Presidential 2020 – the race is on

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Presidential 2020 – the race is on
Master Investor Magazine

Master Investor Magazine Issue 58

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So Mr Trump is to be impeached just as the Democratic presidential race speeds up. The chances of a left-wing president in the White House are rising. But the New York markets, at record highs this week, don’t seem to mind too much, writes Victor Hill.

The president faces impeachment

It is quite possible, though less than 50 percent probable, that President Trump will not be a candidate in the November presidential election as he will long-since be a disgraced ex-President. Or so may senior Democrats would like to think.

This was another dramatic week in American politics. On Tuesday, Speaker of the House of Representatives Nancy Pelosi triggered a vote by the House to deliver the formal instruments of impeachment to the Senate. Technically, the Senate has the right to vote to bin these documents forthwith – but Senate Majority Leader Mitch McConnell declared that the Senate will do its constitutional duty.

On Wednesday morning in Washington, Ms Pelosi presented her team of trial managers. These are congressmen and congresswomen who will argue the case for prosecution. This was advanced live on TV in a tortuous torrent of accusation. Essentially, Pelosi and Co. will argue that the president violated his oath of office by using extortion against a foreign power (Ukraine) in order skew the outcome of the forthcoming presidential election. He then attempted to cover up what he had done. There is so much that is legally questionable about this. For now, I will just observe that in a country where the accused is innocent until proven guilty, Mr Trump was declared guilty by a line-up of junior congressmen. The “trial” will begin at 13:00 hours Eastern Time on Tuesday next week (21 January), the day after Martin Luther King Day.

On Wednesday evening the articles of impeachment were formally delivered to the Senate in a sombre procession of notables that might have been a scene from a Harry Potter movie. On Thursday afternoon senators were formally sworn in – individually – as trial jurors. Washington is now in the grip of impeachment fever.

Whether or not the Senate will decide to call witnesses to testify before the impeachment trial will most probably be decided next Wednesday, as the first few days of the trial will be taken up with procedural matters. Some Republican senators, including Mitt Romney (Utah) have expressed the view that key witnesses – such as former National Security Advisor John Bolton – should be subpoenaed to appear.

The president opposes the summoning of witnesses to give testimony – naturally. But all the 15 impeachment trials held in the Senate over the last 200 years have summoned witnesses. It isn’t all bad news for Mr Trump, however. Rudy Giuliani, a former mayor of New York City and Associate Attorney General, thinks that by calling witnesses Team Trump will be able to discredit Senator Biden and his son Hunter who looms large in the Ukraine scandal.

Readers will recall that the allegation is that President Trump requested Ukraine’s President Zelensky to dish dirt on Hunter Biden’s business dealings in Ukraine. Team Trump will do their utmost to ensure that any such dirt sticks during the impeachment trial as that would damage Joe Biden’s presidential bid – possibly fatally.

In the event that the Senate were to vote to impeach the president, he would cease to hold that office and Vice President Pence would immediately be sworn in as the 46th President of the USA. (Technically, the Senate could vote to incarcerate Mr Trump – but let’s not get ahead of ourselves.) Unlike Mr Trump, Mr Pence has no widespread support base, except amongst evangelical Christians in the Mid-West. (He represented a district of Indiana for years in the House and served as the state’s governor over 2013-17.) Therefore, from the Democrats’ point of view, Mr Pence would be an easier opponent to beat, come November.

The Democrats go head-to-head

Also on Monday, Senator Cory Booker announced that he was withdrawing from the race for the Democratic nomination. He had been trailing in the polls. For the remaining candidates the temperature has risen. Veteran left-winger Senator Bernie Sanders accused ultra-liberal Senator Elizabeth Warren of being “elitist”. She hit back by claiming that in a private conversation between the two in 2016 Sanders had told Warren that a woman could not beat Mr Trump. If anything, this comment went against Senator Warren – Americans don’t like people who betray confidences.

On Tuesday evening (14 January) the remaining Democratic candidates joined a live TV debate in Des Moines, Iowa. This was the last show-down between the Democratic candidates before the Iowa caucus on 03 February. In 2004 a victory in the Iowa caucus transformed Barack Obama from an underdog into a front-runner.

Conspicuous by his absence was Michael Bloomberg, multi-billionaire founder of the eponymous corporation and a former mayor of New York. Mr Bloomberg has already spent an estimated $120 million of his own money on his late-starter campaign; but in failing to appear on the panel in Des Moines he was taking a leaf out of Mr Trump’s 2016 playbook.

On the night the dramatis personae were: Vermont Senator Bernie Sanders (78 years old), Massachusetts Senator Elizabeth Warren (70), former South Bend, Indiana, Mayor Pete Buttigieg (37), former Vice President Joe Biden (77), Minnesota Senator Amy Klobuchar (59) and Tom Steyer (62), a hedge fund manager, environmentalist and philanthropist of whom most Americans have never heard. Just before Christmas, Senator Sanders had a major heart attack and had stents inserted in his arteries. He looked exhausted during the debate, and yet he was declared the winner by pundits for his command of his brief.

