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Our own worst enemy. A trade war with our friends? ERP is a growth area. Yes. But will I invest?

We are our own worst enemy.

No one shoots us in the foot as well as we do.

That was a philosophy I followed when I ran a company. It wasn’t our competition that was hurting us. It was ourselves.

I fear now.

The Wall Street Journal warns “Tough Talk on Trade Rattles Investors.”

It headlines:

Trump administration officials are pushing back against overseas officials opposed to planned steel and aluminum tariffs and U.S. executives who warn the move could undermine a strengthening American economy.

The Journal writes:

The policy point is that Mr. Trump’s tariffs are trying to revive a world of steel production that no longer exists. He is taxing steel-consuming industries that employ 6.5 million and have the potential to grow more jobs to help a declining industry that employs only 140,000.

The Journal profiles an Austrian steelmaker  in Donawitz that automated  its factory and now “needs all of 14 employees to make 500,000 tons of steel wire a year. The same mill in the 1960s would have needed as many as 1,000 workers to produce a similar amount albeit of lesser quality.”

If we start a trade war to help a declining U.S. industry, we’ll hurt all manner of our own industries (as the Europeans target iconic U.S. companies like Harley Davidson, Jack Daniels).

And the stockmarket  will have an excuse to drop, big time.

No one wins a trade war.

I repeat, no one wins a trade war, despite what Mr. Trump believes.

I’m praying that the Administration comes to its senses before this gets really ugly.

This is the first time in the Trump Administration that I’ve felt stockmarkets could tumble for a legitimate reason.

Trade wars are not good for stocks.

I’m not the only person who believes this. Take brilliant investor Carl Icahn.

CBS Moneywatch reported three days ago:

Carl Icahn unloaded millions in steel-related stock days before Trump tariff

As the saying goes, timing is everything.

Investor and former regulatory advisor Carl Icahn dumped $31.1 million of stock in a Wisconsin company that relies heavily on steel to make its products last week, days before President Donald Trump said he’d impose stiff tariffs on steel imports (and hence raise the price of steel).

The disclosure in a regulatory filing, first reported by ThinkProgress, shows Icahn systematically sold off almost 1 million shares of Manitowoc Company (MTW), which makes cranes and other equipment.

The billionaire investor and longtime confidant of Mr. Trump started selling the stock on Feb. 12. Icahn began selling before Commerce Secretary Wilbur Ross released a report Feb. 16 that called for a 24 percent tariff.

Mr. Trump’s announcement seven days later that he would inflict a 25 percent tariff on steel imports has sideswiped the market, steel-tied stocks in particular. Manitowoc stock has since lost 12 percent of its value.

Here’s Manitowoc’s stock over the last year. Mr. Icahn’s timing ability — you got to admit — is pretty awesome.

mtw

Cramer’s picks

Where do we get stock ideas from? From our own shopping (think Costco, Square, Apple, etc.)

And from “gurus.”

The key with gurus is to do your own research on their picks.

Cramer is pushing two tech companies, Servicenow (NOW) and Workday (DAY).

As stocks, both have done extraordinarily well, especially Servicenow (NOW).

ServiceNow
These two make ERP — Enterprise Resource Planning — software. They sell their software to huge companies that have hundreds of different software systems. The idea is that the ERP will pull all the zillions of systems together and allow any user anywhere in the company to access all the systems and make intelligent decisions based on the company’s entire operation rather than bits and pieces of it.

The German company SAP started ERP in the 1970s and is making money at it, while Servicenow and Workday are not.

You can boggle your mind by reading more about ERP in places like Wikipedia  and Investopedia

After spending half the weekend studying ERP, I came away with the conclusion that ERP software is:

+ Incredibly expensive,

+ Incredibly difficult to install, and

+ Incredibly difficult to derive sufficient benefit to pay for its enormous cost.

Worse, installing it is likely to detract a firm from the basics of running its business — designing and introducing new products that will sell and dealing with customers to sell them the most — the best for their needs, given their preferences, etc.

Moreover, overlaying a huge new IT system over existing smaller friendlier systems may completely detract from getting the full benefits of the existing systems — each of which were installed for a reason.

Given all this, I came to the conclusion that CRM — customer relationship management — software would pay off much faster and is a much better investment — for me as an investor and for its customers.

Chart SAP, NOW and WDAY against Salesforce (CRM), you can clearly see the historical results.

CRMTenYears

Hence, I’m glad CRM is in my recommended portfolio — the one in the right hand column on my web site — and WDAY and NOW are not.

What I’ve learned about hearing aids

+ Don’t procrastinate. If your family says you need them, you do. If your favorite word is “What?” you definitely need them. It’s not nice to put your family and friends through a deaf you.

+ All hearing aids amplify sounds and voices. Some will filter out some ambient noise — like in a restaurant. But it’s not 100%. Their basic job is to amplify. The more expensive ones purport to amplify sounds from one direction — the people you want to hear. Mine does, a little.

