"Kamilton": the 2024 election and who tells your story
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Okay, well, that was some election. Well come everybody to the remember six post election in the market podcast this once called hamilton which is like hamilton with A K and I explain why um you know politics is a full contact sport. We all know that and uh when you're running for office you play the hand at your delt.

Sometimes it's a good hands, sometimes it's a bad hand but you play the hand your delt you do so aggressively um playing out why I am missing that admitted i'm going to get to all of the obvious issues around the implications of of a trump factory for markets and economics. But I want to do something a little bit different for us just for a couple minutes. Look at these results.

Harris reportedly has under performed biden in almost every single counting the united states trump came closer to winning new york, and paris came to winning florida. Trump s currently ahead nationally by about five million votes. Think about if the popular vote compact were in place for whatever reason, uh, states like california, uh would be obligated to give all their electors to to trump um and trump even fought Harris to a practical draw in Clark county about and for those of you remember, formers had majority later Harry read, you know it's a highly unionized place and read was very popular there.

And so this would kind of be like Harris fighting trump to a draw in in rand poll or mechano s county. So these these results were kind of remarkable. And as an investments person and an economics person, I couldn't avoid thinking the following.

How would I have played this hand if I were delta? okay. The labor force participation rates almost at all time high. So the job markets are really strong. That's a selling point.

There has been a significant expansion under the by administration of reassuring and fdi related job announcement after having dipped under the trump s. Clean energy spending was allocated almost three quarters to G, O, P districts, including some of the most important districts in the swing states in north CarOlina, georgia, michigan zone. And the chips act resulted in a surge.

And manufacturing construction in places like arezzo a in places like um ohio and new mexico. And you also had the highest year to date returns in the equity market in an election years since one and dirty six. And these equity market returns have contributed to the best of icy measures for corporate to find benefit plans in twenty years.

And yet the biden and Harris teams collectively working on this election weren't able to convert that effectively to turn out at the at the polls. And so, uh, I think there are some tough questions and interesting questions to ask about about that. And looked the food and inflation search was very painful, but by most accounts analytically IT subsided um and yes, IT was the worst food inflation surge since the late nineteen and seventies.

A lot of was brought on by the administration policies. But um as we show in the peace, wage growth has been out tripping rents. So as bad as the inflation search has been, media workers have been keeping ahead of IT of from a wages perspective, growth is steady so far this year. And the reason that's important in this context is the another thing the administration, the Harris team had going for IT was despite all the presidents of yelled current versions leading to recessions, the fed was able to raise rates to stem inflation without causing recession for the first time in six years. And so um i'm kind of struck by um this kind of information and how IT seems to have such little impact on the voters and the exit polls showing very gloomy perceptions of economic conditions.

And you know the there's this quote from the hamilton musical who lives, who dies, who tells your story and I remember dirk and could you go anywhere in the nineteen nineties without seeing bob rubin television, or hearing bob rubin on the radio, or reading about bob rubin in front talking about the successes of the clinton president, said when rigging was president. The same goes for don regan, who never stopped talking, and James Baker, who didn't talk as much but was very effective when he did. Same goes for ten guide guides work on restoring faith and confidence in the banking sector.

Uh, official crisis was was kind of cornerstone of obama's second run for, you know, run for second term. And the common feature here is just like Alexander hamilton, who is the first treasury secretary, these four treasury secretaries both understood finance, but were excEllent communicators, and understood that their role was to relentlessly and tirelessly and aggressively sell the achievements of the administration. And so with all of that backdrop, i'm going to ask the uncomfortable question, which is, was Janet yelland, a former college professor and fed chairman, the right person at the right time to have in that seat to tell the story, to tell the story of dynamics um particularly since the president himself was incapable doing so.

And just as an exercise here, I know this is an an exact one. I ran a google trends analysis to see what kind of put overall recognitions flash digital media footprint slash impact on society the Allen was having in the months leading up to the the election and IT pales in comparison to Steve manuka before the twenty twenty election. And most people I know couldn't identify Steve ukon in a police liner menu.

