(Part II) – Coronavirus as a Global Economic Reset…

…there had to be a point where the value of the Wall St economy surpassed the value of the Main St economy… Part I Here

We now look forward, and consider the question: How would the multinational underwriters, the multinational financial systems, reset all transactional tables (the bookkeeping systems underneath the valuation) if the U.S. stock market was ever forced to re-value economic nationalism over multinational globalism?

To first answer the “how” question, we must visit the “why” question. Why would the multinational financial underwriters want to reset their valuations?

Obviously, the global financial system does not act altruistically. What would motivate the global wealth valuation authority (various market investment indexes) to want, or need, a reset.

The answer to the “why” question might not be as challenging as it appears.

First, there has been a seismic shift in how the world looks at the economic exploitation of multinational systems, or globalism.  See Bernie Sanders?  See those yellow vests in France?  See what happened with the U.K. Brexit referendum?  See the shrinking EU influence?  See the open/public confrontation and push-back against China? See Trump? All examples are consequences of the rise of economic nationalism.

Secondly, the original Wall Street corporate motive (during decades of mergers and acquisitions) to shift product manufacturing to Southeast Asia (ASEAN nations) was driven by a lower cost of overall business, higher profit margins and greed.

As a direct outcome economic wealth was shifted from the U.S. to ASEAN nations, and particularly China. Low wages, low regulation, cheap operational costs, incentives and subsidies from Asia equals cheap TV’s, sneakers, furniture and durable goods.

Even with high fuel prices and overseas shipping costs, there was a big difference between U.S. and ASEAN manufacturing costs.  As hundreds of U.S. Wall Street multinationals chased profits the rust-belt was created.

However, over time (three decades) the outflow of U.S. wealth resulted in a higher wealth level in the ASEAN nations.  Over time Asian workers receive higher wages and their standard of living increased.

With 30 years of stagnate wage growth in the U.S, and with rising wages and standards in southeast Asia, the difference in labor costs starts to narrow. Simultaneously, the internal economy in China, Vietnam, S-Korea etc. all started to increase.

The ASEAN workers are now buying stuff they couldn’t afford before.

Instead of a reliance on the U.S. consumer, the internal economy (local demand on a generational scale) starts driving a need in Asia for the same products.  As a result, more U.S. and global multinationals expanded operations in those ASEAN nations because new consumers were created.

However, the multinationals were also taking advantage of (exploiting) prior trade constructs like NAFTA.  Ex. U.S. multinationals used Canada and Mexico to assemble Chinese products for distribution into the U.S.

Along comes Donald Trump who has watched all of this and he wants to change it.

President Trump starts initiating policies that specifically benefit Main Street by speeding up the process of narrowing the cost difference between the U.S. and SE Asia.

President Trump calls these policies “America First”.

Trump lowers the corporate tax rate to offset the ASEAN benefit of Chinese subsidies. A tax policy that also makes corporate tax inversion less likely.

Trump further narrows production costs by lowering U.S. energy costs. A policy to unleash all facets of energy development (ex. pipeline approvals and ANWR opening). Again, lower energy costs in the U.S. narrows the cost difference for manufacturing.

Trump deregulates various industries, again closing the gap between the U.S. and ASEAN nations. Part of this deregulation allows for expanded (easier) raw material development.

With the initial framework established, President Trump starts getting serious.

President Trump puts a big wrench into the cost dynamic with tariffs on imported goods from China and Asia.  Trump then eliminates the three-decade-old NAFTA loopholes that allowed manufacturers to work around origination rules.

The USMCA has more strict origination rules that require parts to originate in North America. The tax/tariff for violating the origination rule(s) are not particularly high, but they are a disincentive. Again, that narrows the cost difference.

All of these policies, lower corp taxes, deregulation, lower energy costs, access to abundant raw materials; closed NAFTA loopholes; and the looming threat of easy to apply tariffs; work together to narrow the cost difference between production in ASEAN nations and production in the U.S.

Then when you factor-in shipping costs & new trade rules, well, the difference is minimal.

So there’s the “why” answer.

♦ The multinational systems (Wall St. valuation underwriters) are now open to a reset in the current global evaluation indexes, because the landscape has completely changed.

A 72″ flat screen TV can be made in the U.S. for the same price as the TV in Vietnam.

However, there’s still another problem… For that, we need a metaphor… so we’ll stick with a fictional TV corporation.

A U.S. electronic multinational has a stock market evaluation based, in part, on their TV assembly operations overseas.  Assume that division of the parent company is 20% of the total company valuation. If that company wants to return the TV division to the U.S. the exit cost of the move is not worth 20% of their total valuation.

The physical land (leased or owned), physical factory (leased or owned), and physical machinery are worth pennies on the original investment dollar.

