Gigantic funds from both military and financial sectors. Unanimous cooperation of the mainstream media. Polls signalling only one possible result of this election. All of the above did not help Hillary Clinton to win. The new President of the United States is Donald Trump.
“Shocking”. This is the adjective mostly used in relation to the result of yesterday’s election. Many remember dozen of polls giving an undisputable win to Hillary Clinton. The sheer conviction of her inevitable success made betting agencies pay only 22 cents on every dollar you put for the former Secretary of the State. The resounding “why” starts ringing in the background.
"I am a better investor because I am a businessman, and a better businessman because I am no investor" - Warren Buffett In the past, the value investor Mohnish Pabrai has spoken about why investors need to have some first-hand business experience. Pabrai started his own IT consulting and systems integration company, TransTech, Inc, in Read More
On Tuesday we saw average citizens going to vote. ‘Average’ here means those who may still classify as the middle-class but most probably already fell out of this band after the government took their money one way or the other. On the Election Day, they were not driven by experts’ opinion. They paid attention to the last 8 years they remembered very well – shrinking salaries, high inflation and another tax they were compelled to work for. All this made them look for an alternative, change.
One more thing which became even more evident yesterday. The result of this race shows that polls are only a tool to manipulate the electorate.
According to our prognosis victory of Trump led to losses across equity markets. We believe that thanks to central banks and the Plunge Protection Team situation has been smoothed out – if not for their intervention markets would have landed much lower.
Among all indices, Japan is standing out where Nikkei lost over 5%. Looking at the Bank of Japan in the past we should expect printing more currency and direct purchases made by the central bank. Japanese bankers will do anything to stop further haemorrhaging even if it means more debt.
Everyone who owns gold had a big smile when the news of new president arrived. What is interesting is that gold first jumped up to 1335 USD and then stabilised at 1300 USD. This unusual drop may be associated with backroom actions of central banks and the Plunge Protection Team. Silver has a similar story to tell.
With precious metals on the rise, miners were also on the winning side. Before trading started on Wednesday GDXJ was already 7.8% ahead.
President Trump left many in shock and disbelief but the reaction of market was foreseeable. In case of Hillary Clinton’s win investors were looking forward to a continuation of Barack Obama’s policy. The defeat of the former Secretary of State increased uncertainty pushing the capital towards safer assets – precious metals.
What would Trump’s policy look like?
First of all, we have to be objective. Influence of the Military-Industrial Complex is not going to suddenly disappear. Attempt to put the US and Russia on a collision course will continue especially due to the fact of still existent military advantage of the US.
Assuming that nothing extraordinary happens until Donald Trump is sworn into office I want you to pay attention to future Vice-President (VP) Mike Pence. He is not a typical figurehead media was expecting to see in the office. During campaign Pence was a strong asset in Trump’s corner and will be playing important role in Trump’s administration.
The former governor of Indiana is an experienced politician. There is a chance that new President of the US (POTUS) will be responsible for making a show while many decisions will come directly from the VP. While in office, Pence lowered both public expenditure and taxes. This solution is the last hope for the country. For now, America has anaemic GDP growth and debt is on the rise. There is a chance to show everyone that the free market reforms are better in stimulating the economy than shoving printed money into financial markets by the FED.
Decisions made by Trump (or Pence on president’s behalf) will depend on the economic situation of the US. Hypothetical crisis can put severe public pressure on new government and limit its options.
Sooner or later the US will have to face recession. This is the result of last 15-20 years of American monetary policy and economic governance not the election of new POTUS.
The result of 8th November is a testament to a mobilisation of the middle-class, quickly shrinking in recent years. The revolt in American society is growing. Only 8 years ago everyone seemed to believe in the burning need of “choosing the first black president of the US”. Four years later he was the “lesser of two evils”. Today the establishment promoted the “first woman becoming American president”. Finally, the patience of taxpayers has been depleted.
Millions had the chance to see for themselves the level of media untruthfulness. Thanks to the increasing role of the internet everyone was able to verify any information.
Trump’s presidency can lead to the warmer relation with Russia which can marginalise the growing role of Middle and Eastern Europe but an election of Clinton could have led to a conflict on a global scale. Even though there is no official war between Russia and the US, Syria experienced civilian exodus. What would be the death toll of the open conflict given that war theatre would be in Europe?
Markets were convinced about Clinton’s win and this gave low-risk chance to short equities in the US and stockpile on precious metals.
Finally, I want to highlight that what happened during last few months would not have been possible two years ago. In June we saw the UK voting to leave the European Union. Today we have Donald Trump as the 45th President of the US. It may be that the overarching goal is a further destruction of monetary systems. Everyone who promotes protectionism could then be blamed for the systemic failure and used as an argument to return to the path of an ever more globalised world with new world reserve currency – SDR.
Independent Trader Team