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“Managed Globalization”​ Through Mandated “Onshoring”​ is a Necessary Pandemic Response- But, That’s Only Half the Battle

By: Neil S. Siskind

“Managed globalization” (or “nationalism”, or “protectionism”, or “partial-autarky”, or whatever term you prefer) as a response to a pandemic (in this case, the COVID-19 pandemic), and for the purposes of preventing and managing future diseases and pandemics, requires two entirely separate elements. Congress’s establishment of a federal mandate requiring the “onshoring” or “reshoring” of all manufacturing, production, and distribution of all “essential products” (or “critical products”) is a necessary measure towards the country being prepared to efficiently manage future emergencies as they arise and create demand for essential/critical products by hospitals, law enforcement, firefighters, the military, local businesses, and the general public, allowing for manufacturers and government agencies to more effectively prevent raw material and production limitations, and to rapidly solve supply chain constraints. We’ve learned, and are learning, a harsh lesson about the importance of this strategy and structure.

But, in terms of preventing or minimizing widespread infection and disease from pathogen outbreaks, in the first instance, inbound-travel restrictions and protocols are the main control valves.

A person brought this novel coronavirus to the United States; that happened through air travel- and not through trade. If we fail to properly and perpetually manage inbound travel from foreign nations (including by Americans returning home from business and pleasure trips), then, the next pandemic- notwithstanding manufacturing, production, and total supply chain autarky for essential/critical products- may not be far off (not to suggest that this pandemic is, even, nearly over).

Without inbound-travel restrictions and protocols, including health checks and quarantines for inbound travelers from overseas (with such protocols conducted at the travelers’ expenses), we will always be reactive- and not proactive.

Diseases (and pandemics) can certainly start in the United States; zoonoses can, potentially, be transmitted from animals to humans in U.S. forests, in U.S. rural areas, on U.S. farms, and in U.S. zoos. But, our modern and efficient health systems and standards, combined with our national interest and self-interest, would lead to an immediate and complete response, which would include mass and vast notices to the American public. We have laws and standards and protocols designed to protect the nation. Certain other countries may not have the same, or equivalent, health-management resources, emergency management systems, and legal obligations, or, they may have different standards of what is “concerning” or “problematic”, or they may have different interests, values, or food and sanitation practices. A nation’s financial resources, and limitations on such, play a role in its ability to detect and respond to emergencies. A nation’s self-interest in not creating a panic or not being blamed for a pandemic may outweigh its interest in our safety- as we have, now, witnessed.

Manufacturing, production, and complete supply chain autarky for all essential/critical products (including for the raw materials used in such products) through strictly domestic raw material sourcing/growing/development and essential/critical product manufacturing and production is a necessary national policy towards effectively responding to future state and national emergencies, of all kinds. But, when it comes to protection from diseases, at the borders and at customs is where versions of protectionism or managed globalization related to human cross-border mobility and movement must be implemented- otherwise our national health standards, health and hygiene practices, and disease emergency measures, will, increasingly, be rendered impotent.

Surely this would change the nature of travel as we know it. But, I’d rather see America change the nature of travel than see another country change the nature of America– again (and not even feel remorseful about it).

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About the Writer

Restructure and reduce business and personal debts; collect debts owed; monetize receivables by selling your invoices: https://www.debt-solutions-attorney.com/

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Neil Siskind is: President of The Siskind Law Firm, https://www.debt-solutions-attorney.com/, focused on debt negotiation and restructuring, debt collection, debt investing, product investments, trademark licensing, and product distribution; Founder & Chairman of The Fatherhood Assignment™, a think tank and advocate for children with absentee fathers; Founder of the global charity marketing initiative, Caring is Free®; Founder of National Fatherhood Day™; Owner & Conservator of The Neil S. Siskind Nature Preserve, over 9 acres of conserved waterfront land along New York’s majestic Hudson River; and author of The Complete Guide To The Ways To Manufacture & Sell Your Products. On December 11, 2017, in his article The Yield Curve Speaketh: Why Stocks Might Crash in Early 2018, Neil Siskind accurately predicted the February, 2018 stock crash, the largest single-day point drop in the Dow Jones Industrial Average’s history. All the stock indices are down approximately 6% for 2018. In his September 26, 2018 article, Lots of “Bull” In The Bull Market: Let’s Look At What’s “Really” Growing, Neil Siskind explained that, despite Wall Street’s bullishness, the economic data and stock market underpinnings were in decline, and the economy and stocks were at imminent risk. By the closing of markets on October 23, 2018, the S&P 500 had fallen approximately 7%, with October being the S&P’s worst month since August 2015 (and December being the S&P’s worst month ever), the Nasdaq continues to have its worst month since 2016, and is down approximately 8% from article publication, and the DJIA is having its worst monthly performance since 2008. In 2018, Neil Siskind coined the phrase “synchronized global slowth™” (or “synchronous slowth™”) to describe the occurrence or condition of multiple emerging market and developed market economies commencing a downward trajectory of economic and GDP growth, or actually contracting to a point of slow, stagnant, or negative economic and GDP growth, simultaneously. If you are in need of office space in South Florida, contact Neil Siskind about space availability at The Siskind Executive Office Complex in Boca Raton, FL.

