Investing through the summer fog of 2012

The economy continued to throw off mixed signals for the month of July, whipsawing traders and making investors even more squeamish and paranoid about where to tuck their wealth.

Added to this seesaw of economic data from everything from July's consumer confidence of 65.9, up from a revised 62.7; the July Chicago PMI of 53.7 up from 52.9.

The May S&P Case-Shiller HPI 20-city M/M rose 0.9%, however, the Yr/Yr fell 0.7%. The June New Home Sales figure fell to 350k from a revised up 382,000. The M/M Pending Home Sales Index for June dropped -1.4% from a revised downward 5.4% increase.

The Richmond Fed Manufacturing Index for July fell from -3 to -17. Conversely, the Empire State Manufacturing Survey, Kansas City Fed Manufacturing Index, Philadelphia Fed Survey all improved from the previous month.

The Dallas Fed Manufacturing Survey, consisting of a Business Activity Index and Production Index, found both indexes falling.

The knowledge that short-term markets are driven first by news headlines and central bank policies rather than primarily macro and macroeconomic data forces a perverse reaction onto the market in this unfamiliar climate we find our capital in.

Deteriorating economic statistics brings hope, by some, of additional stimulus measures from the Feds. Today, August 1, the Feds may shed some light onto their contingency plans, if there are any plans, for supporting a decaying economy between now and the November elections.

If Quantitative Easing III (QE III) or some variation of yield repression doesn't materialize from the Feds, markets will have an excuse to move lower, decaying as well.

Secondly, European Central Bank President, Mario Draghi, kicked off last Thursday's stock market rally by stating that he will do whatever it takes to save the Euro. A quick recap; in theory, generally, saving the Euro and the EU requires capping rising Spanish and Italian debt yields by the ECB agreeing to purchase their sovereign debt.

Because of inflationary fears, many German politicians, including Chancellor Angela Merkel's coalition government, vigorously oppose this action and similar bailout schemes. Two days ago, Monday, Treasury Secretary Timothy Geithner met with German Finance Minister Wolfgang Schaeuble and Mario Draghi, reaffirming their commitment in solving this crisis.

On Thursday, the European Central Bank will hold another policy meeting to find common ground. If the meeting fails to produce the proper response in the eyes of the market, this too will reverse last week's rally and send the market lower.

A third item that will send stocks lower in August, extending the S&P 500 incarceration in the current trading range between 1,099 and 1,419, if the realization sinks in of the draconian effects of federal budget automatic sequestration.

When austerity begins appearing in budgeting decisions in government, and workers begin preparing for possible layoffs and downsizing by reducing personal spending, and when businesses relying on government contracts to purchase their goods and services recalculate their cash flow and revenue, GDP will decline.

The May 2012, G.19 Federal Reserve Statistical Release, dated July 9th, shows "consumer credit increased at an annual rate of 8 percent in May. Revolving credit increased at an annual rate of 11-1/4 percent, while non-revolving credit increased at an annual rate of 6-1/2 percent." It's hard to imagine this type of credit activity continuing in the third and fourth quarters of 2012.

Our anemic economy grew 1.5% in the second quarter, down from 2.0% in the first quarter, with major help from consumer credit. Subtracting significant credit in the third and fourth quarters will exacerbate any weakness.

Individual savings rates were reported up 4.3%, annualized, in the first three months of this year, starving an already malnourished economy of vital disposable income. The minuscule interest currently being paid on savings is also problematic for an economy in need of greater money supply velocity.

An economically weakened Europe and a weakening China will inadvertently push the US economy over the edge unless smaller emerging markets can somehow re-accelerate the global economy while avoiding the developed nations' debt contagion.

The final culprit with the motive and opportunity to assassinate the economy is stagflation. As 2012 futures' prices on corn, oats, soy beans, and wheat reached multiyear highs, 1,300 counties spread over 29 Midwest states have been declared natural disaster areas by the USDA.

In the 1970's, President Richard M. Nixon imposed wage and price controls in an attempt to snuff out stagflation and inflation. President Gerald Ford attempted to talk down inflation with a Whip Inflation Now (WIN) campaign, complete with WIN buttons. Inflation ran rampant throughout the 1970's until a new Sheriff rode into town in 1979.

