WATERFORD, Ireland – Stocks got a little tailwind push yesterday… with the wind coming from post-debate commentary.

It looked to many pundits that Hillary had prevailed. She belled the cat.

This was good news to the stock market. Hillary is “business as usual.”

The Dow rose 133 points.

Grand Opening

We’re in Ireland for the grand opening of our new international headquarters.

Like so many other things in life, this project didn’t take us where we wanted to go, but it probably took us where we ought to be.

Operating from Ireland, we had hoped to get tax advantages.

Ireland has a low corporate tax rate – just 12.5%. But as it turned out, we are unable to shelter income here… because we have so little income to shelter.

Our new headquarters is mostly a cost center, not a profit center. We support our operations all over the world – with telephone and computer services, for example.

Still, Ireland is an agreeable place with friendly people. Almost everyone is ready to have a pint with you.

And you don’t have to worry about air conditioning or watering the flowers.

Epic Fail

Meanwhile, we were shocked to see in the Financial Times – yes, the “pink paper,” no less! – a sensible article on current central bank policies.

Our heart raced. Our pulse sped up. A light sweat gathered on our forehead.

What is going on? we wondered.

The Financial Times is the mouthpiece of the international Deep State. It is solidly behind Hillary… NATO… the EU… QE… ZIRP… NIRP… the phony credit dollar… and just about every other cockamamie perversion of civilized life.

And yet… there it was… in Monday’s edition. William White, head of the OECD’s economic development review committee:

The monetary stimulus provided repeatedly over the past eight years has failed […] Debt levels have risen […] Consumers have had to save more, not less, to ensure adequate income in retirement.

At the same time, easy money threatens two sets of undesirable side effects. First, current policies foster financial instability… and many asset prices bid up to dangerously high levels. Second, current policies threaten future growth. Resources misallocated before the crisis have been locked in through zombie banks supporting zombie companies.

On the demand side, accumulating debt creates headwinds, leading to more monetary expansion and more debt […] On the supply side, misallocations slow growth, which again leads to monetary easing, more misallocation and still less growth.

Regular Diary readers will recognize this analysis. It is more or less what we have been discussing in these pages for the last eight years (minus our pointing the finger of blame at the post-1971 dollar).

That this critique has moved from the back alleys of the Diary to the main street of the Financial Times is an important sign.

It is a sign of desperation.

The Establishment is in need of a new program. New magic. New hocus pocus that will keep this swindle working.

New Hustle

Not that the Establishment is ready to abandon its activist meddling or give up its racket.

It depends on the system now in place to move trillions of dollars of other people’s money in its direction.

But monetary policy is clearly not doing the trick. And the insiders are now coming to terms with it. They need a new hustle.

What?

Fiscal stimulus!

They want the government to spend more money. Where will it get more money?

It will borrow it, of course.

This is what Larry Summers has been calling for. It is what Paul Krugman wants.

Our friend Richard Duncan at Macro Watch believes it is essential to avoid depression.

The Financial Times has been in favor of bigger government deficits (aka “fiscal stimulus”) since the crisis began.

But never before in the mainstream media have we seen it backed by a realistic understanding of how the Fed’s policies have failed.

Regards,

Signature

Bill

Investor Focus


By Chris Mayer, Chief Investment Strategist, Bonner Private Portfolio


There’s a critical factor many people overlook when investing overseas…

If you want exposure to foreign markets, you have to buy companies that do business there.

It’s so simple. And yet, investors pour billions of dollars into foreign stocks and funds without checking them.

Consider Singapore…

Over the 19 years ending in 2014, Singapore’s economy grew 225%.

What do you think Singapore’s stock market returned?

About 50%.

Take a look:

How can Singapore’s benchmark index (STI) deliver a return that was a quarter of the economic growth rate?

Because most Singaporean companies did most of their business outside of Singapore.

I just finished reading a privately printed collection of essays (“Compendium Compilation 2015”) by Murray Stahl – a money manager at Horizon Kinetics.

Stahl cites the Singapore example, among others, to illustrate that the characteristics of stocks have little to do with where their legal home is.

Another interesting example is Mexico.

An index of Mexican stocks returned almost 12% annually from 1996 to March 2015 – mainly because Mexican-based wireless services company Américan Móvil went up tenfold over that period. But most of its customers are not in Mexico.

Here’s one of my favorite examples: The closed-end India Fund (IFN) has a large holding in IT services company Infosys. Yet, this is a company that gets less than 2% of its sales from India.

