Friday, May 29, 2020

And the Winner IS: Vietnam? India? Bangladesh? China?

The Get-Out-Of-China Movement is not new. 10 years ago, as the RMB was increasing in value, buyers panicked and started to scramble for other places to make their goods, the main objective being cheaper prices.


So now, in 2020, who is the winner of this race?  A lot of talk and press about moving imports, “nearshoring” etc. I got to wondering, what is the actual result, not the implied result of the talk and politics?


Let’s analyze according to the numbers, globally (All numbers per World Bank)

1.     GDP

2.     GDP/Capita

3.     GDP/Capita at PPP (Purchasing Power Parity, how much your money will buy locally)

1.   Exports

Exports 2008 and 2018 (Current US$ BIllion)


2008 Exports

2018 Exports

Difference $

Increase %






















Clearly the $ Winner is China. But, in terms of Difference in $, and Increase %- The winner clearly is- VIETNAM


2.   GDP

GDP 2008 and 2018 (Current US$ Billion)


2008 GDP

2018 GDP

Difference $

Increase %



























Here included the US for comparison. China still the winner in numbers, with an impressive 16.3% annual growth. Bangladesh was first in % with 16.7% annually.  But China’s increase in $ and % was impressive- more than all the others combined. And the winner is- CHINA

3.   GDP/Capita

GDP/Capita 2008 and 2018 (Current US$ Billion)


2008 GDP/Capita

2018 GDP/Capita

Difference $

Increase %


























Impressive gains in peoples’ welfare all around, but, again, the difference in China standard of living and wealth is more than all the others combined AND the highest %. And the winner is- CHINA


4.   GDP/Capita at PPP

GDP/Capita at PPP 2008 and 2018 (Current US$ Billion)


2008 GDP/Capita @ PPP

2018 GDP/Capita @PPP

Difference $

Increase %


























This, of course, is what the increased wealth will buy, and is the best indicator of the welfare of the people. So here we need to look at the difference, in $ and % of the Nominal GDP/Capita and at PPP. So here it is:

5.   GDP/Capita vs. GDP/Capita at PPP

GDP/Capita, GDP/Capita at PPP 2018  Comparison(Current US$ Billion)


2008 GDP/Capita

2018 GDP/Capita @PPP

Difference $

Increase %


























Here, despite the much higher base in China, both Vietnam and India had US$ gains almost equaling the gain in China. And the Winner Is- INDIA and VIETNAM.


6.   GNI at PPP

GNI, PPP 2008 and 2018  Comparison(Current US$ Billion)


2008 GNI PPP

2018 GNI PPP

Difference $

Increase %



























But, a nation’s wealth (which may or may not translate to peoples’ pockets) is really measured by GNI (Gross National Income, which is the wealth gathered from both domestic production (GDP) and international sources. And, measured at PPP, it tells what that income will buy within the country. The nominal numbers do NOT tell the tale that PPP does.


So here’s something you may not have known: AT PPP, China was a wealthier nation than the US in 2018. This is impressive, because it shows that the business China has done since the 1990s has brought it from “People are Starving in China” (when I was a kid, that is what my mother told me when I wouldn’t eat), to one of the world’s wealthiest nations and healthiest economies. And the People benefit by that. So, while all the countries examined here have done a great job of building wealth for their people, the clear winner is-CHINA


For all out there with a touch of Ethnocentrism, get over the story that China built their wealth by taking money out of our pockets, as it is just BS; we hungrily paid for the merchandise and service that we got- nobody forced us. What is more, China responded by building one of the best rail, road and air infrastructures in the world and improving living conditions for its people. If you don’t believe me, go to China and see for yourself; IF you have, you know.


So, by the numbers and by the efforts to achieve them, CHINA is the big winner. As the man said, they earned it.


But what about the Future? IF ideology doesn’t get in the way (this is a definite possibility), China will continue to develop and upgrade its productive base. IF it does, all those who beat their chests about “nearshoring” and “Get out of China” will face the same fate as the looter politicians in Atlas Shrugged: no place to make enough goods/not enough supply to meet demand/higher prices and the American people are screwed again by the politicians.


