De Groote Financial Group June 24, 2016 No Comments

“Watch your thoughts, for they will become actions. Watch your actions, for they’ll become habits. Watch your habits for they will forge your character. Watch your character, for it will make your destiny.”

– Margaret Thatcher

I am a firm believer that when power is centralized away from the people, the people will speak. Our very independence as a nation was established in 1776 declaring that we will not live under the tyranny of a government in England. As an optimist, England may be unleashing the next economic revolution declaring sovereignty from the controls of Brussels and the EU. It would be a mistake to bet against human nature and the ability to innovate. Despite the critics and all the government officials against this break up, it is absurd to think the people of Great Britain will suddenly decide to stop innovating, investing and growing.

Like Bono, the lead singer from U2 said, “Aid is just a stop-gap. Commerce [and] entrepreneurial capitalism takes more people out of poverty than aid…In dealing with poverty here and around the world, welfare and foreign aid are a Band-Aid. Free enterprise is a cure…Entrepreneurship is the most sure way of development.”

Margaret Thatcher could not have said it better, “your habits will forge your character. Watch your character, for it will make your destiny.”
Recently I watched a series on TV series on the 60’s and 70’s produced by CNN. I haven’t seen the 80’s yet or even know if they made one. But, what I discovered is that we have been here before. The world was just as crazy in the 60’s and 70’s. The difference is the noise and speed in which we communicate.
Stay focused on what is important. Do not let the volatility or noise shake your convictions or your core values. Together, we can manage the amount of risk you are willing to take but not the markets returns.
We are here to answer any questions or concerns you might have and look forward to discussing any issues what so ever.
Enjoy the comments about last week as they point to two forces colliding.

Very truly yours,
Doug De Groote, CFP®, MBA, CTC

Britain Votes To Leave The European Union (EU)…

By a count of 52% to 48%, the Brits chose to end their 43-year membership in the union.
What it means – It means that most analysts were wildly wrong about which way the Brits would go. It means the UK gets a new prime minister, since David Cameron resigned in the wake of the vote. And it means the Brits will eventually get their country back.

Membership in the EU started out so simple. There were trade agreements and common-sense rules on travel. Then the bureaucrats started adding layers of new regulations and conditions. Economic and workplace control slowly gravitated to Brussels, and human rights issues weren’t far behind. By ending the membership now, Britons are re-establishing their identity.

Many analysts predicted economic doom. While the markets sold off hard after the news of the vote, I don’t think it will last. Untangling the ties that bind will take years, and no one involved wants (or can afford) less trade and economic cooperation. There are many reasons that equity markets should roll over. This isn’t one of them.
But there are losers, like the remaining 27 countries in the EU. When will other strong members choose to jump ship? What about Eurozone countries? If they leave the EU and the common currency, then things will really unravel fast.

The one certainty out of all of this is increased volatility.

EU Proposal Would Tax Robot Labor…

The draft proposal classifies robotic workers as “electronic persons,” subjecting their owners to social security taxes. Wow…Is this another reason to shrink government in the EU? Will we follow down the same path?
What it means – If robots replace workers, who pays for retirees? Since most government retirement programs are based on current workers and employers paying for current retirees, the money’s got to come from somewhere.

This law would force business owners to pay the amount of taxes saved by replacing human labor with automation.

There’s no escaping the taxman. While this particular plan may not have legs, proposals like it will eventually find their way into law in most advanced economies.

Let’s just hope the day when the robots decide they aren’t terribly interested in supporting old people never comes.

Saudi Arabia’s Energy Minister Says The Global Oil Glut Is Over… Comments by Khalid Al-Falih suggested that the “war” on U.S. oil producers might be over.
What it means – For Saudi Arabia, at least for now, oil is everything. They fear a loss of market share more than a dip in prices. So when crude oil tanked in 2014, the Saudis kept production high and even gave discounts to some buyers, effectively declaring “war” on the competition, namely U.S. oil producers. Nearly two years later, they can declare victory.

U.S. producers took it on the chin. Active oil rigs fell from a peak of 1,609 in late 2014 to just 316 last month. Shuttering rigs is game over for many drillers. Over the last year and a half, 81 U.S. companies declared bankruptcy, costing thousands of jobs. But in this great shakeout, the survivors innovated. They can turn a profit even in this low-price environment. And should the market demand it, producers can bring their rigs back online, although it will take a while to get enough workers back in the oil field to ramp up production.

The global oil glut might be over, but given the Saudi acceptance of lower prices, the adjustment by U.S. producers, and the general lack of global demand, I don’t expect any massive moves upward for crude oil.

Chinese Students Give Nude Selfies As Collateral To Online Loan Sharks…

In the Wild Wild East of unregulated online lending in China, borrowers are losing their shirts.
What it means – Unlike in the U.S. where students only need to sign a simple promissory note to receive tens of thousands of dollars in loans, Chinese students face tighter regulations and limited funds.

To fill this market demand, online lenders have stepped in, requiring a bit more personal form of an IOU. Lenders and potential borrowers meet via smartphone chat applications to hash out terms. Loan amounts can range from a handful of yuan to tens of thousands, and can carry interest rates as high as 30%.

To ensure payment, lenders require the borrower send a nude selfie along with pictures of their ID, address, phone number and family information. If borrowers don’t pay, lenders will release the photos to friends and family. Talk about bullying. Ask yourself this, are you prepared to be bullied by globalization? Or are you willing to be the lender of last resort for the rest of the world’s students?

Doug De Groote, CFP®, MBA, CTC
Managing Director

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