UPDATES - FOLLOW THE FACTS, NOT THE NARRATIVE

     This week we want to review some important updates.  There is much positive karma going on out there - which of course you would never hear in the news - and the potential is even so much greater if capitalism and education are permitted to keep quietly flourishing (well maybe not so quietly).  Here are some facts:

1.  Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, recently released a report explaining the true job growth and "reversing of income inequality" now occurring in the United States.  Low tax rates and deregulation are creating 200,000 new jobs a month for our citizens in 2019, which is roughly double the number needed to keep up with population growth.  So, 100,000 citizens per month are still coming off the unemployment rolls!  More than 70% of the people taking these new jobs reported that in the prior month they weren't even looking for work!  Yes, the opportunities are too good to resist, even for all of the people who had considered themselves disabled and preferred a government check.  Wow.
     Interestingly, as unemployment has plummeted to 3.6%, unemployment for recent community college and vocational school grads is 30-40% less than four-year college grads.  Wake up call for the under-achieving university system in our country?  Wages are increasing over 3% and the "less educated" wages are growing nearly double the "educated."  Wages in mining are up 7.5%, leisure and hospitality 4.4% and retail 4.3%, while wages in finance are up 2.3%.  No wonder the elites, technocrats and trust fund babies are losing their minds!  Go with the facts, not the false narratives spread by those with the microphones.

2.  The smart ones understand that nuclear energy is the energy answer for the future, and holds a far greater potential than the next-best alternative.  Yet, the elites continue to pursue nonsensical agendas to simply stir up voters.  Wyoming Senator John Barrasso, Chairman of the Senate Committee on Environment and Public works, recently attempted to overcome the barriers to finally completing the Yucca Mountain nuclear waster storage facility in Nevada.  He claims that if the U.S. is serious about climate change, we must become serious about nuclear energy.  Nuclear power generates roughly 20% of our power today and 60% of our carbon-free energy, which is more than 3X the energy produced by wind and 18X the amount of solar.
     The Yucca Mountain storage site is larger than Massachusetts and is determined to safely contain this material for at least a million years, while new technologies are dramatically reducing even this storage requirement.  Because of "New Green" plans, the Nuclear Regulatory Commission stopped work on Yucca in 2015, and eight states have passed laws against building more nuclear capability until this is resolved.
     Mark Mills, Senior Fellow at the Manhattan Institute, attempted to clarify the true "waste and destruction" which must occur to meet global agendas such as the Paris Accord.  A single electric-car battery weighs 1,000 pounds, while fabricating one requires digging up and processing 500,000 pounds of raw materials "somewhere on the planet."  Building a wind turbine requires 900 tons of steel, 2,500 tons of concrete, and 45 tons of nonrecyclable plastic, while solar power requires even more cement, steel, and glass plus rare-earth elements.
     To meet these "renewable" agendas, silver mining must jump 250%, indium 1,200%, and other elements 300-1,000%.  Finally, don't forget that more than 90% of the world's solar panels are built in Asia on coal-heavy electric grids blacking out the sky at today's levels, and the 2050 Paris Accord targets for solar will result in the disposal of more than double the tonnage of today's global plastic waste. [But at least Starbuck's is using paper straws!].

3.  In our continuous campaign to support school choice and charter schools, we wanted to highlight Baker Mitchell's fantastic efforts in North Carolina.  A retired electrical engineer who sold his company and began volunteering as an elementary school science teacher, Mr. Mitchell became inspired by Thaddeus Lott, the principal of the high-achieving, low-income Wesley Elementary in Houston.  He became so inspired that he founded the Roger Bacon Academy which oversees four charter schools in southeastern North Carolina.  He recently published a report to counter the opposition's current strategy to play the race card to stop these successful schools.  He reports that in North Carolina charter schools have a 26.1% black enrollment versus 25.2% for state district schools.  The report presented to the North Carolina General Assembly this year confirmed that at virtually every grade level and virtually every student subgroup - white, African American, Hispanic, economically disadvantaged, students with disabilities, and students with limited English proficiency - charters outperformed the district schools in English, math and science.  As 40% or more of Roger Bacon's students come from low-income households, Mr. Mitchell says his critics simply "do not want families making education decisions for their children.  The system does not want to lose control or money."  We are incredibly grateful for warriors like Mr. Mitchell.

     Know the facts.  Don't succumb to the narratives.  Have a great week!

"The two of us are quite rich...both of us are sons of immigrants who came to these shores with almost nothing...we know that we can spend our dollars more wisely, and in ways that benefit our communities and our country, than politicians can...the businesses we created have employed hundreds of thousands of Americans...We have given more than $2 billion to charity...Our patriotism is measured not in how much we pay in taxes - which is a lot - but in the businesses and the wealth and the jobs we create."  -  Bernie Marcus, co-founder of The Home Depot, and John Catsimatidis, owner of Red Apple Group.

** Thank you very much to the WSJ, Forbes, and Fortune for the above quotations and statistics.

** For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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GROWTH & LOWER TAXES SAVE THE WORLD

     Throughout our relatively short American economic history, just when we were about ready to go over the cliff, new policies promoting lower taxes, less regulation, and rugged individualism have sparked strong economic growth, and we, and the world which depends on us, have lived to see another hopeful future.
     This week we must again step back to objectively review the state of our economy as compared to the previous decade.  We must periodically stop, analyze, and employ rational thought to gain understanding, lest we find ourselves amongst the non-thinking masses which morph into the current rhetoric and ideology of the media and whomever is shouting the loudest.
     This week our economic statistics against showed the strongest economy in half a century.  We have unemployment rates which you had been told were not possible ever again, with record-low unemployment rates for African-American and Latino citizens.  We have strong wage growth for middle-class workers, servers, and hotel staff.  We have high labor participation rates, which means that the people who had given up looking for work, or had decided that a government check was a better alternative, have now instead decided to take one of these new jobs.
     This does not happen by accident.  This is not the result of "cycles."  This is not lucky timing.  This is clear cause and effect which us JAM VIEWS members must understand, lest we are later swayed by the economically-uneducated masses. "He who stands for nothing will fall for anything."
     According to Stephen Moore, a senior fellow with the Heritage Foundation, the previous Administration's government stimulus "went for food stamps, unemployment benefits, ObamaCare subsidies, 'cash for clunkers' and failed green energy handouts (see Solyndra or EPV Solar)."  This was when our then-President proclaimed that if you owned a business "you didn't build that."  This focus merely re-distributed the slices of a finite and decreasing pie.  This strategy always guarantees defeat for everyone.
     We must be educated on abundance instead of scarcity.  Growth brings abundance and an ever-increasing pie, which brings more slices for everyone.  Today, with the tremendous jolt to our economy from tax cuts, reduced regulations, and other efforts to get the government out of your pocket and off your back (and some would say their heel off your throat), the Congressional Budget Office (CBO) has grudgingly determined that "higher-than-expected growth will add an extra $1.2 trillion to federal revenue in the coming decade, covering about 80% of the Treasury's original projected cost of the tax cuts.  If 3% growth is sustained for another year, the growth surge will have (already) paid for the tax cuts," according to Senator Phil Gramm.  And after that, all of the extra government revenue is whipped cream on top of the ice cream of an incredible boost for the nation's citizens, themselves.  The current President would assert, "Get the government out of the way, so you can build that."
     And, certainly more grudgingly, even the New York Times this week acknowledged that "Joe Six-Pack" received a nice tax break this year in order to better care for his middle-class family.  It wasn't all to support the rich.
     We have to stay diligent with our rational and mathematical logic, or we will always go with the flow of current thinking, which is almost always wrong, as JAM VIEWS continually highlights.  When the heated debate of the current tax reform was in full force, Larry Summers, a top Obama advisor, wrote in the Washington Post that tax reform would make no difference unless "you believe in tooth fairies and ludicrous supply-side economics."  Mr. Summers followed up about the specific cuts, "I am proudly guilty of asserting that it is some combination of dishonest, incompetent and absurd."
     One of the Friends of JAM (FOJ) sent me the current Wikipedia definition for the Laffer Curve.  This Curve, which illustrates the relationship between taxation and the resulting levels of government revenue, was originally sketched on a napkin in a meeting of Dick Cheney, Donald Rumsfeld, and Arthur Laffer.  The economy has consistently proven that the lower the tax rate, the more wealth for the citizens and the more wealth for the government.  Yet, the Wikipedia listing states, "The New Palgrave Dictionary of Economics reports that estimates of revenue-maximizing tax rates have varied widely, with a mid-range of around 70%.  There is a consensus among leading economists that a reduction in the US federal income tax rate would not raise annual total tax revenue."  What?  Consensus of whom?  Ridiculous!  This is what our children are being fed in college.  This is why JAM VIEWS attempts to stop us from blindly following the TV show, your professor, the government, your boss, that guy on the corner.  They are almost always wrong.
     Don't be mentally lazy.  Think.  Have a great week!