It can’t replace China- ever, but clearly the second winner here is VIETNAM. Driven by a savvy government and ambitious, capable people, Vietnam will overtake India as the second largest producer in Asia within 2-3 years at the outside. This is amazing or disappointing (depending on your point of view), considering Vietnam population of around 100 million and India’s of 1.4 billion. VIETNAM without a doubt is the future WINNER.


We in the US can meet our needs if we don’t listen to the politicians. They are ill-informed and have nobody’s welfare but their own in mind. Then the winner will be nobody and the losers will be us. Final word: BUSINESS IS BUSINESS.

Monday, May 25, 2020

When Ideology Trumps Strategy: Why Our Leadership is Failing Us

(And causing unnecessary hardship, death and disaster)


(There has been a lot written globally about the failure of leadership during the pandemic. Political explanations don’t tell us WHY these minds are failing to make timely or correct decisions. The following offers some lessons of history, and psychological analysis of the barriers that cost us lives and money and more lives and more money)


We are going through an unprecedented era and crisis that affects everyone on the planet. I don’t think that anyone would dispute the fact that how we handle the near term and longer-term future will have a profound impact not only on people’s lives, but on the nature of our survival as a nation and civilization.


The best example of this is the recent NY Times report that, if we had started the lockdown 2 weeks earlier, we could have saved 36,000 lives. So, the bottom line is, in times of crisis or war, we depend heavily on our political leaders’ decisions; they literally hold the power of our life and death in their hands. But, even in the face of deaths, our leaders talk about “reviews” and ideological issues that gain us nothing, even hurt us.


Every leader has a lot to think about when making decisions. As the representative of the company or country, he or she has to uphold the political principles of the nation; but, even more, he or she has to take appropriate actions to resolve or solve the issues, over and above the political considerations. Our leaders have shown a profound inability to make the right decision in terms of helping their constituents, we the people, and have wasted months and millions talking about political issues when they could actually have been doing something constructive.


History has shown that a leader who cannot clearly and practically solve a problem, whether it is military or economic or both, is destined to fail. And, with that failure, go the lives and livelihoods of the citizens.


History proves that, if we cannot depend on leaders to have the mental capacity to make the best decisions for their constituents, we would be better off without them.


Let’s go back to WWII. Andrew Roberts, author of The Storm of War, one of the best books ever written about that devastating war, insists that Germany clearly could have won the war, had it not been for Hitler’s inability to put Grand Strategy (the practical and actionable) ahead of Nazi ideology.


Many examples given by Roberts clearly underline the fact that Hitler’s mistaken decisions which were taken despite his generals’ recommendations were direct causes of Germany’s defeat. In a speech to the American War College, he gives examples:

1.     Hitler made an ideological decision to kill 6 million Jews, yet the population of factory workers from 1939-1945 decreased by 10 million. IN essence, he killed 6 million of his potential best workers;

2.     Hitler never coordinated with Japan against Russia, where, if he had, Stalin would have not had the strength to resist Operation Barbarossa, Germany’s attack on Russia.

In his lecture to the US War College, Roberts describes the above and more in detail; he concludes with the statement that the defeat of Germany was heavily laid on the fact that, for Hitler, Ideology Trumps Strategy (his words).


What are the basic character flaws that cause mistakes like Hitler made in WWII? Surely Hitler was not the first or last to make such mistakes, and those errors are not relegated to past history- they are happening right before our eyes.


Ray Dalio, Founder and CEO of Bridgewater Associates, one of the world’s largest hedge funds, in his book Principles, focuses on what he calls the Two Biggest Barriers to Success:

1.     Ego

2.     Blind Spot


The first, Ego, is the failing that prevents you from seeing your own weakness, or the weakness in your plan and argument, causing you to want to see what you think is right, regardless of whether it is true or not. Your self-awareness and humility are cast aside to protect and convince yourself that you alone know the truth.


