I’m still reeling from the ghastly, even gory revelations around the criminal investigations of Mrs Hillary Clinton & her surrogates, and her “Likely” indictment. Donald Trump’s election is highly probable now: his opponent is being revealed as a compromised candidate with baggage that no country would want to carry at its very helm. [Update: The very next day of writing this article, in a typical commentator’s curse, foot-in-mouth fashion, it broke that the FBI Director, James Comey, has exonerated Hillary Clinton. And although this episode may be over, there are reports that she may still be involved in an investigation of the Clinton Foundation. Nevertheless, the Bullish Bear still holds up the argument that evidence of rampant corruption should demolish hopes of a Clinton presidency in an honestly cast ballot on 8th of November, 2016.]
Zero Hedge: “Statistically, the market has an 86.4% success rate in forecasting the election”
For those not very familiar with American politics, Mr Trump stands in the anti-establishment corner of the ring, while Mrs Clinton stands in the establishment corner. This really is BREXIT-II, only a lot bigger! Mr Trump, a populist, nationalist representative is being opposed by democrats, republicans, rich elites, Wall Street and the mainstream media. While Mrs Clinton, in a flagging, scandal hit campaign, is running out of ammunition and running into trouble. Deep, deep trouble.
It honestly feels as if pitchfork villagers and stone throwers, in the form of one-page news aggregators (Drudge), old-fashioned pub-brawling loudmouths (Alex Jones) and computer geeks with no outside life (Julian Assange of WikiLeaks) are attempting to bring down the giant David. With a little help from Sherlock Holmes (In the form of sleuths, FBI, NYPD), I might add.
Trump’s economic plan is mixed
Mr Trump’s economic plan seems to lean towards the traditional republican/ conservative ideals, which can be summed up as: cut regulations, cut taxes & protect domestic industry.
It is a blend of common sense (Renegotiate trade deals, exit TPP, reduce expansionist militarism, reduce illegal immigration, increase skilled immigration, veteran care), protectionism (Tariffs, branding the Chinese “Currency manipulators”), fiscal boost (Defense spending) and free market (Tax cuts, healthcare, school choice, reduce regulations generally). But at the frontend is an “very massive recession” and at the backend is the danger of sustainably and significantly increasing leverage, tempered by his warning of the need to restructure national debt. This is my evaluation. For other evaluations, critical: Business Insider, CNN, Moody’s, TIME, Wall Street Journal, balanced: CATO Institute, and complimentary: Breitbart, National Review.
Big changes expected
Structural change are expected “bigly” as an establishment-run White House has been extremely susceptible to corporate lobbying & cronyism, as is being revealed through WikiLeaks, FBI and other investigations on a daily basis. And whilst the short-term impact could be very sharp and widespread, the long-term advantages of an establishment-free administration are many, and indeed necessary to stop the carnage in the Middle East, rebuild & heal the global economy.
These are historic, seismic developments, and a new regime can bring changes in all directions of biblical proportion.
To be sure, it being all of four days before the voting day, the Bullish Bear is merely speculating that these sweeping structural changes Can be carried out, which has a question mark to it: Mr Trump’s Republican Party is fighting a close race to retain control of the House of Representatives and the Senate. But we can pontificate over political developments later. Let’s see what structural changes lie in store for American and world industry based on economic policy of The Donald.
Industry-by-industry look at possible ramifications of a Trump administration <On a scale of -5 to +5, read as: Short-term impact, Structural impact>
Agriculture/ Seed-tech <0, +4>
Trump is a wildcard in this area, and has fired a brief innuendo against “evil Monsanto” in the past. What this means for Bayer-Monsanto or the Monsanto Protection Act, we cannot know. But Mr Trump has been quoted decrying centralized regulation of the agricultural industry saying, “The agriculture industry should be free to seek its best solutions through the market system.” He has targeted “The FDA food police,” calling for the elimination of food-safety regulations, which is a positive development.
Lesser clarity is available on the issue of labeling requirements for GMO foods, which is a very important issue, as 64 countries around the world require labeling of GMOs.
