Rise of the Robots

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Experts have been telling us that there is no point in getting American manufacturing jobs back. They have said the only difference between having a factory in China and a factory in America is that instead of Chinese Robots doing the manufacturing American ones would instead. Any economist who makes this argument is so myopic and short-sighted that they should be fired on the spot.

In the following article I will show you that bringing manufacturing back is very beneficial to the economy even if it is mostly automated. There is a concept in economics called backward linkages, or to put it simply demand the factory itself causes in other areas of the economy. I hope you see how much growth our experts are willing to give up because they cannot see these advantages.

JUST IN TIME

Before we begin we have to understand how companies manage their inventories. After all this is where backward linkages come from. Your raw materials, food supply, and other things you need to keep your operation going. The first thing we need to know is corporations do not like stockpiling extra items. They would rather get the item exactly when they need it. For instance if it takes 2 days to get your supply of silver on site then they would only want to keep a supply of 2 days of silver available. The reason is farily simple. Suppose it costs 5$ for 2 days supply. If you stockpiled 4 days worth of supply then you would have to pay 10$ right away, instead of being able to pay 5$ now and invest the extra 5$ for 2 days before having to pay it. This may seem like a small amount in this example but multiply it in the billions and you see how important this is for companies. In fact this concept is so important that an entire subset of the software development industry is devoted to getting the formulas just right.

Most people in the corporate world would be very familiar with the concept already as they are judged on their ability to maintain a lean and profitable operation. Politicians involved in government work may be unfamiliar with the concept and its impact to the economy as they can stockpile as many items as they need without concern.

Production Materials

Let us say you bring back a manufacturing facility that specializes in mobile phones. Due to the very precise work let us assume most of the actual work in producing the cellphone itself will be automated. According to our economists this facility is now worthless in terms of job production as robots produce the actual product not humans.

Do these products appear out of thin air? No you need raw materials to build them. In the case of mobile phones you would need a source of gold for wiring. If your factory was moved from Beijing to Detroit would you continue sourcing your gold supply in Cheng Du for example? Keep in mind it would take you weeks to get the raw material to the factory forcing you to keep 20 or more days of supply on hand, or would  you source your raw materials from another offshore company which will only require to have 3-4 days of material on hand? Keep in mind risk assessments have to be done for each case as well and the complexity of moving raw materials across borders and oceans will add to the sheer distance of sourcing your materials from China.

Gold is not the only raw material needed in a mobile phone. Plastic, Glass, Silver, I could go on and on. Demand for them will go up and places that produce them will be forced to hire more people. The materials need to be transported from one site to another which gives truckers jobs as well. Keep in mind we are just talking about one factory here. Our amazing leaders would give up all these benefits though because a robot would produce the final product.

The Robot

A surprising number of people think that the cost stops once you purchase the actual machine. This is not the case. Machines wear out. They need spare parts, somebody to repair them, and in most cases they also consume more electricity than a human would in the same position.

While the producer would be the machine you would need to hire people to repair and clean it generating employment locally. The spare parts would have to be sourced from the closest possible location which generates additional business to that area. The power plant would make more profits too allowing it to expand and hire more people.

In essence if we bring the automated manufacturing base back you are creating a brand new service industry centered around the machines. Why would our economists want us to forego creating a brand new sector of the economy?

Employment

No matter how automated a factory is it would still need to employ humans. People still need to watch the security cameras, mechanics still need to repair the machines, and some processes will not have been automated yet and still needs manual labor. It is not all blue-collar work either. Programmers need to be involved to make sure the machines are doing the right job, somebody needs to do quality control, and of course people need to manage the plant too.

These people need to live somewhere and they will most likely live in the nearby cities. That means that the money they earn goes into that economy which means that more people need to be employed there to provide the services that they need, leading to more employment and more people able to buy. Multiply this in many small towns across America and you are looking at an economic boom.

Robots Are Our Friends

Economists who say that there is no point bringing manufacturing jobs back are so myopic that they only see the individual tree that is producing the product and miss the forest which is the web which supports that production.

Trump may be the only candidate who sees this because he is the only one who has spent enough time in the corporate world. Remember Trump water and Trump magazine? They are actually very hard to buy on their own because they are used exclusively to supply his hotels. Does it sound very similar to backward linkages? It does because it relies on the same concept.

