Tuesday, November 15, 2016

Bonds Sell-Off, SEC Departures, Immigration, and Foreign Reactions

There's a lot to cover today! Unfortunately, here in the real world, I am swamped at work so I'm going to have to keep it short.

Stocks are in and bonds are out as the market anticipates economic growth due to Trump's infrastructure plan.  I am certainly not the expert, but I have my questions about Trump's infrastructure plan, as tax-cut heavy and direct spending light as it is.  As notes the American Enterprise Institute, "The president-elect’s infrastructure plan largely boils down to a tax break in the hopes of luring capital to projects."  The AEI are not exactly pinko commies.  

That said, I certainly hope the market is right!  Economic growth would be good for our country, as a rising tide lifts all boats.  The market's track record is suspect so we have good reason to be cautious, but let's hope the market is right this time around.

Mary Jo White is leaving the Securities and Exchange Commission (SEC), and other resignations are likely to follow swiftly, with new personnel at the helm of the SEC, Commodity Futures Trading Commission (CFTC) and other agencies.  Dodd-Frank may be out the window.  Decreased regulation means greater likelihood of financial meltdowns, period.  Whether you see those meltdowns as the inevitable price of progress or as events that can be prudently managed and mitigated is largely a matter of ideology.  The last time over-leveraged financial institutions were largely left to their own whims it wasn't pretty, but perhaps they're properly leveraged now and can police themselves.

Donald Trump was largely viewed as an "anti-Wall Street" candidate by both his detractors and his supporters, a perception which the candidate cultivated.  Both the market's recent jubilation at his election and the likelihood that financial regulations are likely to be loosened or discarded seem at odds with the rhetoric and perception of the President-elect.

In other news, the Trump transition team appears to be in a rocky spot but these things tend to work themselves out. 

Let's touch base quickly on President-elect Trump and immigration.  Trump has dialed down his initial promise to deport 11 million illegal immigrants; he now says he'll deport only 2 to 3 million, all criminals, evidently.  This number would put him in good company: President Obama deported around 2.5 million illegal immigrants during his tenure in office.  Trump's promised numbers essentially match Obama's accomplished numbers.  President-elect Trump is going to face blowback from numerous police departments, as discussed towards the end of this article

Let's take a quick glimpse at how the world abroad is reacting to Donald Trump's victory:

Russia was swift to congratulate Trump on his victory over "the blonde woman," and bombing of rebel-held areas in Syria began anew.

China issued cordial congratulations to the President-elect, and then hinted at a possible trade war.

In Israeli, right-wingers were emboldened by Trump's victory to declare the two-state solution dead.  Benjamin Netanyahu has yet to show his hand.

In Mexico, there is some understandable anxiety.

Battered Greece is on pins and needles regarding the future under Trump, although far-right group Golden Dawn (what a name!) cheered his election.  Europe is clearly quite divided and it will be interesting to see just how far the European Union unravels, if it does.

Just as with Europe, Japan is highly uncertain as to what a Trump presidency portends.  Will Japan remilitarize at last?  Will South Korea go nuclear?  South Korea going nuclear may be inevitable, but the process would likely accelerate with Donald Trump's blessing.

The right-wing in India are well disposed towards Donald Trump and warm relations with Prime Minister Narendra Modi are to be expected.  It is less clear how Pakistan is taking the news.  Donald Trump has offered to mediate the Kashmir dispute.  If he pulled that off, it would be a major coup for world peace.  What India likes, Pakistan tends to dislike, but it is too soon to say with certainty how the US/India/Pakistan relationship will shift.

Iran is playing its cards close to the chest (always a wise move) and Saudi Arabia might have cause to be a little concerned, as detailed by this article.  

Turkey may seek a reset with the US, but this may be complicated by Trump's pro-Assad bent, which is not music to Recep Tayyip Erdogan's ears.

The rest of the world will have to wait, as I have to get back to my day job for the time being.  Let me just express my condolences over the surprise passing of Gwen Ifill.  The News Hour was one of the only news shows worth watching for past several decades.  Though the show will remain in capable hands, it is a shame that Ms. Ifill has died at an early age - she had a lot left to offer journalism.  Compared to what the News Hour has given us, most of broadcast journalism is a pathetic joke.  Gwen will be missed.

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