- Yes, America is an empire
- Make the empire pay: An even more profitable proposition now
- Weed is legal and teen weed use is… down?
- Follow the signs: Will you need a passport for a domestic flight?
- The education of an engineer… another earful from Rickards readers… defense spending vs. troop morale… and more!
If you missed out on your chance to “make the empire pay” five years ago… the best is just beginning.
Welcome to an abbreviated week of The 5. We pick up where we left off last week — with Jim Rickards telling us that as soon as Donald Trump won the presidency, “the countdown clock had started speed ticking on a time-sensitive investment window in the defense spending space.”
It’s a new — and more lucrative — variation on an old theme here at Agora Financial. Four years ago, our executive publisher, Addison Wiggin, mused as follows: “In Empire of Debt, we postulated the empire has logic all its own. That logic will bring about events beyond your control. It is far better to understand those events and plan your life and your ‘portfolio’ accordingly… than to allow them to blindside you and your family.
“In crass terms, we call it ‘making the empire pay.’ If it suits you better, think of it as channeling some of your tax dollars back into your own pocket.”
Perhaps if you’re a newer reader, we should back up a bit: Yes, the United States is an empire.
“As distinct from other peoples,” wrote the late Chalmers Johnson in 2004, “most Americans do not recognize — or do not want to recognize — that the United States dominates the world through its military power. Due to government secrecy, our citizens are often ignorant of the fact that our garrisons encircle the planet.” Depending on how you count, the U.S. military has roughly 800 bases in 80 countries.
It’s a strange kind of empire, to be sure. That was the point of Empire of Debt — a book Addison penned a decade ago with Agora founder Bill Bonner. Unlike empires of old, Washington doesn’t exact tribute from its vassal states. “Pretending to make the world a better place,” they wrote, “the United States could not very well require the poor nations it conquered to pay up. Instead, it had to borrow from them.”
And so more than 70 years after V-J Day, Washington still keeps 54,000 troops stationed in Japan. Japan is also Washington’s largest foreign creditor, holding $1.13 trillion in U.S. Treasuries. That’s nearly 8% of the non-Social Security and non-Medicare national debt.
“America has the largest military budget of any country in the world,” says Jim Rickards, getting back to the opportunity at hand.
“In fact, at an annual budget of $600 billion, we spend more on our military than the next seven biggest countries in the entire world. When you zoom in and look at our annual budget, we spent 54 cents of every $1 in discretionary government spending on our military.
“The number is so big that it’s almost too hard to imagine, so here’s something you’ll find shocking: At these rates, we currently spend $1,137,747 per minute on tanks, planes, cybersecurity, fuel and new tech innovations for our troops.
“Donald Trump clearly promised two things during his presidential campaign,” Jim goes on: “1) To implement a $1 trillion spending program, 2) To Make America’s Military Great Again.”
Days after the election, Forbes ran the following headline: “President Trump Is Likely to Boost the U.S. Military’s Spending by $500 Billion to $1 Trillion.”
“Trump’s spending initiative could nearly double what we’re spending on the military right now,” Jim goes on. “It’s a rare window where just about everyone agrees that military spending is going to boom.”
Now as before, the safe way to play it is the iShares Dow Jones U.S. Aerospace and Defense ETF (ITA).
Addison first suggested it five years ago; it’s up nearly 140% since then. In the December issue of Rickards’ Strategic Intelligence, contributing editor Nomi Prins says ITA is still a buy — good for 15–20% a year during the Trump administration.
But if you don’t mind a little more risk in exchange for a much greater reward… you’ll want to consider the small-cap and microcap defense plays that Jim and his team have identified over the last seven weeks since the election. They formulated what Jim calls the DRONE system to screen hundreds of defense names… and identify the plays with the most explosive potential under a Trump administration.
To seize on this limited window of time, check out what Jim’s DRONE system is all about at this link. There’s no long video to watch, but please note that we’re taking this special report offline tomorrow night at midnight — for reasons that will become evident when you click here.
Dow 20,000? As we write, the Big Board has slipped below 19,900. And the other major indexes are posting even bigger losses, the Nasdaq down nearly three-quarters of a percent from yesterday’s record close.
Treasuries are benefiting from the safety trade, the yield on a 10-year note back to 2.55%. Gold is not benefiting… but it’s hanging onto gains posted yesterday, at $1,138.
No big economic numbers today; yesterday, the Case-Shiller national home price index notched a record high. That’s before you adjust for inflation; take that into account and overall home prices are still 15% below the 2006 peak.
Statistical curiosity: Teenage marijuana use has plunged in Colorado.
The feds have issued state-by-state results from its National Survey on Drug Use and Health. They found in 2013–14, 20.8% of Coloradans age 12–17 had used weed in the previous year. In 2014–15, after recreational pot had become legal, that number was down to 18.4%.
True, teen marijuana use was down in other states as well — but not nearly as much. And adult usage in Colorado was up big after legalization.
The feds didn’t venture what accounts for the drop. But the numbers bolster the case legalization advocates have made for years — that looser marijuana laws don’t pose a public health threat to young people.
