You might be interested in Thomas P. M. Barnett’s new piece at Politico. In the piece Dr. Barnett finds a connecting thread in President-Elect Trump’s remarks on Greenland, Canada, and Panama. Here’s a snippet:
Three key trends animate the globe right now: (a) an East-West decoupling dynamic, (b) a re-regionalization imperative along North-South lines that brings “near-shoring” production close to home markets, and (c) a growing superpower clash animating all these “races” — namely, adapting to climate change, winning the energy transition, achieving AI supremacy, etc.
Trump, love him or loath him, sees just enough of this world and the fear it generates to know the right plan of attack.
Trump’s approach to international affairs reflects Americans’ judgment that we are done building a world order — which we’ve overseen from 1954 to 2008 —and now must vigorously embrace an aggressively competitive approach to this multipolar world; in other words, be less the generous market-maker and more the selfish market-player.
I haven’t followed Dr. Barnett much since reading his book, The Pentagon’s New Map. My remarks on it are in this twenty year old post. I think that my observations have aged better than his.
Quite a bit has changed over that twenty years. Russia, clearly, is no longer “New Core” to use Dr. Barnett’s terminology. Or is there a Core 2? Is China still “New Core”? I think the slug provided by Politico is notable:
Do you want a future in which Canada defects to the EU, Russia rules the Arctic and China runs Latin America? That’s the default outcome of non-action.
I can’t imagine Canada wanting to join us. He said we should consider military action against Panama and Greenland. So he has said a number of bizarre things when he talks about the issue. He doesnt seem to understand that Panama has had issues with water that lead to increases in costs for using the locks. Anyway, set that all aside and the only thing that maybe makes some sense is Greenland. However, I would like to see some sort of cost analysis. We already have a base there. If a US mining company wants to mine there I dont see anything stopping them.
The contention was being made that if Greenland goes independent they could boot us out and auction it off to the highest bidder, probably CHina. Meh. If that is true Greenland could just sell themselves to China anyway. Besides which, the whole issue seems to be security concerns vis a vis Russia and Trump considers them good guys. Hard to tell if this is just a distraction so we dont talk about the awful Hegseth nomination.
Steve
I like to open odds that the US will not have more territory by Jan 20, 2029.
I’ll open at 99.999%.
But the drama along the way!
@Curious, I might take that bet because there’s probably a 33.33% chance that Diego Garcia is U.S. territory in the next four years. Basically assuming equal chance that it will be the territory of the UK, the US or Mauritius, with the issue being driven by events that might necessitate some sort of resolution.
Ottawa ≠ Canada
I can imagine the western provinces (Alberta, Manitoba, Saskatchewan) wanting to federate with the United States.
My pick for underestimated event changing US territoreal extent is either Puerto Rico independence or statehood. But not happening before 2029
As for Canada, Alberta / Saskatchewan will stay, unless Ottawa behaves extremely inflammatory towards those provinces like banning their exports of energy to the US in a tariff war while favoring Ontario Quebec with said tariffs. Its unimaginable the Canadian Federal government would be that obtuse, since if either province left it would sever the country into 2.
Dave Schuler: Maybe That Trump Guy Isn’t So Crazy After All…
Trump engages in crazy talk:
• Threatening military action against Greenland, an autonomous territory of Denmark, a founding member of NATO, is crazy talk. It would violate the charter of the United Nations and international law. Just saying it undermines NATO, the credibility of the United States, our relationship with Europe, and international law.
• Threatening military action to seize the Panama Canal is crazy talk. It would violate the Torrijos-Carter Treaties. It would violate the charter of the United Nations and international law. Just saying it undermines the credibility of the United States and of international law.
• Threatening economic pressure on Canada unless they surrender their sovereignty to the United States is crazy talk. Just saying it undermines the friendly relations with Canada, the credibility of the United States, and international law.