"Victory smiles upon those who anticipate the changes in the character of war, not upon those who wait to adapt themselves after the changes occur."  -  Italian Air Marshall Giulio Douhet

Many thanks to the WSJ, Forbes, & Fortune for the above statistics and quotations.

** For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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WINTER IS COMING

     Too much debt eventually gets us all: personally, corporately, and nationally.  I have made this mistake many, many times.  For example, in 2010, amidst the regulator backlash following the Financial Crisis, I spent our cash and debt on acquiring financial practices from Merrill Lynch, UBS, and Morgan Stanley.  Taking advantage of the market dislocation, I was able to provide our MICG shareholders a $4 increase in equity value for every $1 spent on acquisitions.
     But, I didn't keep enough "powder dry" for our own Black Swan, which by definition I never saw coming.  If I had saved $10 million in the war chest, I could have written a large "settlement" check to the government regulators and had them move onto the next target.  Instead, I demanded arbitration to defend our people, and a terrible spiral, cyclone, ensued.  I should have saved the money.
     The United States is finally bumping up against the wall of too much debt, and extreme consequences are on the way unless radical changes to entitlement spending are enacted quickly (which isn't going to happen in this environment where everyone has lost their minds).  So, let's first clarify for our JAM Views members the difference between debt and deficit.  The talking heads interchange these terms all day long, and this confuses most observers and obfuscates the dire station we are in.
     The DEFICIT is the yearly amount we are dipping into our credit line (we have no savings) to pay our current bills.  This is your Wells Fargo overdraft for small items, or credit line secured by the house for the big items (the country's credit line is secured by your future life wages and the anticipated taxes on those wages = "the full faith and credit of the United States").  The last balanced budget was under Bill Clinton, so we have been dipping into the line ever since, up to the tune of $900 billion just this year!
     The NATIONAL DEBT is the total mortgage, to which the annual deficits keep increasing the balance, or which is also increased in large chunks by the Federal Reserve printing more money to fund the Iraq Wars, or when the Obama Administration bailed out the banks with trillions of newly printed dollars. (All of this printing eventually, always, creates significant inflation, but we will cover that another day).  The U.S. now owes $22 Trillion in Treasury debt (the country's mortgage), with the majority of principal due to bondholders over the next 8 years, and with $6.5 trillion owned by China, Japan, and Saudi Arabia.  Also, don't forget that the true national debt is over $70 trillion once we include our unfunded liabilities (the commitments we have made without saving the money to cover).
     Now, debt is only a problem in relation to revenue; with our household, our company or our country.  Unfortunately, our national debt has ballooned to 80% of GDP (revenue) and in the next few years will equal 100%.  Very, very soon, with this tenuous balance sheet, America's creditors (buyers of U.S. Government bonds - home and abroad) are going to demand much higher interest rates due to risk of default, "cram down" or other political options. (Don't believe it will never happen, as we have done it multiple times before, and President Trump has mentioned these options more than once).
     The Perfect Storm current possibility, or probability, comes from the fact that after the 2008 Financial Crisis, the Obama Administration decided to use monetary stimulus (lower interest rates and printing money) instead of fiscal stimulus (lower taxes and reduced regulations).  Therefore, instead of reducing the mortgage-bank debt, we greatly increased and redistributed the debt to the U.S. Treasury, corporations, and personal consumers.  We piled on more and more debt to solve a debt crisis; and the world followed us.
     Over the past 10 years, total global debt (sovereign, corporate, household) has risen 75%.  Countries owe $60 trillion, and corporations owe $66 trillion, with McKinsey reporting that 40% of U.S. companies are rated only one notch above "junk bond" rating or lower!  Pause for effect.  The Bank for International Settlements estimates that 10% of long-term companies in the developed world are now "Zombie Companies," meaning earnings before interest and taxes don't even cover the interest expenses.  They are just sucking in more capital to survive. (Lyft IPO?).
     Why do you think everyone in Washington calls for a public execution of the Federal Reserve Chairman whenever he now mentions raising interest rates?  A 1% increase in rates will be disastrous on this huge debt load.  These higher interest payments will crowd out business investments and the nation's growth rate will stall; which in turn will mean less tax revenue, lower household incomes and a higher debt to GDP ratio, and the cycle, or cyclone, will feed upon itself.
     The only two answers, again, are to increase growth (pro business) and to actually reduce entitlement spending (Medicare, Medicaid, & Social Security).  Don't follow the talking head's misdirection about defense and discretionary spending.  Those numbers are down in the noise and at historical lows.  At current defense budgets of only 3.1%, we have already given up the world to the Chinese.
     So, which politician on TV lately has the guts, or the brains, to raise the social security full benefits age to 70, and then index it to increasing life expectancies?  Stopping the growth of entitlements is the only answer, only answer; even strong growth cannot eclipse this tidal wave.  As educated JAM Views members, we would be extremely naive to believe a politician could pull this off in today's environment, so the prudent decision would be to plan for the more likely scenario.
     Remember, in investing, always do opposite what feels good at the time, and always do opposite what everyone else at the cocktail party is doing.

"The race to zero fees and zero advice is the next scheme to gather and control capital, and people, and is the unfortunate result of an industry which forgot that 'price is only a concern when value is in question.'" -  Bob Vukovich, Just One More

* Many thanks to the WSJ, Forbes, & Fortune for the above statistics and quotations.

