THE WORLD HAS CHANGED

There is an excellent series of interviews posted at The Christian Science Monitor. The world has changed. Fifty years ago, there were a billion people on the planet "living the good life" while there were several billion more on the edge of starvation. Today there are 5 billion people "living the good life" and only another billion or billion and a half facing starvation.

The key difference between now and then is that free trade "broke out". While it is also true that political freedom "broke out", China has demonstrated that political freedom does not have to immediately match economic freedom for the people to benefit greatly. Still, the key to both increased political and economic freedom has been the increase in free trade. Poor people around the world have been given the opportunity "to fish" rather than being given "free fish". In the case of China, once the government did away with collective farms and allowed individuals to own and operate their own farms, the economic growth has been incredible. The new farm owners cannot influence who runs the government but they do greatly influence their own standards of living.

BACKLASH IN AMERICA

America is experiencing backlash because formerly protected jobs have been exposed to free market competition, forcing many Americans to retrain for other jobs, many of which are even higher paid jobs. It has become more and more rare for a small group of workers to be dramatically over paid simply because they have artificial protection from competition. For example, the monopoly power of the UAW has finally been cracked wide open. Americans can now buy cars made in America without paying for crazy work rules and exorbitant worker benefits. The unions are not happy but cars are being made in Texas, Tennessee, South Carolina, Georgia and elsewhere while hundreds of thousands of former Michigan workers draw from fat pension buyouts.

HOW CAN WE REDUCE THE NUMBER OF WARS AND REACH THE OTHER BILLION POOR PEOPLE?

The democratic base has forced Hillary and Obama to repudiate free trade deals already on the books and to help stall pending trade deals. The fact is that both sides to trade are winners, otherwise the trade would not take place. I will not give the grocer ten cents for an egg unless I would rather have the egg and there is a price at which I will stop buying gasoline. The neat trick is that the risk of war is reduced when the people of a land are actively engaged in trade. The Chinese and the Saudis each hold millions of dollars of investments in the USA that would be damaged if these countries were to go to war against us. Why fight with your neighbors if they are willing to buy your goods?

The predominantly Shi'a country of Bahrain just made a nuclear energy deal with the USA. Suddenly, this "first cousin" to Iran has an economic interest in keeping the peace with the USA. Trade with Iran has been dramatically reduced as a result of its unwillingness to play by the rules as laid out by the UN. As a result, Iranians are seeing goods prices jump 20% on top of 20%.

Diplomacy is a complicated, multi-faceted game. Sometimes, the thing we have to offer in trade is nuclear energy support, however, most of the time we simply must be willing to buy the products made by the poorest of the poor. When we buy goods from the poor, we bless ourselves and the poor. A recent study showed that the most happy of all people are those who give to others. While "It is more blessed to give than to receive" it is amazing that the willingness to buy and sell from and to the poor of the world is the gift that keeps on giving. The world has changed but more change is needed.

A couple of weeks ago, at a United Methodist Missions Festival, a life time missionary, whose work is to be honored and praised, told me how "the rich are getting richer and the poor are getting poorer", the liberal mantra. Having seen been up close and personal with starving families, I understand why this missionary is willing to "covet the wealth of some" while drawing the conclusion that the poor are getting poorer. No one can deny that billions more people are wealthy today than at any other time in history and no one can deny that there are at least a billion people who are fighting starvation. The problem with the missionaries line of thinking is that even if we could redistribute the wealth evenly, we would not end poverty. What history has shown is that when wealth is confiscated from one and given to another, all reason for work is destroyed. A dependent relationship is quickly established and the number of poor grows to meet the supply of "free goods".

The world has changed but there is yet another billion people who need to be offered a price for whatever "fish" they are able to supply. When the USA trades a few ears of corn for a an hour of African labor, the trade is a benefit to the people of America but it is an answer to prayer in Africa. It may seem harsh but selling corn to Africans is much greater gift than giving corn to Africans. It is not anti-American for many American consumers to benefit and many African workers to benefit because one over paid American Auto Worker is bought-out of his union contract. The fact is that the overpaid worker in America can quickly find a job at a fair wage. The wages in America for highly skilled workers continues to climb. Americans do not need collectives to provide the labor for auto plants anymore than the Chinese needed collectives to provide the labor for farms.

DOES ALL OF THE ABOVE SAY SELL GM AND FORD?

NO! GM and Ford have gone through a period of radical change. Their costs have been cut dramatically and the value of the dollar is so low that people in the poorest of countries can now afford a used American made car. Shares in GM and Ford are "down the mountain" from where they once were but now that the turn is here, even US Auto stocks will see a big run.

This morning, the markets are "backing and filling". The big decline in energy and material stocks has attracted the attention of the "true believers in the commodities 'super cycle'". The big boys are pretty much out of energy stocks, institutional investors own only 5% of oil stocks and 95% of airline stocks. Still, as the market rotation continues, it will take a while for the turn to become obvious to the majority. Many will continue to buy energy and basic materials "on the dips" for years to come. Yesterday, the NASDAQ was up 3%. The energy stocks may go up over the next several years but they will not lead the Bull Market Stampede.