Trump and the Carrier Deal

On December 3rd, I spoke with Neil Cavuto, Kennedy and Charles Payne on Fox News concerning President Elect Trump’s action after Carrier, a division of United Technology, announced that it was going to move 2,100 factory jobs to Mexico. The president-elect announced that he would make them keep the jobs in the U.S. The initial claim for the negotiations the Trump had with Carrier was the 1,100 jobs would be saved, but at this point, it looks like around 300 of those jobs were white collar positions that were never going to Mexico in the first place. The total number of jobs remaining in the U.S. is expect to be around 800.

In order to keep those 800 jobs in the country, Carrier was granted about $7 million in tax breaks paid out over 10 year, which means $875 per worker per year. That’s a pretty small number when comparing the cost of labor in the U.S. versus Mexico.

A more plausible story is that some discussions were had concerning the $6.7 billion in federal contracts held by Carrier’s parent company, United Technologies. While I’m all for reducing taxes and regulation, making the U.S. a more competitive place for companies to do business, I’m not too happy to see the power of the White House used to force a company to do something that it originally believed was not in the best interest of its shareholders.

Italian Referendum

On December 1st my Cocktail Investing co-Author and fellow Tematica Researcher published a piece on the Italian Referendum for Business Insider which you can read here. We think the market is under-pricing the longer-term impact of this decision and what the likely “no” outcome can mean for the European Union.

Election 2016 – Personality not Policy

Election 2016 – Personality not Policy

Watching last night’s third and final presidential debate was an experience I’d put somewhere between a root canal and wearing a tight wool sweater in Central Park in July. It seems this year the preponderance of what we hear about Election 2016 is personality, not policy. Bespoke Investment Group recently asked 1,500 households around the U.S. to provide just one word to describe the presidential candidates. These are the results put into word clouds.

2016-10-20-election-2016Regardless of your political leanings. This is a big problem.

Parents now have to be legitimately concerned whether a presidential debate is age appropriate for their children.

Political discourse in the nation has become both absurd and disgusting, with the only rational response for many being a total loss of faith in the system, which leads to a hunker down mentality, which only exacerbates the economic headwinds we face.

If Clinton wins, she will begin her presidency with tens of millions of Americans convinced that she belongs in jail. If the Democrats are able to take the house and Senate, over 40% of the nation will likely be enraged by the ensuing legislation and feel utterly disenfranchised.  If the Republicans maintain the House and Senate, we will likely see increasingly furious and hate-filled deadlocks.

If Trump wins, over 40% of the nation will be enraged by his presence in the White House as growing numbers of his own political party continue try and distance themselves from him. During his campaign he alienated many of those who would otherwise have been great supporters of the Republican nominee. Some see this as a tribute to his “outsider” nature, but once in the White House, that outsider needs to work with others. That will require gaining their respect.

I believe the core of the problem here, the reason that any concept of civility is completely gone, is because government is simple involved in too much of our lives. This means that we all need to agree on one-size-fits-all solutions to a degree that is simply not possible. This was a nation founded on the idea that people of all preferences and persuasions could live peacefully together under a government that was created simply to protect their individual liberties.

If we want to return to civility, we need to respect our individual preferences, get back to running our own lives and by shrinking the scope of government stop running the lives of our neighbors!

Clinton good for stocks?

Clinton good for stocks?

On October 14th I spoke with Stuart Varney concerning the impact on investors of a Hillary Clinton win coupled with a Democrat sweep of the House and Senate. While the market index moves so far have indicated a preference for Clinton over Trump, investors aren’t likely to benefit from a Clinton presidency.

A Clinton presidency would mean higher taxes, which is a headwind to growth. She has expressed a desire to increase taxes on investments, which makes them less attractive relative to other options. She’s also discussed increased regulations, which is already considered by the C suite folks to be one of the biggest challenges facing companies today. While the stock market indices have so far been more bullish when Hillary has a solid lead in the polls, investors should think through what her plans would mean for their bottom line as well as the bottom line of the companies in which they invest.

 

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Foreign Leaders Nervous About Trump

On March 8th I spoke with Neil Cavuto about how many foreign leaders, particularly those in Europe, are getting nervous about Donald Trump’s statements. Living a good portion of my time in Italy I am able to have a richer perspective on how the rest of the world views what is happening in the U.S., and while I agree that the U.S. ought not chose its policies based on the preferences of other nations, it is always a good idea to at least listen to our friends and neighbors, just as we do in our personal lives.

The United States has the largest economy in the world and the most powerful military, so naturally the rest of the world has a vested interest in what happens here. Our entertainment industry is also the most impactful in the world, so that American cultural shifts are often rippled throughout the globe. What happens here, doesn’t stay here.