The importance of bringing back manufacturing is not really on who produces the actual good but that jobs are generated for the economy. The specific job does not really matter much after all more available jobs and less labor via deportations means more bargaining power for the laborer and higher wages.

Trump’s Path to 1237: POST NE Massacre

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The fourth super Tuesday is over and it was a massacre. 17 bound delegates for Trump in PA, 28 delegates for Trump in CT, 38 delegates in MD, 11 delegates in RI, 16 delegates in DE. On the other hand Kasich got 5 delegates and Cruz got 3. All in all the end result of tonight is 110 delegates for Trump, 5 for Kasich, and 3 for Cruz.

Something else that is not reported on is that Trump and Cruz ran a slate of unbound delegates in PA. Trump’s slate won 28 and Cruz’s slate won 5.

Without the unbound delegates that are committed to him we have Trump with 956. Here is his projected path.

NJ – 51 – All the polls show him winning

NM – 10 – Proportional I gave Trump 40%

WA- 17 – Proportional I gave Trump 40%

OR – 12 – Proportional I gave Trump 40%

IN – 21 – Close fight with Cruz. I gave the state to cruz but some delegates to trump

CA – 94 – Current polls show Trump nearly sweeping the state. I project a more conservative estimate

WV – 34 – All the polls show Trump winning and PA has shown he can run a slate and win

I gave Trump 0 in each other state.

With the unbound delegates on his slate that brings Trump up to 1223. At least 10 PA delegates have said they would vote for the winner of their district so that gets Trump to 1237.

Time to board the train and say President Trump.

 

The Trump Effect:Wages

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A lot of people will question why I even make this article as they already assume Trump will be a disaster for wages. Let me be clear though. If you want your wages to go up Trump is the best candidate to pick for president. You may remember that Sanders wants a 15 dollar federal minimum wage and that Trump said that he would not increase or maybe even lower it. That is true. Trump will be the best candidate for wages to go up. Not for the federal minimum wage.

I do not believe that America can support a 15 dollar federal minimum wage. If you are reading this article from Los Angeles or New York you are thinking that I am crazy and that 15 dollars does not even make ends meet for you. If however you are reading this article from Iowa or Colorado you may be wondering how employers can afford the 15$ minimum. In fact if you are reading this in another part of the country you may just be thinking that you want a job 15$ or not. Therein lies the problem. Trump has to be the president of the entire country, not just New York or California. Something that makes perfect sense in the these states may be disastrous in others. Individual state increases can and should be considered but an across the board increase would be hard.

The next thing that people will bring up is that the European countries which Sanders bases his economic models on all have high minimum wages and are doing well. First off these countries are very small. They do not have the income disparity that the US has. If you look at their economic diversity New York who has one of the highest GDP’s in the work may well look like it comes from another country as opposed to Virginia or Michigan. Second according to this link http://www.investopedia.com/articles/investing/080515/5-developed-countries-without-minimum-wages.asp Switzerland , Denmark, Sweden, and Norway do not even have minimum wages. They have employee organizations that negotiate wages with each industry as they recognize that each industry can only support a certain level of minimum wage. Replace the word industry with state. Does it sound like they solved the very problem I was discussing?

How do we get a wage increase then? You can legislate whatever minimum wage you want. Just like wishing for a waifu doesn’t make Miku real, it doesn’t mean that conditions for the minimum wage exist.You cannot just say minimum wage is 50 dollars then set up all the precursor conditions for wage to be lowered. That just makes companies leave. The best thing to do would be to set up conditions for wages to increase and watch it rise. There are two main factors that affect wage, availability of labor and scarcity of jobs. If you reduce the first and increase the second the bargaining power of labor will go up and they get higher wages. If you do the opposite then wages go down.

AVAILABILITY OF LABOR

This one seems fairly obvious. From the beginning of his campaign Trump has said that he would do something about illegal immigration. I would even give him credit for illegal immigration being one of the main concerns and discussed topics this electoral cycle. Clearly republicans as a political class didn’t think it would be which is why most of the other major candidates supported amnesty. Removing illegal immigrants from the labor pool reduces the amount of competition that citizens have. The main argument against this is that illegal immigrants do the jobs americans wont. That is an incomplete thought though. Illegal immigrants do the jobs americans wont at the prices offered by companies. If the compensation was high enough. Say a living wage then the job would get done.