Was the former secretary of treasures and the trump t. administration. So there there is an issue here of who's telling the story, how good are they are doing IT, because that's what politics is all about. Um that phone ranking is my wife. She's probably agreeing with this disagree eed with a slight of thinking.

So um anyway, let's get to the to the rest of what we have to talk about today, which is the truck trade, the markets and the prediction odds you know saw this coming um starting in late Augustly september when trumps odds were improving, you started to see some traditional trump profile ated sectors doing Better whether that was energy, defense, bitcoin financials um and then short positions and treasuries and renewables. Uh as elections go, this was a pretty uh IT IT was easier this time around to associate sectors and industries with different candidates because their users are different. Um uh the market are going up this morning um and I understand why um the the first course of the business of this new administration might be a focus on deregulation and tax cuts.

It's inflationary. Consequence is might come later. But let's take a look at that for a minute. Um uh here is the physical policies that the the the the trump people talked about and the trump himself talked about during the campaign.

You know it's it's an enormous amount of tax cuts um financed primarily with a ten percent universal tariff uh where the amount of money they can t raise from that nobody knows and there's a lot of questions, procedures about where they are, not the president, even as the ability unliterary to impose that kind of tariff. Now he um or whether have the governing margins in in in the congress to implement that legislatively. Um I think question the the trump presidency uh grows fiscal deficits and bring us the kind of day of reckoning forward.

And you're starting to see that already. Uh in the bond markets, which which will talk about um there's a pretty clear economic consensus on types. Now the economist i'm not one right, but the the economist chicago and M I T um at the I M F and at the trade association, wherever they are, they may be wrong.

But the universal perspective here is that these things are negative for for inflation, growth and employment. Long run, particularly universal you will see. Um but as I mention, the Marks saw some of this coming in advance.

This next chart shows the how that as the trump odds on the left access were picking up, you started to see kind of a lockstep pick up in the ten year treasury rate. And before that, when trump odds were declining, decline in the ten year treasury. So over the last three, four months, the ten year has been trading kind of as a bell weather on the trump presidency.

And remember, long rates, and this is one of the more important charts and concepts. And so I think people should talk about right now, long rates have already been behaving like differently from other vegal periods. Normally, when the fed starts easing, you you'll see a rally in the long rate or you'll see a modest little blip up of ten or twenty basis point until the fed really is committed to easy.

And then he comes down um the ten years been rising of mines straight line almost ever since the first fed. Ca, and so now that's not all trump. Some of that is the fact that inflation expectations are Better in the tips. Markets have risen again and at the high end of the range that they've been at over the last couple years. So in that that's that's part of IT.

But when you take the rising inflation expectations and you combine them with the potential issues of deportations and tariff, you know you kind of potentially put the fed on their back feet on the markets are currently pricing in they let's call a three and a half percent funds rate by middle of next year. Um are the economist of J P. Morgan's investment banks still think that's plausible? I think we have to take a great a deep look here at the at the market consequences of some of the trump policies if they happen.

And because remember, the fed didn't start easing until IT was clear that you were starting to get some relief on wage growth, which was beginning to spiral uh uh, upward and the lowest cortile of wages in particular, uh, the fed didn't really start talking me about him until those started to roll over. And by the way, they still growing in five percent year. So um if you if you get A U turn in the lower cortile of wages and wages picking up there because of deportation is shrinking in the labor market that puts the fed in a tough spot.

And you know the country needs immigrants. The problem is he doesn't need them on a lower spaces. IT doesn't need them on a chaotic basis and IT doesn't need them uh in in in a way that causes huge financial distress for cities.

One of the charts in the iron the market that were released today um looks at the new york city. And just like the federal government, new york city has the mayor and the mayor puts out his financial for the office of management budget. And then there's an independent controller that looks at those numbers.

