POITOU, FRANCE – “Nothing really changes.”
Sitting next to us at breakfast, a companion was reading an article written by the No. 2 man in France, Édouard Philippe, in Le Monde.
The headline promised to tell us how the country was going to “deblock” itself.
But upon inspection, the proposals were the same old claptrap about favoring “green” energy… changing the tax code to reward one group and punish another… and spending more money on various humbug initiatives.
Philippe claims, for example, that France will “invest” $50 billion in job training programs, new industries, and infrastructure.
The idea behind it, although not stated expressly, is that a brighter future is out there somewhere, and that France’s politicians and bureaucrats will do a better job of going to meet it than the people themselves.
“Just like the U.S.,” our American companion continued.
In order to “invest” $50 billion, the feds have to get the money from somewhere.
They earn no money. They can only get funds by taking them away from others. Tax it. Or borrow it.
Either way, the resources used to build a new road or hire a new person must be taken away from other plans and programs set in motion by other people, who came by the resources honestly.
The only possible way in which the economy, or the people as a whole, could benefit from shuffling resources from private use to public use would be if the feds were somehow better resource allocators. But the proposition is laughable.
People invest their resources in many different ways. One wants a new car. Another prepares for his retirement. Still another remodels his home, moving his refrigerator closer to the TV screen so he won’t miss anything when getting another beer.
The feds are completely ignorant about these investments. And completely inconsiderate of them. They just take the resources away… and use them for their own crackpot schemes.
The feds are always terrible investors.
They have little or no experience with real business. They’ve never earned a dime. They have no appreciation for risk; they never put their own money on the line, so they never learn.
And their motives are always distorted by their own desire for re-election, payoffs, or political advantage.
That is just business as usual. But things DO change. As more and more resources are diverted from bona fide uses… and turned over to cronies and zombies… the more the economy creaks and groans.
It takes real investment, real work, real innovation and competition… real resources and time… to make people better off. In France, as in the USA, the real economy suffers as the claptrap programs and phony “investments” multiply.
In the 1950s, 1960s, and 1970s, the French government commanded about 40% of the economy; growth and prosperity boomed. It was the “30 glorious” years.
Now, the feds control 60% of the economy… and it limps along with 10% unemployment and negligible real growth.
“Just like the U.S.,” our companion repeated.
In America, during the 1950s, 1960s… and even the 1970s… government spending made up about 25% of the economy.
Later, by expanding regulation, the feds got control of new segments of the economy – directing money into medical/pharmaceutical industries, schools and universities, housing (via Fannie Mae, Freddie Mac, and mortgage-interest deductions), and Wall Street (via fake money and cheap credit).
The feds now effectively control 60% of the economy – roughly the same percentage as in France.
And the U.S. economy, too, struggles to make headway.
Many people thought they saw an unlikely messiah last year – in the person of Donald J. Trump.
Here was a “disruptor” willing to shake up the system. Here was a brawler ready to take on the elite. Taxes and spending would be cut. Regulations, too. The economy would boom.
Alas, there is no “Trump bump” for the economy. At least not yet. The New York Times:
While the June jobs report, coming on Friday, is expected to show that hiring continued at a healthy pace last month, other recent indicators in areas like consumer spending, construction and auto sales have been decidedly less robust.
As a result, Wall Street forecasters have been busy lowering their growth estimates for the second quarter, which ended last Friday, much as they were forced to do over the first three months of the year. Economic expansion for the full year now appears unlikely to be much greater than 2 percent – about the average for the current recovery, which celebrates its eighth year this month.
While hardly terrible, it is not the burst of growth – a “Trump bump” – that many expected to result from an upturn in consumer and business sentiment after Mr. Trump’s election.
“What did I tell you?” asked our companion rhetorically.
America’s new president… and France’s new chief, Emmanuel Macron… promised something new. A breath of fresh air. But to make any real change, each would have to squeeze the power and money now flowing to the elites.
And neither is inclined to do so.
“Fresh air?” she asked again, not posing a question but jumping to a conclusion…
“What I smell is the same stale gas. And it stinks.”
By Chris Mayer, Editor, Chris Mayer’s Focus
When you think of the world’s greatest investors, I doubt you’ll name Russ Gremel. And yet, he turned $1,000 into $2.1 million.
Gremel is 98 years old today and lives in a bungalow in Chicago’s Jefferson Park, his home for nearly 95 years. He prefers oatmeal and stews to “fancy foods” and enjoys smoking his pipe on his front porch. He never had a mortgage. And his last car was a 25-year-old Dodge Omni.
He retired when he was 45 years old.
But this isn’t another story about how a guy got rich by not spending any money.