The newly appointed Federal Reserve Board Chairman, "Tall" Paul Volcker, ended inflation by jacking up short-term interest rates to 22%. Although, lifting interest rates to nosebleed levels induced at the time the deepest recession since the Great Depression, inflation did not return.

Another smart decision made by the government at the time was issuing callable long-dated treasury bonds and zero coupon bonds to minimize interest expense. This morning, Treasury announced it is investigating issuing floating rate notes; while interest rates are lower than they have been in the past 100 years. I'm puzzled by such a decision.

This earnings' season, restaurants such as McDonalds (MCD), Chipotle (CMG), Buffalo Wild Wings (BWLD), have admitted to struggles with cost inputs, missing earnings estimates, and are now lowering guidance for upcoming quarters. Food suppliers like Hormel Foods Corporation (HRL), Tyson Foods, Inc. (TSN), and Smithfield Foods, Inc. (SFD) are experiencing these headwinds, as well.

Brent Crude oil is priced north of $100 dollars a barrel. Members of OPEC require the price of oil to stay north on $80 dollars a barrel to maintain political stability at home. That price level is in conflict with jump-starting the global economy that is continuing to deleverage from the previous decade.

Regardless, if the price of oil should rise or fall short-term, the global economy will be petroleum-based for decades to come. Therefore, an essential building block for any inflation defensive portfolio requires an integrated oil company such as Exxon Mobile (XOM) or Chevron (CVX).

One final thought; although, we have experienced deflation in many things since 2008, technology, of course, real estate and virtually any asset requiring financing, and the cost of capital itself, this economic period will end, too. And once more, we will again face and fight inflation.

Unappreciated is the two-stage intermediate step between deflation and inflation – stagflation. Ben Bernanke has spent years and trillions of dollars attempting to re-inflate asset prices. One day he will succeed. At that point, Stage One, the rising cost of living, or cost-push inflation kicks in, whereby, too few dollars are available for rising prices.

Stage two of the stagflation equation is flat wages and personal income. Whether one draws a paycheck from a job or clip coupons from investments, purchasing power begins contracting, not growing.

This reality of less disposable income relative to prices, combined with an aging population and extended life expectancy is a recipe for structural economic arrested development until we surrender to full-blown inflation in future years.

Politicians will feel obligated to rectify the former condition and then, the more radical and dangerous phase of inflation occurs, demand-pull, leading to too many cheapened dollars chasing too few goods.

Confidence or the lack thereof, in a nation's currency, is the thin line straddling inflation and hyperinflation.

And, it is here, that your portfolio of hard assets such as gold and silver, agricultural commodities providing food security, natural resources such as land, timber, water, energy, selective adjustable rate debt, and very selective stocks, will pay off for the patient, long-term, investor during inflationary times.

Will the Price of Gold Reach $5,000?

All the current chatter these days on whether or not to reduce a portfolio’s exposure to gold is, to put it bluntly, a short term trader's conversation. A crowded trade, whales exiting a crowded trade, is it deflation or inflation? Gold is the inferior commodity to soft commodities such as wheat; gold’s current price elasticity, and more, all sound reasonable.

However, if you are a trend position builder and/or a long term investor of gold, we shall now review other important long term considerations that transactional traders omit from discussions.

If credit rating agencies have become less duplicitous, since the last decade, when they were arguably complicit in financial high crimes and misdemeanors, the US government’s credit rating must appear on someone’s credit watch list, inside of two years, if not, altogether downgraded to less than AAA. This is a plus for gold.

Between now and 2015, the global economy, measured in regional or national terms, will experience a protracted slowdown. In reality, a truer 21st century metric, for the production and consumption of goods and services, is seven billion individual, micro-economies. Nevertheless, the US will fair far worse than several developed nations and most emerging countries. The US 20th century debt structure is unsustainable with 21st century cash flows.

The US is also the largest component of the current global economy. Since the signing of NAFTA in 1994, US taxpayers has underwritten emerging markets’ growth through free-market supply-side economic policies. This change in industrial policy has stunted our internal ability to robustly expand our GDP. America’s only way out is discovering a transformative “next new thing”.

Realistically, in 2010, the Chinese economy simply isn’t large enough to save the world from economic contraction and, subsequent, global political instability. Only the American economy, if it were still functioning properly, could do the job. But it does not and can not; another plus for gold.