It is the operation, and the preceding financial result, that carried the Wall Street valuation.  If the TV division is going to relocate into the U.S, Mexico or, less likely Canada, that division is going to have to invest in the move and only recapture a few dollars from the sale of land, factory or equipment they leave behind.

How do they pay for the costs to return to North America?…

…and, more importantly…

How do the multinational underwriters who assigned the divisional valuation, and the investors who subsequently inflated the valuation, lower the divisional valuation to reset for an entirely new landscape and growth/profit opportunity?

In essence what this “TV” example shows is a corporation detaching their valuation from globalism, and reattaching their valuation to economic nationalism, Main Street USA, again.

That’s the opportunity behind Coronavirus….

This entry was posted in ASEAN, Bailouts, Big Government, China, Decepticons, Deep State, Donald Trump, Economy, Election 2020, energy, European Union, Legislation, media bias, NAFTA, President Trump, Taxes, Trade Deal, Travel, Uncategorized, United Kingdom (UK) and Great Britain, US dept of agriculture, US Treasury, USA, USMCA. Bookmark the permalink.

271 Responses to (Part II) – Coronavirus as a Global Economic Reset…

  1. Robster says:

    Yet Wall Street, like drug addicts, continue to receive artificially low interest rates, increase their corporate debt to inflate their stock price, and now insist on bailouts from Washington. I personally doubt President Trump will let companies fail and re-emerge as Main Street companies. Keep a sharp eye out for Bush-Obama style bailouts.

    Liked by 1 person

  2. Carly says:

    Sundance, thank you. A couple of things I’d like to know: who are our American allies (Peter Thiel? Others?). And how does the average American invest in Main Street. I, for one, would like to deleverage from the Wall Street Market and divert investments to Main Street. Thank you.

    Liked by 3 people

    • Courtlandt says:

      Find businesses you like and engage the owners… all of us biz owners that have growing businesses need financial partners, mostly we are left to sharks and banks for the lending tools we need. That’s really all you’re doing by purchasing public equities, it’s just orders of magnitude difference, and a more organized system to do so. Many small businesses don’t need help but when you find a match you’re glad you did. You do your own research, make your own relationships and invest in the “real economy.” My caveat is your expectations. The entire concept of making money with your money, ROI, is also gloriously over blown, usary and ROI in general is here because of thousands of years of classism and opportunity bias, violence, theft, cronnyism, genocide and darker still. Good luck and may the force be with you : )

      Like

  3. Somebody's Gramma says:

    THANK YOU THANK YOU THANK YOU SUNDANCE!! I’ve been with Donald J. Trump from the moment they came down the elevator. I listened to him and what he said made perfect sense to me. I sincerely appreciate your articles explaining MAGAnomics and how Main Street is going to win through all of this. Everything this man has done directly benefited my large extended middle class family, who had been slipping slowly downward through the Obama years (and Bush, and Clinton and before). What the banksters and the globalists have done to America can never be forgiven. We should never forget about the exfiltration of jobs and wealth from our country while the “elites” lined their pockets! Either people en masse get on board with MAGAnomics or GTHO of our country. I think Trump is fully capable of pulling the train into the station. #MAGA #KAG

    Liked by 8 people

    • pyromancer76 says:

      Somebody’s Grandma, I am reviewing Sundance’s two posts (research articles) in order to send them off to those who are willing to learn from them. My reply to you is a day late, but I am with you all the way.

      Donald Trump knew this economics in the 1980s and he gave us his gift of his knowledge and experience from the time he and Melania road down that escalator. I am grateful to the Monster Vote of Americans who knew this then. I am eternally grateful to President Trump for all his magnificent efforts. I thank Sundance for keeping us clearly informed. And I appreciate your words of wisdom.

      Like

  4. I really don’t see this economic reset as being tied to “coronavirus.” It has always been there. Accountants live in an abstract world of “widgets,” not actual companies serving actual people in a world where things like typhoons and epidemics and politics and wars do sometimes happen. Financiers live in an even more abstract world that in most respects is essentially gambling.

    And so, “globalism” says not only that you should produce your 17″ television in the place where the labor costs are least, but that it’s perfectly okay (and indeed, desirable) to shut down “competing” domestic abilities to build the same thing – dare we say, “better?” Don’t employ your own people, don’t try to make a better product … just keep the gamblers happy?

    PDJT made himself a billionaire several times over simply by understanding “The Art of the Deal.™” Where “the Deal” is not just a single negotiation but the entire business arrangement including not only yourself but your web of mutual stakeholders. The globalists stared at their widget-sheets and promptly convinced themselves that they were the smartest kids in school even as they built an edifice so fragile that it can be pushed-over by … a common cold.

    “What <b.Fools These Mortals Be!”
    – Puck, A Midsummer Night’s Dream

    This “reset” was inevitable because there is vast new economic opportunity in it. Well, certainly not “new,” just momentarily disregarded.

