Monday, November 7, 2016

Is it better to be feared or loved

A Trump win might be bad for stocks, but it would be very positive for the dollar and Treasurys.

Now, that sounds ridiculous on the surface, because here’s this loose cannon who’s unpredictable. But that’s the point. He is so unpredictable that foreigners are going to look around and say "boy, we’ve got to head for the safe havens." And one of the safe havens is Treasurys and [another is] the dollar.

We’ve seen that in the past that where you’ve had uncertainty, and even where the Fed is raising rates, Treasurys rise as everybody heads for safety.

Machiavelli said it’s better to be feared than to be loved. If someone loves you, they can fall out of love with you but they’re probably going to keep fearing you. That’s where we are with Trump.

It’s awfully hard to even speculate. What they say going in and what they end up doing are terribly different.

Let’s say Trump wins. Is Congress going to let him build a wall on the Mexican border? I don’t think so. Yes, we’re in a protectionist era because when you have lack of domestic growth, everybody tries to unload the problem on foreigners with protectionism, devaluations, cutbacks on imports. But is there going to be a dramatic change? TPP is dead anyway, and similar deals in the euro-zone are going nowhere.

And if Hillary is elected, is she going to be able to jack up taxes with virtually no deductions, and include capital gains? Unless democrats have a clean sweep of Congress, I don’t think that’s going to happen either.

The one thing I think is likely to happen under either candidate is massive fiscal stimulus. You have so many voters in Western Europe and North America who’ve had no real income growth for over 10 years, and they are, in the words of Howard Beale, "Mad as hell and not going to take it anymore."