VIDEO TRANSCRIPTION - UnderTheLens - 03-26-25 - APRIL - A Sustainable US Competitive Advantage - Part II

 

 

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SLIDE 2

Thank you for joining me. I'm Gord Long.

A REMINDER BEFORE WE BEGIN: DO NO NOT TRADE FROM ANY OF THESE SLIDES - they are COMMENTARY for educational and discussions purposes ONLY.

Always consult a professional financial advisor before making any investment decisions.

SLIDE 3 – COVER

As we have well documented, the US faces unprecedented economic and financial challenges as the national fiscal debt soars seemingly out of control.  However, there is a solution if the US is to take bold and decisive action.

The window is rapidly closing; the time short; and the risks are not insignificant – but it is possible!

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The US must implement a national policy approach that will place it on the path to delivering a sustainable competitive advantage for the nation.

This sustainable competitive advantage must deliver performance that will be consistently better than its competitors over the longer term.

This sustainable competitive advantage must have unique strengths that will be difficult for competitors to replicate.

This subject is important enough that we will do it in a two part series accompanied by expanded materials in out weekly newsletter.  Hopefully, this effort will aid you in building an investment portfolio that will likewise perform and the results also being sustainable.

In Part 1 we covered the areas outlined here, where we focused on what and why something must be done - as well as what it will take.

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In Part 2 we will focus in this session on how it can be done!

The approach is different than anything previously attempted by the US but actually builds on what is already in place but which needs to be properly organized, structured and financed.

The change in how money and credit is now created has completely altered the investment landscape. This all stems initially from the US currency becoming a Fiat Currency under President Richard Nixon and subsequently the US Federal Reserve adopting two significant policy stands:

  1. Reducing the long held US Bank Reserve Requirements of US Money Center Banks to 0.0% from a historical average of 14.1%,
  2. The Federal Reserve then paying interest to Money Center Banks on Bank Reserves & Reverse Repo assets on deposit with the Federal Reserve.

This has made money effectively limitless if the collateral securing the money is accepted as having a financial value.

The opportunity for the US Government to raise money now can start with the US Government pledging assets owned or controlled where a financial value and title can be legally established. This is the craft and trade of Wall Street in an era of Collateral Transformations, Collateral Swaps and any number of creative new derivative structures.

It’s about Asset Monetization which we will get into when we talk about the three legged stool of:

  • Sovereign Wealth Funds
  • Private Equity
  • Crypto Currencies

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First let’s start with the importance of an Investment Driven Strategy where the Government shares in the Profits versus pays out taxpayer money on borrowed debt financing.

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You can raise money or capital by borrowing money or through the use of securities which allocate equity based on the net worth of capital invested.

By lending you issue debt in the form of Bonds which come in the form of Bills, Notes or Bonds depending on Maturity of the Debt ….

..... or you  receive equity for the securities you create and then potentially profit on the change in the value of those securities.

Those securities are the three legged stool I mentioned where the securities are created through the monetization of assets. Governments have plenty of assets but traditionally have been unable or hesitant to monetize them.

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That has all changed with changes in Federal Reserve Policy, modern Credit creation instruments and the global Derivatives complex.

My colleague Richard Duncan does a masterful job of explaining the new realities in his recent book “The Money Revolution”.

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We are living in a in a completely new policy environment.

Old World:

  • Gold Backed Money,
  • Balanced Trade,
  • Large Budget Deficits,
  • Excessive Money Creation

... actually did more harm than good.

New World:

  • Large Scale Government Investment is POSSIBLE
  • New Investable Global Industries and Technologies AVAILABLE
  • Financing of Large Scale Money Creation SOUGHT
  • The Delivery of a Technological Revolution is POSSIBLE

… would deliver higher rates of economic growth but also

… solve intractable global problems

… radically improve the well being of everyone

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THE US STRATEGIC IMPERATIVE

The United States can and must make a multi-trillion-dollar investment in new industries and technologies over the next 10 years in order to ignite a technological revolution that would turbo charge economic growth, consolidate the country’s geopolitical preeminence and vastly enhance human wellbeing, not only in the Us, but all around the world!”