About 70 years ago, Gremel bought $1,000 of Walgreens stock… and never sold. He just “sat tight” through booms and busts, inflations, wars, Fed money printing, management changes, etc…
Gremel’s $1,000 grew into $2.1 million – a return of about 13.5% per year over 70 years. (Incidentally, that’s 65% better than the Dow’s 8.2% annual return over the same time period.)
I know you don’t want to wait 70 years. Neither do I.
I retell Gremel’s story because it shows how you can get striking returns in a rather ordinary business. Walgreens is a pharmacy. It doesn’t have a lot of sizzle. But 13.5% annually over 70 years will get you a 2,100-bagger.
As I like to remind people – in this letter, when I speak at conferences or give interviews, and when I meet readers – netting a 100-bagger is all about the math. If you grow your money 20% per year, you will have a 100-bagger about 25 years later.
Math is math.
So you need to find businesses that can earn those types of returns for years.
An analogy may help: If you want to get from New York to Los Angeles, you can’t focus on the destination. There are no signs in Times Square that point the way to Rodeo Drive.
If you want to get there, you’ll need to focus on heading cross town at 45th Street, taking 11th Avenue south to the Lincoln Tunnel, then heading due west for about 2,800 miles. After about 41 hours, you should start seeing signs for Rodeo Drive.
Most people focus on the destination when they look for 100-baggers. They want to find a stock that fires their imagination: a new drug, a shiny technology, a bold restaurant concept…
But you can get a 100x return with less glamorous businesses. In fact, most of the 100-baggers in my study were basic businesses – insurers, banks, retailers, railroads, pipelines, food companies, etc.
So who cares about glamour? If the company can increase cash earnings at a rate of 20% annually for many years… that’s the best way to find 100-baggers.
Remember… it’s all just math. And I’ll take math over “new,” shiny,” and “bold” any day.
– Chris Mayer
P.S. Flashy investments are rarely consistently profitable. Most of the time, it’s the “boring” investments that will deliver you the biggest returns. While I was a corporate banker, I uncovered one such “boring” investment strategy that few people know about. However, it’s a technique I’ve used with my own money while never losing a single penny. See for yourself right here.
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In today’s mailbag, readers comment on the “French way” of government regulations…
Read your essay. Just another fine reason to love the French. Seems it still is true that there is the right way, the wrong way, and the French way. Maybe we should have just left them to learn German 70+ years ago.
– David P.
Interesting comment about the government stickers to indicate which cars pollute. I lived in Singapore where they have a “COE” (certificate of entitlement) required for every vehicle. It lasted for 10 years and cost about $90,000. After 10 years you were required to purchase another. Needless to say, you didn’t find 10 year old cars on the Island. Also, it was not legal to bring a car into the country, only purchased locally so they could control the certification process.
– Dan M.
Don’t rent your gatehouse. Instead, let American students stay there for free if they can take care of it and fix any problems. Set a limited time that they can stay. You may need a deposit that would cover any damage. I am sure you can find a lot of students studying French at Universities who would love to find something like this. The more natural and historic the better for them.
– Joseph M.
As to what the French people think of our duly elected President – remind them that President Macron minus the “a” and “c” plus “o” equals “Moron.” So. I guess it takes one to know one.
– Kevin L.
Your Diary on the French government reminded me of a bit Jack Benny had in which a robber pulls a gun on him and says, “Your money or your life!” Benny doesn’t respond. The robber says, “Well?” Benny replies, “I’m thinking, I’m thinking.”
– Stephen R.
Meanwhile, readers consider if Trump belongs in D.C. or on the professional wrestling circuit…
As a red state resident, it might surprise you that I don’t watch pro wrestling. But you are correct that I don’t listen to the taxpayer-supported, faux intellectuals at NPR and their pretentious claptrap. But these swamp-creature-loving people, who most certainly read their social-engineering bible to pump themselves up before each broadcast, do have a superior command of English grammar, delivered via their bloodless, soft, refined way of speaking.
So this must mean they have “class, and well-considered opinions,” unlike unsophisticated louts like me who reside in red states. And as you railed against President Trump’s lack of decorum, appropriateness, and saying his behavior resembled that of professional wrestlers, you failed to mention the unseemliness of former President Obama’s constant criticism of his successor.
– Frank W.
You have hit the nail on the head! What used to be politics, has degraded to WWE-style wrestling. Keep up the good work.
– Bill S.
Bill’s longtime friend and legendary investor Doug Casey just released a warning…
Doug believes that the country is on the verge of a “financial hurricane” that could wipe out 401(k)s, IRAs, and even the Social Security system. But when the crisis does hit, Doug believes it will present a unique opportunity for a handful of brave investors. Learn more here.