Why ‘Buy American’ is Un-American

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

On Tuesday, President Trump signed an executive order directing federal agencies to “Buy American, Hire American.”

The president said the order will protect American workers and those in the building and manufacturing trades. He also used the following rhetoric to drive home the point: “It’s America first, you better believe it. It’s time. It’s time, right?”

Now, I consider myself very patriotic, and for rational reasons. That is to say, I see the intellectual foundation this country was built on, and that foundation is freedom from government and the protection of individual rights.

I also volunteered to defend that freedom by joining the U.S. Army as an infantryman, paratrooper and member of our special operations forces. Yet despite my patriotism, I think the president’s rhetoric is flawed.

In fact, the notion that someone has a patriotic duty to buy American is something that I think goes against the free minds and free market principles our founders embraced.

About six years ago, I wrote an article for MarketWatch titled, “Why it’s un-American to buy only American.”

Considering the president’s executive order, I thought this piece might shed a little different light on this issue. Here is the text of the article that appeared on MarketWatch, Dec. 2, 2010.

Why it’s un-American to buy only American

By Jim Woods

When General Motors Co. went public again last month and GM executives rang the opening bell on the NYSE, many Americans rejoiced in the fact that the auto maker was back.

 I must admit that I’m also pleased that GM shares are back where they belong, available to the public so that we can render a verdict on the company’s performance with our investment dollars.

One thing I’m not happy about, however, is the renewed chatter I’ve heard about how Americans need to once again “buy American” in order to support companies here at home — including General Motors.

Americans shouldn’t feel some kind of duty to buy American-made goods. In fact, it’s actually un-American to buy only American.

For the record, I am a proud owner of a GM automobile. I’m a Corvette enthusiast, and I currently drive the ultra-high performance Z06 model. I love the car for the automotive heritage it represents, its styling, the incredible bang for the buck — and for the fact that it can pretty much blow the doors off of just about anything else on the road.

But I love the Corvette for its virtues — and freely chose to spend my hard-earned dollars on such a product because I believe it’s superior. It is decisions like this that are the cornerstone of being an American consumer and succeeding as an American business.

If my Z06 was an inferior machine, I wouldn’t have bought it, and GM wouldn’t have gotten my money.

American consumers must have the right to freely make purchases based on a product’s virtues. This idea was perhaps put best by Harry Binswanger in an article called “Buy American is UN-American,” where he makes the case that buying American products out of a sense of patriotic duty actually runs counter to the basic premises of Americanism.

“In purchasing goods [only made in America], we are expected to view ourselves and the sellers not as individuals, but as units of a nation. We are expected to accept lower quality or more expensive goods in the name of alleged benefits to the national collective,” Binswanger wrote. Binswanger concludes with a powerful idea, “A patriotic American acts as a capitalist and an individualist: he buys the best, wherever it may be found.”

To be clear, I’m not saying boycott GM or any other American company. My Corvette purchase was based on factors such as quality, aesthetics and price and this vehicle represents all of these things to me. The Corvette just so happens to be an iconic American-made car. However, if the Corvette would have been made in Brazil, China, Portugal or Mexico, I still would have bought it based on its aforementioned virtues.

Besides, in this global economy it’s hard to even know what “American made” even means. For example, GM’s Equinox sport-utility vehicle has an engine that’s made in China. Rival Ford Motor Co.’s popular Fusion model is assembled in Mexico, and Chrysler’s beefy 300C model is assembled in Canada, and has an engine that’s made in Mexico.

Oh, and as for Japanese cars? Toyota Motor Corp. (TM) actually makes its ubiquitous Camry model largely in the U.S., with some 80% of that car’s parts made here. The company also has over 25,000 U.S. employees.

This international hybridization of not just car companies, but also many multinational companies, brings into question the very concept of a company having a national identity.

I realize that politicians, pundits and labor movement leaders like to use the “buy American” issue to get votes, or to rile up the public against a convenient foe. But the reality is much more complicated than just an “us versus them” issue.

So, if you’re one of the many new GM stockholders or one of the millions of Americans like me who owns a General Motors automobile, I hope you made your decision for reasons other than a desire to “buy American.”

No matter what a marketing message says, owning a lemon is never patriotic.

Finally, while I am in no way opposed to the president trying to create American jobs or bring the American economy back into full-blown growth mode, I am opposed to the notion that you should buy something simply out of a sense of nationalism.

The real virtue is buying the best product or service for the job. If that product or service is American, all the better.

ETF Talk: Buying Investment-Grade U.S. Bonds

By Eagle Staff

Investment-grade bonds have been surprisingly strong performers this year in defiance of conventional wisdom.

One way to take advantage of rising bond prices is through the iShares Core U.S. Aggregate Bond ETF (AGG), an exchange-traded fund (ETF) that focuses on investment-grade U.S. bonds. As its name implies, the ETF invests in U.S.-based bonds such as Treasuries and high-quality corporate bonds.

With $43.83 billion in total assets, a daily trading volume of $265.3 million and a whopping 6,203 total holdings in its portfolio, AGG is an enormous fund. However, it operates with high efficiency and high liquidity, boasting an expense ratio of only 0.05%, which is considerably lower than most of its rivals.