Further reading: Should GMO labeling be required of all foods? (Mic Network Inc) >>
However, there is more clarity on the front of the Environmental Protection Agency, EPA, for which he has picked a known climate skeptic, Myron Ebell. As a climate skeptic himself, Mr Trump wants to transition the agency to one with a drastically different agenda. The Bullish Bear welcomes this as perhaps his most clearly radical and polarizing reform.
Cable TV industry <0, +2>
Fueled by intense bias against Mr Trump, it will not be surprising that he would consider a TV station startup. As an opinion piece in MarketWatch noted, “Blatant bias against Trump may hasten the end of mainstream media.”
It was reported by the Financial Times of London last month that Jared Kushner, Mr Trump’s son-in-law, approached dealmakers informally with a view to setup a Trump television network after the presidential elections.
Look for a new momentum and spotlight on Mrs Clinton’s “Alt-right media”: Breitbart, WND, Drudge Report, and the over-the-top raging bull-horn, Infowars.com.
Healthcare <-2, +4>
Mr Trump has vowed to repeal the Affordable Care Act (ACA), popularly known as Obamacare. The Act has gained notoriety of late as premiums are soaring and medical practitioners are discontent. Mr Trump’s healthcare plan is to break up healthcare insurance monopolies, allowing vendors to compete and thus lowering prices for consumers. He wants to allow tax deduction for insurance premium payments.
Mr Trump’s election could mean a negative impact on healthcare stocks, which have corrected ahead of broader indices of late, following rising premiums and the pulling out of some large insurance companies. Many healthcare companies such as HCA and Universal Health Services had benefited tremendously from Obamacare.
Related to this area, Mr Trump plans to allow eligible veterans to gain access to private healthcare after the unraveling of massive corruption at the Department of Veteran Affairs hospitals. The plan incorporates what seems to be a fair short-term remedial measure, but lacks clarity on means of funding.
Manufacturing <+2, -1>
Mr Trump is mostly rhetoric on the topic of manufacturing, claiming that he would bring back the jobs which were drained from the United States due to “Terrible” trade deals such as NAFTA, trying his best to mirror his counterpart from 23 years ago, Ross Perot. He wants American Companies to relocate their manufacturing bases at home, and has offered little by way of concrete steps except that corporate tax rates will be cut to 15% from existing rate of 33%, which has to be granted as a significant step. Are litigation challenges likely for Companies such as Ford who have built plants outside United States? I think not so, but his rhetoric can have a negative impact on the business-friendliness of investment conditions.
Gun manufacturers <0, +4>
As The UK Independent reported, fear of Mrs Clinton has sent gun sales and manufacturer profits soaring. So, the appointment of National Rifle Association-endorsed Donald Trump to the White House may be a short-term negative for Companies such as Sturm Ruger, Cabelas and Smith & Wesson and Visa Outdoor, unless accompanied by civil agitation from allegedly George Soros-backed arsonist groups. In the long-run, the gun manufacturing industry, hammered with regulations, will benefit from a less intrusive administration. Lesser hostility towards 3D-printed guns can dent the prices of guns. However, this being a technological shift, will be a healthy & organic development.
Weapons manufacturer industry <-3, -5>
The military-industrial complex, as President Dwight D. Eisenhower warned, has potential for the “disastrous rise of misplaced power.” An arguably relatively less-hawkish Trump administration will force the weapons manufacturer industry to scale down. There is potential for litigation challenges as there have been many allegations from the anti-establishment camp, that Mr Barrack Hussein Obama has been arming Al-Qaeda/ ISIS! There is also spooky evidence of images of hundreds of new-looking Toyota pickups and land cruisers with ISIS. How did that happen?!
Gold mining <0, +3>
Despite extremely accommodative interest rates, United States’ roughly half-a-trillion dollar a year trade deficits continue. With the promise of further accommodation in fiscal policy (Lower taxes, in particular), a significant increase in America’s enormous debt burden could be the catalyst to devalue the dollar, and revalue Gold.
