The Booming Economy vs. Real-World Danger

The Booming Economy vs. Real-World Danger

“You can’t handle the truth!”

 Everyone’s favorite courtroom scene from Jack Nicholson – portraying Colonel Nathan R. Jessup – while he spars with Tom Cruise’s character in the military/legal drama, “A Few Good Men.”

It was riveting theater, and for those who have seen the movie, almost all agree it was great acting and superior story-telling. Colonel Jessup’s line was to point out that the world had many dangers, and to keep the dangers out we need walls. It was people like Jessup who stood on the walls to keep the barbarians at the gates, not inside them.

But in today’s real world geo-political conflicts, there are neither walls nor gates, nor anything else that is keeping real danger from reaching the homeland. This week we saw a book released once again describing the Trump White House in less than flattering terms. The Brett Kavanaugh hearings for confirmation to the Supreme Court were riddled with obstruction from the Democrats and outside protesters. These distractions are trying to keep the body politic from focusing on the good and bad news which should most matter to them.

Contrast this less than rosy picture with an economy which continues to boom at Reagan-era levels of growth. It begs the question as to what will eventually win out:  the booming economy or real-world threats that the American people have little understanding or knowledge of.  North Korea may get the foreign policy headlines – but other serious risks have grown and are now rising to the forefront.

So, what gives – unrestrained optimism or actual geopolitical threats?  Here are our top three of each:

I. Top Three Indicators that The Economy will Keep on Booming:

  1. “Institute of Supply Management has another record month!”: ISM has manufacturing production in the United States rising to 61.3% capacity, the highest number since 2004! This is a direct result of deregulation, tax reform, and steel industry policy. This is great and continued good news for America.
  2. “Construction spending up 5.8% year-over-year”: The housing market price level has recovered from the 2008 banking collapse, and prices have remained elevated for some time. Construction spending has remained a consistent positive marker for the economy and GDP growth. And speaking of GDP growth…
  3. “3rd Quarter GDP growth projections are now at 4.7%!”: Back to back 4%+ growth? Everyone said this would be impossible!  New normal … secular stagnation … all of the media reports that America could no longer grow at Regan-era levels of growth appear to be wrong.  We still have September before the 3rd quarter ends, but the projections appear to be heading towards a rising growth number for the economy.

II. Top Three Real-World Dangers that are Flying Under the Public Radar:

  1. “Russian adventurism is more than just Ukraine”: The American public gets most of their Russia news through one filter – The Mueller Probe of alleged Trump-Russia Election Collusion. On the periphery, the invasion of the eastern part of Ukraine remains a major concern in the European theater, as does Russian deployments in the Middle East.  But their growing alliance with Iran … the movement of an entire fleet into the Mediterranean for the first time since 1989 … they have cheated on, and no longer abide by the INF Treaty – this was known by the previous administration and now NATO General Secretary Jens Stoltenberg has stated that Russia could launch a first strike using battlefield nuclear weapons and defeat NATO within 24 hours.  The US and NATO have never faced such a predicament, since pre-INF the US had equivalent forces in theater to respond.  Not anymore.
  2. “Chinese Navy now controls South China Sea”: The Chinese have ignored international law, court rulings, and treaties to seize several islands belonging to the Philippines. They spent the better part of 2010 through 2014 building artificial islands in the South China Sea with zero push back from the United States.  There nuclear force has increased in size, and now has Multiple Re-entry capacity (MIRV’s) that can send multiple warheads onto multiple targets. Leading members of the PLAN (People’s Liberation Army Navy) have been quoted as saying they are war-planning for nuclear strikes on the US homeland.  Russia and China have nuclear stockpiles that, combined, could overwhelm a US defense system and defeat US ballistic missile forces. The majority of the American people believe we have the largest, most advanced arsenal in the world. That is no longer the case, and our enemies continue to build more and more.
  3. “North Korea, Iran, failed states, Venezuela …. the list of large problems for American policy is not shrinking”: It is very hard to understand the fact that while progress has been made on North Korean nukes, we are where near a resolution … the US gave Iran billions of dollars for the now defunct Iran deal, and they have used it to expand terror activities throughout the Middle East … Russia, Iran and supposed NATO member and ally, Turkey, have been devising the plans for the final rebel holdout in Syria, as all parties inch closer to Israel.

The economic boom is unprecedented, and with obvious structural strength, not inflated money printing.  But your optimism must be off-set by an ever-increasing set of dangers on the global stage.  Whichever direction the market goes, having your money in principal protection products is a safe strategy for your portfolio. Give us a call at (877) 912-1919.

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