    Like

    • P.S.: “America First!” was also always just common sense. If you’re a Lithuanian sitting down to negotiate with a Belgian and a Moroccan, then you should be saying “Lithuania First!™” all through your negotiations because neither that Belgian nor that Moroccan are going to do it for you. But, if all three of you are putting “[My_Country] FIRST!” and everyone at the table knows it … what’s going to come out of that negotiation is one of those very hard-won agreements where “everybody [more or less] wins.”

      It’s very plain to see that these “globalists” had no negotiation skills at all. They weren’t businessmen who had actually “had things go very-wrong due to circumstances beyond their control that they could have anticipated and prevented.” If they could cut the labor cost by $5 an hour they’d happily ship their products halfway around the planet to get it, blithely assuming that no one would ever say, “I can beat your pants off at your own game, smarty-pants, if I make it right here just like my granddaddy did!”

      Liked by 3 people

      • David A says:

        Another factor in balancing the costs is that, due to automation, labor costs are a reduced percentage of total costs.

        Like

  5. Rgt says:

    Time to dissolve the National Offices of the Chamber of Commerce

    Liked by 3 people

    • ewreck1967 says:

      And the FED and the FIB and the DOE and and and and…..It’s almost endless. Unfortunately never going to happen unless we have another revolution and that ain’t happening either.

      Like

  6. Alligator Gar says:

    I get it. I do. But I have been investing hundreds of dollars per paycheck into the stock market in a 401k for 22 years. I have lost it all. Glad for you Main Streeters. You are doing great, I guess. I’ll be eating dog food on Social Security in retirement. Not a happy camper middle class American Trump voter right now. Sorry. All, politics is PERSONAL.

    Liked by 1 person

    • cattastrophe says:

      I sincerely hope this will not be the case for you. My thoughts are that President Trump will find a way to protect and help all Americans facing this. That’s a lot to invest in one person but he does have many on board now that will help him find solutions.

      Liked by 1 person

    • Rob says:

      I guess you shouldn’t gamble with your savings.

      Like

    • DCP says:

      I assume that you are talking about the lower value of the stocks in your 401k.

      But I would point out one thing. Unless you have sold those stocks, you haven’t lost a dime. The stocks are worth less (NOT “{worthless”). You still own them. You won’t take a real loss until you sell them.

      So, don’t sell. The economy will come back. And it will come “ROARING” back.

      DCP

      Liked by 7 people

    • wee2low says:

      Sorry to hear that Alligator. Few things on that.

      First if you’re close to retirement and you hadn’t moved your portfolio into very conservative vehicles then you’re not getting very good financial advice. If you’re not close to retirement then hold on. Money is ruthless and this too shall pass.

      Second, I’m sure you were a very happy Trump voter when the market was breaking records right? You think Clinton, Biden or Sanders would have done anything to generate 1/10th of what occured?

      Third, I think it’s well past time that some Main Streeters get some love don’t you? Whole towns are abandoned or riddled with fentanyl junkies that once thrived. It’s well past time that Americans stop being used and abused by other countries, uber wealthy and crooked politicians.

      Liked by 2 people

    • Tl Howard says:

      I have you beat: 48 years. People have to remember that my money produced pay checks over those years for untold numbers of Americans….as long as the companies were here in the US.

      Like

    • ewreck1967 says:

      Dog food is quite pricey. Funny how no one complains when their 401k fraudulently goes up.

      Like

    • Super Elite says:

      Your mistake, Alligator, was to gamble to begin with. For gambling is just what the stock market is. Remember 1929. After being to pay into a 401k I didn’t lose to much but I begrudge every penny of it.

      Like

      • Super Elite says:

        * to pay into

        Like

      • Alligator Gar says:

        Nope. Not gambling. You like putting money in a CD for .02%? Now, I hear rumblings of negative interest on savings? No, I don’t like that, either. My point is that there is no method for people my age, mid-50s, to reasonably provide for ourselves in old age if we don’t have a schtick or come from money.

        I’m just a working stiff. My most productive years have been plagued with black Monday busts in ’87, 1990s dot com busts, 2000s Obungler downturns, and now this disease disaster. Just when it was looking promising. I don’t blame anyone, no, not at all. Just a crappy turn of events all around for quite a few of us.

        Liked by 3 people

        • soldiersmom2 says:

          It is disheartening and you aren’t alone. There are millions of us out there just like you. In the late ’90’s, I invested several thousands in Amazon stock and rode that high for a couple of years. It was thrilling. Then the crash in 2000. I panicked and sold it all. I’ve regretted that over many years now. You only lose when you sell! Look at this as a tremendous buying opportunity. I take comfort from a lot of “old” friends who are not panicked with this downturn. Their calm response is “it will come back.”

          Like

    • Linda K. says:

      The money in your 401K will return, if you can wait awhile. I think the market will rip once this is over. Lots of good deals in this market.Maybe Wall Street will start to reflect Main Street as more businesses come home.