A sharp, short-term impact from a debt-interest rate reset favors traditional hard asset-backed commodities, prime of them being precious metals, which has suffered a setback between 2013 and 2015.
Note: In the structural impact score of +3, a hawkish Chairman after Janet Yellen’s term ends in February 2018 is factored in, else a score of +5 would have been appropriate!
Further reading: Clinton or Trump will be good for Gold (Peter Schiff) >>
Energy. Particularly, Coal <0, +5>
Mr Trump is focused on domestic production of oil and gas, and wants to “rescind all job-destroying Obama executive actions,” “eliminate all barriers to responsible energy production” and “unleashing” untapped oil and natural gas reserves. Again, rhetorically positive, surrounded by the right talent pool, but whether this can actually be realized remains to be seen. I forecast that there can be sharp movement in Oil prices, but this will be due to a secondary impact: a devaluation in the Dollar and a deficit crisis could be the trigger first.
Where Mr Trump’s policies will have an energy-related impact is for Coal-based energy producers, leaving solar & wind energy producers in a much tougher fight for market share. Mr Trump has vowed to bring “Coal jobs back,” in an industry hamstrung by overt regulations.
Much as this is a political overtone & a vote-winner, the Bullish Bear is in complete agreement; the end of anti-Coal regulations is a must: Coal is a plentiful, movable, low-cost energy resource, increasingly cleanly produced, and in the face of soaring energy prices in the West, will be a much-needed relief to industrial and residential consumption (Various advantages of Coal can be sourced here). In the developing world, these arguments become only stronger. And a historical fact to counter all environment-related concerns is that, since the 1920s, weather-related deaths have dropped by a 98%! Let that sink in a bit.
Book recommendation: Alex Epstein’s The Moral Case for Fossil Fuels >>
Infrastructure <0, +2>
Both candidates have promised infrastructure spending, but the anti-establishment plan of Donald Trump is twice as aggressive as Mrs Clinton’s.
Donald Trump has unveiled plans to spend $1 Trillion over the next ten years, but here’s the good part, with very limited government participation. The plan was developed by Trump economic advisors Peter Navarro and Wilbur Ross.
As with many other pieces of his plan, there isn’t much clarity and interest rate is a key dependent variable – big infrastructure spending would naturally entail heavy borrowing.
Financial & Allied Services <-4, 0>
Financial Services, including broking, investment banking, the pensions & mutual funds industry could prosper, but only after a sharp downturn. The consulting and legal professions will bounce back too in the post-reset era, but there will very likely be a sharp reset first!
The stock market has had it too easy for too long – easy money and more easy money has meant a dreamy run for stocks and bonds despite the weakest economic recovery ever on record. There has to be a reset!
Banking, levered sectors <-5, 0>
This will undoubtedly be the most radical and clear target of the anti-establishment forces. Much debate surrounds a possible reinstatement of Glass-Steagall in this area, but that is pointless exercise.
Litigationally, a stricter Department of Justice and S.E.C. could unravel the already scandal-hit, tainted industry. Billions of dollars’ worth fines, public ridicule and anger over the past two decades are just the tip of the iceberg: Leading banks have, in fact, had an easy ride after being caught red-handed scamming pensions, rigging financial markets, interfering with politics (E.g. literally writing the laws of the country) and money-laundering to benefit foreign governments, drug cartels & even terrorists… Allegedly (Safe to use this term, I gather)!
And that’s not all. Donald Trump has, on multiple occasions, riled against the Fed for being politically allied with the Democratic Party, and for being too easy with monetary policy. A charge that, of course, pre-dates current Fed Chair Janet Yellen’s term.
A relatively hawkish Federal Reserve could lay bare the weaknesses of national treasury, the banks’ balance sheets, levered industries (E.g. real estate, automotive) & expose the entire economy to another banking sector-led turmoil.
A turmoil, that the Bullish Bear believes, the economy can restructure and recover from, and grow into a much better future, much stronger structurally than before.