Over and above the straightforward economic issues illegals present a special problem to any federal or state mandated minimum wage. They form a special protected class in the country that is immune to the wage which makes it harder for laws to have their desired effect. Consider for instance if the government were to put a 20$ minimum wage in place and a company in response to that let people go and hired illegals instead at the old wage. It defeats the purpose of the law and currently while laws have been in place to prevent this they are not enforced.

SCARCITY OF JOBS : PUBLIC

There are two components to Trump’s plan for this public, meaning a government labor program and private meaning encouraging businesses to grow. Let me discuss the public first.

I can already see the mouths of conservatives frothing at the thought of a public works program and Trump being labelled another big government liberal. Remember though that we are ok with the government funding the military and other agencies for our defense so there is precedent to say that if it’s for national defense, one of the main duties of the government according to the constitution, then public spending is ok. The wall is one such measure. Whether you consider it an emplacement for actual military defense (it is a wall) or one to defend the national borders and control illegal immigration. The wall carries with it jobs for actual building the wall, supplying the laborers who work on it, labor to pave the roads to the wall, and I can come up with many others. It does build an entire industry around it increasing the availability of jobs.

A component of public spending as well is rebuilding the military. It may seem like we already have too much of a military but that is not the point. There are plenty of small towns and cities in the country who are dependent on their local bases to survive, military spending must be kept up so that they can continue with their jobs. Releasing them into the labor pool at this critical juncture is just not an option. Trump is also the most averse to international conflict. If you look at his statements it is consistent. Dont get involved until you have too, aka let Putin handle ISIS, and if you do have to get involved get in and out as fast as possible using any means necessary. This is the place where the killing of families or carpet bombing comes from. Trump is very afraid of another quagmire and all of his plans do everything possible to avoid that. This is economically significant because instead of spending the money abroad the military units would be spending their money here. For instance if a marine division were stationed in Iraq then they would buy some supplies from the local people pumping money into that economy. If they were stationed instead in Detroit for example they would buy supplies from the local people pumping money in that economy. That increases the demand for goods and services prompting more businesses to open up and cater to them.

SCARCITY OF JOBS: PRIVATE

Any discussion on private jobs has to begin with the tax plan. Trump proposes lowering the corporate tax to 25% from the high of 35% that we have now and then closing all loopholes. It has been stated that this plan dramatically reduces the amount of tax Trump has to pay for his own companies. Anyone who says that is so misinformed you should not pay attention to anything else they say. On paper the USA has a tax rate of 35% however once you take advantage of all the loopholes built into the system the effective tax rate is 15% and indeed some companies pay nothing. A 25% rate means that all companies pay the same. This makes small businesses who are paying at 35% because they cannot afford the army of lawyers to get the rate down to 15% more competitive with the corporations encouraging more of them to open.

It also needs to be said that all the public spending on the wall and the military at home means that more private companies have to open to support the demand. Trump has also shown that he has a very belligerent attitude to companies that outsource. Calling them out and even calling for boycotts on some. Even if no legislation gets passed having a president willing to do that already sends a chilling effect to avoid outsourcing. While it is true Trump has engaged heavily in outsourcing himself we have to understand that is exactly how our leaders have set up the American system. If you don’t outsource and use every single advantage in the tax code then your competitors will beat you. We need that system to change and who better than someone willing to call out companies for not acting in America’s best interest. Trump has also called for retaliatory tariffs and measures to request companies to shift their jobs back onshore. This also helps increase the number of jobs available.

TRUMP EFFECT

Other candidates promise to legislate higher wages as if waving a magic wand will make anime real, all the while creating conditions such as welcoming all illegal aliens and in some cases tripling the corporate tax rate to make wages go down. If you look at everything in an economic sense, Trump is the only one who proposes creating the conditions for wages of American citizens to go up.

China Trade War?

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I’ve been hearing things like the US will lose a trade war with china and Trump cannot possibly be serious. I understand the panic which is why I wanted to take a look at the details.

