Thoughts on Trump

Comment on 14 May 2019 at “More Trump?“

I wanted to share two things. Firstly, I recall reading in Rutger Bregman’s book “Utopia for Realists” that in the 60s the Republicans came very close to implementing a form of Universal Basic Income… Apparently the Bill was put forward to Congress, etc, and the only reason it was not passed into law is that the Democrats felt it did not go far enough… Politics being what it is, the Republicans eventually dropped it as a “stale” policy… Having personal concerns about social equity in Western Societies, and seeing the US as now representing a role-model in which I would not like to see my own country continue to follow in this regard, I find it rather surreal to consider how the world might now be had this policy been enacted! So I have no trouble in believing that Republicans have gone further to the right…

On Trump, I made a prediction to some friends over Christmas which freaked them out – not just because it concerned them, but because they quickly realised it is actually quite plausible given the character of the man… I expect that if Trump is re-elected, within 12 to 18 months he will begin to feel out the public for support for over-turning the 22nd amendment limiting US presidents to 2 terms… I know everybody will say there’s no chance, but I don’t think anyone would suggest it is against his character to try (just one example, look at how he has brought his own family with him to Washington DC)… And China issues, especially with Xi extending his stay indefinitely, will likely be used as partial justification… In the last 3 years we’ve all learned to not think that anything is beyond the realms of possibility for this president… (Note, I do agree with him pushing back on China, and I give him a great deal of kudos for breaking through the group think surrounding their emergence as a Global power as Western elites, especially in business and politics, lined up for the short term gains from it, but I firmly believe that future US Presidents will continue what his administration has commenced)…

Having now read this, tell me you don’t think it’s likely crossed his mind… and lingered…

I agree entirely that to the extent that it is a risk to consider it is certainly a tail risk/black swan and should not be factored into considerations, except in one specific way… the simplistic market jibber jabber that goes on daily has been saying for months that Trump wants/needs a deal with the Chinese… I see incentives to Trump in continuing to play hardball with the Chinese (and that’s certainly starting to be more recognised even this last week)… This thesis is just one potential end game to which Trump may or may not be aiming (or may potentially become his aim)…

Comment on 25 November 2016 at “Make No Mistake, Rising Bond Yields are Bad for Investors“

Yes things have gotten interesting. In my opinion it all remains to be seen whether the Trump presidency is akin to the Whitlam prime ministership – in terms of policy urgency if not policy intent – or he turns out to be rather more “pragmatic” (as the herd currently like to call it).

It’s interesting how the world turns. I had been slowly developing the view of artificial stability in markets for a prolonged period that was well articulated by Jeremy Grantham and Ben Inker in the GMO 3Q2016 Newsletter – and feel sure that a Clinton election would have continued the status quo for a good while longer.

But now we have completely black box in the form of Trump and we are presented with a matrix that runs from extreme policy urgency/radical policy initiatives right through to pragmatic policy urgency and initiatives (so not much deviation from the status quo). And if anybody pretends to have a good handle on where this presidency will go then one should promptly disregard all that they say.

Absolutely the unexpected election of Trump has thrown market psychology on its head, and has the capacity to kickstart a return to the cyclical boom bust (revert to mean) world that we have come to know and love over the last half century (Grantham reckons we have been spoilt with around half of all speculative bubbles from the last 400 years occurring in that period).

But given the remaining imbalances in the world – and especially public and private debt – and thus the need for central banks to continue with extraordinary policy accommodation (afterall the Fed Fund rate is still well below 1%), one has to consider that the likelihood that this is a false dawn is non-trivial and in fact is probably significant.

While I would not be surprised if the peak for bond prices has been seen, I would be equally unsurprised if there were very significant retracements in these recent moves for several years ahead…

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