My pick for unexpected event would be Cuba. Long considered of geostrategic importance for navigation into and out of the Gulf of Cheez-Its, with the coveted naming rights (perhaps Gulf of Tesla, the market will decide). It may be of less importance than when sugar was of vast importance, but the wild card is what happens with the Cuban-American diaspora if the government falls. Will they return/invest in Cuba and seek incorporation?
I was just paraphrasing Dr. Barnett’s piece in my tongue-in-cheek title. My own view is that President-Elect Trump too frequently speaks imprudently and floats trial balloons.
Dave Schuler: My own view is that President-Elect Trump too frequently speaks imprudently and floats trial balloons.
Attacking Denmark? It’s crazy talk.
Is anyone in favor of the US using military force to acquire new territory, all of it from allies? Has American imperialism reached the point of naked force? Russia’s critique of American behavior is spot on.
The “In These Times” podcast last week, categorized the seriousness of these issues kind of like this:
1. Panama — military intervention is being underrated. The U.S. invaded Panama somewhat recently (Operation Just Cause, 1989), and the U.S. economic and security interest in the canal are real. Getting Panama to agree to U.S. privileges would be a coup, and a deal could be worked out at China’s expense.
2. Greenland — territorial status is being underrated. Chinese mining ventures in the Western hemisphere pose real security concerns as do Russian military activities in the Arctic. NATO membership makes military action very unlikely, but continuing U.S. membership in NATO is not guaranteed.
3. Canada — change is far less likely, but Greenland, Panama and tariffs pose serious risk of destabilizing the country. The initial strategic interest in acquiring Greenland in the 1860s was to check the British Provinces.
1) The US used to routinely invade Latin America. It was mostly/always done to promote US business interests. Smedley Butler, our most decorated Marine, nails it.
“I served in all commissioned ranks from a second lieutenant to Major-General. And during that period I spent most of my time being a high-class muscle man for Big Business, for Wall Street and for the bankers. In short, I was a racketeer for capitalism. … Thus I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. … I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-12. I brought light to the Dominican Republic for American sugar interests in 1916.”
2) At present there are 23 mining licenses in Greenland. US companies have one (1) of those. The others are owned by Canada and the UK. US companies dont seem that interested in mining there. Neither does China which showed some minor interests but dropped them.
https://www.washingtonpost.com/opinions/2025/01/16/greenland-minerals-american-investment/#
3) Polls in Canada are running about 10% in favor of joining the US.
OT-Very long, detailed look at illegal immigration during the Biden’s years with lots more data and info than most people will know.
https://www.alexnowrasteh.com/p/biden-didnt-cause-the-border-crisis
Steve
That’s another way of saying “Ontario”.
That’s because it takes capital investment. Why make capital investments when you can buy stocks, the stocks will appreciate, and you make more when you sell them than you would with a capital investment?
“That’s because it takes capital investment. Why make capital investments when you can buy stocks, the stocks will appreciate, and you make more when you sell them than you would with a capital investment?”
I’m not sure where you are going with this; and I never did comment on the price earnings post.
Capital asset pricing (CAPM) is more than just earnings. Curious pointed out the expansion of the monetary base, which really is a reference to the denominator in the CAPM series equation, represented by interest rates. As the Fed expanded, rates went down, and valuations went up. A second problem exists with the index, where a handful of companies now drag PE multiples up. Said another way, you can tell two entirely different stories by what companies you include in an index.
As far as capex vs stocks, what’s the difference? The truth be told valuations implicitly incorporate free cash flow. A steel mill requires a lot of capex; business services do not. You will calculate a higher valuation given the same earnings in business services vs a steel mill.
Alternatively… we buy all the stock certificates of a company. We can use free cash flow (post capex) to pay down debt, increasing equity value, or reinvest to create higher future earnings. But either way capex is included in valuations, and on our dime. Just cutting up ownership into little bites of shares that are publicly traded doesn’t change anything.
I’m not trying to be preachy, I assume you know these things, but it doesn’t come through in the PE post or the comment above.
The difference is that capital investment builds something but buying stock does not. It might in the case of an IPO but after the IPO buying stock only has something to do with the real economy when a purchase of real goods is made which is not most of the time for the ultra-rich.
