Every once in a while, one has to look at the macro effect, even though the micro effect is something we can easily see. David Rubenstein was at the Seeking Alfa sponsored by CNBC in mid July. Mr. Rubenstein is the co-founder of Caryle Group which is a very successful fund which owns 275 companies around the world. How he sees the world is important.
He was asked what keeps you up at night?
- Budget deficit – when the public begins to sound off the deficit is too high.
- Tariffs – if tariffs become a trade war
- Income inequality – more work does not translate to more income at the bottom
Mr. Rubenstein has 275 companies in the portfolio and every quarter the results are correlated with macro views. At the moment, Mr. Rubenstein believes his companies are doing well and will continue to do well.
The context he put tariffs in was the world has $80 trillion in trade, at the time of the interview about $50 billion was in tariff mode. The problem is when the percentage increases to above 5% and is expected to increase for example the President puts out a $500 billion tariff as if it will have no affect on capital investment or decision making. The President believes companies bringing back money into the US from overseas holdings translates into investments in new jobs. (an example is Apple – they held $350 billion in overseas accounts – with the money coming back at lower tax rates, they increased their dividend and bought back stock. The investments were done with domestic money)
Linking to dividend paying stocks, if our personal lives it is relatively easy to project aspects or changes to systems. We think that some is good, but we are not positive when it affects us. At the time of the interview, it was thought the world economy could easily absorb the changes. It is always good to listen to people who have a bigger picture of the world than we do. There are always many challenges or fires to be put out, which one become larger we are not positive. The essence is ensure you keep doing your homework, try to narrow you field to see both the macro and micro picture and remember when you choose quality time is on your side.
There are more questions than answers, till the next time – to raising questions.