Top 10 things China buys from Us
1. Soybean $10.82 b
2. Semiconductors – 6.9 b
3. aircraft parts – 5.75 b
4. plastic 3.73 b
5. passenger cars – 3.43 b
6 copper 3.32 b
7. paper – 3.04 b
8. organic chemicals – 2.75 b
9. aluminum 2.21 b
10. industrial materials 3.99b

Top 10 things US buys from china
1. computers – 39.37b
2. household stuff – 32.61b
3. pc accessories – 28.32 b
4. toys – 27.81b
5. cotton clothing – 17.15 b
6. textile clothing -17.31 b
7. telecom equipment 16.62 b
8. tv vcr etc 15.31b
9. furniture 13.56 b
10. footwear 13.20 b

In a trade war the most at risk US industry is our precious soybean industry. Of course we all know that the US will collapse without this. For China its computers.

I understand that the soybean industry is important to some farmers. We just have to realize that before China we were already exporting the soy to Japan, Korea, and other asian countries. The market is still there we just need to divert into it.

I want you to take a look at the products in each category. US products sold to china are mostly raw material to make a finished product while china ships out finished products to sell to the US.

Suppose china put in a tariff. They buy the US products and their production cost increases. Even if they were to sell it to another market they would have to charge a higher price. Or they can cease buying from the US and we have to find another buyer for soybean. Suppose the US stop buying these products and get them from another country? Do you think the computer industry in China is more important than the soybean industry in the US? Remember China is not the only country that produces electronics. I can name 5 other countries who would love to sell us their stuff without thinking whereas I cant name many other countries who can take the volume of goods that the US does.

Conclusion – A trade war will be over so fast it will make your head spin

 

Repeal 40B

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There is a potential that we are headed to a contested convention. I wrote before and I still believe that Trump is on his way to 1237 before the event. In this article I would like to discuss a strategy for Trump that will help him get the magic number.

Rule 40b is the rule that states a candidate needs to have had a majority of the delegates in 8 states for him or her to be nominated in the convention. This means that the only two candidates eligible for nomination would be Trump and Cruz. The best strategy for Trump would be to have this rule repealed. It does not necessarily mean that Trumpian delegates should do it themselves. They can just offer no resistance when the establishment does it. I see a move like this driving a permanent wedge between Cruz and the never trump forces. Before I discuss why this is good for Trump lets take a look at the 3 factions still running and their strategy

TRUMPIAN

With very little connections inside the political establishment and the Republican party infrastructure relying on the popular vote is really the only hope for Trump to get the nomination. I agree that if Trump does not win on the first ballot then he does not win at all.

CRUZ

With a well-funded war chest donated by his millionaire donors and more recently wall street Cruz definitely has the money to build a solid ground game. His unholy alliance with the establishment gives him the backing of the political apparatus as well to sway delegates to his cause. His strategy is off course second ballot forward. Rule 40b is necessary here as he does not want to fight an outsider challenge.

GOPe

The GOPe would like to put forward their own candidate that they feel is more electable come the general. They believe that by doing this they save the downticket and give the party a more noble defeat in the election. I’ve written before how this strategy is insane but it is what they truly believe. The alliance with Cruz is of course a temporary one as they need a proxy to fight Trump.

THE ART OF WAR

We have already established that Trump will lose on the second vote. This is important because it means the personal loyalty of each delegate is no longer important to him. As long as they vote the way they are bound to for the first ballot then that is all that is necessary. Spending resources to prepare for the second ballot would be a waste as the deck is stacked against him.

Cruz however is doing everything he can to get the delegates he selects into the convention. Here is the rub though. Cruz is using the apparatus of the establishment to do that. Cruz is not looking at any conflicts of loyalty between him and the GOPe as the rules currently state that only he and Trump can be nominated.

If you remove rule 40B then Cruz will have to invest more of his resources into the delegate selection process as he now has to contend with delegates who may not have loyalty to Trump but may very well have loyalty to the establishment. This also drives a wedge in between the current Cruz-GOPe alliance as it makes both want delegate loyalty to their faction. While the delegate hunt consumes the resources of both factions Trump can spend his on winning over voters.

Progressive Globalism : Boarding the Trump Train

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One of the hallmarks of progressivism is that it asks more from the rich to help out the poor. On a local level I have no problem with that. I have written about a trickle up economy here https://tsukesthoughts.wordpress.com/2016/03/30/trickle-up-the-new-economy/ and believe that the best way to stimulate an economy is to give the tax cuts and benefits to the people most likely to spend the money inside the economy creating velocity of money and providing more jobs and employment.

