Saturday, 12 November 2016

Weekend Update 12/11/2016 – Trump, A New Direction.

There can be few fields of human endeavour in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.

John Kenneth Galbraith.

The big news of the week was the election of “the loose cannon” Donald Trump to be the next US President rather than “the crook” Hillary Clinton. The markets at first didn’t know quite what to make of it, with emerging markets generally getting hammered, stocks mostly upbeat, while Treasury markets generally were downbeat. But the thing about loose cannons is that it’s almost impossible to predict what happens next, or for how long. I suspect that those going long stocks, especially US stocks, are jumping the gun. While time and tide wait for no man, no wise captain sets out into a storm.

This old dinosaur captain will remain in port awaiting further developments, like watching to see what kind of a team president elect Trump manages to assemble, plus what happens next in Europe where another referendum is coming up in Italy on December 4th. Currently the polls narrowly suggest that the reform referendum will fail, but who trust polls in 2016. 

In the meantime we congratulate the Scottish golf course magnate who just trumped the Beverly Hillbillies and the Clinton Foundation. As for “swamp draining,” time will tell.

Aberdeenshire business owner wins presidential election

Wednesday 09 November 2016.
Donald Trump, owner of Trump International Golf Links at Balmedie, has been elected as the next President of the USA. Mr Trump, whose golf course opened in July 2012, beat off strong competition from Democrat rival Hillary Clinton. He has visited the area on several occasions, the most recent being earlier this year. Mr Trump is half Scottish - his mother Mary MacLeod being from Stornoway on the Isle of Lewis. She grew up in a simple croft until she landed in Manhattan at the age of 20 and her first language was Gaelic.

US opposition to AIIB ‘strategic mistake’, says senior Trump adviser

James Woolsey says new administration expected give ‘much warmer’ response to China’s ‘One Road’ initiative

PUBLISHED : Thursday, 10 November, 2016, 5:29pm UPDATED : Friday, 11 November, 2016, 12:53pm
A top adviser to US president-elect Donald Trump has lashed out at the Obama administration’s opposition to China’s ­economic diplomacy, especially the decision to stay away from the Beijing-based Asian ­Infrastructure Investment Bank.
In an opinion piece in the South China Morning Post on Friday, James Woolsey, a senior adviser to Trump on national security and intelligence, called Washington’s spurning of the China-led multilateral lender “a strategic mistake” and expected a “much warmer” response from Trump to President Xi Jinping’s “One Belt, One Road” initiative.
The United States and Japan are the only two G7 countries that have not signed up to be AIIB members, a move viewed by Beijing as a sign of Washington’s mistrust of the Chinese government and its ambition to exert bigger ­regional influence.
Analysts said that if Trump backed US membership of the ­AIIB and endorsed China’s efforts to revive trade routes along the ancient Silk Road, it would be a big sign of goodwill from Washington to Beijing to pave the way for ­future agreements.
Wang Huiyao, a director at the Centre for China and Globalisation, a think tank in Beijing, said: “China can invite the United States to join the AIIB after Trump’s inauguration.”
Wang also said a Trump presidency was not necessarily bad for Sino-US economic ties despite his China-bashing rhetoric on the campaign trail.
Former Chinese vice-commerce minister Wei Jianguo agreed, saying that while Trump labelled China a currency manipulator and threatened trade wars, he might have a more open ­attitude towards China-backed institutions and investment ­programmes.
Wei, now a deputy director of the China Centre for International Economic Exchanges, said that if Trump embraced the AIIB, more trade and investment deals could flow between the two economies.
“There is huge potential for ­cooperation between China and the US,” Wei said.
Analysts said Beijing would also be relieved if Trump followed through on a vow to scrap the Trans-Pacific Partnership, a Pacific Rim trade agreement that ­includes the US, Japan, Australia and Vietnam but not China.
The TPP is the economic centrepiece of the Obama administration’s “pivot to Asia” and ­Beijing sees it as a push to weaken China’s role in the global trade system.

Trump’s Transition Team Pledges to Dismantle Dodd-Frank Act

President-elect Donald Trump is translating some of his populist campaign rhetoric into policy statements, including the contention that the Dodd-Frank Act should be scrapped because it has made Wall Street banks an even bigger threat to the nation’s economy and working families.

