"Give me your tired, your poor,

Your huddled masses yearning to breathe free,

The wretched refuse of your teeming shore.

Send these, the homeless, tempest-tossed to me,

I lift my lamp beside the golden door!"

— "New Colossus" by Emma Lazarus (Statue of Liberty)

 

This "land down under" has escaped an economic recession for 26 years in a row. An open immigration policy in a nationalist world that demands just the opposite is one of the key drivers to their success. An abundance of natural resource wealth has also helped.

 

Readers would need to go back to the late 1980s, early 1990s, to find two quarters of negative growth (the definition of an economic recession) in Australia. Back then, Australia was noted for its boom and bust economy. Throughout their 160-plus year history, mining booms in gold, gas, sheep and other commodities left investors rich and confident for a couple of years, only to be followed by devastating shocks to the economy as commodity demand declined, throwing workers on the streets and companies into bankruptcy.

 

This writer has a special fondness for Australia. Early in my career, I spent years investing in Western Australia's iron ore and Queensland's coal. Following in my footsteps, my daughter also spent a couple of years in Australia as an exchange student. Back then, the government tightly controlled the exchange rate. Today, the central bank is free to set interest rates without political interference and the exchange rate is no longer fixed.

 

Investments in industries outside of the mining areas were also encouraged. Aided by the government, businesses were encouraged to seek out new, non-mining investments, thereby reducing Australia's dependence on commodity exports. Since most of the mining is done in the outback, where population and infrastructure are scarce, it made sense to focus investment on those areas where most of the population lives. That bet has paid off. Today, natural resources represent only 7 percent of the economy.

 

At the same time that government spending picked up, Australia's immigration policies were reversed. From 1901 to the 1970s, Australia was known for its "White Australia" policies where the country only allowed immigrants of European descent to permanently set foot on its shores. Since then, Australia liberalized its immigration policies. On the back of that decision, the population has grown by 50 percent.

 

Australia has also created a "points" system for assessing potential migrants. Skilled workers, ranked by the country's needs, count especially high. Immigrants must also pass health and character tests, and before becoming citizens, must pass an English-language quiz on the nation's constitution, history and values. The largest source of skilled labor is coming from India (21 percent), China (15 percent), and the U.K. (9 percent).

 

The country, which boasts a population of 25 million, welcomed 184,000 new arrivals last year. A government-commissioned study indicates another 11.8 million immigrants are expected to make Australia their home over the next three decades. Most of the new entrants are

expected to settle in Sydney, Melbourne, Brisbane and Perth. Economists credit this continued migration with creating long-term demand, higher consumption, lower unemployment, and continued economic growth.

 

The facts are that if a country has strong population growth, it is harder to go backward in economic output. Their economy will most likely grow at around a 3 percent rate this year, which is higher than their long-term average rate of around 2.5 percent. The labor force participation rate is at a seven-year high, while overall unemployment is around 5.5 percent.

 

While global nationalism's favorite whipping boy is immigration, just over half of the population in Australia thinks the total number of immigrants is either "about right" or "too low." While four in 10 believe the number is too high.

 

I am sure Australia's example will rub some readers the wrong way. So many of us mistake this new-found nationalism for patriotism. That is a fallacy. Throughout history, it has always been easier to blame a foreigner for a nation's woes (Jews in pre-war Germany, the Ottoman Empire's genocide of Armenians, the Tutsis in Rwanda), rather than face the real reasons.

 

My suggestion is that we sell the Statue of Liberty to the Aussies and use the proceeds to build that wall on our southern borders. Why not, since it appears we have very little use for the Statue of Liberty, or what it stands for, in today's America.

 

Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

Over the weekend, the G-7 group of nations met to denounce the recent actions of the United States. This coming Friday, these same leaders convene in Quebec. President Trump will attend and seems determined to face them down.

 

Ever since the Trump administration announced plans to raise tariffs on imported steel and aluminum by 25 percent and 10 percent respectively, our allies have been livid. Some are referring to the upcoming meeting as the G-6, plus the United States. You've got to hand it to the president, he doesn't back off, but given the circumstances, maybe he should.

 

I doubt that anyone in this country believes the present trade agreements we have signed throughout the years are even remotely fair. They should be renegotiated, but there are different ways of going about it. Unfortunately, Trump used a rather "trumped-up" excuse for his actions by claiming "national security" as justification for the tariffs. Given that the tariffs will be levied principally against America's strongest allies, is it any wonder that the G-7's response was what it was?

 

They rightfully believe that the Trump Administration's blatant attempt to circumvent the World Trade Organization (WTO) is illegal. As an example, Canadian Prime Minister, Justin Trudeau, responded to the claim by saying that "Canadians have served alongside Americans in two world wars and in Korea. From the beaches of Normandy to the mountains of Afghanistan, we have fought and died together."

 

"Canada," the president claims, "has treated our agricultural business and farmers very poorly for a very long period of time." How that squares with national security is anyone's guess.