** For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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 SCHADENFREUDE

     Schadenfreude: n\ 'sha-d'h-Froi-da.  Enjoyment obtained from the trouble of others.  Interesting.  H.L. Mencken defined Puritanism as the haunting fear that someone, somewhere, may be happy.  Andy Kessler, investor, spins this Puritanism definition to now be "the haunting fear that someone, somewhere, may be successful.  Finally, do you remember the old joke about the Russian who isn't happy that he and his neighbor each have a cow?  He isn't truly happy until his neighbor's cow dies.
     Why can't the socialists let others be successful?  Don't they understand that someone has to be the adult, that someone needs to make the money for them to redistribute?  Apparently they do not read JAM Views, or they would understand that governments have no money; they only take from the producers and give to the looters.
     So, now the socialists want to break up the successful companies, but at the same time they want the government to provide a Universal Income to every citizen.  They are too uneducated to understand that these two objectives are mutually exclusive.
     Columbia law professor Tim Wu recently stated, "We've let Facebook have their ride, they've made their money and they've been very successful" but it's time to "break things up a little bit."  First of all, "he" and his academics haven't "let" Facebook do anything.  Doesn't this ring of the previous Administration's proclamations that a rugged individualist never built anything, only the government can do this?
     The collectivists now want Facebook to divest of Instagram and WhatsApp, Amazon to sell whole Foods, Google to get rid of DoubleClick, and Apple to spin off the App Store.  This is no different than calls years ago to stop IBM and GE.  Collectivists don't understand that innovation and free markets take care of rebalancing the equation, moving towards equilibrium naturally.  Soon, great innovations in a multitude of smaller companies will make most of the above names irrelevant, just as IBM and GE are today.
     But, in the interim stage, Facebook, Google, Amazon, Apple, Microsoft and Samsung are spending $85 billion per year on research and development, which will multiply exponentially into products, services, and thousands of other startups which we cannot even envision today.  Why break that up through foolish government mandates?
     Next, Universal Income, a minimum paycheck to every citizen regardless of their personal production, is also gaining momentum as "a reasonable idea."  Beyond the expected lunatics in the news today, this extra government paycheck has recently been supported by Barack Obama, Bill Gates, Richard Branson, Mark Zuckerberg, and Elon Musk.  I'm sure you've noticed that once your net worth exceeds $1 billion, you must replace your capitalistic drive to succeed with a huge bucket of guilt for how you got there, at least when you are publicly addressing the media.
     They all must have burned their copy of Adam Smith's "Wealth of Nations," and already had dropped out of Stanford before taking the Behavioral Economics 101 course.  In a shocking paradox, the startup incubator, Y-Combinator, is pushing the Basic Income Project which would provide an extra $1,000 per month for everyone, or instead a fixed percentage of the nation's GDP every year.  They don't understand that there would not be any more GDP!
     If you think this will never happen, just look to Italy whose left wing 5-Star Movement's legislators have just instituted reddito di cittadinanza, or citizen's income.  Italian citizens will be required to do eight hours of community service per week and must accept one of their first three job offers (from whom?) to keep getting their checks.  Analysts estimate that nearly 20% of Italy's economy is "off the books," so there should be a huge crowd qualifying for the additional check, about $11,000 extra per year.  And, consistent with these brain-dead economics, any unspent monthly balances are clawed back so savings are impossible, and, of course, if you work more you lose the same amount from your government check.  I swear I don't make this stuff up!  It reminds me of how the Air Force Academy's roads were beautifully re-paved every year, whether they needed it or not, to ensure we did not lose our government allocation next year.
     I urge all JAM Views readers not to scoff at these ideas which destroy innovation, motivation, and dreams realization.  Social media, jealousy and lack of education can combine quickly into a terrible cocktail intoxicating 51% of the vote. These terrible human traits bubble over where you least expect them.  Everyone "wants your stuff!"  Send in a Freedom of Information Act (FOIA) request for your FBI file (trust me, there is one) and review their collection of financial documentation on your mortgages and car leases back further than you can remember, yourself.  Ask yourself why they have all that information on you.  Pay attention.  Seek knowledge.

"Property is the fruit of labor - property is desirable - is a positive good in the world.  That some should be rich, shows that others may become rich, and hence is just encouragement in industry and enterprise.  Let not him who is houseless pull down the house of another, but let him work diligently and build one for himself, thus by example assuring that his own shall be safe from violence when built."  -  Abraham Lincoln

* Many thanks to the WSJ, Forbes, & Fortune, & especially Andy Kessler for the above statistics and quotations.

** For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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LET US LEAD LIVES OF SIGNIFICANCE

     At JAM Views we periodically review the WSJ Obituaries to learn about people who believed in opportunity, took risks, and decided to take the path less traveled.  These tributes are excellent lessons, case studies, which hopefully shake us from our weekly routines and help us remember why we started these journeys in the first place.
     Barbara Gardner Proctor, an African-American woman born to an unwed mother in North Carolina, once stated, "I have never had the luxury, or the hindrance, of having anyone take care of me."  When applying to the Small Business Administration for a loan to start an advertising firm in 1970, she was asked what her collateral was.  She replied, "Me!," and that turned out be solid backing as she grew her Chicago firm to great success representing Kraft Foods and Sears.  Barbara moved onto the next adventure recently at age 86 after an amazing life.
    After a promising start to a Wall Street career, Jason Spindler was at his Tower 7 office during 9/11.  Instead of fleeing the devastation, he joined the first responders to help the injured.  This experience promoted him to join the U.S. Peace Corps, bringing finance and investment opportunities to the developing world.  He became Founder and CEO of i-Dev International with offices in San Francisco, Lima and Nairobi.  His firm funded Twiga Foods connecting fruit and vegetable growers across Kenya to markets, as well as coffee ventures in Madagascar, and an East African fast-food chain.  Tragically, just shy of his 41st birthday he was killed by Islamist extremists who stormed a hotel complex in Nairobi where he was on a late lunch.  What an amazing journey he experienced here, and I am sure the universe simply needed him for another great expedition.
     Caroline Rose Hunt was the daughter of H.L. Hunt who used his poker winnings to acquire oil fields in Texas.  Fortunately, she did not invest her slice of the inheritance with her two brothers, Nelson and William Hunt, who famously went bankrupt attempting to corner the silver market.  "Moozie," as she like her grandchildren to call her, instead built a chain of luxury hotels to include the Bel-Air in Los Angeles and the Carlyle in New York, and spurred development in blighted areas around Dallas.  She wrote a novel and two cookbooks, created Lady Primrose bath oils, soaps and lotions, and led weekly Bible study sessions at her Presbyterian church.  She recently passed at age 95, leaving 19 grandchildren and 23 great-grandchildren with an incredible example and role model for their own journeys.
     Robert Smith was a bored Boston attorney when a client asked him to collect a debt in Turkey.  He flew there and had to create a convoluted transaction, but he was then hooked on buying foreign abandoned debt and then selling it at much higher prices.  Decked out in his toupee and $99 seersucker suit, Mr. Smith traveled the world in search of adventure and profits.  He stayed in hotels with "dead cats floating in the pool," and wanted "to prove to his wife that he wasn't a loser."  In this murky world, he bought Guatemalan bonds from one arm of a British bank and sold them, at a hefty markup, to another unit of the same bank.  He profited on Nigerian Government promissory notes, and he recounted his adventures in his 2009 memoir, "Riches Among the Ruins."  He recently passed at age 78, and his wife said a few days after his funeral, "He wanted something different, and he certainly got it."
     Susan Ellis, with degrees in English and folklore, landed a job at the Philadelphia Family Court managing volunteers helping youths in trouble.  She had "absolutely no qualifications," but discovered neither did most everyone else.  So, she started Energize Inc. in 1977 to teach nonprofits and other organizations how to use volunteers more effectively.  She changed their mindsets from "little old ladies in flowery hats" to computer coders and legal aides.  She preached, "The best volunteering is when the giver and the recipient see each other as equivalent and equal - when they both benefit, and it's a form of exchange."  She wrote and co-wrote 14 books and gave speeches in 26 countries.  Diagnosed with cancer, Susan kept friends updated by email on her "Medical Magical Mystery Tour," with her last update stating, "One day at a time.  Smile as often as possible.  Love to you all!!! XOXO Susan."  She moved on at age 70, likely now organizing all of her new angel volunteers, and left her estate to the new Susan J. Ellis Foundation to continue her amazing work.
     WOW!  This week let's not complain about our boss, whine that our back hurts, or lose patience with our children's stumbles.  Life is an adventure, and the clock is ticking.  We live in the greatest country, and during the most prosperous time ever, in the history of this strange blue rock.  No excuses!  Let's make it happen this week.  Good luck!