Currently, wasteful spending on virtually every federal budget item, especially defense as reported by the Inspector General and Homeland Security‘s TSA - both scared cows, is criminal. Our $13 trillion economy is under taxed for the services and standard of living we once demanded for ourselves as Americans.

More than 40 out of 50 state budgets are upside down, regardless of their blue or red political hue. Education has been marked down from an investment to an expense. The privatization of public assets are sure to begin in 2011. This financial insolvency and economic uncertainty serves as a Petri dish for elevated gold prices, in the next five years.

Too many multinational and offshore corporations are allowed to skirt their legitimate financial obligations, while our military police the world, and our morbidly obese military budget consumes evermore anorexic tax receipts. The dollar and US debt will eventually be ostracized in the financial community by investors. Gold will be embraced.

Maximizing shareholder’s value is the petard we hoisted our middle class onto. The homicide of America’s 20th century economic miracle, will show, we participated as both perpetrator and victim. Leaving in place strategic assets - the building blocks for future generations, and their higher standard of living, is an anathema to short term maximization - and its cannibalistic fatal flaw. The dollar’s purchasing power will diminish relative to gold.

The references above indicts the value of the US dollar over the next five years. Already, waiting in the wings, are competitive conspirators such as China, Russia, France, and Brazil, orchestrating the dollar’s eventual replacement as the world’s currency. The de facto world reserve currency emerging today is gold bullion.

How high will the price of gold go? The inflation-adjusted price today for gold is more than $2,200 an oz. There are models with gold reaching $5,000, $6,000, and $8,500 dollars an oz. One outlier has gold pegged at $36,000 per oz. Pick a number. How much debasement will the dollar experience over the next five years; 5%, 10%, 25%? Will the dollar still exist in five years?

The global average annual income per person is rising. There are a billion people coming online in the 21st century who now can afford a second meal in their daily diet. Tens of millions of individuals with rising incomes can afford to save by investing in jewelry or ingots or coins that store value such as silver and gold.

These new participants in [supply] globalization economics and [demand] international consumption will, push precious metals’ supply/demand curve outward, thus, changing its price elasticity.

History has shown that economic catastrophes, from the Dutch tulip mania of the 1630’s, to England’s 1720 South Sea Bubble, and France’s 1720 Mississippi Bubble, are ultimately expressed much like three-act plays.

Returning to the present, Act I, for the sake of illustration, was the over leveraging of the US economy the previous three decades. The private sector, public sector, and the federal government all sinned. The spices of human greed and amorality, by way of packaging and repackaging asset-backed securities until synthetic derivatives were created from thin air, became essential to the final flavor of this recipe. This dish, then, served to investors worldwide induced the 2008 global financial meltdown.

Act II are the economic repercussions; business failures, personal bankruptcies, home foreclosures, new rules and regulations, the abortion of long standing public policies and programs, migration of populations, and the destruction of towns and neighborhoods.

Also, there is a desire for the criminal prosecutions of the apparatchiks supervising the economic meltdown (although, so far, they and their superiors seems immune from prosecution and jail time). In short, social progress based on past economic prosperity is thrown into reverse and anxiety, resentment, fear, and political anger swells. Gold becomes trustworthy.

Act III is just beginning; the comeuppance for disastrous political policies and financial ruin. Business and political leaders who were in charge will be accused of violating their respective trusts with constituents by failing to protect that which the masses worship and prize most - economic and national, identity and security, As sclerosis permanently invades once functioning markets, people will insist individuals be held accountable. Gold is the beneficiary in this environment.

If past is prologue, scapegoats will be created, politicians will be driven from office in disgrace, political parties and governments may collapse. History will turn another page, begin a new chapter, for better or for worse. Currencies will be debased, hollow sovereign debt and dubious private wealth will rot on the garbage heap of time.

The only constant now, as before, is change and gold, for the long term.

The Perfect L-Shaped Recovery

Since no one else will ask the question, I will; why in 2010 must the legislation of basic human integrity, still, is necessary? I know, man and money are not the stuff, of which, virtue is made, however, when will it sink in that tempting fate, especially during a secular bear market, ultimately, is a loser’s game?

The FinReg follies have concluded with TBTF banking left unmolested. If there were men, or women in charge, who would have said years ago, “…no thank you, this firm prefer not to do business in this manner”, the notional value of outstanding credit default swaps alone would not eclipse the insane $65 trillion dollars being demanded by Kim Jong-il, North Korea’s Supreme Leader, as reported in Forbes from an AP story, as war reparations from the US.