+ Hearing aids that work with a Bluetooth app on your iPhone or Android smartphone are 1000% better.  With the app, you can adjust volume, boost frequencies you’re missing and pick certain patterns — restaurant, outside, “all around”, etc. You can even define your own pattern.

+ $3,000 hearing aids are not the total solution. Even with them in my ears, I prefer to watch TV with my $70 Sennheiser headphones.

SennheiserRS120

Click here. The sound is far richer. It’s in stereo and I can hear the dialog far better. I can wear the headphones over my hearing aids.

+ My hearing aids don’t have a microphone. I can hear cell phone calls, but I have to speak to my iPhone’s mike. A better choice is these $27 Soundpeats Bluetooth earbuds.

SoundPeats

They have a microphone. You can be on the phone, walk around, take notes, without holding your phone. That’s really useful. Click here. 

+ On a plane, the only devices to get are the Bose QuietComfort 20 noise cancelling ear buds. They magically kill the engines’ sounds and let you sleep. That box just behind the plug contains the magic noise cancelling electronics.

BoseEarbuds

Frequent flyers swear by them. I wouldn’t get on a plane without them. They cost $249. You can use them for speaking and listening on cell phone calls. You can use them for watching YouTube on your laptop. Far better than your laptop’s crummy speakers. Click here.  

+ The key to being happy with hearing aids is a patient lady. This is Menessa Garcia of Costco La Quinta, California. She sold me my ReSound Forte hearing aids.

MenessaGarcia

She spent a total of three hours with me — testing my hearing, teaching me how to insert my hearing aids, teaching me how to use the app, etc. You need someone like her. Nice, helpful lady.

+ Sometimes you simply don’t want your hearing aids in. For example, playing tennis. The sound of the ball is too loud. It’s also not good to sleep, swim or shower with them.

+ I paid $2,700 for my hearing aids. I suspect I would have paid $6,000 had I gone to a local corner store audiologist who are big on marketing and light on service. But I have no real idea. I can’t Google ReSound Forte hearing aids and get competitive pricing information. Hearing aids may be the only product in the world where total obfuscation reigns. Me thinks deliberately.

But for me, there are solutions. See above. And I’m happy.

Stuff to carry when you travel

+ Black electrician tape. Use it to cover light sources — microwave, alarm clock, TV.

+ Safety pins. Use them to pin the drapes together to further reduce light.

+ Ear plugs. To kill ambient noise. And the Bose noise cancelling ear buds — see above.

+ Melatonin. For getting to sleep when you’re in another time zone.

The Jehovah’s Witness and the weather

Saturday morning the weather was too bad to play golf.

Suddenly there was a knock on the door.

A young, well dressed man stood there. He said “Hello sir, I’m a Jehovah’s Witness.”

I said, “Come in and sit down.”

I offered him a cup of coffee and asked, “What do you want to talk about?”

He said, “Don’t know. Nobody’s ever let me in before.”

HarryNewton
Harry Newton, who had fun researching and writing today’s blog. Writing still remains the best way of teaching oneself something.

I worry about Mr. Trump’s trade war and its effects on the stockmarket. We’ll see this week.

4 Comments

  1. gerryb says:

    Jim Cramer: 7 Reasons the Steel Tariffs Don’t Matter
    By JIM CRAMER FOLLOW | MAR 5, 2018 | 4:14 PM EST
    Stock quotes in this article: BA, CAT, FB, AMZN, BABA, NFLX, GOOGL
    All weekend I heard about the tariffs and how they would destroy the market. My twitter feed was filled with the sky is falling predictions. There was no way we could avoid a disaster. The president had put us on a collision course with bear market.

    All I can say is if this is a collision course, we need more tariffs. Heck, we need a hot trade war with all the trimmings.

    What gives? How could so many be so wrong?

    First, as I said last week, the bear case just is way too negative. China is the target of these duties, not the other countries we keep hearing about and China did nothing against us. I know you have heard endlessly from the so-called free traders out there that we do only a small percentage of steel business with China anyway.

    That’s a false construct. China produces far more steel than it needs in order to keep people working. It then dumps that steel all over the place, Canada, Latin America, Europe, you name it. Then nations that are hurt dump their own steel into our country, often at prices far below the actual cost of production for many of our steel companies.

    There are many reasons why China didn’t retaliate but the most salient is that China itself may be concerned that the markets it sends its excess steel to could be closed if the U.S. wins the war, something that’s distinctly possible.

    So, reason number one why the stock market didn’t crash is that the Chinese know they aren’t playing fair and are scared about the consequences if they don’t curb their oversupply.