AGG maintains its liquidity by only lightly investing (about 11%) in long-term bonds that have a maturity date of 20 years or more. Instead, 85% of AGG’s bonds have a maturity date of less than 10 years.

A bond is considered investment grade if its credit rating is BBB- or higher, as determined by Standard & Poor’s. Roughly 72% of bonds held by AGG are AAA rated, and about 28% are rated in the range of AA to BBB.

Bear in mind that bonds tend to move in the opposite direction of stocks. They also tend to be sensitive to changes in interest rates, so pay attention to any expected rate hikes from the Fed and make sure you take appropriate action.

From the chart below, you can see that AGG took a hit during the “Trump Rally” in the stock markets, starting in November 2016. Since the beginning of the year though, AGG has been on a path to recovery. Year to date, AGG has a return of 1.68%, versus the S&P 500’s return of 5.54%. AGG has a distribution yield of 2.67%.

AGG’s top five holdings are the U.S. Treasury, 36.86%; Federal National Mortgage Association, 14.20%; Federal Home Loan Mortgage Corporation — Gold, 7.45%; Government National Mortgage Association II, 7.25%; and Federal Home Loan Mortgage Corporation, 0.75%.

If you are seeking dedicated exposure to U.S. investment-grade bonds during their surprising rise this year, I encourage you to look into iShares Core U.S. Aggregate Bond ETF (AGG) as a potential investment.

As always, we are happy to answer any of your questions about ETFs, so do not hesitate to send us an email. You just may see your question answered in a future ETF Talk.
What’s Your ETF’s Literary Theme?

I love literature, and I studied the art intensely during my college years. And while most of my time these days is focused on finding the best exchange-traded funds (ETFs) for my subscribers to own, I still devote a block of time each week to reading and studying literary fiction.

Aristotle once wrote that fiction is of greater philosophical importance than history, and the reason why is because “history represents things as they are, while fiction represents them as they might be and ought to be.”

I think it’s important to look at the world, and one’s life, as an exercise in developing things as they ought to be. Literature helps us in that herculean task.

As for the basic attributes of literature (i.e. the novel), there’s style, characterization, plot and theme. Of these, the most important is plot, as that is basically the purposeful progression of events in the story.

Yet a work of literature’s plot cannot be properly constructed without a theme.

The theme is basically the summation of a novel’s abstract meaning. For example, the theme of Victor Hugo’s “Les Miserables” is: “The injustice of society toward its lower classes.” The theme of George Orwell’s “1984” is: “The horror of totalitarian government.”

Great novels always have discernable themes, and ones that can be put succinctly the way I just did with “Les Miserables” and “1984.”

Now, when it comes to ETFs, there’s a growing trend in the industry toward investing in themes.

A recent article in Investor’s Business Daily detailed some of the pros and cons of investing in so-called “thematic ETFs.”

These are ETFs that are designed to take advantage of specific trends and/or themes, in society.

For example, one big theme in the investment space today is robotics and the rise of artificial intelligence (AI).

Here’s what the IBD article stated about this investable theme’s ETF:

Alphabet’s (GOOGL) self-driving cars, Amazon’s (AMZN) Alexa and Apple’s (AAPL) Siri put a consumer-friendly face on machine learning and artificial intelligence (AI). However, robots, AI and automation have widespread industrial and commercial uses.

Global X Robotics & Artificial Intelligence (BOTZ) seizes the companies that stand to gain most from the trend. Its stock holdings include Mobileye, Intuitive Surgical (ISRG) and iRobot (IRBT).

The AI theme is big in literature, too. Isaac Asimov’s “Robot” series is one example, but perhaps the most well-known example of a literary AI theme is the “Terminator” film series.

The theme of the “Terminator” series is: “The rise of the machines,” i.e. AI gone terribly wrong, and turning on its creator.

For investors, the AI investment theme might be: “Taking advantage of the rise of the machines.”

Other thematic ETFs include lithium batteries via the Globak X Li Battery Tech (LIT), a fund aimed at profiting from powering electric cars like Tesla Motors (TSLA), 3-D printing via the Ark Invest 3D Printing ETF (PRNT), which taps into the advent of printing spare parts and tools at home, and the Global X U.S. Infrastructure Development ETF (PAVE), a fund that should benefit from President Trump’s infrastructure build.

Like great literature, a great ETF might just be the one with the most targeted, popular theme.

So, what’s the literary theme in your ETF portfolio?

Nobody’s Perfect

“I’m in pursuit of what cannot be achieved: perfection.”

— Andrew Vachss

Writer and activist Andrew Vachss (pronounced like fax) has had a diversified career that includes more than 20 novels. He’s also an attorney, and a child protection consultant that exclusively represents children and youths. Vachss has achieved quite a lot in life, and one of the keys to his achievement is his pursuit of perfection.

Importantly, Vachss knows that perfection isn’t achievable. However, it’s the journey of trying to do better with every work of fiction and every legal case that’s the key to his great work. When it comes to money, career, relationships and just about anything in life, pursue perfection. You won’t get there, but the pursuit will make you better.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Click here to ask Jim.

In case you missed it, I encourage you to read my article from last week about how ETFs have varying themes that cater to investors with different tastes.

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