On a local level that is good. It is a disaster on a global level. This is my main problem with Bernie Sanders as a candidate. He wants a lot of good things but they can only be achieved by a nationalist like Trump. You are probably thinking that Sanders is a nationalist too right? Whatever label he gives himself his ideas are that of a globalist populist. Basically you try to do what is best for everyone on the globe instead of everyone in the nation. This is why his stances to the refugees, illegal immigration, and his lack of understanding on the issue of healthcare.

OVERVIEW

In its simplest form progressive policies takes money from the rich and gives it to the poor. Who is the rich though? Is it China? Britain? The EU? If you haven’t figured out yet it is America. Progressive Globalism is at its heart a transfer of wealth from the US to every other country in the globe. The country is already poor and struggling but we are about to make everyone poorer.

HEALTHCARE

One of Sanders main arguments is that other modern countries provide healthcare for all their citizens yet the US cannot. Why is this? Well the other countries have a limit on how much companies can charge for drugs and the US does not. The answer seems to be simple right? Place a limit on the drugs prices of the US. Well the companies recover their research costs in the American market. Without the American market then there would be no new drugs available. In effect the European countries can have good healthcare because the American healthcare system is bad. Once you fix the drug prices and crack down on illegal immigration, thereby lowering the total number of people who need healthcare and most likely cannot pay healthcare cost will be lowered.

Would a progressive globalist change this once he sees the impact of his policies on the rest of the world? I have my doubts. I have no doubt that a person who puts America First would have no trouble doing it.

MINIMUM WAGE : SANDERS

People will be surprised to see this on the list. Isn’t Sanders the champion of 15$ minimum wage and Trump say we may have to lower it? It should be a no brainer right? My own personal view of minimum wage is that 15$ may work for California and New York who have economies so different from Iowa, Michigan, or Alabama that they may as well be from another country but it will not work for the poorer states who will not be able to afford it.

On to Sanders, you can legislate whatever minimum wage you want. You can say it will be 100$ it does not mean that it is good for the country nor does it mean that businesses will necessarily follow it. I would like to remind everyone that illegals exist and Sanders is the one most in favour of them. They can be hired like they are now to bypass the minimum wage.

Lets look at it without the promises. What keeps wages down? Well the scarcity of jobs and the excess of workers. More workers mean that they lose the ability to negotiate a good wage because they are easily replaceable. Given this data the only way to increase wages then is to increase the frequency of jobs and remove the excess of workers.

Let us take a look at what Sanders offers. He has offered citizenship to illegal aliens and has said he would not deport any. The gist is more incentives for illegal immigrants. The pope one of the biggest proponents of this has effectively endorsed him. What does illegal immigration do? Well it increases the available pool of workers. What about companies then? Currently after all the loopholes we have a 15% interest rate. Sanders would close the loopholes so we are back at 35% and then increase the tax so we are we effectively triple their rate. I am all for taxing corporations but at some point it is better to stop doing business in the country. You also don’t hear about tariffs from Sanders because that would hurt other economies who depend on selling to the US.

Wages are low because of scarcity of jobs and too many workers. Sanders adds to both fronts.

MINIMUM WAGE: TRUMP

Well what about Trump? The person who says the national minimum wage will be lowered or left alone. Lets take a look using the same standards as Sanders. Trump has made it a central piece of his platform to aggressively go after illegals. Removing benefits, installing e verify, and then deporting them faster. This of course reduces the pool of available workers.

Trump has also made the wall a central piece of his campaign.  A lot of people see the wall as an anti – immigration program. Which it is, but it also doubles as a jobs program. After all does anybody think the wall will build itself? That adds to the frequency of jobs by itself. Trump also proposes to lower the corporate tax to 25% and close all loopholes. Corporations who can afford armies of lawyers will see their tax rate rise but small business who can’t will see it drop. The tax rate increase though is more modest than Bernie’s proposed one and combined with the Tariff Trump is threatening increases likelihood of companies remaining in the US.

Trumps policies increase the frequency of jobs and reduces the available workforce giving more opportunities for workers to negotiate a better wage for themselves.