""Life should not be a journey to the grave with the intention of arriving safely in the pretty and well preserved body, but rather to skid in broadside in a cloud of smoke, thoroughly used up, totally worn out, and loudly proclaiming, 'Wow!  What a ride!'"  --  Hunter S. Thompson

* Thank you to the WSJ for sharing these amazing stories.

* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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DOLLAR STRATEGY:  NOT WEAK, NOT STRONG, BUT STABLE

     Periodically we pick up the newspaper, or a Fortune Magazine, and we read confusing articles proclaiming the need for a weak U.S. dollar, or a strong U.S. dollar, many times interchanging the exact same arguments for either case.  Now, as JAM Views members we know to first pause and remember (1) the pontificator is more than likely incorrect, and (2) their views are driven by their own self-interests (not to mention confirmation bias and recency bias).
     I have to admit that even while running an investment firm for two decades, when it came to exchange rates I would have to regularly pull the finance books off the back shelf and refresh my memory on what helps what and why.  So, I thought this week we could endeavor to present a simple lesson on the strength of the dollar, so that we can more easily debunk Uncle Harry's rant about Trump's trade policies over Schlesinger's Easter Brunch.
     First, know that we are not dealing with absolutes.  The dollar is strong or weak only in relevance to the rest of the world currencies (similar to how stocks are overvalued or undervalued mostly in comparison to current interest rates).  Currently, the U.S. dollar is about 5% "stronger" against the world than its average since 1971 (when we abandoned the gold standard), so pretty "normal."
     The main arguments for a strong dollar promote selling our U.S. Government bonds to the world at higher prices, adding more capital without the Federal Reserve having to buy our bonds, and giving the U.S. strong purchasing power and influence around the world.  "He who owns the gold makes the rules."
     The primary arguments for a weak dollar are for promoting U.S. exports.  If the dollar is weaker compared to the Japanese Yen, the Japanese will find the Harley Davidson's to be much less expensive, and U.S. manufacturing jobs will thrive, at least in the short-term.
     It seems simple enough, but the real world never works the way the elites claim it does (seems to be a recurring JAM Views theme).  For example, the Swiss and the Dutch are at the top of the list for best-performing currencies (strongest) since 1900, but the major parts of their economies are exports.  Also, history is replete with countries devaluing their currency (making it weaker) to boost their export economies, and hurt imports, only to see them quickly ravaged by inflation, devaluing more, and destroying everything.
     The answer for the U.S. dollar now, and always has been, is stability.  The Federal Reserve and U.S. politicians can only do damage to the free markets, and they try their damnedest every day to make it worse.  As we have taught in JAM Views, "money goes where it is treated best."  Artificial inputs only screw up systems which are constantly searching for equilibrium, balance, homeostasis.  The British economist, John Maynard Keynes, has been screwing up economies with artificial steering since 1913 when Britain replaced gold with foreign-exchange reserves.
     Our friend, Steve Forbes, explains it best.  Last year he wrote, "Economists and policymakers regard as holy writ the fantasy that the economy can be steered, as if it were a car...The Federal Reserve, or any central bank, can no more control an economy than long-ago Soviet central planners could...with 7 billion people around the world and countless millions of entities of all kinds engaging in more than 100 billion transactions each day...the only sensible question to ponder is how much damage will our central bank do?"
     The answer is stability.  Remember how CEO's complained during the previous Administration that they couldn't make long-term investments because they didn't know if tax rates and regulatory costs were going to keep going higher?  Note how the stock market always falls when there is "uncertainty."  Listen to Coach "K" say, "I don't care if the refs are calling it loose or tight.  I just need them to be consistent!"
     If the U.S. dollar was allowed to find its own proper value, without misinformed politicians and technocrats attempting to justify their own existence (and government paychecks with your tax dollars), then the system would find the correct interest rates, correct inflation rates (maybe it's 2% as the Fed claims or more likely it's closer to zero), and correct exchange rates.  U.S. companies and workers would maximize efficiency and productivity with the requirement to be as competitive as possible, and the U.S. would efficiently import the correct goods from the correct countries which maximize our own self-interests, just as with Adam Smith's butcher and baker.
     Since the Egyptians and the Romans, monetary stability has been maintained over long periods by a gold standard.  Forbes, again, said it best in one of his never-ending campaigns to return to the gold standard.  "Markets work best with fixed weights and measures.  Everyone knows how chaotic life would be if the number of minutes in an hour or ounces in a pound fluctuated.  The same is true for money, which is supposed to measure value.  Until we blew it all up in the early 1970's, the U.S. had a fixed value for the dollar since Alexander Hamilton established it with a gold standard in 1791.  It's no coincidence that the U.S.' average pace of economic growth since then has fallen sharply."
     During brunch slip Uncle Harry one more mimosa, light on the OJ, and let him know that all the fake news is gobbledygook (economics term), and as he goes for another trip to the buffet, stress "less is more."  Let's continue to do whatever we can to keep governments out of free markets and to allow the citizens of all currencies to thrive.  Now that we understand the basics, pay attention to the mistakes countries make every day in attempting to manipulate their currency.  "First do no harm."

"The rating agencies guys wore blue suits from JC Penny, with ties that matched too well, and shirts that were starched just a bit too stiffly.  They appeared to know enough to justify their jobs, and nothing more."  Michael Lewis, The Big Short

* Thank you to the WSJ, Forbes, and Fortune for the above statistics and quotations.

* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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CAPITALISTS SHOULD VOTE FOR NUCLEAR

     The nuclear power industry probably has the worst marketing department in the history of the world, and also can't even figure out how to have their own lobbyists effectively pay off the Washington politicians, as does the rest of the energy industry.
     JAM Views' mission is to not only help us all understand true economic and business principles, but to continuously uncover how the great majority of what "they" tell us simply is not true.  Nuclear power falls into this category.  If we all understood commercial nuclear power generation, and its incredible potential to completely change the technology landscape of our country, every capitalist and every New Green Deal believer would have to support its primary, and possibly only, position powering the United States.
     Quick basics.  Nuclear power today is generated by splitting or joining the nuclei of atoms.  The nucleus is the heart of the atom which is the building block of molecules which form to create everything on the planet.  So, let's first agree that there is pretty much an infinite supply of atoms for our projects.  Fission is the splitting of the nucleus which releases a tremendous amount of energy, and which shows us that the universe has already been designed to hold incredible energy beyond our current understanding.  Fission performed on one pound of uranium releases as much energy as burning six million pounds of coal.  The atomic bomb (WWII) was created by an "uncontrolled" fission chain reaction.  Commercial nuclear power plants are basically "controlled" fission chain reactions.
     Fusion is the uniting of nuclei and is the basis for a thermonuclear explosion, like which fuels the sun, and which is thousands of times greater than the atomic fission.  Unfortunately, currently, fusion needs about 122 million degrees Fahrenheit to ignite, like from a fission bomb, so commercial applications are still in the works.
     In nuclear power plants today, fission creates a tremendous amount of energy which is converted to steam (which directly powers nuclear submarines), and is then converted to electricity to power our cities.
     John Rie, prior owner of CBRS which specialized in bioremediation, and Alan Emery, former president of the Canadian Museum of Nature, are members of Est Actio, an international group of multi-disciplinary scientists "looking for ways to stabilize the climate."  They released a report in the Wall street Journal promoting both the economic and green benefits of nuclear power.  I've included a few highlights:

1. From 1970-1990 Sweden doubled its energy output by deploying nuclear plants. They also reduced carbon emissions by 50%, reduced fossil-fuel use by 40%, and expanded the economy by 50%.

