Mint – Blain’s Morning Porridge August 24rd 2016
My dad suggested I register for a donor card.. he’s a man after my own heart.
On one hand, I was looking at some US charts on real business investment over the past few years. It’s been declining across the board – you name the sector, and investment in new plant, machinery or staff is falling. Hang on! How can that be? US corporates have been on a feeding frenzy borrowing cheap money… to invest in financial assets and stock buybacks.. Oops.. That’s what happens when interest rates are too low. Normalisation please!
But who knows how the world might have changed by Christmas? The next few months are going to be about the literal elephant in the room..
I was watching a documentary on Trump last night. Aside from reckoning his campaign manager was just about the most loathsome creature ever given air time, it highlighted many worrying trends – including the unreported scale of The Donald’s “closet” supporters who are too embarrassed to publicly support him. The numbers could be vastly underestimated.
Perhaps we’re worrying unduly, but Trump’s election prospects are likely to be a dominant market theme over the coming months. So get used to it now.
The question, unfortunately, will not be what will happen if he wins, but will he win? That’s a very subtle and significant distinction. Perhaps a Trump victory might prove a grander scale Brexit moment. You can’t help but wonder can he really be so bad? Perhaps we’re being deliberately scared by Democrats and hostile Republicans. Perhaps it will prove the fear of Trump dwarfs the real effects of Trump…maybe his bark is less than his bite, meaning we could get a grander scale replay of Brexit and all the market opportunities that threw up.
However, many of my American chums tell me unequivocally a Trump presidency will be the end of everything. Absolutely everything.
These are not folk given to undue panic. Many, on both the left (which corresponds to a moderate Tory on this fair Isle), right across to some rifle-toting Texan Republicans I drink fine wines with are genuinely terrified what Trump might do. Just one example. Consider a global trade shock in his wake. Listening to Trump’s anti-trade rhetoric you can’t help wonder what an isolationist US could do to the global economy. Global recession on a grand scale is one potential outcome making the 1920/30s look like a golden era.
Whatever…. the next few months are likely to be volatile. Moreover, it’s going to be difficult to price the actual result. Polling is not the exact science we once thought it was. In recent years voters have become increasingly sophisticated and less transparent – they lie - hence the polling industry has been plagued by uncertainty and doubt and getting it repeatedly wrong. Especially when they are dealing with those parts of the electorate who just want to protest by voting against the status quo – which is essentially what Brexit, Trump and the European new parties are about.
So, whatever the polls say, the next three months will increasingly be riven by worries about how much we might be underestimating Trump's support.
How long before we’re reading the Fed won’t act ahead of the election? Oh. We already are.
And isn’t it funny that whenever we speak of the US election no one even mentions Hillary Clinton? It’s not her election to lose, it’s hers to go out and win.. but are you getting the sense she can? Doesn’t she look tired?
Back to the day job…
Head of Capital Markets / Alternative Assets