Showing posts with label 2016 US presidential elections. Show all posts
Showing posts with label 2016 US presidential elections. Show all posts

Tuesday, November 15, 2016

Foundation revisited


The 2016 presidential elections reminded me of Isaac Asimov’s Foundation, the famous science fiction trilogy. 

The Galactic Empire had been on the decline for many years which only Hari Seldon, the preeminent sociologist, had realized.  He had mapped a way to both reduce and shorten the chaos that was bound to ensue.   Seldon’s insight and plan were made possible by psychohistory, a new social science combining sociology with statistics, which he had invented. Yet all of Seldon and his vast team’s efforts were nearly wrecked by the appearance of the Mule, a mutant endowed with extraordinary para-mental powers.

The US have never seen a candidate like Donald Trump, and while he doesn’t have the Mule’s mental powers, he has read the electorate like nobody else.  Reagan saw America’s longing for a change and infused it with his optimism and confidence.  Bill Clinton offered youth, moderation and the promise of “a new beginning”.  Trump sensed the people’s rising frustrations with a mediocre economy, a dysfunctional political establishment and widening social and cultural gaps.

All presidential campaigns have had their nasty moments, but where the Clintons had been insinuating, Trump was crude, in your face and openly aggressive.  Soon, TV ratings took off, with viewers smelling the blood-soaked sand of the Coliseum, cheering for the candidate’s political incorrectness, sneering at the embarrassed faces of prominent journalists and anchormen.

Facing Trump was Hillary Clinton, a long time establishment figure, backed by a very strong organization, extensive party support won over many years, but ill at ease with crowds and beset by too many skeletons in her closet.

In the end, against all odds, Trump pulled a surprise victory. What happened?  What of the future?


In my view, the crux of these elections was the dichotomy between message and messenger.

The most insightful commentary, attributed to financier Peter Thiel, a Trump supporter, is that the media [and the elites] always took Trump literally but never seriously, while a lot of voters took him seriously but not literally.  He went on to say that “when these voters hear things like the Muslim comment or the wall comment... what they hear is we’re going to have a saner, more sensible immigration policy”.

The preliminary results give Trump 306 electoral and 60.4 million (47.3%) popular votes to 232 and 61 million (47.8%) to Clinton. 

In appearance, this was a very close contest.  Our foremost political pollster Nate Silver calculated that, had 1% of the people who voted for Trump chosen Clinton instead, she would have won the contest 307 to 231. 

But Democrats suffered a bigger defeat than the above numbers show.

First, many Republicans, who largely shared Trump’s views (bombast and hyperbole aside) but objected to his persona, didn’t vote for him but did vote for the rest of the Republican ticket.  This explains the Republican Party sweeping in the House and the Senate.

Second, voter turnout, while lower than in the most recent elections, was higher than the average of the last 40 years, and, importantly, was lower in traditionally Democratic states, about the same in Republican ones and higher in the swing states that Trump won.

Finally, these elections were a referendum on the last eight years.  While President Obama is liked personally, many voters didn't absolve him from the Washington gridlock, were unhappy with soaring Obamacare premiums and uneasy with his stance on terror.

All this means that, depending on what President Trump does, he could tap on an additional reservoir of support beyond the 60 millions who voted for him.

What of the future?

Americans want results, more and better jobs.  Hopefully, Trump will not make the single biggest mistake Obama made, which was not to give absolute priority to economic growth.  There should be room for consensus there.  But he will also have to deliver on many of the promises which propelled him to the White House.  Even if people understand that there was much hyperbole, it will be difficult.

Trump’s appointments will be the first test of his ability to build an effective cabinet without losing his popular support.  The presidential campaign has shown that he is driven more by a desire to win than by ideology.  His business career also shows that he has greatly reduced the level of risks he is willing to take.  I would say that it is premature to plan a move to Canada.

America is a country which gravitates to the center, which prefers reforms to revolution.  It is also one where federal powers have been distributed among three institutions, independent of each other.  It does best when it sticks to these fundamental tenets.

Wednesday, September 14, 2016

On the Cliffs of Marble

When I left France for the US in 1972, as it turned out never to come back, I packed a poster of the north wall of the Eiger and a copy of my favorite book of all times: Ernst Jünger “ Sur les Falaises de Marbre[1].

This extraordinary book recalls the last days in an imaginary land before its invasion and destruction at the hands of the Great Forester, a cunning and ruthless tyrant who lived in the vast forests nearby.  Jünger started his book while staying in a small town on the shore of Lake Constance.  Years later while on a vacation, I visited picturesque Meersburg and Lindau, drove through the rolling hills behind Hagnau and watched the sun set over the snowy peaks of the Alps beyond the shimmering lake, and memories of the book and its magic rushed back to my mind.