2.  The world will need 38.6 terawatts of power in addition to existing hydropower over the next 50 years (38,600 one-gigawatt power plants).  Only nuclear or fossil fuels can meet this demand.

3.  Wind and solar are three to five time more costly than nuclear.

4.  Nuclear actually creates large profits.  It costs $2.3 billion to build a one-gigawatt plant (Not a thousand jigawatts by Doc and Marty!), which at current electricity rates generates about $419 million net revenue annually, which is $33.5 billion net revenue over the 80-year life of the plant.

5.  Reality on safety.  The 1979 Three-Mile Island incident caused zero deaths or increases in cancer.  The 2011 Fukushima "disaster" caused zero deaths or disease.  The 1986 Chernobyl Plant's bad design and lack of Soviet Union response caused 150 deaths.  The 2012 World Health Organization report estimates the burning of fossil fuels and biomass causes three million deaths world-wide every year.

6.  Reality on waste.  A nuclear power plant generates 20 metric tons of waste annually.  A typical coal plant produces this much toxic waste (mercury, arsenic, etc.) in one hour (I probably shouldn't be writing this in West Virginia!).  Most nuclear waste is hazardous for only a few decades, and newer technology plants are recycling nuclear fuel, actually using up waste.  France is way ahead of us here.  How did we let that happen?

     The fact that nuclear power is not at least the dominant energy source for the United States today is purely a result of lack of education and entrenched corporate interests controlling Congress and the White House;  Bush and oil on one side versus Obama and uneconomical Greens on the other.
     Nuclear power is our limitless future if we can overcome politics, fear, and misinformation.  Nuclear is the universe already given to us.  We have not even touched the tip of the tip of the iceberg, and it is already the best economic-green option.  Nuclear is about abundance instead of scarcity, and it simply needs a better marketing department.  JAM Views members, and capitalists across the planet, should support nuclear, but most importantly, must support the commercial re-launch and not look to ineffective governments to control the future.  Commercial implementations will achieve 100x the progress in 1/100th the timeframe it would take governments to move in the right direction.  Remember the Laws of Thermodynamics; energy is neither created nor destroyed, yet merely transferred.  We already have way more than we will ever need, and the net cost will eventually be zero.  We just have to be smart enough to use it.

"Whenever you find yourself on the side of the majority it's time to pause and reflect."  -  Mark Twain

* Thank you to the WSJ, Forbes and Fortune for the above statistics and quotations.

* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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SOCIALIST BUSINESS ADVISORS

     For most of us, when we think of socialism we think of a political construct, like Communist Soviet Union, or Venezuela under Chavez.  But, our loyal JAM Views readers now understand that all politics are about money, nothing else.  Socialism is about controlling the money and, therefore, controlling the people.  Socialism, and all of its euphemistic cousins, takes money from the producers and gives it to the looters under the guise of creating equality.  It was a scam as a first thought thousands of years ago, and remains today the greatest detriment to the forward progress of mankind.
     We are thankful for the President calling out this ridiculous socialist ideology during his recent State of the Union, as the socialist agenda has once again become trendy among the economically-unaware.  The last person, or organization, you want to be in charge of your money is a government.  Throughout history, these entities have a dismal track record for reducing expenses, increasing revenue, achieving objectives, or successfully allocating capital.  Remember, British Prime Minister Margaret Thatcher famously quoted the problem with socialism is "eventually you run out of other people's money."
     Let's review a few current socialism examples getting press in our county:

1.  California's high-speed rail project, initially conceived to connect San Francisco and Sacramento with Los Angeles and San Diego, was approved by voters in 2008 to be funded with a $10 billion bond offering, $3.5 billion in federal government funds, and incentivised private partners.  Construction began in 2015, and, now, New Governor Gavin Newsom has basically pulled the plug on the government project due to the recent estimate of $77 billion to complete!  What a disaster and embarrassment.

2.  California utility PG&E filed Chapter 11 bankruptcy this month as it expects $30 billion in liabilities from more than a dozen major wildfires in recent years caused by its equipment.  This failure is due to the government overseers prioritizing the state's climate goals over safe and reliable service, in other words running a proper business.  The politicians last year approved a $269 million rate hike to pay for "fast charging" stations for everyone's Teslas purchased with other government credits (my apologies for always picking on Teslas to my Academy roommate, the coolest guy on the planet, who has two in his California driveway!), and another $437 million to pay for employee retention programs while shutting down the nuclear plant which produced over 25% of their total power (Did we say "Soviet Union?").  Then, the legislature voted to mandate 100% of PG&E's energy be generated by solar and wind by 2045.  While PG&E was spending a billion here and a billion there on these mandates, they forgot to invest their capital on insulating equipment, clearing overgrown vegetation, and taking other precautionary measures to reduce wildfire hazards.  Now, California politicians are tweeting about the company's focus on profits over safety, even though the politicians are 100% responsible for the disaster. (I once heard a story of how the government shut down an extremely valuable investment company, the golden goose they called it, over a minor regulatory dispute, and then rallied the shareholders and community against the company, all to their own significant detriment.  Unfortunately, this scenario plays out every day in our country).

3.  Now, Bernie Sanders and 16 other Senators are campaigning diligently to replace ALL private health insurance in the U.S. with a government-run single health care plan (Did we already say "Soviet Union?").

4.  Forty Congress members now propose The Green New Deal which includes "a job guarantee program to assure a living wage job to every person who wants one." (I foresee long bread lines).

5.  Elizabeth Warren is demanding a new federal charter for business which would now make companies answer to not only shareholders (the owners), but also to politicians and government oversight groups. (Such as the Politburo?).

6.  And, of course taxes.  Elizabeth also wants to add a new, extra 2% tax not on income or consumption, but just for having accumulated savings and net worth.  This 2% "wealth tax" is government confiscation which even France recently abolished!  No more storming The Bastille!

     Let's stop there this week, as it's probably all our stomachs can withstand.  This week please do your best to help the economically-unaware begin to realize that the LAST "person" you want to run your business, manage your project, or to efficiently allocate your capital is the government.  Take an aggressive stand today, like the President, and call out these ridiculous talking heads.  See through politics and understand money.  That's all there is.  As Margaret foretold, soon they are going to run out of yours.

"The robbed that smiles steals something from the thief."  -  Shakespeare, Othello

* Thank you to Alejandro Lazo & the WSJ, Forbes, & Fortune for the above statistics and quotations.

* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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DRIVING MYSELF TO PRISON

Due to extenuating circumstances, Jeff was unable to send a blog for this week's JAM VIEWS. 
FOJ chose an oldie but goodie:


I had rejected three Government plea offers, endured a four week trial debacle, and received a twelve year prison sentence. Following the egregious trial, I was assured I would remain free on bond while the Appeals Court reviewed the facts and would certainly reverse the decision. But, I had not yet received confirmation of this reprieve.  
On November 12, 2013, I was meeting with my new consulting team and reviewing the day's rebuilding progress. At 4:15 PM my cell phone buzzed with a call from the attorney's office. "Jeff, you're not going to believe this, but the Appeals Court answered our forty-page Motion with one sentence, 'Bond is Denied.' You have to report to prison in Morgantown, West Virginia by Noon tomorrow, and whatever you do, don't be late." I had been naive about the system. I had always believed that common sense would prevail, things would be resolved, and we would rebuild our organization and restore our shareholders. 
After many tears with my amazing team, I decided to spare my family and friends an uncomfortable road trip to West Virginia. I would drive myself to prison. At 3 AM I texted my son in college that I loved him, I smooched Mom, I punched Morgantown into the iPhone's GPS, and I began my journey West. 
The dramatic fall from grace swirled through my mind as I kept asking myself out loud, "How the hell did we get to this point?!" I decided to use my voice texting function to say goodbye, hopefully only temporarily, to all my friends listed in the phone's contacts. At least I wouldn't wake them up with a 3 AM call and make their day as miserable as mine. "Kevin, I'm driving myself to prison today! You better find another partner for the Member-Guest, but hold my slot for next year!" "Sean, write this down. Don't ever, ever invest in a solar stock!" "Dave, you're probably just getting home from the L.A. bars, and I'm driving myself to prison. Tell me a good story!" And on I drove, reaching deep into my contacts list, going all the way back to military buddies, business partners, and the neighborhood gang. It was a long drive. I imagined friends waking up across time zones saying, "Honey, I'll be damned. Martinovich is going to prison today!" and then, "Oh, don't forget to pick up my dry-cleaning," as they quickly moved on with their own lives and responsibilities. 
As the sun rose in my rearview mirror, I started to receive a few responses - "WTF???," "Dude, I'll send some cookies! Do you like Rice Krispy treats?," and "Turn left! Turn left!" I also received a call from my attorney, James Broccoletti. "Don't worry. Hang in there. We will get the appeal in as quickly as possible. Remember, don't be late!" (He would send me a letter in prison one week later stating that he had withdrawn from my appeal case, and to this day he has refused to return the $25,000 deposit!). 
Then the phone died. The GPS was gone. In the confusion I had forgot to bring the phone charger. I had no paperwork for where I was supposed to go. I contemplated stopping for a morning cocktail since this was West Virginia, and someone had to be serving a beverage which could calm the nerves. But a quick calculation said that I might be cutting it close, I didn't know where I was going, and I remembered Broccoletti saying that the first thing they do is give you a breathalyzer! 
As I got closer, I stopped at two stores for directions, but to no avail. Time was short, and the blood pressure was rising. I asked God to not let today be another disaster on top of a long list of recent disasters. I stopped again at a corner restaurant and engaged the pierced and tattooed hostess, "Hi, I have a meeting this morning at the Morgantown Prison. Can you please give me directions?" I chuckled internally at my embarrassment. She paused, looked me over in my Hugo Boss sport coat and Gucci loafers, and pointed, "Mile and a half down the road." I thanked her, ran to the car, and felt secure in the forty-five minutes I had left for a safe arrival. 
I pulled up to the gate, and the lone guard walked out of his shack. 
I offered, "Hi, I'm Jeff Martinovich, and I'm reporting to prison today." 
He leaned onto my door, looked into the empty car, and inquired with a perfect West Virginia twang, "You drove yourself to prison?" 
I nervously replied, "Well, it's a long story. I didn't think I was making the trip. Everyone fell apart last night. I thought I'd better just drive myself. I'm going to park in that lot over there. My buddy, Mike, owns a car lot, and he'll send a couple guys over to pick it up tomorrow." 
He looked at me like I'd lost my mind, leaned back, spit tobacco juice on my front left tire (true story!) and said, "You're not parking your car here. Your only option is to go back into town, leave your car, and take a taxi back here. And, you have thirty minutes to make it back, or you'll be starting your sentence in the Hole!" 
I wasn't sure what the Hole was, but it certainly did not sound good! I had scary visions of Paul Newman in "Cool Hand Luke." I whipped the car around and headed in the opposite direction. There would be no time to get a taxi, and surely the guard took great enjoyment in knowing this fact. My only hope was my Goth hostess. I pulled into the restaurant's small parking lot and ran in to ask if I could leave my car there overnight. 
"Oh no, Sir. John The Manager would never allow that. There's never enough space as it is." 
I interrupted, "I'm sorry to be short, but I'm in a huge hurry. May I please speak to John?" 
Soon appeared John The Manager displaying double the piercings and tattoos as our hostess, died black hair, and thick black eyeliner. "Cannot do it. No way!" he rolled off his pierced tongue. 
I proceeded to employ every Dale Carnegie technique I could remember to influence this fine, young gentleman to allow me to leave my car, but I was getting nowhere. Then, I went to Plan B and just would not accept "no" for an answer. Finally, in exasperation, he yelled, "Fine! But if it is still here tomorrow, it will be gone!" and he stormed back to the kitchen. 
I turned back to my hostess. "Miss, I didn't exactly tell you the whole story before. If I don't report to prison in fifteen minutes, they are going to throw me in the Hole! Is there anyway I could talk you into driving me to the front gate so I can make it on time? You can even drive my car!" 
I then experienced for the first time the label of a "felon" as she took two dramatic steps backwards and made clear that my request would not be possible. 
I ran to the car. My watch noted I actually had sixteen minutes remaining. I threw the watch, the phone, the wallet, and the keys into the glove compartment. I slammed the car door, looked to the sky, and let out a yell, "Okay God, if this is the way it's got to be, then this is the way it's got to be!" 
I took off in a sprint across the snow covered parking lot. I crossed the street, dodging a few cars, and ran as fast as I could against traffic on the side of the narrow rural road. The snow was deep on the side, and the shoulder was covered in slush and puddles. The road was occupied with Ford F-150's barreling down on this lunatic running for his life against traffic in a black sport coat and loafers! The trucks showered me with spray as they passed too close for comfort. As the mind slows down at these extreme times, so many events which had brought me to this point played like a movie in front of me. 
I was soaked to the bone, the snow was deep, and I knew I wasn't making good time. I screamed to God once more, "After all of this, you have to let me make it!" 
I spotted the prison ahead, and it gave me a final burst of energy. There was a gap in the oncoming traffic, so I moved onto the road and gave it all this forty-seven-year-old body could summon. I sprinted through the gate like Eric Liddell winning the Olympic gold in "Chariots of Fire." 
The guard walked over to me as I clutched my knees, heaving and gasping. He looked me over and shook his head. "Two minutes to spare. I never thought you'd make it." 
I followed him into the Processing Center. There would be no Hole for Prisoner 81091-083 today! 

"The real test of man is not when he plays the role he wants for himself, but when he plays the role destiny has for him." 
-- Vaclav Havel 

* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com

* To access JAM Views directly, please visit jeffreyamartinovich.blogspot.com.