Other Recent Articles by Neil S. Siskind:

Settle Debts, Restructure Debts, Collect Debts, Sell Receivables: Debt Solutions From The Siskind Law Firm- https://www.debt-solutions-attorney.com/ 

Buying or Investing in a Distressed Business is Not, Necessarily, the Same as Buying Distressed Credit- By: NEIL S. SISKIND

Buying or Investing in a Distressed Business is Not, Necessarily, the Same as Buying Distressed Credit.

A business can be distressed for reasons other than being in arrears on a credit obligation.

A business could be in good standing on a loan, while failing to pay its expenses, including its rent, vendors, and/or payroll, as they come do- or a company may have no debt, at all.

Investing in this kind of distressed situation would require debt or equity capital being put towards operations improvements, or to marketing and sales initiatives and personnel, with either option being designed to move the company to profitability through operations changes, as opposed to through buying and restructuring or paying-down credit obligations.

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Narrow Credit Spreads, Low Interest Rates, and Distressed Debt- By: NEIL SISKIND

Narrow Credit Spreads, Low Interest Rates, and Distressed Debt

Narrow credit spreads (in times of low bond yields) mean that financing operations with corporate bonds is inexpensive, and capital is pretty freely available for public companies. Low interest rates mean that there’s a low cost of capital and low debt service costs for public and private businesses.

In times of low rates, low yields, and narrow spreads, companies take on debt- sometimes, or often, too much debt- which can turn against them as interest rates rise, or as growth and earnings slow.

This puts companies, and their credit obligations, under pressure, and can push companies’ loans into default. When the number of non-performing loans (“NPLs”) rise, it creates distressed debt and distressed credit opportunities for investors.

Of course, a buyer of a distressed credit instrument has to understand the underlying business, industry, and sector of the subject company and have a proper business plan in order to improve performance and ensure a successful distressed credit investment.

The terms “distressed asset”, “distressed debt”, and “distressed credit” can be used, and “are” used, interchangeably- By: NEIL SISKIND

The terms “distressed asset”, “distressed debt”, and “distressed credit” can be used, and “are” used, interchangeably. But, “distressed assets” not only include distressed equity (where liabilities exceed assets) or a distressed credit instrument (due to a past due underlying debt obligation, i.e. a distressed debt), but also include actual personal property and real property, such as property being sold for below its market value in order to pay-off a debt secured by that property. So, the term “distressed asset” is a bit of a broader catch-all term to include assets that go beyond “instruments” evidencing past due debt, and beyond insolvent company equity (for companies not able to pay debts as they come due).

All distressed assets, including collateral already foreclosed-on and owned by a commercial creditor following a default, or an asset seized by a government agency pursuant to a tax lien, result from a distressed credit and distressed debt situation (save for an asset seized by law enforcement due to criminal activity- though it could be said that such seizure was for a debt owed to society).

Collateral Caution for Lenders- by: NEIL SISKIND

Collateral Caution for Lenders

The value of business loan collateral (besides real estate) in this fast-moving, fast-changing world, can, also, be fast-changing.

Hard business assets have, heretofore, always provided good security for business loans. But, while once considered good loan collateral, hard assets now become quickly outdated & lose value because industries & technologies rapidly evolve, and because entire ways of life, shopping, and work, are changing. Thus, hard business assets are less reliable loan security.

In the modern economy, used machinery and other used equipment are often more valuable as scrap than in their present forms due to rapid technological changes, economic changes, & disinflation, resulting from technology & globalization- while product inventories quickly lose value due to technology’s & globalization’s influences on disinflation, making new products nearly as inexpensive as are aged or excess products.