Some have said it was a criticism of Stalinism, others of Nazism.  It certainly was a paean to freedom, to what makes life in harmony with friends, neighbors and nature so precious, and how quickly we can lose these and how painful it then is.

I don’t believe that we are living on the banks of Jünger’s vast Marina.  But I do feel that we are in danger of slipping into a period of greater tension, greater division and failure to address our most pressing problems.  Before too long, and unless we regain our senses, the time for a Great Forester could arrive.

For many reasons, we are left with four candidates to the presidency: a populist and demagogue and Forester apprentice, an aging career politician with truth telling issues, an ex pot entrepreneur, and an activist who spray-paints bulldozers of companies she disapproves of (sadly, the Democrat, Republican and Green VP candidates are probably better than the top of their tickets).

It is difficult to imagine how any of these candidates could unite the country.  Hillary Clinton is probably the one more likely to try and build consensus because she is the one who most lacks a committed base, but can she bridge the trust gap?

Meanwhile, Americans are more divided than they have been in decades.  It is both ironic and sad that they were most united when President Obama took office in 2008.  Responsibility for this can be spread wide, and because of that, redemption will be hard to reach: Tea Party extremists unwilling to compromise, main stream Republicans unable to deal with them and the opposition, Democrats in Congress and the White House enamored with diktat and income redistribution without GDP growth; most of all, politicians deaf to popular angst and aspirations.

Against this dreary political background, the economy and the financial markets have been operating with a high degree of wariness, where extreme monetary policies have attempted to offset the absence of fiscal reforms and pro-growth policies.  The fix has carried increasing risks: financial assets are overpriced, public pension funds are hugely under water, the insurance industry is at risk and even consumption is threatened by the need for households to save more when 10 year Treasurys yield a meager 1.7% p.a.  

So we have a divided political class, a divided nation, a subpar economy and stretched financial markets.  I might add that the same combination of slow growth and excessive indebtedness is pressuring governments and traditional parties and giving openings to populists of all kinds around the world.

As an investor, I would think that prudence is in order.  Sure, stocks are not as expensive as bonds, but does that make them attractive, as a class?  Not really.  There is nothing wrong in keeping stocks of steady performing companies, or in buying into carefully chosen turnarounds.  But if one keeps a large exposure to equities, buying some protection seems advisable to me.

Alternatively, cash does look like a good temporary alternative.  Another one is real estate.

History shows that people and countries don’t change until they have to.  In America, I don’t think we have reached that point, nor do I see anyone able to mobilize the nation.  History has also shown that it takes time for a large country or economy to change direction.       

Caveat emptor!




[1] On the Marble Cliffs.

Thursday, July 21, 2016

Sister Souljah, Brother Judas?

Last March, I wrote a post about Republican presidential candidates’ Sister Souljah opportunities and how they had flunked them: Mitt Romney failing to take a budget deal that would give him 90% of what he wanted, the 2016 candidates failing to push back against Donald Trump’s insults.

Well, Ted Cruz was given a second chance yesterday and he grabbed it.  Except that he was immediately cast as a Judas.

The original Sister Souljah moment was Bill Clinton speaking as a candidate to Jesse Jackson’s Rainbow Coalition and rejecting a well known black activist’s call for black on white violence.  In the immediate aftermath, he suffered a drop in support from some quarters, but eventually more than made up for that with moderate Americans.

Yesterday, Ted Cruz refused to endorse Donald Trump, calling instead for Republicans to stick to principles and vote their conscience.  Today, at a breakfast of Texas delegates, he added that he couldn’t endorse a candidate who insulted his family.  What took him so long?

The party reaction was telling and frankly shocking:  the New York delegation screamed and booed; on CNN, a Trump official could barely control himself calling for Cruz’ party exclusion, Governor Christie was likewise furious and the general audience didn’t fare much better.

Ted Cruz took major risks with that speech and the fallout was immediate. Most political commentators accused him of careerism.  The party was exposed as more divided than it wanted to appear.  Party grandees who had fallen in line behind Donald Trump realized that they could be dangerously exposed in case the Trump candidacy failed come November.

Accusing Cruz of weighing in career considerations in such a major decision seems disingenuous to me.  Likewise, denying that he may have principles seems unfair.  What is undeniable is that he showed great courage and that he will be, with Donald Trump, the most memorable Republican figure of 2016. 

Whether this will have been his Sister Souljah moment, time will tell.  I believe that it will eventually strengthen his influence within the Republican Party: he will have warned about the Republican nominee’s shortcomings, he will have name recognition, and he clearly showed more courage than his peers.  But unless he moderates his views I don’t see him in the White House in 2020.