The denture-wearing Dodd-Frank Act is being hawked as the toughest regulatory piece of legislation since the 1930’s. Reinstating Glass-Steagall, strictly enforcing the Securities Acts of 1933, 1934, and the 1940 Investment Act would have been faster, cheaper, and more powerful. Progressive Republican, Judge Ferdinand Pecora is undoubtedly disappointed at the latest scion of his depression era handy work and he’s been dead since 1971.

If the BP Deep Horizon Project Manager had said “not on my watch” and stopped operating the drilling rig once it was discovered and reported that too many short cuts had placed the overall safety of the men, facility, project, and gulf of Mexico, into question.

Is it too much to ask that a dollop of integrity be used in Washington DC, as we enter the double-dip of the Great Recession, so that the proper mixture of program cuts, war funding, and tax increases is crafted with intelligence and vision?

Gee - 20?

North of the border, an amoral group of desperados, thieves, cutthroats, land pirates, scallywags, and mercenaries, oh yes - I’m not speaking of illegal immigrants invading Arizona, I’m referring to the G-20 confab being hosted by Toronto, Canada, at a cost of $1 billion dollars, to protect world leaders. The meeting ended with Europe committed to austerity measures while the US favors more spending.

I guess if you have almost destroyed the global banking system, the global financial markets, turned home ownership from a lifetime achievement reward into a daily nightmare, robbed the soon-to-be retired of their nest egg with a zero return over the previous decade, while paying actual retirees next to nothing for the use of their principal, and insisting that everyone’s standard of living for the next decade must become austere, for the greater good, then, protection to the tune of $21M an hour, including overtime, over a two day period, is necessary.

The European Union is on suicide watch, China’s foot is on the stimulus break before home prices and wages reach outer orbit, and Australia is smothering mining stocks with new taxes; so mining, one of Australia’s most powerful industries, smothered the career of the previous PM, and replaced he with a she. The USA and its states are broke, so are many of its citizens; the velocity of money is nearly a negative number, unemployment is not falling - but home prices are, The Gulf of Mexico is a challenge unto itself. Purchasing equities is a low priority.

The Bear Market

The secular stock market will experience severe head winds for the next few years. Highs in the popular averages have been made for 2010. The street is beginning to accept that there is no V-shaped recovery on the horizon; or a U-Shaped, nor a W-Shaped - the winner of the 2010 Post Great Recession Economic Silhouette is the letter L.

The final 1st qtr. GDP figure was 2.7%, down from 5.6% in the 4th qtr. of 2009. Consensus agreed at the outset that stimulus spending added roughly 2.5% in GDP growth.

That as a given, the organic GDP figures for the 4Q/2009 and 1Q/2010, respectively, was 3.1% and 0.2%. Averaging the two quarters, GDP growth is 1.65%. Congress, not passing the extension to unemployment benefits, is reducing in the economy, by an additional $5 billion, monthly, deposable income to aid spending, adding one more headwind to the recovery. Dodd-Frank will add to the cost of doing business. Massive layoffs are scheduled at the state and municipal levels. Tax selling will pick up as well.

In 2010, the way you win the money management game is by not losing.

Continue to buy gold on dips; GLD, IAU, SGOL, and gold bars and rounds. Cash is King. Don’t add to treasuries’ positions, with the 10-year note below 3%, and don’t sell any you may own– for now.

Apple Computer

Apple computer stock is a sell. The iPhone 4 is the greatest invention since electricity; this was proven with 1.7 million units being sold in the first three days. At the beginning of this year, everyone said the stock price would easily reach $300. It did not.

Some day it may reach that round figure, but not before the next market correction occurs. Apple will see $250 before it will see $300. It closed Friday at $266. If you want to own it, sell the 260 October put. If I’m right, the stock will come back to you. If you think I might be wrong, buy the 280 October call for insurance against a short-term bounce, though I doubt it.

Where Is Gold Headed?

Gold continued to fall on Friday as the rising U.S. dollar reduced its hedge appeal. December gold fell to $1,115.30 per ounce, down $10.40 on the session. Prices fell as low as $1,110.80 earlier in the day. The metal lost $46.50 on the week, falling in four of five sessions. Gold is more than $100 off the record $1,218 reached last week. Yesterday, gold was flat.