Infosys is not the only stock in the India Fund that doesn’t do much business in India. No surprise then that the returns of the India Fund seem to have little to do with the booming economic growth in the country…

If you want to invest in India, start by investing in stocks that actually do a lot of business in India… not in some fund that calls itself an India fund, or a company that happens to have its headquarters in India.

Remember this, too, when people talk about the U.S. economy and U.S. stocks… The S&P 500 now gets about half of its earnings outside of the U.S. It’s no longer a proxy for the U.S. economy.

There are many factors that go into a stock market’s return, of course. But you have to pay attention to where the companies’ sales are from, not just where the companies are from.

Editor’s Note: Chris just launched a brand-new investment advisory, and it’s totally different from his other service – the one Bill Bonner is following with $5 million from his family trust.

Chris’s new advisory focuses on smaller companies that – while more volatile – have the potential to become "the next Starbucks" and grow your money much bigger, much faster than the stocks he recommends in the service Bill follows. (More details about the project here.)


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Mailbag

Despite Bill’s warning yesterday about a new banking crisis, U.S. presidential politics are still at the forefront of Diary readers’ minds.

But first, Chris Mayer answers three questions about his new investment service

Chris, although somewhat counterintuitive, the methods you outline make a lot of sense to me. Here are my questions:

  1. Will this opportunity be appropriate for a 74 year old retiree where preservation of capital is number one (but certainly not adverse to high returns!)?

  2. You will be informing us if your assessment of a purchased company turns negative (or, less positive) in the future with advice to sell, correct?

  3. Of the 10,000 worldwide potential opportunities, will you be assessing a significant portion of them? Seems that would take a huge staff.

– Reed M.

Chris Mayer comment:

  1. If you can own a stock for a couple of years, yes. If you can’t own a stock for at least a couple of years, I think the answer is no.

  2. Yes. I’ll give you monthly updates on the names and will also include sell recommendations when appropriate.

  3. Yes and no. It’s easy to knock out names we won’t bother with in Focus. We won’t look at anything more than a $3 billion market cap. We’re not going to look at bad businesses, junior miners, biotechs with no revenues, or tiny penny stocks.

    There are many stocks. There aren’t that many really good businesses. Even so, we have a large universe and we’re working through them one at a time.

And now, your fellow Diary readers express their thoughts about presidential politics in America…

I do not understand why you reject Clinton with such enthusiasm. Yes, she was the wife of a president, she was a senator, and she was a secretary of state.

As you correctly point out, she has to play by the rules the Deep State imposes, as did Obama. And as will every president in the future. Meanwhile, we have a clearly mentally disturbed individual as the other alternative. I find the wide support for such a person unbelievable, as does every rational person.

The choice is not between different policies, economic philosophy, or even a better America. The choice is between the rational and the insane. This same choice was made in Germany and gave Hitler to the world. I never expected this choice would happen in the U.S.

– Edmund S.

I think too much is being made of the wrongs of Donald Trump. I personally don’t agree with some of his methods for righting the ship. But I admire his willingness to come to the table from a non-politician background.

He’s a doer, not a complainer. And a breath of fresh air, even if it does have a whiff of sulphur. Better than the cyanide that Clinton will bring if she were to get elected.

– Brad H.

I wrote in before to say that the best way to get our economy going is for the government to allow U.S. companies bring money home by greatly lowering the repatriation tax.

They have trillions of dollars parked offshore. If the government dropped repatriation tax from 35% down to, say, 5 or 10%… and if companies invested that money in the U.S…. we would have $3 trillion to $5 trillion dollars quickly thrown into or economy, and it would be on fire.

Have you and your readers noticed Trump is thinking the same way? Even though a lot of people don’t want either candidate, at least Trump understands how to make money. And that is what this country needs right now.

– John M.

You asked what Thomas Jefferson would have said to 100 million Americans on the eve of Monday’s presidential debate?

“For I have sworn upon the Altar of Conscience eternal honesty against every form of tyranny upon the mind of man.” And, “All tyranny needs to get a foothold is for good men of conscience to remain silent.”

– Stephen G.


In Case You Missed It…

Will Bonner just released a video message to explain why you should consider trying Chris Mayer’s Focus

Hundreds of your fellow Diary readers have already signed on… and they’ve already received Chris’s first recommendation.

To learn more about what’s waiting for you if you decide to give Focus a try, watch Will’s video message here.