settle on lowering tariff barriers rather than trying to impose demands on sovereign countries. But the real reveal is that Trump does not want free trade. Trump does not want fair trade. Trump really wants no trade – or at least sharply restricted imports.

Rational Markets?

To all finance professors, I have some good news and some bad news. All this tariff chaos is great fodder. It is an exciting time to be in the classroom relating what is being taught to what is happening in the “real” world. It fills the news and if the students are remotely interested in learning – and a few of them are – it presents the opportunity to talk about Adam Smith and mercantilism and Trump and his tariffs. However the bad news is the stock market. Finance teaches that markets are rational. It is hard to ascribe rationality to all of the gyrations in the market. Trump is the exogenous force roiling markets. The markets may be rational but the president is clearly not. If Trump imposes new tariffs, the market goes down. Then when he changes his mind and pauses the exact same tariffs, the markets rebound. Clearly there are times when the markets seem rational but this is one of the times when it seems that they are not. 

So what is a professor to profess? I tell students that there are various investment strategies at play and at times one may dominate the others. Consider a Warren Buffett strategy in which one purchases a firm’s stock based on its underlying value. This will result in a mostly buy and hold strategy. Another method is one of a day trader who will try to buy low and sell high as stock prices move during the day. This is pure speculation. Then there is the circumstance where markets are rational but some investors are not. These may be the individual investors who are playing the market and seemingly buy at the wrong time and sell at the wrong time creating market volatility. Thus, one could argue that the market is rational but at times investors may not be. As such it is interesting to parse what is happening with the gyrations in stock markets and in the market for bitcoin. 

Foreign students pay nothing?

President Trump said that students from foreign countries are paying nothing for attending college at Harvard and other U.S. institutions. Huh? That’s news to me and news to every school in the US. Quite the contrary, foreign students are the cash cow at our universities. They pay full tuition and are not eligible to receive US federal aid. Yet Trump tweeted “Why isn’t Harvard saying that almost 31% of their students are from FOREIGN LANDS, and yet those countries, some not at all friendly to the United States, pay NOTHING toward their student’s education, nor do they ever intend to.” Then who pays? Certainly Harvard is not gifting 7,000 international students free tuition.

Of course, this comes amid the fight between the Trump administration and Harvard. Trump wants to revoke the university’s ability to enroll foreign students as part of his campaign to bend the university to his demands. Despite what Trump says, the foreigners are a major source of revenue for the university. The Boston area receives about $385 million annually from the foreigners and around $4 billion for the state as a whole. In addition 24 billion dollar US companies were founded by foreign students who studied at Harvard.

Who pays their tuition and fees? If not the students, then perhaps it is their governments. The average total cost to attend Harvard is $90,000 annually. International students being ineligible for US federal financial aid are more likely to pay full freight. They are universities’ cash cows. Harvard’s international students make up 27 percent of its enrollment. They make up 39 percent at Columbia and an even higher share at 43 other universities with at least 1,000 students. It is not clear that universities favor foreign students to American ones, But it is clear that without foreign graduate students, our science departments would be in severe trouble. 

There are currently more that 1.1 million international students enrolled at US colleges and universities, half of whom are graduate students. India is first with China second. Then come South Korea, Canada, Taiwan, Viet Nam and Nigeria. The number of international students in graduate STEM (science, technology, engineering and mathematics) programs far outweighs domestic ones. In computer science, 72% of grad students are international. Fields like petroleum engineering have international student enrollment rates as high as 81%. Fifty percent of engineering students are international. Over 60 percent of all STEM doctorates are awarded to international students. Again, imagine the fate of these disciplines were it not for the international students. BTW, this past semester the most common name in my undergraduate finance class was Patel. There were five Indian surnamed students but no other international students in the class. Only one attended on an irregular basis the rest just showed up to take the exams. Their grades were one A, one B, two C+ and one C.

I would be shocked if Trump prevailed in court over his banning foreign students from Harvard or any other university. Recall that all this started out with the revocation of visas for foreign students participating in anti-Israel demonstrations. But it has morphed into something much more global – the banning of foreign students period. Again, that a federal government would have this kind of power to ban foreign students should be frightening to any conservative.