Published January 24, 2017

The Problem With Putting “America First”

We all know Trump wants to “Make America Great Again.”

But no one really knows what that means. We’re not even sure Trump does.

After all, he’s never said why America is no longer great. He’s also been vague about how he plans to make America better.

Still, you’ve got to hand it to the guy.

MAGA is an effective slogan.

It’s catchy. It’s simple. And it “promises” a better tomorrow.

Most importantly, it helped Trump pull off the unthinkable.

• Last week, he gave us an idea of how he plans to “Make America Great Again”…

He’s going to put “America First.”

Trump shared his “new vision” during Friday’s inauguration speech:

We assembled here today are issuing a new decree to be heard in every city, in every foreign capital and in every hall of power. From this day forward, a new vision will govern our land. From this day forward, it's going to be only America first—America first.

You might think this is just another one of Trump’s catchphrases. But Trump says this simple idea is going to guide every decision he makes as president:

Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families…

We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs.

• Trump wants to radically change how we do business…

And he wants to start with trade.

According to Trump, our current trade policy is backwards. It helps other countries at our expense. The New York Times reported on Friday:

“We’ve made other countries rich,” he said, “while the wealth, strength and confidence of our country has disappeared over the horizon.” The American middle class has suffered the most, he said, finding its slice of the American dream “redistributed across the entire world.”

Trump wants to fix this.

He wants to rebuild the nation’s hollowed-out manufacturing sector. He wants to put American factories back to work.

He’s not wasting time, either.

• On Monday, Trump threatened to impose a “substantial border tax”…

A border tax would make it more expensive to buy goods made outside the United States. In other words, it’s a tariff.

Trump didn’t direct the message at foreign companies, either. He delivered it to a room full of Fortune 500 executives. The CEOs of Ford, Dell, and Dow Chemical were among those in attendance.

Trump’s message was simple: Play by my rules, or else…

If you go to another country… we are going to be imposing a very major border tax on the product when it comes in, which I think is fair.

All you have to do is stay. Don't leave. Don't fire your people.

Trump thinks making more goods on U.S. soil will benefit the American people. But he doesn’t seem to understand something very important…

• We buy goods made overseas for a reason…

They’re cheap.

You see, U.S. workers are expensive. According to the Economist Intelligence Unit (EIU), the average U.S. worker makes about 76 times more money per hour than a factory worker in Indonesia.

Workers in Mexico, China, and Vietnam are also very cheap.

In other words, it makes sense for U.S. companies to make goods abroad. It also makes sense for U.S. consumers to buy goods made on foreign soil.

• Trump thinks his “America First” policies will bring jobs back to America…

But we think this plan could backfire…

Imagine that you run a U.S. company that builds computers in Vietnam.

You pay your factory workers $5 a day. That doesn’t sound like much. But it’s good money for someone living in Vietnam.

Now, let’s say the U.S. government imposes a huge border tax on the goods you make overseas. It no longer makes sense for you to operate a factory in Vietnam. You shut it down.

You open up a factory in the United States instead. You a hire a bunch of new employees. But remember, U.S. workers aren’t cheap.

You have to pay them 20 times more than your old workers. Your operating costs skyrocket.

Now, you have a choice to make. Do you eat the high costs and make less profit? Or do you pass the higher costs along to your customers?

The choice is obvious. You raise prices.

Now, imagine this happening on a grand scale. The average American would end up paying a lot more money for televisions, cars, and smartphones.

• Trump’s protectionist policies could lead to much higher consumer prices…

And that’s the last thing Americans can afford right now.

Inflation has already taken off.

Inflation measures how fast prices for everyday goods and services rise. A high inflation rate means prices rise very quickly.

Today, the official U.S. inflation rate is rising at the fastest pace since 2011. Everyday prices are rising three times faster than they did in 2015.

If Trump makes good on his border tax threat, many U.S. companies could have no choice but to raise prices. That would be bad news for most Americans.

• The good news is that you can protect yourself and profit from higher inflation…

The best way to do this is by owning hard assets.

Hard assets like gold, copper, and oil have tangible value. Because of this, they become more valuable when there’s inflation.

Several key commodities have made big moves over the last 12 months.

Silver is up 20% since last January. Copper is up 30%. Oil is up 64%.

The more inflation we get, the higher these assets should climb.

• If you don’t own hard assets yet, we encourage you to get started…

The first hard asset you should own is physical gold.

As we often point out, gold is real money. It’s preserved wealth for centuries. It’s also survived every sort of financial calamity…including periods of hyperinflation. That’s when a country’s paper currencies rapidly lose value.

Once you own enough gold for safety, you should think about betting on higher commodity prices.

You can do this by owning companies that mine or produce hard assets. Tomorrow, we’ll tell you about one of the top speculations to profit from during these unpredictable times.


Chart of the Day

Trump wants a weak dollar.

A week ago, Trump said the strong dollar is “killing us.” It was the first time an active president has complained about the dollar being too strong.

Yesterday, U.S. Treasury Secretary nominee Steven Mnuchin echoed Trump’s words. He said an “excessively strong dollar” could hurt the economy.

Trump and Mnuchin have a point.

You see, a strong dollar makes U.S. exports more expensive. That makes it harder for U.S. companies to compete with other companies around the world.

The Trump administration is trying to “talk down” the strong dollar to help U.S. businesses. And it appears to be working.

You can see in the chart below that the U.S. dollar has plunged 3% since December 28. That’s a huge move for a major currency like the dollar. It’s now trading at the lowest level since early December.

Few people saw this coming.

After the election, the U.S. dollar jumped 6% to its highest level in 15 years. The dollar broke out because most people expected the Fed to raise interest rates three times this year, which is bullish for the dollar.

Now, investors don’t know what to expect.

Just to be clear, the White House isn’t in charge of monetary policy. That’s the Federal Reserve’s job. And Janet Yellen, the current head of the Fed, still has another year left on her term.

Still, it will be very interesting to see if the Fed sticks to its original plan in light of Trump’s recent comments. It will also be interesting to see who Trump picks as Yellen’s successor.

We’ll keep you updated on this story as it develops. In the meantime, stay disciplined.

Don’t get greedy. Obey your stop losses. And hang on to your gold.

Regards,

Justin Spittler
Delray Beach, Florida
January 24, 2017

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