After the government’s answer to the 2008 financial crisis, the “big banks got bigger while community financial institutions have disappeared at a rate of one per day, and taxpayers remain on the hook for bailing out financial firms deemed ‘too big to fail,’” says a statement posted on Trump’s official transition website. “The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.”

----In addition to repealing Dodd-Frank, Trump’s transition website outlines several policies that will be familiar to those who followed his campaign, including calls for a moratorium on new rules so existing measures can be reviewed. It also broadly addressed a tax-code overhaul, saying Trump’s plan “can be summarized as lower, simpler, fairer, and pro-growth.”

The new administration’s plans for financial regulation could pull from a proposal released earlier this year by Representative Jeb Hensarling, the Texas Republican who leads the House Financial Services Committee. His bill -- dubbed the Choice Act -- calls for ripping up core parts of Dodd-Frank, including a provision that empowers the government to dismantle failed banks. He also wants to do away with Volcker Rule restrictions on banks’ trading and investments, and to weaken the reach of the Consumer Financial Protection Bureau.

Canada PM says ready to renegotiate NAFTA with Trump

AFPNovember 10, 2016
Ottawa (AFP) - Canadian Prime Minister Justin Trudeau said Thursday he is willing to renegotiate the North American Free Trade Agreement (NAFTA), which US President-elect Donald Trump has said he wants to change or scrap.

During the campaign, Trump called NAFTA the worst trade deal the United States has ever signed, while proposing protectionist measures to repatriate American jobs lost to free trade.

"I think it's important that we be open to talking about trade deals," Trudeau -- a fierce defender of free trade, which helps bolster the Canadian economy -- told reporters.

"If the Americans want to talk about NAFTA, I'm more than happy to talk about it," he said, adding that it was important to periodically reassess trade deals to ensure that they continue to be of benefit to Canadians.

Trudeau called the president-elect on Wednesday to congratulate him on his election victory.

The 1994 North American Free Trade Agreement (NAFTA) binds 530 million consumers in Canada, the United States and Mexico.

Bilateral trade crossing the US-Canadian border amounts to US$1.8 billion daily.

Thirty-four US states rely on trade with Canada, which supports nine million American jobs, while exports to the United States represents 20 percent of Canada's GDP.

Trump-Trade Reversal Sees European Stocks Losing More Ground

November 11, 2016 — 8:24 AM GMT Updated on November 11, 2016 — 5:10 PM GMT
Winners and losers among European stocks in the immediate aftermath of Donald Trump’s election victory swapped places on Friday, sending equities lower.

Industry groups that rallied as Trump defeated Hillary Clinton lost ground, while those that were punished recovered, on bets the moves went too far. Construction firms and commodity producers were among the worst decliners, after rallying Wednesday on optimism of higher infrastructure spending. Drugmakers also fell, after surging on speculation of less regulatory oversight. Bond-proxy sectors such as utilities and real estate firms rebounded from two days of losses.

The Stoxx Europe 600 Index fell 0.4 percent at the close after failing to hold opening gains of as much as 0.7 percent. The second daily drop trimmed the benchmark’s biggest weekly rise since July. European equities lost momentum after a three-day rally that broke their longest spell without gains since 1994.

“We’re taking a breather and beginning to think about the wider repercussions of” Trump’s win, said Witold Bahrke, a macro strategist at Nordea Investment Funds in Luxembourg. “You can say this is pro-growth and pro-equity, but it depends hugely on the concrete type of measures he takes. We are moving away from the hope phase to the delivery phase.”


Goldman Warns Bond-Market Carnage Threatens Global Reflation

November 11, 2016 — 5:01 PM GMT Updated on November 11, 2016 — 5:48 PM GMT
The bond market’s tumble this week on President-elect Donald Trump’s proposals to boost fiscal spending and stoke inflation threatens to throw a wrench in his plans before he even takes office.

Benchmark 10-year Treasury yields rose this week by the most since the 2013 episode known as the “taper tantrum,” while inflation gauges climbed to 16-month highs in anticipation of the Republican’s proposals for infrastructure spending and tax cuts. The carnage spread worldwide, with more than $1 trillion wiped off the value of global bonds, according to Bank of America Corp. data.