 

My point is why confuse the issues? This is not about national security; it is about unfair trade practices. If Trump were to stick to the facts, our trading partners would need to re-examine their own policies. And what we can do in the name of national security, other nations can do as well. The irony is that the World Trade Organization was originally set up after WWII at the prodding of the U.S. to handle just these issues.

 

Back in 1930, the Smoot-Hawley Tariff Act was passed despite stiff congressional opposition. The law is widely believed to have exacerbated the severity of The Great Depression. The act was intended to save the nation's factories by raising tariffs on imports to record levels. Instead, other nations responded in kind. A global trade war developed, which ultimately led to a shooting war. And the rest is history.

 

No one of rational mind wants to see that history repeated. It may be that the president's administration lacks the knowledge and expertise required to navigate the established WTO channels. Few, if any, of his men have any experience in negotiating far-reaching trade deals.

 

It could be that Trump lacks the patience to wait for these deals, some of which could take years to hammer out.  After all, most of the world's truly successful trade agreements required years of negotiations. Or maybe he thinks he needs a "win" in time to influence the mid-term elections. 

 

By circumventing the WTO, Trump raises the risk that a trade war could develop. President Trump has started with steel and aluminum but has now expanded his list of potential tariffs to food, lumber, automobiles, technology, and whatever else he can fit into his tweets. But tweets are not diplomacy, nor are they trade negotiations. Both need to be developed if we are truly serious about getting better trade deals.

 

Trump is preaching to the choir when he demands a fairer share of the trade pie, but where's the beef? Where are the specific plans to right those wrongs? They are noticeably absent. Bluster and bravado has worked for Trump thus far. Let's cross our fingers that his unorthodox tactics can carry the day.

 

Wilbur Ross, his commerce secretary, just returned from China empty-handed. The Chinese were ready to negotiate with specific ideas. They floated an offer to purchase a massive amount of U.S. goods worth $70 million next year if Trump backed off his tariff threats on Chinese imports.

 

Evidently, the offer was not good enough, but there were no counter offers. Donald Trump has been complaining about the unfair trading practices of our friends and foes for decades. He campaigned on these issues and won. The problem is now that he is in charge, he needs to not only point out the problems but come up with the solutions. You can't negotiate with tweets.

 

Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

As the month wound down, so did stocks. Pronouncements from Washington dominated the market's direction on a daily basis. We can expect to see that trend continue as the summer doldrums reduce liquidity and exaggerate market swings.

 

The adage of "sell in May," however, did not fulfill the bears' expectations this year.

 

Actually, the month of May has been pretty good for stocks recently. The S&P 500 Benchmark Index gained a smidge over two percent for the month this year. That's not to say those gains were easy. The stress level for those who are trying to trade this market is through the roof.

 

And that's because two opposing trends are impacting the financial markets. The first is short-term volatility caused by political events. At the moment, these are mostly trade-related: tariffs and counter-tariffs, NAFTA concerns, and China trade. All of the above have generated a war of words (or tweets) and, depending on someone's mood in the morning, can spark 1-2 percent movements in the index in either direction. The falsehoods, about-turns, and misinformation have day traders going crazy.

 

And don't forget the international events. This week, Italy dominated trade, as a political/financial crisis may be brewing in Europe's fourth-largest economy. A new prime minister, Guiseppe Conte, was appointed Friday as an uneasy coalition of populists and right-wingers agreed to compromise in the wake of a severe financial downturn in Italian financial markets this week.

 

We will wait for future developments (see my column published yesterday on the subject) before giving the green light to Italy and Europe. At the same time, the Trump/Kim show continues. The off again, on-again charade is accomplishing what both egomaniacs want most: more time in the limelight.

 

Then there is the longer-term trend, which centers on real fundamentals: unemployment, inflation, interest rates, global growth and the like. All of these indicators are still flashing positive for the stock market. As readers know, I have been urging investors to focus on that trend and ignore the noise caused by all the short-term, headline-grabbing events.

 

Take today's much-heralded employment report. The U.S. unemployment rate has just hit an 18-month low at 3.8 percent. We haven't had a lower rate since the year 2000. Wage growth came in at 2.7 percent compared to a year ago. That is a stellar performance, no two ways about it.

 

This report, however, was marred by controversy. Prior to its release, Donald Trump tweeted a "heads-up" that he was "looking forward to seeing the employment numbers at 8:30 this morning" — obviously a tip that the numbers would be good. Federal rules (as Trump knows but ignored) state that no one in the executive branch can comment on major economic reports until an hour after they are released. Since few individuals (but almost all institutions) trade in the hours before and after the markets open, Trump's comments enabled bond, currency, and stock market futures traders at big institutions to profit from this information.

 

At the end of the day, what matters is the economic trends, and right now the trends are your friends. Until the data say otherwise, investors should remain invested, ignore the short-term volatility traps and enjoy the summer.