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YOU DON'T NEED AN EMPLOYER

     I know I keep pestering you to take that step; to start your own business, to teach the rest of the world, and to constantly lead by example.  But, I really think this is your year!  The window is open!  Unemployment is 3.9%, and corporations are more flexible than ever - literally ever.  Technology is ready for you, the regulatory environment is ready, and the tax structure is optimal.  Now is the time for you to be the person you always dreamed you could be.  On our death beds we only regret the things we DID NOT do.
     I have an idea.  Why don't you set July 4, 2019, as the date you will launch your new business?  You can execute a responsible and methodical game plan to hit this target.  If you are now an electrician working for other contractors, on Independence Day you will roll out your own organization.  If you are a software engineer, by the time you are watching fireworks, you will have launched your own consulting enterprise.  If you are in sales, by mid-year you will have negotiated contracts to independently represent only products and services about which you are passionate.
     First, review our previous Post, "What Smart Investors Look for in a Business Plan."  Initially, you are not going to need investors but the plan will help you get out of the gates.  Investors will come later when everyone wants to get in on your success.
     Second, let's take the next few months to get everything you need in place.  You will be surprised at how easy and inexpensive it is.  The Friends of JAM have been kind enough to help us with a Virginia, USA, startup example.  I note "USA" since we are honored to have many JAM Views readers from Germany, Ireland, France, and Ukraine, to highlight a few most-frequent visitors.
     While watching "Seinfeld" reruns this weekend you can access Virginia.gov and open your single-member Limited Liability Company (LLC) online in 15 minutes, to include Articles of Incorporation. Pay the $100 fee and you are off and running.  Do it yourself instead of paying an attorney to waste your time and money.  You don't even need to pay Legal Zoom $400.  All these intermediaries do is charge you tons of money to make you think you need them.  Do it yourself so that you understand everything.  Remember, you are taking back your power!  Make a note to also file a simple Annual Report and $50 to the state in 12 months.
     Spend 10-minutes online with IRS.gov, and get your Employer Identification Number (EIN) for your new company.  That's free.  If you think your name or logo is really awesome, you can trademark these at USPTO.gov.  That's $400, or we can wait on this one until the Chinese begin stealing your Intellectual Property (IP).  Open a corporate account with Ally Bank online, so you don't have to pay all the fees from the big banks.
     Download QuickBooks for the Self-Employed, at $10 per month, so you can easily keep track of all the expenses you will now write off your taxes.  Come tax time, as a single-member LLC in Virginia you will simply translate your revenue and expenses to your Schedule C on your personal return.  Easy.  Later, when you add employees and are printing money, you will do a separate return, K-1's, and all that.
     Next, during "Cheers" reruns you will create your online presence.  At GoDaddy.com you will purchase your website name (URL) for $13, and you will also have them host your website for $7 per month.  Next, you will design your website using one of Go Daddy's easy plug-n-play templates.  Super simple.  Then, you click over to Blogger.com to start your own blog (You mumble to yourself, "I've met Martinovich, and if he can do it, anyone can do it!").  This is free.  You open a new blog, and twice a week you begin posting something short and simple that will help people in your industry.  By next year, they will refer to you as "an expert."
     Now, you are going to gradually dip your toe into this new venture by doing a little work on the side.  Steve Strauss wrote in "USA Today" that nearly 40% of Americans now have a side hustle, and "the average side hustler earns about $8,000 a year."  That pays for a lot of ballet lessons, not to mention braces!  I know a beautiful woman who sells R&F on the side, another for Scentsy, and you would be surprised who drives for Uber and Lyft.
     Steve also highlighted the online product Ascend as one tool that allows us to do just as much in our startup from home as we used to only be able to accomplish at the office.  From the dashboard you can manage contacts, give price quotes, manage workflows, and invoice customers.  Over coffee you can run email and social marketing campaigns, create a video in a few minutes, and create search-engine-optimized (SEO) pages.
     Now is the time.  You will not find a better window during your working lifetime.  Grab the opportunity for freedom, challenge, responsibility, and no excuses.  Maybe it will go nowhere, maybe it will be a failure, but then again, maybe you will succeed.  You don't have to build Berkshire Hathaway, but at the end of this journey you need to be able to hold your head high, your shoulders back, and claim, "I played the game, and I gave it everything I had."
     Download "Defending Your Life" this weekend and watch Meryl Streep during her life review.  Notice how she overcame fear.  That's the point.  That's why we came down here.  I will be cheerleading you all the way to Independence Day and beyond!  And, if you stumble, we will all help you back up to stay in the fight.  You can do this.

"Never doubt that a small group of thoughtful committed citizens can change the world.  Indeed, it is the only thing that ever has."  - Margaret Mead

* Thank you to Friends of JAM (FOJ) for the above research conducted, initially, for the JAM Course "Building Special Companies."

* I, thank God, am not a lawyer or accountant, and nothing above is to be construed as legal or tax advice.  Please consult an expert. (Isn't it ridiculous that the lawyers make us include this, or otherwise they sue us to protect their own cartel?  I promise we will fix this, also).

* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

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BUILD A VALUABLE COMPANY INSTEAD OF HIGH CURRENT INCOME

     Even before this Presidential Administration lowered corporate tax rates to allow U.S. companies to be more competitive domestically and internationally, the smart business owners already knew to reinvest their income back into the company instead of taking out high, current, taxable income.
     Dr. Thomas Stanley wrote years ago "The Millionaire Next Door," in which he explained how true wealth was not found in the neighborhoods of large homes, small trees, and BMW's in the driveways.  These communities contained substantial debt and nightly spending arguments between husbands and wives.  Real wealth and independence was found in neighborhoods with small homes, large trees, and early model Buicks in the driveways.
     The homes with Buicks were inhabited by the owners of Sammy's Heating and Air, Tommy's Auto Body Shop, and Susan's Premier Staffing Agency.  These business owners had built value into their corporate entity, as well as saved significant dollars in defined benefit plans, deferred compensation plans, and second-to-die whole life insurance policies.  These people  had real walk-away, liquid, tax-favored money for whenever they chose to move onto the next adventure; and they had worked their buns off and deserved every dime, and more.
     If we choose to maximize our short-term income, we will be taxed at the highest rates, not long-term capital gains rates, and we will likely increase our standard of living to match however much income we bring home.  Children psychology studies conclude that lower IQ children will choose 2 M&M's now instead of 5 M&M's in five minutes, while higher IQ children will forego instant gratification in anticipation of a much greater reward.  They must innately understand at an early age the power of tax-deferred compounding, which even Einstein labeled, "The 8th Wonder of the World."
     As entrepreneurs building our Special Companies, we must find our comfortable monthly income level for our family, and then we must fix that number and decide to, at least for a while, reinvest all surplus income back into growing the value of the company.  In the year 2000, I pegged my monthly take home pay from our companies, and even though our revenue increased significantly over the next ten years, I reinvested all of this extra income back into acquisitions and personnel which greatly increased the enterprise worth of our businesses.
     But, we must understand how to increase our company's marketable value far beyond the simple math of revenue and earnings multiples.  Recently, IBM acquired Red Hat.  The acquisition of Red Hat only added 4% additional revenue to IBM's financial statements, but IBM paid in cash $33 billion for Red Hat, which equaled one-third of the total value of IBM.  33% for 4% more revenue!  Is IBM crazy or brilliant?  We will see.  But, how can we make our organization extremely valuable, even outside the numbers, like Red Hat:

1) Maximize intellectual property (IP) which includes patents, copyrights, and trademarks.  So often we miss this opportunity to add value by protecting our long-term reputations and achievements, and by even re-licensing this property to others (Google "3-peat").