The second, Blind Spot, which results from Ego or just your own DNA, prevents you from seeing what is coming. Everyone has a blind spot, a weakness. You must understand it and compensate for it or find others who can. If you don’t, the result can smack you in the side of the head and result in failure or catastrophe.


Together the two constitute a fatal flaw to effective leadership and success. Hitler suffered greatly from these two barriers; we know the result.


Clearly, the combination of Ego, Blind Spot and putting Ideology before Strategy or Solutions was a fatal flaw for Hitler. And it resulted not only in Germany losing WWII, but in tens of millions of deaths that could have been avoided.


What is more important is that these characteristics constitute a Failure of Leadership whenever in time or in which situation they happen. Like right now.


Why am I writing this? How does this apply to our current situation? Can we say that ANY of our political leaders, especially those with the most power, are thinking clearly and practically, so we can depend on their decisions?  OR can we see that ideology, ego and blind spot is obstructing progress and costing lives?


Remember Andrew Roberts’ words: When Ideology Trumps Strategy, a war and lives will be lost, and we will be left holding the bag of isolation, political and economic devastation.


History has proven this and will prove it again- and again- as long as we allow it to.

Thursday, May 21, 2020

TJX: A Positive Shopping (and Investment) Experience

TJX: A Positive Shopping (and Investment) Experience


Customers line up as TJ Maxx reopens

After many decades in the world of retail, I chose to restrict my personal investment in retail stocks to TJX.  Let me explain why.

Having first invested in 2018, I was enjoying double-digit returns on my (modest) investment until COVID-19 dropped a nuke on the world of retail- especially brick & mortar. 

TJX per share price today is -6.8% from 1 year ago, which represents a climb back of 37% from its nadir in March of this year. While TJX is expected to announce a significant drop in YOY sales and profits for Q1 2021, the stock today (5/20) is one of the best positive movers. Why? That kind of report usually drops the bottom out of a stock.

Here’s why: Shares of TJX jumped 10% after an analyst at RBC Capital Markets upgraded them to outperform from sector perform. The analyst said that while the retailer is “undoubtedly experiencing a material deceleration as the COVID-19 pandemic intensifies, we see longer-term market share opportunities ahead as this event accelerates industry consolidation.”

Industry consolidation? No kidding. JC Penney, J Crew, Neiman Marcus, Pier 1, more.

That in itself does not guarantee success for those who remain; in fact, it could be the Ides of March (Not a pun) for others. What the analyst is really thinking is that the business model, value proposition, historical management and shareholder performance is far superior to any other major retailer.

Personally, I believe that, within a year, barring unknown unknowns, that TJX share price will approach that of its pre-split level (100+ and it is 51 now, was as high as 65 before March). Why do I feel so strongly about this stock and why didn’t I bail out when the s**t hit the fan? Three main reasons: 

*NOTE: (all numbers, business and policy information below derived from TJX FY 2020 Annual Report and Notice of Shareholder Meeting)

1. Financial Performance

Here are some of the numbers:

  1. Net Sales ($million): $30,945 1/30/2016; $41,717 2/1/2020
  2. EPS (Earnings Per Share): Just north of $.50 in 2010; $1.67 1/30/2016; $2.67 2/1/2020
  3. Cash dividends Per Share: $.42 1/30/2016; $.92 2/1/2020
  4. Net Income ($million):  $2,278 1/30/2016; $3,272 2/1/2020 (% increase 7.3-7.8% of sales)
  5. 10 year CAGR (Compound Annual Growth Rate) vs. Peer Group Average and S&P 500 index= 22/13/14%
  6. An investment of $100 on January 30, 2015 would be worth almost $200 today, the S&P 500 would pay $175 and the Dow Jones Apparel Retailers Index would be about $130.

It is pretty clear that the entire retail world didn’t grow at this rate or return this well during the last 5 or 10 years. So what we have to conclude from the numbers is that, during this period, TJX has become MORE relevant to their customer’s lives where many others, such as those mentioned above and others not mentioned, like Macy’s, have become LESS.