And, of course, that business services requires less capital investment explains why we have so much of it. What we need is more primary production not secondary or even tertiary production. What we’re getting is lots and lots of tertiary production.
One possible reform would be to treat income derived from selling stock as ordinary income rather than capital gains as is presently the case. That would probably be better than the alternative of increasing the transaction tax on stock sales.
Here’s a question for you. How are your winning bets at the racetrack different from the money you make by selling stock? I mean other than that gambling winnings are taxed as ordinary income while what you make by buying and selling stock is treated as capital gains. IMO they should be treated the same.
Crazy has a quality of its own.
The cannon is loose, firing warning shots everywhere. Allies and adversaries alike are dodging shadows and the Overton Window is unmoored and adrift. Much of the unthinkable has suddenly become possible.
Interesting times.
Dave.
Your commentary strikes me more as grousing about trading than investment commentary. Trading is a liquidity issue, to which I will return.
Your paragraph 1
To note that only IPOs are fresh capital is banal. And who has ownership of a tiny sliver of equity is just an administrative entry.
No one buys stock shares if they don’t endorse the policies of the firm, including the capital plan. (Ok retail investors excepted, but these people gamble on football too).
Unless you endorse the capital plan, and all other policies of corporate governance, you don’t buy the shares. Only if you are preparing a proxy fight do you buy the stock. As a passive investor you don’t avoid the capital plan of the company by buying stock in it. It’s not either or, as you asserted.
People like me change the capital plan. We buy all the stock. We collaborate with management on a 3,5,7 year capital plan.
Your critical notion of buying stock to avoid capex is just a bias, not an investment or corporate finance concept of any merit.
Your pp 2
I’m all in with you on more investment in blood and guts production. But it has nothing to do with your original assertion. Failure to do so is a byproduct of environmental policy, regulatory policy, government biases, trade policy…. Businessmen are greedy, if blood and guts industry and investment made sense we would do it. Oh, that’s right, I do. You conflate the issues with stock purchases.
Your pp3
It’s clear you don’t appreciate trading, and liquidity. Neither do 99% of people I’ve run into. People ask me: Drew, isn’t use of leverage risky ? The answer is yes. Guess what, people, You buy a house at 20% down and you just did an LBO at 20% equity. Who are you pointing your finger at? We tend to capitalize at 40%. But let me tell you what freeks me out. Liquidity. If we are wrong…….we are stuck.
You buy Apple or IBM you can trade out in a hour. My investments? Nope. It’s a huge risk. I’m stuck. An incredible risk. I understand that if you are not in the business you might not appreciate it viscerally. But it sends chills…. So when you criticize trading I shake my head and say, how naive. It is essential to capital markets.
You are entitled to your personal value judgments. But restrictions on liquidity would devastate capital markets. Reckless.
Chafe as I might at your comment, you make some reasonable points. Yes, “trading” vs. “investment in blood and guts production” is a valuable distinction. The total value of stocks traded in the U. S. in 2024 was around $83 trillion. The total annual business investment in the U. S. in 2024 was around $2 trillion. The discrepancy between the two is prima facie evidence that they are not the same. Perhaps you’re right about liquidity but the sheer size of the discrepancy strongly suggests that there’s something more than maintaining liquidity going on.
Your remedy, “environmental policy, regulatory policy, government biases, trade policy”, is just part of the remedy, I think. I think that, broadly, the incentives should change.
Although I’m open to arguments to the contrary I think that the timing of the transition from short term capital gains to long term should be changed from one year to five years and long term capital gains should not be taxed at all. Regulatory reform is essential as well. More attention in regulation needs to be paid to cost benefit than at present. That alone suggests to me that regulation by the permanent bureaucracy needs to be curtailed.
There is a very good reason to want to decrease trading. It crowds out “investment in blood and guts production”. There is a tremendous differential in the risks of each which is how our present system discourages “investment in blood and guts production” in favor of trading.