Senator Sanders managed repeatedly to return the discussion to climate change. This was interpreted as an attempt not to allow Mr Steyer to own the issue. He even refused to let it go when asked about topics nominally unrelated to climate. Asked about the new US-Canada-Mexico free trade agreement, he explained:

“Every major environmental organisation has said no to this new trade agreement because it does not even have the phrase ‘climate change’ in it. And given the fact that climate change is right now the greatest threat facing this planet, I will not vote for a trade agreement that does not incorporate very, very strong principles to significantly lower fossil fuel emissions in the world.”[i]

Climate change is the second most-important issue for Democratic voters, according to the Pew Research Centre, narrowly behind healthcare. Mr Sanders made himself the leader of the issue on Tuesday. It contributed to a strong overall performance that puts him in prime position in the Iowa caucuses.

The kindest thing that many pundits have said about Mr Biden is that he is boring. He is also described as bumbling and inarticulate. He comes over to this British observer as a senior who passionately wishes to take over the recreation committee at a care home.

Mr Buttigieg is the real outsider and yet his CV (résumé in American English) is impressively establishment. Mr Buttigieg attended Harvard University where he graduated magna cum laude in 2004. He then studied at Pembroke College, Oxford as a Rhodes Scholar. While in Oxford he converted to Anglicanism (the Episcopalian Church in the USA). From 2007 to 2010, he worked at McKinsey & Co. From 2009 to 2017 he served as a naval intelligence officer in the United States Navy Reserve, attaining the rank of lieutenant. In 2014, he was deployed to Afghanistan for seven months and was awarded the Joint Service Commendation Medal. Mr Buttigieg is the first out-gay presidential front-runner and married his partner in 2018.

Master Investor Magazine

Master Investor Magazine Issue 58

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For many people Mr Buttigieg’s experience in Afghanistan counts for more than his brief term as a small-town mayor. America is probably unready for a kind of gay Emmanuel Macron figure. But his strong showing in the debate may be a foretaste of a new brand of politics to come.

Climate change as an election issue

In America, there is very little discussion of environmental matters in general, although it was significant how climate change featured so largely in the Democratic debate.

The Australian wildfires have loomed large in news reports but there has been little or no linkage between these and the climate change debate. This is partly because Americans regard wildfires as a fact of life. According to the National Interagency Fire Center (NIFC) the area affected by wildfires in the US has actually fallen due to efficient forest management (something the Australians need to study when this crisis has passed). In the worst year, 1930, 52.3 million acres of American forests burned; last year that was down to 8.8 million acres.

The Trump administration has proposed changes to the 50-year old National Environmental Policy Act. Under the proposals, Federal agencies would no longer have to take climate change into account when they assess the environmental impact of highways, pipelines and other major infrastructure projects. The administration aspires to roll back unnecessarily restrictive environmental regulations.

It seems that the Trump administration, and much of its support base across middle class and lower-middle class America, is now well out of sync with the money men on the environment. This week the $7 trillion investment firm BlackRock’s (NYSE:BLK) CEO Larry Fink talked about a “fundamental reshaping of finance”, whereby climate change will become the centre of the firm’s investment strategy going forward. Mr Fink says this will involve selling investments with “high sustainability-related risk” like coal producers; and he warned that risk will cause a “significant reallocation of capital sooner than most anticipate”.

I alerted readers that this was likely to happen two weeks ago. Mr Trump is in danger of allowing the Democrats to own the climate change issue. His obduracy on climate change may well yet cost him the election.

The US-China Trade Deal: Phase I achieved

Just as the impeachment drama was unfolding on Capitol Hill so Chinese deputy premier Liu arrived at the White House. He was there to sign the first of a suite of agreements which will constitute a new trade arrangement between the world’s two largest economies.

The deal takes steps to root out intellectual property theft and forced technology transfers in exchange for Chinese market access. It also details a $200 billion increase in Chinese purchases of US goods over the next two years. The president declared that the US and China are “righting the wrongs of the past”.

The agreement calls on China to submit an “Action Plan” to strengthen intellectual property protection within 30 days of the agreement, setting out measures that China will take to implement its obligations and the date by which each measure will go into effect. The deal provides that companies should operate without any force or pressure from the other party. Technology transfers must be based on market terms that are voluntary and reflect mutual agreement.

It’s not hyperbole to say that Mr Trump – despite the imprecations of the ultra-globalists and China-huggers – has won the US-China trade war that he initiated. It’s clear that the Chinese leadership takes him much more seriously than his Democratic opponents do; indeed he is widely admired throughout Asia, including, it now seems, in Iran where he may yet be the catalyst for the liberation of an oppressed people. Middle America understands that perfectly. Assuming he survives Ms Pelosi’s attempted coup d’état, he will be a tough act to beat come November, whomsoever the Democratic candidate.

Wall Street on a roll

The NASDAQ rose to a new high on Monday (13 January) of 9,274, driven by its five biggest stocks: Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Alphabet (NASAQ:GOOG), Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB). The Big Five now comprise 18 percent of the total market capitalisation of the index. The dominance of these five stocks in the index is unprecedented, and some strategists see their sheer size as a limiting factor on a continued bull market.

At close on Monday, Apple was worth $1.4 trillion, Microsoft $1.2 trillion, Alphabet/Google $986 billion, Amazon $934 billion and Facebook $622 billion. While the value of these stocks has soared, their dividend payout ratios have fallen, as Mike Wilson, head of equity strategy at Morgan Stanley, wrote in a note on Sunday. How long the tech party will last is the sixty-four-trillion dollar question. I’ll dodge that question today: but I’d like to consider it very soon.


[i] The US-Mexico-Canada (USMCA) Trade Deal was passed by the Senate on Thursday (16 January) by 89 votes to 10.

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