So why has TJX done so well and why do I believe they will continue to do so? This despite the fact that TJX does not rely on ecommerce to deliver its business, leaning instead on the in-store shopping experience. Read on..

2. Business Model/Value Proposition

TJX calls its in store shopping experience “the Treasure Hunt.” All TJX employees, in store or buying/support, are unified and on the same page that this is how they should make the customer feel when they are in the stores.

TJX calls its merchandising style “opportunistic buying.” It is well known that TJX buyers are very sharp operators to find the best of the distressed, resulting in “a compelling value proposition of fashionable, quality, brand name and designer merchandise assortments more frequently than traditional retailers.” Cheaper, better faster- that is the way I remember we used to operate in the world of NYC department stores during the 1970’s. We had our “T-stands” with new fashion and test styles, but we were in the market every week without fail to search and push for bargains for our “rounders.” Traditional department stores have abandoned this style in favor of planned promotions (maybe a year in advance) and dizzying sale offers, which leaves them no money for opportunistic buying- assuming they knew it when they saw it.

The buying style, of course, is facilitated by what TJX calls their “Flexible Business Model”- buying and inventory management strategies, not buying up your spend way in advance, but leaving money for opportunities and planning for them to occur- having the merchandising ability and open-to-buy to always react. That is what we did years ago as well.

All of this skilled merchandising results in an exciting shopping experience. 

This business model, as I mentioned, is not new; it is the Creed of the Merchant, as practiced by those who have become icons in the world of retail, such as Stanley Marcus and Mickey Drexler. And it keeps you relevant. After COVID-19, TJX will more than make up for the lost sales and momentum while stores had to be closed. It will FEAST on the megatons of great merchandise that was a casualty of retailers or manufacturers with leftover goods. 

3. Management Compensation/Bonus Policy

Unlike other retailers recently, TJX does NOT pay for non-performance. Executive compensation is solidly based on short- and long-term performance: “directly tying incentive compensation to the achievement of objective performance metrics” and “Award limits on maximum plan payouts” and “Emphasis on long-term opportunities for equity and cash incentives;” it openly eschews the tricky gimmicks that have made retail executives obscenely rich as the ship is sinking, such as “No single-trigger benefits upon a change of control.” This last one alone has cost the retail customer billions.

There are pages and pages of details about executive compensation in the Shareholder’s Meeting document and the Annual Report, both of which are public. 

The executive compensation plan pie chart sums up the policies:

a. almost 50% of compensation is based on PSUs (Performance Share Units)

b. Salary is 10-16% (CEO, NEO)

c. Long-term incentives are 74-71% of compensation

d. Performance metrics include Pre-Tax Income, Total Sales, EPS Growth, and ROIC (Return on Invested Capital); these are store-wide metrics which don’t favor one executive or another or the CEO.

4. Conclusion

Here’s the best part: TJX is not run like a cheapie discount store; it has been and is run like a department store with smart merchants, smart policies, and smart executives who are all together on one thing: Provide the best experience for your customer; they will spend and come back again and again because they know there are new “treasures” to be found.

That is my take on why TJX is a great shopping experience for its customer, and a great investment short and long term.

(News media carried pictures and videos of long queues to get in to TJX stores that reopened in the Southeast. Besides the health questions, which I am pretty sure they handled (or hope they did), this shows that people still have lots of open to buy for the right items at the right VALUE.

Customers line up as TJ Maxx reopens

Monday, May 18, 2020

How Do We Manage the Future of Capitalism- Shrug?

How Do We Manage the Future of Capitalism- Shrug?

“‘Mr. Rearden,’ said Francisco, his voice solemnly calm, ‘if you saw Atlas, the giant who holds the world on his shoulders, if you saw that he stood, blood running down his chest, his knees buckling, his arms trembling but still trying to hold the world aloft with the last of his strength, and the greater his effort the heavier the world bore down upon his shoulders- what would you tell him to do?’