Nothing has changed.

The strategy to buy and hold gold now is predicated on the following rational:

Gold should be held for at least three to five years.
We are at the beginning of a new cycle for gold accumulation.
Economic indicators still favors commodities and hard assets.
The long-term trend is still up for the price of gold.
The secular bull market in equities that began in 1982 exhausted itself in 2007. The current bull market in gold started in 2002. The economic data pouring out in November and December has a tremendous amount of “white noise” in it. The fourth quarter of 2008 had such a dramatic collapse that year-over-year comparisons and seasonal adjustments distorts the true economic picture. This will continue another two or three months.

April 15th, the deadline to pay taxes, is 120 days away. This will be the day of reckoning for municipal budgets when shortfalls in tax receipts around the country become apparent. The federal government will be shocked in the drop in taxes collected, also.

People invest for one of two reasons: greed or fear. Over the next two years, investors will buy gold primarily out of fear. There are insufficient funds to service the obscene amounts of outstanding debt that was issued this decade. As more and more defaults occur from real estate, corporations, and governments, trust in domestic and international financial systems alike will diminish. The price of gold will rise.

Historically, it is documented that after periods of hyper-credit, the swift and troublesome reversal of credit causes an economic depression. Unemployment swells, lifestyles and life choices are interrupted, altered, or sometimes ruined. Public anger begins to rise; politics becomes more bitter and partisan, and true solutions are prevented from reaching the surface and being enacted.

When economic systems are broken, to protect their jobs, politicians rely too heavily on monetary and fiscal policies, which have limited impact on the aftermath of busted bubbles. Political discontent ensues, the propensity for violence by all sides’ increases, and a pattern for chaos emerges. This current edition of growing anarchy isn’t my paranoia; I’m borrowing it from several senior Goldman Sachs bankers who applied for gun permits (soon after receiving first dibs on the H1N1 vaccine before city hospitals) in November before their lavish Christmas bonuses were paid. Their CEO, Lloyd Blankfein, also upgraded the security system on his two New York homes.

These types of events occur pushing up the price of gold absent real inflation.

Then inflation begins.

We are leaving the first decade of the 21st century. The second decade will be quite different from the previous one. Ten years ago, the federal government was running huge budget surpluses and paying down the debt. Then Federal Reserve Board Chairman, Alan Greenspan, speculated aloud about the distant problem of the debt market running out of treasury obligations if the US borrowing needs continued to fall. Congress became concerned and decided to study the problem. So, the future can be changed.

As the price of gold continues to rise, fear is replaced by greed as the primary reason to hold gold bullion. This is a recurring theme throughout history which is never discussed in the mainstream media. I don’t work in the mainstream media; I provide economic commentary to preserve wealth and to manage risk for clients. What investment strategies did work this decade is ill-equipped for tomorrow.

Make no mistake about it: near term, wealth is under assault and risk is growing- from all sides.

10 Reasons to Believe That We're in a Depression

As the economy drifts listlessly going into this holiday season, thoughts of sugar-plumbed call options and zombie companies (Fannie Mae (FNM), Freddie Mac (FRE), and Citibank (C)) are dancing in the heads of day traders, fund managers and CNBC.

Hooray, hooray, everything is OK! Well, not quite. While Wall Street is feasting on the greatest secular bear market bounce in history, Main Street is experiencing persistent and formidable economic famine, the likes of which, have not been seen the Great Depression – which recorded the second greatest secular bear market bounce in history.

10. Look at the macroeconomic data.

Tuesday’s retail sales number, up 1.37 %; excluding autos, were up .2%. The year-over-year number was -1.74%! The world ended September 15, 2008, with the demise of Lehman. Financially, October 2008 was the dark side of the moon, yet, October 2009 still lags? The GPD is in a funk.

9. Look at the market’s technical data

On CNBC’s Fast Money last week, a dazed and beaten Louise Yamada pointed out there are “green shoots” of stock distribution appearing in the market; rising volume on falling days and falling volume on rally days. Additionally, the market’s chart pattern still roughly traces 1932-1941 period. We are near the 1938 bounce during the Great Depression. Money was and can be made in a depression.