Saturday, June 11, 2016

The Prisoner of (Mar al) Zenda, an exercise in fiction

On a balmy Florida morning, the mansion staff were tidying up the veranda and cleaning after the guests had finished their breakfast.  The dinner and recital of the previous evening had gone rather well considering the palpable tension which had pervaded the relations between the host and some of his most prominent guests.

But the atmosphere had relaxed considerably come morning, and the Majority Leader, who had maintained his habitual reserve since he had arrived, was almost bubbly by the time he had finished his croissants.  The Speaker had returned from an early two hour run and was engaged in a lively discussion with a Silicon Valley investor.

As limousines started to pull up and attendants were loading the luggage, the Host was amiably chatting with departing guests before sending them on their way.  In all the buzz, one could easily be forgiven for failing to notice that the famous hair of their host had turned a shade redder, or that a small blue van was silently rolling towards the service exit.

The bombshell exploded a week later when the Host told Wolf Blitzer on CNN that he had decided to pick former General and CIA Director David Petraeus as his running mate to set up the first co-presidency in US history.

Wolf’s eyes literally bulged out of their sockets, and for a few seconds, he was at a loss for words.  The Host gently let him gather his wits and proceeded to explain why this was a win-win strategy for the country, the Republicans and him:

-“Wolf, to make America great again, we need to revitalize the economy, rebuild our military and recast our foreign policy which have been TERRIBLE in the last eight years.  I am a very successful businessman, my friend Carl Icahn will pitch me his best ideas, and I will choose a FANTASTIC Treasury Secretary!  But look, as smart as I am, I have no experience in foreign affairs or in defense, and David is the best out there, and so I am so grateful that he accepted to serve our great country as Vice President with primary authority in these two areas as well as domestic security.”

-“Donald,---woah,…ah…this is so unexpected,.euh…

-“Wolf, you are a VERY sharp journalist, one of the very best in the business, as a matter of fact I think you may be the best, and surely you can see that this ticket is bringing the temperament and competence which I promised all along and which this great country deserves.  And we will win in November!”

Within seconds, somewhere in Kentucky, the Majority Leader clasped his hands, and, in a manner reminiscent of Dinah Lord’s at the end of The Philadelphia Story, simply uttered: “I did it!”  Somewhere in Chappaqua, NY, a blond woman sunk into her sofa, sobbing: “Not again!”  Five thousand miles away, in a small Amazonian forest clearing, a thin plume of smoke was twisting in the morning mist as a few women were grilling freshly caught fish from the Apaporis river.  The rest of the small Xurungawah tribe was sitting in rapt silence as a big fair skin man with a strange yellow-white mane was haranguing them:

-“Folks, this is one incredible place and you are an amazing people!  We will build here the most amazing ecological resort in the world!  I see you don’t quite grasp what I am telling you, but we will get it done folks, and by the way,..”

Unlike in the movie, we don’t know if Donald Trump has a perfect double.  But an opinion is starting to take hold: at his age, he is unlikely to change, and for a growing number of Americans (including me) he is unelectable to the presidency.

Republican Party leaders are realizing that, but they can’t ignore the votes of millions and nominate another candidate.  They can’t go to war with him although they can’t embrace his corrosive statements.  They openly worry that he doesn’t know enough about domestic or foreign policy to govern effectively.  Yet they are unwilling to leave the White House in the Democrats' hands without a fight.

Still, they hold two aces: one is money.  Effectively, they will control the bulk of the donor contributions and therefore how the campaign will be waged.  They also know that as a man with a large ego, Donald Trump will not want to face a humiliating defeat.

They could try and convince him to resign.  But while his poll ratings have weakened, they haven’t entered panic territory.  Until then, neither he nor his supporters will let go.

Or the party leadership could convince him to share a co-presidency with a respected professional heavyweight; somebody strong enough to make that project credible.  In 1976, Gerald Ford briefly offered a similar deal to Ronald Reagan.  It didn’t work because the two men were not complementary and believed that they could win on their own[1].

This is not 1976.  A co-presidency of the kind suggested above would have several key benefits for the Republicans: 1) it would wrong-foot a Democratic strategy focused so far on discrediting a personality, Trump, 2) it would prevent many Trump voters from bolting or abstaining, 3) it would force the Democrats to come up with a government program agreeable to both Clinton and Sanders factions, and 4) it would also force them  to do the same, giving them credibility.  Win or lose, the benefits for the country are obvious.

In truth, the options for the Republicans are very limited and risky, and they only have themselves to blame.  Our “Prisoner of Zenda option” is a long shot.  But hoping that Hillary Clinton is forced to retire would only bring in Joe Biden, and he would trounce Donald Trump (my opinion).  Allocating most of the money and efforts to the Congressional races at the cost of the presidential one is risky: it could divide the Party further and encourage Republican voters to stay home.

If only Ruritania were real!




[1]  Ronald Reagan believed he could win in 1980.