‘I…don’t know. What…could he do? What would you tell him?’

‘To shrug’”

“Atlas Shrugged,” Ayn Rand, 1957

Lately, there has been a lot written about the future of capitalism.

The current situation, accelerated and highlighted by COVID-19, has yielded increasing income inequality, bankruptcies, unemployment and Bernie Sanders-who tried to secure political capital by proposing a move to whatever he called his political system, where everyone gets something whether they earned it or not.

The inequality is striking: 

  • In 2019, The Guardian reported that World's 26 richest people own as much as poorest 50%, according to Oxfam (link)
  •     In 2020, Oxfam reported that “The world’s 2,153 billionaires have more wealth than the 4.6 billion people who make up 60 percent of the planet’s population” (link)
  •     Bernie Sanders reported on the wealth of the world’s richest as described above, and his solution was? take it away and distribute it to those who have no clue as to how to make money. What does this solve except as a disincentive to people who have built great companies that changed our world and most of our lives except for redistributing their wealth? Then what? Is Bernie going to deliver your Amazon packages?

We have a system-capitalism- that was built on the freedom for everyone to capture their dream without the interference (not regulation) or participation of government. It has been copied, cared for, and mutated around the world. Most important, is not to confuse Capitalism with a political system. Vietnam and China are one-party, “Communist” governments that have risen to the top of the economic ladder by conducting themselves how? Not what Bernie would have them do- giving the freedom and reward to individuals to be successful based on their own efforts; the dramatic effect of their success is Capitalist- that they provide jobs, community growth and income for those who could not do it on their own, but who can serve and follow. 

So, to me, Capitalism is not an economic system, it is an economic process whereby people, with the permission and sometimes assistance of governments, can realize their own vision and make it real. 

Any political system that discourages or punishes individual effort at the expense of the entrepreneurs by mandating that individual effort must be diluted by taking away what is rightfully earned from those who earned it, to those who did not or could not. And it has an unbroken record of failure, according to world history.

So any political system can allow Capitalism to exist and encourage it for the welfare of its citizens. 

Mao tried to equalize the playing field in China, but now, China is as financially unequal as the “Capitalist” countries, if not more. George Orwell predicted that fatal flaw in Communism with his novel “Animal Farm,” which saw a group of pigs come to the conclusion that, “All Animals Are Created Equal, But Some Are More Equal Than Others.”

Is this ok? Shall we thank our benefactors who provide us jobs and let this inequality continue as they get richer and richer to an obscene level (nothing wrong with RICH- it is a matter of degrees), and be thankful for what we get?

Or should we look for a way to temper the situation without resorting to a Bernie world or having wealth handed to people who don’t work for it? 

Here’s my basic proposition: We need to improve the middle class standard of living, as we saw at the end of WWII- everyone with a house, car, two kids and a dog; If we do, it will benefit the rich in the long run as people are better off and can buy more; if not, the super rich will see an erosion of their wealth as economies stagnate and everyone’s wealth withers.

So, finding a solution to improving Capitalism so more people can share in the benefits of production and marketing is in everybody’s interest.

So what does that mean? It certainly doesn’t mean overturn the whole system, or grab what someone else earned, because you want to make a political point or you have not thought through what to do about it. It means to adjust- or SHRUG.

Our Atlas is straining, whether we see it or not- and we have the power to support him.

So what do we have to do? This requires collaboration by the great economic and political minds of our time (we have lots of them) AND telling the politicians (non Partisan- All of them) to stand back while We, The People, work out a viable solution. 

Let’s look at some contemporary opinion and current events as a starting point.