While the independent controller last year, when they looked at the new york city figures, said you you're underestimating a asylum expenses by like ten billion hours was the single biggest description y in the controller entire report. And you're starting to see some of the some of the similar size number number show up with the state level two. so.

I think I think a lot of when I when I read a lot about about these immigration issues, democrats tend to focus on things like immigrant contributions to growth and and but are ignoring some of the surge uh, immigration implications, an asylum asylum expenditures in cities that are still trying to recover from covering anyway. So that's the um that's the real dynamic right now. It's important thing to look at, which is the supply side benefit of a the regulatory agenda um by by the trump administration against its inflationary impulses related to the labor markets and related to tariff policy um and related to overall deficit policy where you get a where you get higher debt and higher deficits.

Now there are some constraints on a trip agenda that we should keep mind. The governing margins in the house might be single digits， we don't know yet. Um my guess is that theyll be single digit governing margins in favor of either party.

Um the fillibuster still in place, by the way, for all those democrats that were recommending that by and blow up the phillip ster in favor of some policy, think of how you feel about that right now uh with trump controlling that decision. And then you've also remember this is the ironic part. The truck dominated supreme court past a lot, a lot, made a lot of legislative room rulings of the summer that essentially constrain executive rule in favor of requiring clear congressional legislation.

So uh and that that was the kind of several difference and the other rules that we wrote about july. So ironically, the chopper administration will come in here and have less ability to do cabinet level rule making than either um obama or or trump melted in two thousand sixteen and um just to to wrap up um you know we have a country where half the people are accepted at the result and roughly half people are going to be responded regardless of your politics. Um people should generally try to keep them their partnership away from their portfolios.

There's a lot of examples of how that tends to happen in the negative way. During covet, this was a great paper. During covet universe, chicago looked at partisan mutual fun teams.

Whether they were partisan, democrats partisan, they both underperformed the non partisan multum fn teams because the non partisan teams were able to look dispatched at the opportunities and didn't politicize everything. Um same for individuals. Individuals tend to be a lot more optimistic and take more risk in and portfolios when their preferred political parties in power.

Of course, that means that sometimes they leave a lot of money on the table when their proper party is not in power, irrespective of market economic conditions. And um uh investors are of the only ones to do that right. Stock analysts are more optimistic uh um when their preferred party is in power and the same goes for bank dan was to more optimistic when their party wins the presidency.

So anyway, I think the lessons that we've learned as investors over many years is to is to make sure and keep some the parties partition partitions going to give up on that word, but keep IT away from your portfolio. One last one last comment that I want to make given given the incoming administration and will have a lot more to say about Marks, investments and economics in the weeks ahead. Um specifically, we're going to have to take a very close look at the procedural issues associated with with universal types.

Um vaccines are among the greatest achievements and biomedical science, I don't think any question about that. Um we have a table in the I in the market this this week. We had one same table early this year that shows by the eight or nine the most important vaccines what the annual case and death rates were um before the vaccines were introduced and then how they kind of plumb or basic fully disappeared once the vaccine to introduced.

I just think it's important to keep that in mind if someone like rubber Kennedy junior is going to be um anywhere near public policy and public health the way that the trump administration during the campaign suggested he might be. I don't know whether they're gonna them up for cabinet position or he would simply be an on non non senate confirmed a senior advisor. But uh, vaccines es are among the greatest achievements and by medical science, and people just need to keep that in mind.

And I I put a bibliography together, if you want to really learn more about Robert Kennedy junior what he's done and what his views are um I I have a bunch of links in the inner market that you can access um uh and I will want a very concerned about his impact on scientific discovery and scientific method in this incoming administration. So excuse me, while I retire to my undisclosed location um thanks very much for listening to this first cut on election outcome. Again, this is a uh this is a pretty clear a Mandate for the G, O.

P. And we're going to be taking a close look at both the supply side and inflationary consequences in the weeks. thanks. Michael symbolists .

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