MARKET WATCH
For the most part, the markets remain placid, currently trading slightly higher than their levels two weeks ago.
In political and economic news, Boris Johnson will become the next prime minister of the U.K. While his leadership will likely complicate Brexit negotiations, which have been fairly challenged to date, perhaps a change in philosophy could help move things forward.
Meantime, in the U.S., an agreement has been reached to extend the debt limit until July 31, 2021
----- which is good news (if confirmed by all levels of government), considering past fights over the debt ceiling have led to a shutdown of government.
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IN THE REVIEW QUEUE
How Asia Works
by Joe Studwell:
Asian economies have been among the globe's fastest growing over the last three to four decades. Unfortunately, this growth has not been shared equally. How Asia Works is about how that discrepancy came to be. Within the first three sections of the book, a comparison and analysis is constructed between the strategies of the more prosperous Northeast Asian countries (China, Japan, South Korea, and Taiwan) and the less affluent Southeast Asia (Malaysia, Vietnam, Philippines, and Indonesia). The book argues that sustained economic prosperity resulted from governments who developed sound economic policies and had the willpower to enforce them.
These policies generally focused on three key areas: agriculture, manufacturing and finance. Countries in Northeast Asia gave small plots of land to all their citizens. The incentive of ownership and limited plot size led to increased yields compared to large-scale agricultural projects, which relied on cheap labour that lacked incentives. Once agricultural gains reduced hunger and poverty rates, the next phase was initiated.
These governments mandated that manufactures focus their production primarily on goods for export to bring foreign funds into the country, which would then be reinvested; and to increase their efficiency and upgrade their technological know-how against global competition. Companies that didn't focus on exports or were unprofitable were taken over (often with government backing) by more successful ones.
Thirdly, loans were used as a carrot and stick to support exports. Companies that successfully exported were rewarded with ample and cheap capital to fund further growth. Those that didn't had difficulty securing loans, and, if they could access loans, paid higher rates.
Unfortunately, countries to the south, often with the financial support and guidance of the IMF, mostly chose the opposite strategies in each of these three areas. The result was low food yields, dramatic income inequality, and inefficient companies that overcharged domestic consumers for subpar goods and services. To understand the importance of this, consider what Canadian phone and data costs would be if Rogers and Bell faced international competition.
The fourth and final section of the book focuses on China and delves deeper into how it has used protectionist trade measures to enhance homegrown companies, gain technological information, and export its way to prosperity.
Although the book could be shorter, it provides a solid explanation of Asia's economic development and how it currently works. For my part, I was forced to rethink the utility of universal free trade, especially for developing countries. I was surprised to learn that virtually every developed country enforced protectionist trade strategies early in their economic infancy, and those that prematurely embraced free trade, often paid the economic price at the hands of both foreign and domestic interests.
Lessons on Living a Meaningful Life from Nichelle Nichols
by James Clear:
The casting of Nichelle Nichols on Star Trek was an important step towards helping minorities gain acceptance into mainstream American society. Her story remains important, as barriers continue to exist throughout the Western world and beyond.
How To Be Successful
by Sam Altman:
As the title suggests, Sam Altman reminds us of the important factors required to become successful.
Paradigm Shifts
by Ray Dalio:
This essay does a nice job of illustrating how, since the 1920s, each decade in the U.S. has experienced almost the opposite economic performance from the previous one. Dalio also shares what he feels may lie ahead and how owning gold---- which we do----- may be an important asset for the decade to come. To dive further into this topic, you may want to read
the 45-page version
.
Measuring Global Happiness
by Visual Capitalist:
Based on six key variables----- GDP per capita, life expectancy, social support, freedom of choice, generosity, and perception of corruption----- this infographic shows the world's happiest and unhappiest countries.
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SELECTED INSIGHTS
"The basic point is: we must acknowledge that we are backward, that many of our ways of doing things are inappropriate, and that we need to change."
- Deng Xiaoping
"A bad time in the bond market is typically a lot better than a bad time in the equity markets."
- Greg Peterson, on why most investors should still own bonds
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FREQUENCY CHANGE-UP
After careful thought and a number of conversations with readers, I've decided to change this newsletter's frequency from every two weeks to once a month. This choice will free up my time to delve further into topics I've wanted to explore further.
For those who'd like to hear my thoughts more frequently, you can follow
me on Twitter
or Facebook. As always, feel free to share your thoughts----- I love hearing what you like and your ideas for what could be improved!
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The views of the author do not necessarily reflect those of Raymond James. This article is for information only. Raymond James Ltd. Member-Canadian Investor Protection Fund.
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