PLP Advisors, LLC

Monetary Lessons Learned from the Master's Golf Tournament

A different perspective of what a popular golf tournament can teach us is shown.

 

Grand Rapids, MI -- (ReleaseWire) -- 04/25/2013 -- With so much going on in the economy, it can be hard to keep up with everything that is happening in the world today.

Dennis Tubbergen, a financial advisor, author, radio show host and CEO of PLP Advisors, LLC gives a hand.

Whether people enjoy his weekly newsletter at http://www.moving-markets.com or his blog at http://www.dennistubbergen.com, Tubbergen is dedicated to sharing his viewpoints and opinions. On April 15, 2013 his blog was titled Monetary Policy Lessons from Master's Golf.

"As a golf fan, I was glued to the screen as Australian Adam Scott and Argentinian Angel Cabrera battled for the Master's title in a sudden-death playoff," began Tubbergen. "Mr. Scott won the playoff on the second hole by sinking an impressive birdie putt while Mr. Cabrera made par."

Tubbergen goes on to say that neither did badly, financially speaking. The Master's has a total purse of $8 million. By winning, Mr. Scott claimed $1,440,000. By finishing second, Mr. Cabrera pocketed $864,000.

"Mr. Scott should, in my view, take his winnings home to his native Australia and make some investments there in Australian Dollars," continues Tubbergen. "The Australian Dollar has been strong over the last several years and the fiscal policies of the country are sound when compared to almost any other country around the world."

According to Tubbergen, in 2009 it took about 60 cents U.S. to equal one Australian Dollar. Today, it takes about $1.04 in U.S. Dollars to equal one Australian Dollar. That's a massive increase in value for the Aussie Dollar.

"While there is no guarantee that the Aussie Dollar will continue its march higher against the U.S. Dollar, from a fiscal management standpoint, Australia is doing a much better job managing the country's finances than the United States is doing with its finances," explains Tubbergen. "In 2012, Australia had government debt to Gross Domestic Product of about 20 percent. By contrast, the United States had debt to Gross Domestic Product of about 100 percent."

Using GDP as a metric, the U.S. has five times more debt than does the land down under.

"Those facts probably bode well for the future of Mr. Scott's winnings, should he convert them to Australian Dollars from U.S. Dollars," notes Tubbergen. "By contrast, Mr. Cabrera's native Argentina is a financial mess."

Tubbergen explains that Argentina defaulted on some of its debt back in 2001 and 2002. Since that time, understandably, the country has had a hard time getting investors to lend the country money. Policymakers in Argentina were faced with three choices after the default in order to try to get its national finances in order: raise taxes, cut spending or print money. Policymakers chose the latter.

"Since the default, the Argentinian government has been printing money at a rate five times faster than Ben Bernanke of the U.S. Federal Reserve," states Tubbergen. "Three of the last four years, the amount of money in circulation in Argentina has increased by at least 30 percent. Consumer prices have been increasing at a rate of about 25 percent annually."

Tubbergen goes on to say that since her re-election in 2011, the Argentinian President has imposed exchange controls, making it illegal for Argentinian citizens to purchase U.S. Dollars as a hedge. Since 2002, the Argentinian Peso has lost 80 percent of its value compared to the U.S. Dollar.

"Given these facts, if it's possible, I'd suggest Mr. Cabrera find a place to park his winning paycheck in the U.S.," comments Tubbergen.

"The lesson here is fairly straightforward," he concludes. "Responsible monetary policy benefits a country's citizens in the long term while irresponsible monetary policy ultimately hurts citizens by eroding the value of their accumulated wealth. Wonder if any U.S. policymakers saw anything more than golf during the tournament?"

To read the blog in its entirety go to http://www.dennistubbergen.com and select his April 15, 2013 entry.

Tubbergen’s syndicated radio show can be heard on metro Michigan stations WTKG 1230 AM and WOOD Newsradio1300 AM and 106.9 FM.

About Dennis Tubbergen
Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in Grand Rapids, Michigan. Tubbergen is CEO of PLP Advisors, LLC and has an online blog that can be read at http://www.dennistubbergen.com. To view Tubbergen’s latest Moving Markets? newsletter, go to http://www.moving-markets.com.

The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.