    Second reason? As much as commentators and the media seem bent on inflaming the trade war, it’s simply not that big a deal for many companies in the stock market. For every company I find potentially hurt by retaliation, that is if we even get it, I can find ten companies that won’t see their numbers come down. And remember as much as some would like to see this issue be about how we are protecting the few and injuring the many, as so few people still make steel and aluminum versus those who use it, Wall Street isn’t about fairness. It’s about the numbers and we just don’t get many cuts from a bump in the price of either commodity.

    Three, the U.S. economy is incredibly strong. The tax cuts, the curbing of regulation the newfound lending, the lack of houses, the robust oil and gas market, the revival of manufacturing, these are all happening. They are very big deals, much bigger than a tax on two materials that aren’t that important to us versus the jobs that could be lost that are right now part of the renaissance. The president, with all of his bluster, is not going to risk that recovery even if you think that he is willing to trash our trading partners to the point that it hurts ourselves. Plus, I think that the whole tariff cause may end up adding jobs here as foreign manufacturers might be far more anxious to placate our president, including China. I cannot for the life of me understand why so many believe every trading partner is going to going to come after us. Unlike, say, China or Korea, we are a fantastic market that is wide open to everyone. Who wants to lose that over a 25% increase in the price of steel or a 10% tariff on aluminum. Better just to curtail and move on. The president is betting that’s what is going to happen. I think it’s a reasonable outcome.

    Fourth as much as Trump figures he can impose these restrictions unilaterally, there’s push back in his own party against the across-the-board nature of the tariffs. Some Republicans don’t want to lose NAFTA. Other Republicans, like the Speaker of the House Paul Ryan, think that going down the path of a trade ware is ill-advised. Ryan spokeswoman Ashlee Strong issued a statement saying: “We are extremely worried about the consequences of a trade war and are urging the White House to not advance this plan.” The speaker thinks it could derail economic growth.

    That brings point five into focus: the consumers of the steel and aluminum in this country can easily afford the tariff. It’s less than a third of a penny for cans, it’s slightly more than a $100 for cars. It’s just not that big a deal versus the handout that Congress just gave American business. The corporate tax breaks overwhelm or at least mask any lost earnings from the companies in the blast zone and that includes the stocks of Boeing (BA) and Caterpillar (CAT) which had been among the hardest hit last week and among the biggest gainers today.

    Point six is a harder one for people to understand but money flows from where it is scared to where it’s safe and it does so in a hurry. We saw this happen in the latter part of Friday’s session and we see it today. Let’s just analyze the original FANG. Facebook (FB) just doesn’t have a lot of Chinese business. It’s just not that important to them. Amazon (AMZN) ? China has its own Amazon, Alibaba (BABA) . You sell Amazon off this, you really don’t understand how retail works in China. Netflix (NFLX) ? China doesn’t have Netflix. Today Netflix got a big boost from a UBS report talking about how the moat between it and all other entertainment companies is growing because of its original content. I remember when that content used to be a huge negative because of the cost of production.

    And the G of FANG, Google? Did you forget that Alphabet (GOOGL) isn’t in China? Of the international companies I follow, Alphabet may be the least shortable off this action against China.

    There are whole other areas that aren’t even near the blast zone. The retailers are largely domestic. Sure they sell goods made in China but they sell goods from a lot of foreign countries. The financials, with the exception of some very big banks, don’t have any exposure to China. Health care? I don’t think so. All of those areas rose today.

    Finally, point seven despite all of the harsh words about all trading partners, the Europeans and Canadians and the Latin American countries all know the deal: they recognize that it’s the Chinese that are behind the oversupply. They will, if they have to, start to retaliate not against us, but against China if China keeps pumping out steel at an outrageous rate.

    China can target a lot of industries. It targets steel because it puts so many to work. Same with aluminum. But this tariff is a clarion call for China to find other ways to put people to work. China can easily close its excess capacity if it had jobs for these people. Believe me, it will find another place for these workers if things get too hot.

    Now remember away from trade we got too negative again. The stock market went too far down after a big run and got oversold. That meant we were due for a bounce and presidential tweeting wouldn’t change that. Unless numbers are cut — and they haven’t been — there’s just not enough of a substantive bear case out there. That could change Friday if we get too hot an employment number and we blitz through 3% on the 10-year. But right now? There’s just not enough negatives to do the job.

  2. Jerry says:

    Harry, you are unpatriotic. I support my president and trust that HE knows best, not you. If our president says “Jump!” you ask “How high?” What makes you think a trade war is not good? President Trump believes in protecting American interests. He’s not a bum like you. I will vote for Trump in 2020 and beyond, assuming he decides to stay in office. DON’T RULE THAT OUT.

    • Greg says:

      You think HE knows best. Wow. you’re as stupid as our President. I assume you don’t have much of an education or read. When a president needs a note card to speak to children, I wouldn’t put much faith in him. Let alone so many people on his cabinet being indicted doesn’t give me much faith.