In the digital age, goodwill, existing direct to consumer distribution, cash flows, & IP, may be the best forms of (non-real estate) business loan collateral- versus machinery, equipment, existing wholesale distribution channels, & inventory.

Things once considered to be tried-and-true & measurable loan security- are no longer that, at all.

Non-Performing Mortgage Loans- by: NEIL SISKIND

Non-Performing Mortgage Loans

Non-performing loans, or NPLs, have, historically, referred to mortgage notes. NPL investors can buy one NPL, or, more often, a portfolio of NPLs from a lender.

Banks, which historically were the main source of mortgages, sell portfolios of NPLs b/c banks are not in the business of managing real estate. Loans in default are best monetized early-on, when a portion of the principal can be realized w/o the bank going through the foreclosure process & then selling the property.

But, more than half of all mortgages issued last year came from non-bank lenders, up from 9 % in 2009, so, NPL portfolios will be available from such lenders in the future (both of mortgage & business NPLs).

Investors in NPLs have 1 of 2 goals, depending on the investor: (i) Purchase the loan at a discount-to-principal, then work w/ the borrower to restructure the loan so that the borrower can perform- b/c the loan was bought at a discount to principal, the interest rate can be rather favorable to the investor; or (ii) foreclose & take back the property at auction.

If a portfolio of NPLs is bought, some mortgage loans will end up one way, some will end up the other. Investors should have a plan when buying an NPL, but, also be flexible on options to maximize ROI and/or yield.

Unsecured Debt & Unsecured Credit- By: NEIL SISKIND

Unsecured Debt & Unsecured Credit

Unsecured debt and credit means debts and obligations where the creditor has no security for credit extended to the debtor, beyond the ability to obtain a judgment on the debtor. No particular asset can be secured, or foreclosed on, or seized upon default to pay the outstanding debt. But- such a creditor can get a judgment on a debtor (whether the debtor be a legal entity or an individual), and then freeze, seize, and/or sell the debtor’s assets (and put liens and garnishments on income) to pay the debt.

Unsecured debt includes trade receivables for products and services provided to other businesses; trade receivables for products or services provided to consumers; bills for medical services for people without insurance who visit emergency rooms; medical services not covered by insurance that are not paid for at the time of service; bad checks that don’t clear; lawsuit judgments; past due rent that results in eviction; unpaid utility bills.

Unsecured credit includes personal loans without collateral, and credit provided and received through credit cards.

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Banks and the Fed: It’s Not Only Lower Net Interest Margins- It’s Also Less Loan Security- By: NEIL SISKIND

Banks and the Fed: It’s Not Only Lower Net Interest Margins- It’s Also Less Loan Security

The Fed has, and will continue to, cut its funds rate. Falling Fed funds rates have an almost immediate negative impact on banks’ interest income, as most loans pay a fixed spread over short-term rates. Declining deposit rates — which save banks money — typically take longer to set in.

Not only will banks make less profit on existing and new loans, but, as the economy slows, the value of collateral on existing loans could go lower. Thus, banks that made loans at a particular loan-to-value (LTV) ratio of collateral (such as real estate), would see that LTV ratio rise- meaning that a loan that was once not too risky, may now be much more risky, due to the potential slowdown of the borrower (for a business loan)- and/or due to depreciation in market-value of the collateral covered as loan security (for a business or real estate loan).

Softer Housing Markets? Maybe Not- By: NEIL SISKIND

Softer Housing Markets? Maybe Not

I’ve written in the past how an economic slowdown can lead to higher unemployment, and, thus, weaker housing markets, and even mortgage defaults and foreclosures.

But- as Treasury note yields have declined, it has not only been homeowners who are seeking houses, but, also, investors in search of safe and acceptable yield that can no longer be obtained in Treasuries. In the past several years, yield-hunting investors have turned to residential real estate for yield (rental income)- and for appreciation.

As the economy slows, and yields remain low- and may go even lower- investors in search of yield may keep housing markets across the nation strong, and, in fact, they could get even stronger as unemployment turns people who would otherwise be buyers, into renters- pushing yields (a/k/a rents) even higher- making houses even more desirable long-term investments.

Distressed Credit Investing: It’s What Lies Below- by: NEIL SISKIND

The key to successful distressed investing is the same as with any investing- an investor has to intimately understand and have familiarity with the underlying business and industry, and the value of the underlying asset with which the credit is secured. An investor should stick to distressed assets and debts in markets and assets and industries he/she knows well, and not just trade on any credit instruments across industries or geographies.