8. Look at the market’s fundamentals

On November 6, the Wall Street Journal reported that, with 88% of companies reporting earnings, year-over-year was down 15%. However, earnings estimates by analysts were beaten by 80% of the reporting stocks. Sales are down but layoffs and cost cutting are allowing the market to believe in this Immaculate Conception rally. At some point, currency exchange manipulation by international corporations and lower wages, or fewer workers employed, invariably leads to the destination of painful contraction and negative growth.

7. Consumers

Consumers are toast and retailers are beginning to blink for the holidays. The housing index is rolling over; flat in November at 17, revised downward in October from 18 and September recorded its high of 19 since falling down into single digits. Wednesday morning, housing starts showed a drop of 10.6%, on a seasonally adjusted annual rate, to 529,000 units. In 2006, housing starts were closer to 2,000,000 units. Unemployment is 10.2% ( for U-3; for U-6, the unemployment figure is 17.5%), the housing ATM machine is gone, wages are weak (except on Wall Street) and the market rally has helped institutions more than retail. Credit card lines of credit are truncating, loans are for those who don’t need them and many consumers are too gun-shy to use credit if they could.

6. Municipal Governments

John Maudlin latest piece did a brilliant job dissecting the bleak future of state income shortfalls. A jobless recovery with missing sales taxes will create at minimum 10 more California fiscal basket cases in 2010. The first round of stimulus money actually bailed out states – that’s why new job creation was so muted. Municipal defaults will emerge next year to terrorize investors.

5. Federal Government

Washington doesn’t have the stomach to break up banks that are too big to fail and to seriously reregulate the financial industry. The reverse merger of Washington DC by Wall Street in 2008 makes this so. Much of the financial products that the feds have guaranteed, to the tune of $24 trillion, are so complex that they are only understood by their creators - the borrowers. This ensures that we can sweep our current problems under the rug today to inflict more pain tomorrow. Even if we do not bring back mark-to-market anytime soon, at some point the battered dollar will force interest rates to rise and drive the economy down. Also, certain people in high places need to be replaced. Sadly, they will keep their jobs.

4. The global economy

Countries are diversifying away from the dollar and into gold and other hard assets. So should we (SGOL, SIVR, GDX, GDXJ, IAU, and GLD). They recognize that our fiscal and monetary policies are out of whack and no one in the US, either businessmen or politicians, is putting country before profits or reelection. This is the mindset that formed the greatest generation. South America, circa 1980s, here we come. Also, many countries are recovering faster than the US because their actions in the crisis aimed at repairing their economies, not individual companies.

3. Baby Boomers and retirement

Baby boomers who’ve lost jobs in this period realize their chances of finding one last job before retirement, at their last income level, are extremely low. The “severance package” class of unemployed, and the employed but leery worker, will not return to their previous spending habits. Years ago, they were told to save long-term in the stock market through index funds and to dollar-cost average, to buy more real estate than you could afford because both stocks and real estate rise over time, to fund their retirement accounts and buy company stock, to trust municipal bonds, and they would be alright. Unfortunately, as they near retirement, too few baby boomers are alright.

2. Income and wages

Either global competition, or inevitable draconian changes in fiscal policy to address our growing federal debt, or both, will reduce US wages for many years to come. To increase productivity, wages have been flat for the past 10 years. It was masked by the irrational stock and real estate markets. Without America discovering the “next new thing” our previous standard of living will accelerate downward. State and federal governments will desperately tax income sooner rather than later. These factors enhance the chances of the next leg of our depression.

1. The 21st Century

Every champion, eventually, must retire from the ring. The US is no different. And that is the primary reason most professionals have gotten some portion of the last three years wrong. Any data set from the 20th century is obsolete without significant adjustments. Linear extrapolation of historical patterns of growth, revenue, and consumption, without correctly modifying credit, demand and demographics, plus the impact of technology, domestic tariffs and regulations, and Realpolitik, is like placing a compass inside a magnetic field. Good luck.

No one can take away the fact that America owned the 20th century. However, in the 21st century, cheap land, cheap labor and a younger demographic profile, suggests that in 20 years, the reins of power will be in the adolescent hands of a rapidly growing Asia. So, we invest in their currency (CYB, ICN, and BZF), finance their growth (DRF), and sell them the raw materials (DBN) that they will need to build tomorrow.

For now, besides military weaponry, our number one export is entertainment (DIS).