THE MILITARY

Here both sides agree. We have to get our partners in alliances to foot the bill for more of their own defense spending. Right now because of globalization the US is paying for everyone spending facilitating the transfer of wealth from the country to outside.

The difficult thing then with Sanders position is he wants to cut the military whereas Trump wants to rebuild or spend money on it. On its face cutting the military may make sense. After all we are strong enough and we spend more money on the military than a lot of our competitors combined. If you live in a big city you most likely do not see the downside to this but there are so many small towns and cities across America that need their local base or manufacturing plant to survive. If you remove them then all of a sudden you get more Flint’s and Detroit’s. Of course the displaced citizens need jobs as well. What do you think a huge influx of unemployed workers will do to the negotiating power of labor? What do you think it will do to the demand for labor in the service industries in the affected areas.

I wrote earlier about the need for a trickle up economy but the military industrial complex is a roller coaster that we are on that we cannot get off until we have employment for the people displaced. The military is also unique in that due to security reasons they spend their money onshore. I would rather they spend all of it onshore but they spend such a high percentage that im convinced that it’s not totally wasted. If we want any hope of raising the wages we have to keep military spending as is at least for the meantime.

BOARD THE TRAIN

I feel that this article has gone on too long already so I am cutting it here. Trump does not set a high minimum wage instead he creates a condition wherein wages can be raised. As opposed to setting a wage which businesses will not be able to meet without hiring illegals. If you want quality healthcare and a higher wage I urge you to support Trump it is really the only way. Supporting someone with globalist principles, even progressive ones, just brings the standard of living of the US to the level of other countries.

If you have any other points that you would like me to address as to why only someone with the philosophy of Trump can achieve the goals of Sanders put it in the comment section below and ill make an article for it in the future.

Trump’s Path to 1237: Post New York

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Trumpian forces scored a huge victory in NY yesterday netting Trump 90 of the 95 delegates available. As you know I predicted 85 for him last time around. Im making a new round of projections now after the YUUUGE win. Ill make one prediction for next tuesday and then two predictions for the next contests. One for the worst case scenario and one I think is plausible. Currently Trump has 846 delegates. It should be pointed out as well that the NY primary should have been bad for Trump as you had to be registered as a Republican 6 months prior preventing any of the new people Trump brings into the party from participating. Video in MSNBC also show democrats attempting to switch to Republican to vote for Trump on the day of but of course were denied.

SUPER SUPER TUESDAY (how many have we had already?)

Trump is of course leading all the polls for the states next Tuesday. I see another very good night for him. Here are my projections.

PA – 17 – Every poll ive seen so far has him winning. The unbound delegates are a pain but at least 17 is sure.

Deleware – 16 – He should win here as well given he has won in the area

Maryland – 32 – Im giving him the win but calling 2 districts for other people like WI

CT – 21 – Same logic calling 2 districts for kasich to be on the safe side.

Were at 943 after Super Tuesday

Worse Case Scenario

In this scenario I just give Trump 40% of proportional races and let him lose most winner take all states except for NJ which I believe he wins based on polling.

NJ – 51 – winner take all

CA – 70 – just gave him 40% of the available delegates.

NM – 10 – 40% again

WA – 17 – 40% again

OR – 12 – 40% again

Indiana – 24 – im giving the win to Cruz despite projections from sites like fivethirtyeight and giving trump some delegates.

WV – 23 – giving trump the win plus some delegates. fivethirty eight projects him to sweep here.

nebraska South Dakota Montana – projecting 0

Total 1150. Ive already stated before that he gets 1150 -1300 and that if he is this close they will give it to him. A number of PA delegates have already said that they will vote for the winner of their district.

Plausible Scenario

I try to incorporate some other experts that show Trump can get higher than 40% in some instances.

NJ – 51 – still calling a win

CA – 94 – going by other expert predictions

WV – 34 – still going by experts

Oregon – 13 – 40% rounded up

Washington – 18 – 40% rounded up

New mexico – 10 – 40% rounded up

Indiana – 36 expert predictions

Ending at 1199.

Trump either has to get higher than 40% in some of the proportional states which is a possibility because he has gotten more than 40% in some nationwide polls or he has to win Nebraska, South Dakota, Montana, or overperform in CA to get the 1237 cleanly. Of course I still think at 1199 they just give it to him.