Richard Duncan

The Money Revolution

 

THE US MUST BE AGAIN BE SEEN AS THE PLACE TO INVEST IN

FIXED INVESTMENTS & CAPITAL STOCK

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Investments are not trades and are strategic and long term in thinking. Yes they can be bought and sold with high returns but liquidity comes with restrictions

Large investments are the bread and butter of global institutions for their Assets Under Management or AUM.

Before they consider how much to invest, what and where to invest and how to structure the investments they must have strong confidence in the country they are investing in. The US has long held that vantage point but in recent years this has not been the case as administrations were not pro business and in fact almost predatory.

The US must re-establish itself as an attractive pro-business destination. To do this the US must:

  • REMOVE THE THREAT OF TAXATION, REDUCE REGULATIONS, THE CHANCE OF NATIONALIZATION & CONFISCATIONS TO FUND IRRESPONSIBE GOVERNMENT
  • THE COUNTRY MUST REWARD NOT DE-INCENT THROUGH
    • Tax Treatment
    • Limit Regulatory hurdles
  • A COUNTRY MUST BECOME BUSINESS FRIENDLY v HOSTILE - THIS NEEDS TO BE REINFORCED IN AMERICA AND UNDER THE NEW ADMINISTRATION IS HAPPENING.

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CAPITAL GROWS –DEBT SUFFOCATES & CHOKES

One of the most important things to understand is that capital

  • Grows,
  • Evolves and
  • Become more Complex!

Capital Transforms

  • The way people live and
  • The environment in which they live.

Capital Grows & Evolves Due to Investment

The Amount & Type of Investments determines the Speed at which capital grows and the Direction in which it evolves

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THE US IS LOSING ITS POSITION AS THE WORLD’S MOST IMPORTANT ECONOMY BECAUSE IT NOW INVESTS TOO LITTLE!

  • The rate of growth of the US Capital Stock has been slowing since WWII and has been particularly weak since 2008.
  • The average annual growth rate since 1926 has been 2.5% a year.
  • In 2019 it was 1.6% and was the highest growth rate in a decade.
  • The growth in Capital Stock has slowed because investment has been weak for fixed assets (Tangible Assets used in the production of Income).

Insufficient Government investment is to blame

  • Government investment in fixed assets declined from 7.1% of GDP in 1961 to only 3.5% of GDP in 2019.
  • US Government Spending is being used for Consumption or Transfer Payments for a 70% Consumption Economy versus Fixed Assets

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  • In 2019 China invested twice as much as the US relative to the size of economy.
  • Investment in China accounted for 42% of Chinese  GDP whereas US investment made up only 20% of US GDP
  • China’s is growing much more rapidly than the US Economy
  • Investment creates Capital and Capital Generates Income
  • China has been investing more relative to the size of the economy since 1970

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  • China is now actually Investing much more than the US
  • In 2019 China Invested 36% more or -$1.6 TRILLION more  than the US did!
  • China is now investing more in fixed income than the US and has every year since 2011
  • If this trend continues China will soon overtake the US to become the preeminent global super power!

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THE US MUST IMMEDIATELY START INVESTING MORE IN R&D

  • In 2019 China Overtook the US to become the World Leader in R&D
  • While a great deal of extraordinary work in R&D is being done in the US , current levels are insufficient because China is simply investing more.
  • They are also investing smarter because they have a plan –It is called Made in China 2025 and was initiated in May 2015
  • The cornerstone of that plan was to win the AI Race
  • Made in China 2025 is Sage One of an ambitious three stage, state led program with the ultimate aim of making China the world’s leading manufacturing power by 2049.
  • It has established nine Priority Tasks and10 Key Sectors to promote.
  • The central problem is the US doesn’t have a plan nor feels one in needed because the private sector will do that.

