Mar 29, 2018 by Scott Garvey

A taxing time

John Deere’s share price, like AGCO’s and CNH’s have shown a downward trend since the news of U.S. tariffs was announced

A few days ago, an article appeared in one of the financial publications, which quoted Warren Buffett, the billionaire investor known as “The Oracle”. Think long term and don’t follow the ups and downs of market trends more closely than necessary were his reported comments. In other words, keep calm and carry on.

That was probably music to the ears of many investors, because things aren’t looking too rosy in the financial sector these days. And it doesn’t look like they’re going to brighten any time soon. Although there have been occasional temporary upswings.

Why is that? The stock markets looked so strong and steady just a few months ago. Are we suffering from an economic depression? No, at least not yet.

The reason is that the trade policies of the U.S. have changed dramatically in a very visible way in the last few weeks. And the sad reality is all of us who have investments, pay into pension funds, own mutual funds or stock portfolios are much the poorer for it. Which, of course, includes most of us in the Western World who work for a living.

Since the U.S. Administration broadsided world business leaders with the latest set of tariffs on steel and aluminum (and a promise of others to come), the average person’s non-cash retirement investments have started to shrink at an accelerated pace. This latest threat, of course, comes after that administration imposed—what was it—a short-lived 300 percent tariff on Canadian-made Bombardier aircraft.

With the rapid-fire unpredictable onslaught of off-the-wall trade policy statements, virtually all manufacturers of goods are feeling downward pressure on their share prices as markets suffer a pretty rocky ride.

With the globalization of industry today, pension funds of workers in all countries suffer when that happens, because all of those funds are tied to the wellbeing of today’s corporate entities. When the world order that underpins business and trade becomes unstable, stock prices fall and wealth disappears.

In the U.S. the AEM (Association of Equipment Manufacturers) has been airing a TV commercial on the Fox News Network aimed quite clearly at an audience of one, the U.S. president. After heaping praise upon him in the first 10 or so seconds to apparently assuage his ego, the topic then turns to asking him to, well, smarten up and forget the massive tariffs idea.

Tariffs will affect the retail price of equipment for everyone, including farmers. They will disrupt the functioning of global supply chains that developed over the past few decades. And there will be spinoff effects across all industries. If the threat of escalating tariffs and counter tariffs continues and the certain effects that will have on the global economy come to pass, those of us who’ve been counting on investments to see them through retirement better learn to say this many times every day after we turn 65: “Hello. Welcome to the drive through. Can I take your order, please?”

 

 

Scott

Scott Garvey

Scott Garvey


Grainews' machinery editor Scott Garvey follows trends and innovation in equipment technology, takes a look at new farm machinery offerings, tracks their performance and goes into the workshop to find better ways to keep them up and running.


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