For most Americans alive today, World War II is something we read about in the history books. We don’t sense that it impacted our culture in any meaningful way, at least nothing like the way 9/11 has. In Europe there is a very different memory, one filled with great trepidation over those leaders that seek to use the military in ways that are outside of the law. Donald Trump’s repeated comments concerning how he is confident that the members of the military would defy their oath to uphold the law in order to obey his demands strike an alarming cord in Europe, where leaders in the past who used the military that way brought devastation to a continent.

Perhaps Trump is simply using the type of hyperbole that he found worked so well to garner attention for his reality TV show, but hyperbole of that nature on the global political stage, from a man who could be the commander-in-chief of the largest military in the world, in understandably cause for concern.

Market Movement, Candid on the Candidates & Immigration Crisis

Yes, you read that right! In less than five minutes on with Stuart Varney I managed to discuss the likely next moves for the market, which candidates I think would be best for economic growth and the European immigration crisis… and that was on less than three cups of coffee. Although, to be fair, the sheer terror of making an absolute ass out of myself on national television does provide just a wee bit of adrenaline to put it mildly!

So market moves… S&P 500 went on a tear during the early part of March, but it looks to me to be mostly a momentum move with those stocks that got hit hardest performing the best, all the while earnings expectations keep getting lowered. Think about that for a moment, earnings expectations are lower in early March than at the end of January but stocks are moving higher? Companies are telling us their performance will be weaker than previously thought, yet investors are paying more for their shares? Yes, we’ve gotten a reprieve from crashing oil prices and that is certainly a welcome relief, but we are still facing a strong dollar headwind, as other nations continue to try to stimulate their domestic economies by devaluing their currencies, which regardless of what the Fed does, will strengthen the dollar. That makes U.S. exports less competitive. So while we could see this move up continue for a bit, when I look at all the data, I think it is more likely that this will be a bounce that won’t take us to new highs and the overall downtrend we’ve been seeing in equities since last May will eventually resume.

As for the candidates, I like to keep it simple. The bigger the government, the more opinions you get. The more opinions you have, the more the government gets involved in how businesses from the startup to the gargantuan are run. That makes it more expensive to run a business and makes businesses in aggregate less likely to expand as bigger government means more rules that they have to try and not break or offer the lovely little campaign donation here or there – still more expense. Given the headwinds the U.S. is already facing, more government red tape means less growth.

Next on to minimum wage, just look at what has happened in those cities that have significantly pushed up the minimum wage, such as Seattle. Many smaller businesses have shut down and unemployment for the lower paid wage earners has risen. That is not an improvement for the economy.

Next I look at the tax code. That thing is way too damn big and complex which means way too much time and effort is spent trying to figure out how to pay taxes and how to not pay more than necessary. That is time companies and individuals should be spending on doing what they do better, doing it more efficiently and doing it with a higher level of quality. Instead we have an enormous industry built up around figuring out how to dot i’s and cross t’s to satisfy a monstrously sized IRS. All that is money, time and effort NOT going into growing the economy.

As for the immigrant crisis, this is truly a humanitarian crisis of epic proportions, complicated by understandable fears of terrorism and violence. No nation, no leader has yet to get a handle on a productive way to manage this horrific problem, meanwhile innocent people are dying. They are dying when they try to escape their war-ravaged homes for a better life and they are dying when they stay home and try to fight to protect the land of their birth. There are no easy answers here and the strain of it all is putting enormous pressure on the european union, which is already wobbly with all sorts of debt-induced cracks.

 

GOP Debate Preview

On February 15th I appeared on Mornings with Maria Bartiromo, discussing everything from the Fed’s rate hike, to oil prices to the upcoming GOP Debate. The United States has suffered greatly from the level of contentiousness in DC. Whoever serves in the Oval Office next, whether they be Democrat or Republican, the country will be far better off if they treat the other side with respect and seek to find common ground upon which to build legislation. Whether you like the Affordable Care Act or not, it will continue to face serious attacks because it was enacted without a single vote from the Republicans. It would be easy to simply claim that the reason is Republicans all hate Obama and refuse to enact any of his legislation, but the facts deny that assertion as Republicans have in fact gone along with the President on a variety of positions.

No one has or ever will lead a group of people who completely agree with every position the leader takes. A leader will always face those who oppose their views, and thank God for that! Respectful disagreements can lead to much better solutions – this is something every CEO knows. Those companies whose leadership is never challenged,  are doomed to failure. Only through rigorous debate and critical analysis can the solution to any problem be thoughtfully assessed. A wise leader welcomes such pushback and sets the tone for civil debate. Neither the leadership on the left nor the right have done much to foster a productive environment, instead engaging in emotional appeals to their constituents rather than thoughtful engaging with the opposing side.

As we get to know those who want the incredible honor of serving the country from the Oval Office, keep this in mind; great leaders know the value of disagreement and use it to strengthen their solutions. Great leaders set the tone for respectful disagreement and earn respect from both those whose ideology is aligned with theirs and those who differ. Throughout American history we’ve had Presidents from both the left and the right who have been able to accomplish this and the country was better for it.