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THE US MUST IMMEDIATELY START INVESTING MORE IN R&D

  • If China wins the AI Race , as it did the 5G Race then China will rule the world.
  • The first country to achieve artificial general intelligence, the point where machines can perform any task that a human can, is likely to have the rest of the world at its mercy.
  • At that point AI will quickly accelerate exponentially beyond human intelligence.

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  • This is the Space Race to the power of infinity?
  • The Industrial Revolution enabled Western Europe to conquer most of the rest of the world.
  • The AI Race is a Winner Take All!
  • The winner will have the 21st Century Equivalent of a Nuclear Weapons Monopoly!
  • China has a plan to win that race!

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So how do we do this when the US is running an out of control 34T debt, 125% Debt-to-GDP and Fiscal Deficits of 2T per year?

We think differently!

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We start by monetizing US Government Assets and then approach the financing of our Investment in a Competitive Strategy using new investment tools.

 

 

 

A three legged investment stool consisting of:

SOVEREIGN WEALTH FUND (SWF)

- Where we monetize US Government Assets to begin the funding of it.

PRIVATE EQUITY (PE)

- Incorporate Private Equity in the form of Institutional Investment

CRYTO CURRENCY

- and use Crypto Currency to capture trapped Foreign Investment

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SOVEREIGN WEALTH FUND

Monetization of public assets refers to generating revenue from government-owned assets, like land, roads, or infrastructure, by leveraging private sector expertise and investment, often through leasing or partnerships, to unlock their economic potential.

DEFINTION:

Asset monetization is the process of creating new sources of revenue for the government by unlocking the economic value of unutilized or underutilized public assets.

GOAL:

To generate income from assets that might otherwise be underutilized or not generating any revenue, allowing governments to invest in new infrastructure or other priorities.

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EXAMPLES WOULD BE

  1. Land, Real Estate (Same as ABS, MBS)
  2. Licenses (FCC)
  3. Leases (Energy)
  4. Leasing: Leasing out public land for development or infrastructure projects.
  5. Public-Private Partnerships (PPPs): Collaborating with private companies to manage and operate public assets, with the private sector receiving revenue in exchange for their investment and expertise.
  6. Infrastructure Investment Trusts (InvITs): Allowing investors to invest in infrastructure assets through a trust structure, generating income for the government and investors.

Selling assets: Selling off unused or underutilized government properties

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Private Equity has exploded into trillions of global investment that is ripe for investing in Monetized US Assets as well as targeted investment as part of the Sovereign Wealth Fund.

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The reason President states he wants to be King of Crypto and is making the appointments has been making within the Securities & Exchange Commission is he has big plans for the use of Cryto Currencies as an additional major funding source to finance a US Investment strategy that will not only fund investment but also assist in funding his plans regarding reshoring of key strategic industries.

These are big subjects that we will be talking more about this year in our newsletters.

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So what can we conclude?

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As we concluded in part 1 it is all about having the leadership to care out this plan:

  • VISIONARY LEADERSHIP
  • BOLDNESS OF QUEST
  • HARNESSING A DIVIDEDED NATION

What we tried to point out in Part II is the is a new way of doing things that is all there!

We just need to do it.

The only thing standing in the way is Washington power wrangling taking our eye off the ball or making change impossible for either party to carry out what is required.

A divided country is the kiss of death in times of a country emergency.

Ii can bring a country together is there is a share agreement on threat and solution.

It won’t bring a country together if no one even realizes the problem or refuses to recognize it because it may give the other party some sort of public perception advantage.

We can only hope for the best!

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I would like take a moment as a reminder

DO NO NOT TRADE FROM ANY OF THESE SLIDES - they are for educational and discussions purposes ONLY.

As negative as these comments often are, there has seldom been a better time for investing.  However, it requires careful analysis and not following what have traditionally been the true and tried approaches.

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Do your reading and make sure you have a knowledgeable and well informed professional financial advisor.

So until we talk again, may 2025 turn out to be an outstanding investment year for you and your family?

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I sincerely thank you for listening!