The leap in yields in a world betting they’d stay lower for longer may spell trouble for U.S. growth prospects because it may make borrowing more costly for individuals, companies, states, municipalities and the federal government itself. The 10-year Treasury serves as a benchmark for lending rates from mortgages to corporate obligations.

It would also raise credit risk for high-debt countries in Europe, Francesco Garzarelli at Goldman Sachs Group Inc. said in a report Friday. The surge this week risks spooking bond investors, potentially accelerating the selloff and spurring volatility in equities and corporate securities.

Elsewhere, Brexit Britain and China are already moving on. There is life after the failed EUSSR for those willing to reclaim life outside of the Bilderberger Asylum.

UK and China seek to bury power plant spat with deeper finance ties

Thu Nov 10, 2016 | 9:28pm GMT
Britain and China smoothed over a diplomatic spat on Thursday as top finance officials announced closer cooperation between stock exchanges in the two countries and other initiatives in the financial services sector.

British finance minister Philip Hammond met Chinese Vice Premier Ma Kai as part of efforts to shore up what the two governments have called a "golden era" in their relationship between the world's second and fifth biggest economies.

A decision by Prime Minister Theresa May's in July to delay approval of a partly-Chinese funded nuclear power project was criticised at the time by Beijing. May has since granted approval for the project.

As China gradually relaxes controls on its currency, Britain has developed close financial links with the country, hoping to use the City of London's global status to tap into a potentially huge and lucrative market.

Hammond announced several financial initiatives including progress on a link between the London and Shanghai stock exchanges, the opening of Chinese financial firms' offices in London, and a promised relaxation of rules to allow British firms to own higher stakes in parts of China's financial sector.

"Our strategic collaborations ... are evidence of the continuing strength of this relationship," Hammond said, speaking alongside Ma in London at the conclusion of annual talks on closer financial cooperation.

Although Britain is facing a long and complicated withdrawal from the European Union and an uncertain economic outlook, deputy finance minister Shi Yaobin said he expected to see a smooth transition and good exit deal.

Nothing is so admirable in politics as a short memory.

John Kenneth Galbraith.

And finally, the view from “blue state” California. For once “as goes CA ,so goes America,” didn’t apply.

U.S Markets Shake Off Faux Hysteria After Trump Victory: Lessons and Implications

N. Jason Jencka November 12th, 2016 2:40 am ET

                Late Tuesday evening and Wednesday morning the U.S was generally in what appeared to be a dark and uncertain place. The nation had just elected to its most prominent and powerful political office a bombastic man with no prior experience in politics. The    Dow Jones Industrial Average futures were down more than 800 points (over 4%) as traders anticipated chaotic rancor from a potentially contested election of the brash and controversial Donald Trump. As the hours unfolded early Thursday, markets snapped back and the Dow ultimately closed Wednesday solidly in positive territory. The S&P 500 followed a similar path and trajectory while the Nasdaq lagged.

                The relatively weak performance in tech is not a surprise considering Mr. Trump has taken a rather frosty view towards the industry which has its core in the San Francisco Bay Area region that is the U.S strongest bastion of progressivism. In a sense, the market response to Donald Trump's election victory mirrored the mainstream response to his campaign: Feigned  shock and outrage (fuelled by popular media) turned to eventual acceptance and guarded optimism. The election of Mr. Trump serves as evidence that just enough of the American electorate, perceived authenticity and evident energy “Trump” the finest talking points and most detailed policy projections. A desire for change, fuelled by anger at political stagnation is indeed a powerful force that can't be contained by telepromptered speech or TV ad. Brexit was a preview & Trump's win was an emphatic declaration that deep societal frustration can overpower personality-induced hesitation with swiftly impactful results. Those that continue to believe in a hyper-sanitized globalist political mind-set would do well to take note. Particularly in Brussels and Berlin.
Matt Egan, CNN Money November 9th, 2016:
Seamus Dowdall, Opinion Contributor The Bucknellian November, 9th 2016:
Not explicitly a source but relevant reading nonetheless:

N. Jason Jencka is presently studying Finance and Economics at Sierra Nevada College, located near the shores of Lake Tahoe on the border of California and Nevada. His interests include the interplay between world markets and the global political sphere, with a focus on developments of both sides of the Atlantic in North America and Europe. In his leisure time he enjoys connecting with those people that have an interesting story to tell and a genuine desire to make an impact in the world.

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