2) Build recurring revenue instead of a transactional business. If you have to wake up every day, every month, and milk the cows, you will be valued much lower than the organization which milks them automatically.  In the investment world, firms whose revenue is generated by quarterly asset-based fees are valued substantially higher than firms who rely on transactional brokers.

3) Ensure the company can eventually run without you, and not miss a beat.  In my book, "Building Special Companies," I recount the month in which I took a sabbatical from the business for this very purpose, and to re-charge my batteries.  Not only did the organization not miss me, they all elevated their game and accomplished so many tasks to which they believed I might object.  They were brilliant, and our value stepped to the next level.

4) Work on consistency of earnings.  If your income is all over the map due to contracts won and lost, lawsuits, or windfalls, a buyer will greatly discount your expected future earnings, thus lowering your current value (Net Present Value - NPV).  This is why Microsoft, Apple, and others have always been accused of artificially "smoothing" their earnings - which is true.  This gives their stock a higher valuation.

5) Monetize your brand and your followers.  Our investment firm was valued higher because we had the honor of servicing over 3,000 clients whom mostly utilized our firm for three or more services; planning, portfolio management, insurance, mortgages, wills & trusts, and more.  Psychologists claim that once a client utilizes an organization for three separate services, their retention rate is nearly 100%, as it is too much trouble to transfer all of these relationships. Maximize the Twitter followers, the blog subscribers, and all of the people you may influence.  Be an influencer!

     We will stop here for this week, but I want you to understand that we can begin with the end in mind.  Forego the 2 M&M's, and position your company to be so much more valuable to a strategic buyer who will take advantage of the substantial value you have built.  I mean, really, how many Teslas do you need?

"If you want to change the world...don't back down from the sharks."  -  Admiral William H. McRaven, Make Your Bed

* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

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1st QUARTER UPDATE: TACO BELL & BILL GATES

     This week we want to provide a 1st Quarter 2019 update on five issues we previously studied.  Periodically reviewing these business and monetary lessons in the context of new events helps us re-instill the proper fundamentals and understanding.
     As a follow up to our post proposing "Corporate Universities," three economists - from Northeastern University, Harvard, and the Federal Reserve Bank of Boston - released their study of 36 million online job postings between 2007 & 2012.  When the economy was much stronger in 2007, only 13% of postings required a bachelors degree, and when the economy was slower and unemployment higher in 2012, over 22% of postings required bachelor degrees.  Companies can be much more selective when we all need a job.  But economic growth flips the tables in favor of us job seekers, and as a perfect example, Taco Bell, yes Taco Bell, recently expanded its benefits package to cover $5,000 a year in college tuition.  Now, thanks to growth, Tommy can demand that Taco Bell pay for his college while he serves those double-stuffed Gorditas through the drive-thru window.
     Also following our theme, Oren Cass has released "The Once and Future Worker," and Isabel Sawhill authored "The Forgotten Americans," both arguing that we waste too much taxpayer money on ineffective education.  The federal government spends $160 billion of your money each year for college expense, but only 36% of Americans now graduate from a 4-year program.  The Feds only spend $20 billion of your money on career and technical education and job training.  Cass and Sawhill assert that we should re-purpose college funds, along with means-tested programs such as food stamps and the Earned Income Tax Credit, into these technical programs and job training.  They must both be JAM Views readers!
     Speaking of growth, our mantra, even the European Union is starting to convert.  Economists from the EU and the IF Institute, a German think tank, released the first dynamic-scoring tax model for the EU.  As opposed to the previous static models which never accounted for the tremendous increase in tax revenue from higher GDP growth, which our Posts have proven repeatedly, the EU is finally starting to incorporate dynamic models which predict revenue boosts by stimulating job creation.  Starting with this experiment in Brussels, we can only hope they expand growth ideology and fiscal changes to stimulate the economies throughout Europe.  One more time:  Tax cuts and less-oppressive regulations significantly increase government tax receipts.  Period.
     You recall that we stated that "banks only loan money to people who don't need the money."  Again back in 2007, banks held approximately 14 cents of reserves for every dollar you actually deposited with them, which reflects a normal reserve in what they term a "fractional-reserve banking ratio." (Yes, the bank only keeps 14 cents of your money in the vault and leverages the rest on loans and investments, so if everyone stops by to pick up their money at the same time, your taxpayer dollars will have to bail them all out again.  I don't make this up.  You try to run your business books that way, and see how long it takes for the SEC and the IRS to knock on your front door.  You're not in the club.).
     I digress.  Yet, according to a study released by retired Senator Phil Gramm and Thomas Saving, the banks are now holding $1.31 of reserves for every dollar they owe you.  The reason is that the Federal Reserve is paying them an above-market interest rate on these reserves, so they won't loosen the purse strings and loan you money for your new business.  Banks are holding onto almost 10-times the required reserves.  The Fed should lower the rate they pay banks, so the banks are incentivized to make loans to you, in-turn not stalling our strong economy until true signs of inflation emerge.
     Earlier we were pretty rough on U.S. Attorneys and members of the Bar as we explained the illegal shutdown of David Ganek's $4 billion hedge fund, Level Global, and the class-action attorneys' attempts to blackmail Apple, Google, and Microsoft app platforms.  But, let's continue because no group deserves it more.  Michael Ledeen of the Foundation for the Defense of Democracy released an explanation of the recent, bizarre sentencing hearing for General Flynn.  While the media reported a narrative that the judge rebuked the General and his patriotism, Mr. Ledeen, who was actually in the courtroom, tells a different story.  He believes the judge's aggressiveness sprung from his frustration at "his failure to persuade Mr. Flynn to reconsider his plea (of guilt): If Mr. Flynn won't fight, Judge Sullivan won't do it for him."  Mr. Ledeen summarized his view as "I do not believe Mr. Flynn lied to the FBI.  I think he lied when he made his deal with Mr. Mueller, and his confession was a false one."  Recall your JAM Views lessons:  The great majority of what we hold as true, likely is not.
     Also, certain attorneys are finally fighting back against state laws mandating membership in the Bar, just as other union members have gained more rights to make their own decisions not to join after the Supreme Court decision in Janus v. Afscme.  Against the 32 states in which membership is mandatory, Messrs. Huebert and Sandefur of the Goldwater Institute now claim this requirement is unconstitutional in violation of attorneys' freedom of speech.  They claim the "bar associations wield massive political influence on everything from tort reform to judicial appointments, (and) it distorts American democracy, too."  Maybe we'll let these gentleman be JAM Views guest bloggers!
     Finally, as a follow up to our "Capitalism + Philanthropy = The Answer," Bill Easterly came out against Bill Gates in an effort to teach us that "countries respond to incentives to grow, and organizations like the World Bank and IMF don't design aid programs around incentives."  In other words, giving money to others doesn't work; it actually imprisons them.  Easterly argues that only market-oriented development works, not state-driven approaches.  "When you allow it to happen it does generate miracles and revolutions - but usually not the way the experts intended or planned.  The author of "The White Man's Burden:  Why the West's Efforts to Aid the Rest Have Done so Much Ill and So Little Good" concludes with, "Core Econ 101 principles have stood the test of time, and let's just try to stick to those."
     Again, it looks like our capitalistic members are making progress spreading the good words of self-interest and common sense.  We are making headway, even with the French.  Who would have thunk it?  Keep up the good work, and have a safe and prosperous week.

"People are finding a way to solve their own problems, despite the arrogance and the incompetence of the experts."  -  Bill Easterly

* Thank you to the WSJ, Forbes, and Fortune for many statistics and quotations.

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