      Like

      • Questioning says:

        Heard from my son today; he works for the USDA. Just increased his deduction for 401k and self directed investments to the maximum. Smart kid.

        Liked by 1 person

    • drlou007 says:

      Sorry but that is nonsense. If you really did put 10’s of thousands of dollars in the market over 22 years you would have a decent retirement UNLESS you moved the money in and out and tried to ‘beat the market’. Don’t blame your poor decision making on our President.

      Like

    • azgulch says:

      Don’t sell. This reminds me so much of 1987, I was a commodity broker at that point and time. The market crashed just like this, a true bloodbath. It turned around and in 6 months was at it’s highs.

      Looking at the charts today and it looks like a blip, but these were huge moves at that time. Larger or at least as large % wise as what we have seen recently. So just hang in there.

      Like

    • pepeekeocom says:

      You haven’t lost a penny. And you still have as many shares as you did a few months ago. The value of your shares have gone down in price, but the only way you could lose money is if you to sell some of shares now. The market will come back and the price of your shares will increase. As to when this will happen? It is anybody’s guess, but it has always come back and with President Trump at the helm, I like the odds for a relatively quick recovery.

      Like

    • Robert Justice says:

      Don’t sell your stocks now. Once the pandemic is taken care of (by mid summer I bet), the stock market will roar back bigger than ever. The people who will be hurt on the market crash are those who bought high in the last year or so and sold low in the last couple weeks because they panicked. Invest for the long term.

      Like

    • Huh Gig says:

      Carl Icahn and Warren Buffett, among other rich guys, have started buying stocks again. Pay attention to what guys like that are doing and do not sell.

      Like

  7. Shame on ALL those multibillionaires who are sitting back on their gold plated butts and are watching OUR and THEIR country go into trillion dollar debt!! If Bloomberg can GIVE $550Million to a few business entities for a shameful run for President that he lost, then others can help out his country by giving each legal citizen of OUR UNITED STATES $1million dollars each which would keep our heads above water and OUR country out of debt, relieve anxiety and fear among all of us. This would hardly touch their $1B and it could be tax free, a charitable donation and grow their heart 3 sizes in one day!! All the billionaires should soldier up and do their part to help US since WE are the ones buying their products and making THEM RICH!!!!!

    Like

  8. TheWanderingStar says:

    The Wuhan virus, whether intentionally or unintentionally released is definitely a “nuclear winter” preview from a bio-warfare perspective. Had it been more deadly a great portion of humanity could be wiped out regardless of nationality and including those with very clean assholes.

    Like

  9. John says:

    The Trump administration needs to put in place a program to accelerate the return of plants and companies in China. Would propose meeting with a group of business reps. and advocate them using their unrepatriated offshore profits together with funds they are using to purchase their own stock to finance the move of production facilities in China back to US. Every confirmed dollar so invested would be given a 35% tax credit on their future Federal Corp Tax. Give them 24 months to execute. If the companies find this unacceptable then let them propose an alternative. Companies probably have close to $1 trillion of funds from these sources. The government spending $350 billion to cut the country’s trade deficit with China in half would be a massive win for the US. In addition, the administration should propose a Job Camp program, where trade and tech skills are taught. Goal would be to train 1-2 million workers. This is a very minimum proposal, but could be a place to start. China has declared full scale hostities against the US, and this current situation in China is the perfect opportunity to rectifiy 30 years of stupid trade policies.

    Liked by 1 person

  10. Laramie Evan says:

    “Secondly, the original Wall Street corporate motive (during decades of mergers and acquisitions) to shift product manufacturing to Southeast Asia (ASEAN nations) was driven by a lower cost of overall business, higher profit margins and greed.”

    It’s really troubling to see basic “competition” described this way on what is supposed to be a conservative message board. Trump’s economic nationalism isn’t intended to stop globalism. It’s intended to ensure that the competition is fair. To that end, tariffs are necessary to nudge our trading partners toward fairness. But, if Asian nations or anyone else can still outcompete us in some industries when everything is on an even keel, then they’ve won a fair fight. We will still outcompete them in many other areas because our system — capitalism, which depends on competition, is better.

    Present circumstances may redefine what “fair is,” and may cause some of those “greedy” profit seekers to re-evaluate how they seek profits. But, chasing profits is what made us the most prosperous, well-off and advanced society on earth. I, for one, will not condemn it.

    Liked by 1 person

  11. ewreck1967 says:

    Assuming 100k Chinese Who Flung Poo deaths in America.
    Assuming 6 trillion in “emergency” printing press dollars of new debt.
    60 million per death.
    Worldwide deaths since 1/2020: 9,360,000
    Who Flung Poo deaths since 1/2020: 10,000
    WE BE SUCKERS.

    Like

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