Penn Wealth Publishing

2018.07.15 Penn Wealth Report Vol 6 Issue 02

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20 Penn Wealth RePoRt volume 6 issue 02 15 Jul 2018 Penn Wealth RePoRt Copyright 2018. All Rights Reserved. Weekly business RePoRt JaPan's massive RaRe-eaRth disCoveRy Will thReaten China's Choke-hold Talk about your security risks. Tariffs were threatened on steel and aluminum coming from economic (if not military) adversaries such as China on national security grounds. The risks posed from Communist China with respect to these metals pale in comparison to the national security risk of that country's control of precious metals used in high-tech devices, military equipment, and electric vehicles. Just ask our staunch ally, Japan. In a ter- ritorial dispute between the two countries back in 2010, China (arguably) halted the export of rare-earth materials to Japan, threatening that country's high-tech man- ufacturing industries. While China denies the blockade, they did reduce by 40% the amount of these materials leaving the coun- try. This aggressive tactic made the price of some of the 17 rare-earth materials used in manufacturing to spike by ten times. In 2014, the World Trade Organization ruled that China violated global trade rules with their export restrictions. The 2010 action spurred Japan to seek out other sources for these elements. Now, according to a new report in nature.com, the country has hit the mother-lode of all rare-earth finds: some 16 million tons of the materials lie in a 1,000-square-mile seabed surrounding Japan's Minamitori Island. As China's own appetite for these met- als increases along with their belligerent behavior, the importance of this find cannot be overstated. Some of the precious met- als found among these mineral deposits are yttrium, used in computer monitors, camera lenses, and energy-efficient lighting; euro- pium, used in television sets and low-energy light bulbs; terbium, used in high-tech metal alloys and in the production of electronic devices; and dysprosium, used in nuclear reactor control rods. How important is this find for the United States? After the end of the Cold War, the US essentially gave up the ability to mine rare-earth materials. America's one remain- ing rare-earth mining company, Molycorp, declared bankruptcy in 2015. In other words, we rely on the import of these materials for 100% of our needs. 70% of those imports come from Communist China. How much of a hammer does that give China in our ongoing trade disputes? staRbuCks' "anti-bias tRaining day" says moRe about C-suite than emPloyees We often rail against companies which feel the need to insert themselves into the political arena. More than just displaying the arrogance of executives (the "everyone knows we are right" complex), it is also just dumb business: why irritate half of your cur- rent or potential customer base? Starbucks' ($53-$58-$65) "anti-bias training day" isn't, in our humble opinion, about creating a more tolerant workforce, it is about the optics and the attention the company hopes to garner from fellow members of the "holier-than- thou" club and the useful idiots in the press. If that is not the case, why don't they require employees to go through this training in a staggered manner instead of closing roughly 8,000 stores for an afternoon? Consider the words of Starbucks COO Rosalind Brewer in a CNBC interview: "We have the ability to start a national conversa- tion (about race)." Last we checked, you are a coffee house. Furthermore, what does that say about Starbucks' opinion of its 200,000 or so front line workers? Here's a thought: focus your attention on selling as much product as you can in a friendly, inviting atmosphere. When something goes awry (as it has/does with every company throughout the history of companies), resolve the issue at the proper level and move on, instead of seeing systemic racism everywhere you look. While otheR fixed-inCome manageRs WeRe having a banneR Week, bill gRoss's fund Was Plummeting "Bill Gross is the undisputed 'Bond King.'" People sometimes ask me what I mean when I say the media deals in false narratives. That quote is a perfect, glittering example of precisely what I mean. Journalists repeat something so often, and in such a "well eve- ryone knows..." manner that people just begin to accept it as fact. Truth is, PIMCO's co-founder, who was either fired from or abruptly quit the firm and bolted for Janus three years ago, was built up more by slick marketing than actual bond brilliance. Case in point: look at what just happened to his Janus Henderson Global Unconstrained Bond Fund (JUCIX) this week. Granted, bond fund managers are going through turbulent times. As rates rise, the value of their holdings (and, hence, their funds) generally drop, and vice versa. This past Tuesday, however, bond managers hit global stRategy: east/southeast asia global fixed inCome Japan may have just broken China's stronghold on the supply of high-demand metals. Photo courtesy: Google Maps RestauRants

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