Ray Dalio, the CEO of Bridgewater Associates, one of the world’s largest hedge funds, (and also a member of that Rich Guys fraternity) has made a thoughtful analysis of the situation and future of capitalism; in a recent article published in CNN Business entitled, “Ray Dalio: We must reform capitalism, not abandon it,” he analyzes the situation:

  • The economic world order is changing whether we like it or not. You can see it happening as people and companies around the world are losing income and savings, and central banks and governments are providing them money to try to compensate for those losses. And you can see it as the free market is no longer determining the allocation of capital — governments are.
  • Given this situation, Dalio predicts, Chances are that the new system we end up with will be significantly different from the capitalist system that we've gotten used to.
  • But then he reminds us, As the current crisis unfolds, we should remember that throughout history, capitalism has proven to be the best system, though it can sometimes be highly flawed. It is typically best when it comes to allocating resources and raising a society's productivity and living standards because of how profit-making works.
  • He analyzes the biggest flaw of Capitalism this way: While this profit-making capitalism has worked well in this way, it has also been intolerably imperfect in providing equal opportunity. It has failed to deliver people equal opportunities to be productive if they can be and to take care of the basic needs of people who can't be. It also doesn't create limits on how bad people's living conditions can be or on how decadent spending can be. To me, most tragically, it allows vast numbers of children to grow up in environments of violent squalor, which is both economically and socially bad. It is economically bad because the costs of having large numbers of unproductive people are enormous compared to the benefits of having productive people. And it is socially bad because a system that doesn't provide equal opportunity can't be considered fair — and unfair systems eventually lead to disruptive social conflicts.
  • Then, in a way of saying even he doesn’t have the answer, he says: Can't we all — capitalists, socialists, Republicans and Democrats — agree on that? Can't we all agree that whatever system we have, it must do a great job of both increasing the size of the pie and dividing it well?

Agree on what? How we fix a good and proven system so that more people can benefit from it without disincentivizing those who can create the wealth?

In “Atlas Shrugged,” Ayn Rand imagines a world where those who create wealth are stripped of their companies and wealth by a government who takes away because it can. And a world where people with money and power are told that they must share with those who can’t or won’t or are just too lazy? Back to Animal Farm…this doesn’t work- it will just evolve back to the inequality that Orwell predicts and that Mao hoped to eliminate but didn’t. If the power to create wealth is taken away from those who can, what will be left is  only those who can’t (Read on in Atlas Shrugged and you will see Ayn Rand’s scary vision of this scenario).

So how to solve this problem?

Here’s a start, as I see it: Create a society that does not allow greedy accumulation by the few where it will negatively affect the lives of many. Here’s an example: 

JC Penney, which has just filed for bankruptcy and has been declining for years, at the expense of the loyal employees who have served it for years, will give out $10 million in executive bonuses, including $4.5 million to CEO Jill Soltau.

The excuse is that the bonuses are given to “retain and continue to motivate its key executives.” Huh? This group is  responsible for the current irrelevance of an  iconic institution and failure, what else do they have to claim? When I was in companies large enough to confer a bonus, I remember years when I didn’t get anything because the company had not met its goals (regardless of whether I had met mine or not). What changed? Why do executives who presided at the death of a company deserve to be rewarded for it? What could that $10million add to the lives of the innocent, hardworking employees whose employment was terminated through no fault of their own?

Mariana Mazzucato, in her groundbreaking book “The Value of Everything,” begins to give us a clue to start a solution by her main thesis of distinguishing between the “makers” and the “takers.” This book is the beginning of a road map to MODIFY, not ELIMINATE, Capitalism as our core economic system. Her basic thesis is: Modern economies reward activities that extract value rather than create it. This must change to insure a capitalism that works for us all.

How exactly to do this without making radical, destructive and socially stupid changes a la Bernie is at the beginning of its conversation and learning curve. Everyone should participate in this conversation; the one no-no is don’t leave it to the politicians- politics never solved anything for anyone except them.

I want to be part of this process- we all should be and we all have equal right to cast our opinion and thoughts. As should you.

What I believe to be true, as Ayn Rand said, is that we don’t want to let or cause Atlas to fall and drop the world; we don’t need revolution, war, or other catastrophic events to solve the problem. Most of all, we don’t need POLITICS. Tell the politicians to go fly a kite (ALL of them) and let’s put our heads together to solve this.

What we need is a “Shrug,” not a crisis.

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