As a reminder, the next wave of legalization takes effect as soon as the calendar turns to 2017, on Sunday — which might well prove to be the next catalyst for a select group of “penny pot stocks”.
Now a 5 business travel alert: It will be at least another year before residents of certain states need a passport to take a domestic flight.
It’s been a year since our last update on the matter — an outgrowth of the 2005 REAL ID Act. Under that law, the 50 states are supposed to make their driver’s license photos compliant with facial-recognition software and make their driver’s license databases available to the feds. In a glorious act of nullification, several states have refused to go along.
For more than two years now, the feds have threatened to bar people with noncompliant driver’s licenses from getting on an airplane; they’d need a passport. But the threats looked increasingly hollow as Homeland Security kept pushing back the drop-dead date, buying time, knowing there’d be an insurrection if tens of thousands of people were denied access to air travel.
“Unfortunately for all of us,” we quipped in September of last year, “the feds know exactly how far they can push things before the governed withdraw their consent.”
Which brings us to the matter of these cryptic signs that are now showing up at certain airports…
Well, it’s an interesting exercise in the “nudge” theory of governance — the judicious use of carrots and sticks to achieve a desired result. Do the feds expect citizens of the affected states to pressure their state lawmakers to get on the ball?
By the way, the states not yet in compliance are Kentucky, Maine, Minnesota, Missouri, Montana, Oklahoma, Pennsylvania, South Carolina and Washington.
And there’s an earlier deadline affecting people from those states: Starting Jan. 30 of next year, your driver’s license will be no good if you need to enter a federal building or military base.
To be continued…
[Worth pondering: If there’d been a single instance of a REAL ID-compliant driver’s license that successfully averted a terrorist attack, don’t you think the feds would’ve crowed about it?]
“One more comment,” a reader asks our indulgence, “about the engineer that learned more in his first 30 days on the job than he did in college: I am a retired engineer and can support that if a new graduate has chosen the best position for their first job, they really should expect to learn more in 30 days after graduation than during their entire college curriculum.
“Schooling provides the fundamentals of your trade and also teaches an individual how to think logically, which is especially critical for anyone involved in STEM. Once out in the working world, applying both aspects of this training to correctly understand and develop solutions to solve real-world problems is a whirlwind of new learning.
“Without the basic foundation, being able to successfully tackle the wide array of challenges, especially within the first 30 days, is unlikely.”
“Your answer to a reader complaining about the dismal record of Jim Rickards is pretty cheap,” a reader writes. “You just bother about the gold-price forecast and conveniently forget all the other issues raised: the death of the dollar, Goldfinger, SDRs.”
“I think your reply was terse because the reader was, in essence, correct,” says another. “The problem is that it is obvious Jim Rickards is very smart, connected and thoughtful; however, since I’ve never read any recognition or explanations regarding these most erroneous predictions, I worry his paradigm doesn’t allow culpability. And at least two of us know he got it wrong.”
“More frustrating to me,” writes a third, “is his ‘urgent messages regarding the dollar demise,’ just to find he’s saying the same crap he said six months ago, and it’s weekly!
“His expertise is valued. However, I do think your readers would be better served with up-to-date, fact-based research and updates, versus theatrical skits trying to sell more programs.”
The 5: It’s all tied together — the end of the dollar as the world’s reserve currency, the rise of the SDR to supplant it, gold’s ascent to $10,000 as the financial “pros” realize what’s happening and panic sets in.
No, it’s not necessarily imminent. But the global elites are implementing their plans step by step. You can think of each step as a brick in a wall they’re building. It’s a systematic process… and Jim’s willing to take the heat for “crying wolf” if he describes each brick as a trigger event. (The next one comes New Year’s Day, by the way.) Better, he figures, to jolt people into taking action to protect themselves than to declare a date certain for a catastrophe — a fool’s game anyway — and wait till the last minute….
“Never been called a caterwauler before — not sure how to take it,” a reader writes after we took note of “conservative caterwauling” over Obama “gutting” the military even as defense spending kept rising.
“I have it on good authority from some active-duty folks that today’s military, apparently, is not receiving the benefits of all those defense dollars. These folks are asked to continuously endure long deployments to dangerous areas of conflicts where nothing is accomplished and significant numbers of lives are lost. Morale is approaching the ‘good old days’ of the Carter administration. The USAF has a personnel shortage that is characterized as a crisis by those generals not afraid to speak out.
“Could it be that Obama’s administration mismanaged the expenditure of those dollars? Could that be possible? Could they simply be lining the pockets of buddies who contribute to their campaigns? Just sayin’.”
The 5: Heh… At no time did we assert a correlation between the dollars spent and the grunts/cannon fodder being treated with dignity or respect.
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Through midnight tomorrow night only, we’re offering a huge charter-subscriber discount for Jim Rickards’ latest project — his DRONE system identifying small-cap defense stocks set to soar during a Trump presidency. For access to this limited-time-offer — it will be gone in less than 36 hours — click here.
