Even as friends and neighbors here in Florida dig themselves out of the largest storm we’ve seen in over a decade, I worry about how our country will dig itself out of the most divisive election in over a century.
With the possible exception of the Civil War years, never before have the hard stats shown such extreme polarization in America’s politics and society! (See Black Swan #3 in this article.)
Never before have so many American voters harbored such extreme sentiments of distrust, dislike — even outright disgust — for the two major party candidates for president!
And never before has a presidential election itself, regardless of the outcome, been so potentially dangerous for investors!
Consider just the immediate outcomes …
- If Clinton takes the White House, she will be ferociously attacked by Republicans, liberal Democrats, and most of Middle America.
- If it’s Trump, the attacks could be equally fierce from Democrats, traditional Republicans and most of the Washington/New York establishment.
Either candidate will be under siege, unable to govern.
In desperation, both are likely to circumvent the standard channels of presidential power … lose the support of most Americans … face popular rebellions … and even become the targets of impeachment movements.
How would that domestic strife impact U.S. stocks, bonds and the dollar?
What would it do to the U.S. ecomomy?
What about contra-dollar investments like silver, gold, collectibles and other hard currencies?
Before I jump to the answers, let me give you a quick survey of how other analysts see America’s post-election future (along with my critique of each) …
Forbes: Gridlock or Trumplock?
Forbes contributor Thomas Del Beccaro predicts that …
1. If Hillary wins …
- Washington gridlock will intensify. She will govern like Obama in his last six years — “through regulations, executive orders and a compliant Supreme Court.”
- Maybe she will squeeze through a fix for Obamacare because Republicans also want it. But beyond that, expect little or nothing in terms of new legislation.
- Government spending (plus private spending needed to cope with government regulations) is already half of the U.S. economy and growing. Four years from now, it will be even worse.
- The economy will continue on the same weak-growth path, Fed policies will be very similar, and the stock market, which actually likes government gridlock, will continue to drift higher.
2. Meanwhile, he predicts that if Trump wins …
- Government gridlock will ease — for better or for worse. More legislation will come out of the Senate. But don’t necessarily assume it will be government reform. It could also be just more
- If Trump can build a coalition, he might get tax reform and better prospects for long-term GDP growth. But if he starts a trade war, he could drive the economy into a decline.
You’ll either be one of the lucky few who are rich and secure; or one of the millions who are hungry, desperate, and afraid. Now you might be tempted to say, “Dow 31,000 sounds pretty good to me, Larry, I’ll just hold onto my U.S. stocks and watch them double in value.” In other words, you might be tempted to sit tight and do nothing. But sitting tight is the worst thing you could do, for three reasons … to find out what those reasons are click here before it’s too late! -Larry Edelson
My critique: All this may sound logical. But it misses the big elephant in the room: The ongoing disintegration of the nation’s social fabric — worsening income inequality, civil and ethnic strife, and, unfortunately, violence.
End result: With rare exceptions,
- If the next president takes little or no action to mend the country, the social fabric will naturally continue to unravel.
- And …
- If the next president is more assertive at any level, at least half the nation will react angrily, tearing the country apart more quickly.
Lindsey Group: Bear market
Peter Bookckvar, Chief Market Analyst with The Lindsey Group, says the market’s headed south, no matter who wins. His views:
- Wall Street is wrong. Investors seem to think Hillary Clinton would be better for markets due to the relative certainty she brings to the table, whether good or bad. In reality, it won’t matter.
- Bear market long overdue. We are already in the second longest bull market of all time, eight years so far. So odds are high that the next president will preside over a recession, a bear market and rising deficits.
- Asset bubble. We are in the midst of the third major asset price bubble in the past 15-20 years; and it’s the biggest one ever, mostly in sovereign and corporate bonds. Therefore, the behavior of central bankers and the influence of global interest rates will be the main driver of asset prices over the next four years, not the next president.
- Economy. The next president will have to deal with a GDP growth rate that has now slowed to about 1.5 percent. Any decline in stock prices, among other factors, could easily drive the U.S. economy into a recession.
My critique: This author makes rational arguments but doesn’t mention what we believe could be the overriding factor: The Global Money Tsunami, which, for now at least, continues to drive massive amounts of flight capital from trouble spots around the globe to U.S. markets. (More on this in a moment.)
The Street.com: It’s all about taxes and sectors.
Leon Lazaroff, writing for The Street.com, sees the following impacts of a Clinton victory:
- Banks. Clinton clearly wants be tougher on Wall Street banks. She knows that 67% of U.S. voters favor stricter regulation of financial institutions and even 58% of Republicans want to toughen Wall Street oversight. Possible consequences: (1) Some version of the Volcker Rule aimed at discouraging banks from making risky investments, and (2) a “risk fee” on the liabilities of banks with more than $50 billion in assets.
- Taxes. Under Clinton, expect higher taxes on the rich, including these three: (1) An end to the “carried interest loophole,” the provision that allows money managers and hedge fund operators to treat fees on their clients’ investments as capital gains; (2) higher taxes on short-term capital gains; and (3) a 4% surcharge on people earning more than $5 million.
- Pharma. Clinton has already rolled out a plan to lower prescription drug costs. Yes, it may lower prices, but it could also rock pharmaceutical companies.
- Trade. Clinton helped to negotiate an agreement with Mexico and Pemex to open drilling rights in the Gulf of Mexico. She also supported TTP. Right now, none of this is politically popular. But despite any campaign rhetoric one way or the other, she’s likely to support agreements that boost trade and open foreign markets for U.S. corporations.
Bloomberg: Fed overhaul
Jeanna Smialek, writing for Bloomberg, argues that the Fed may be headed for a shakeup, whether under Clinton or Trump.
Clinton has called for greater diversity at the U.S. central bank. Trump has been vague on how the Fed should change, but has slammed it for keeping interest rates so low.
Meanwhile, lawmakers from both sides of the aisle have proposed legislation in recent years to limit the central bank’s authority, such as an annual audit.
Even if they pass no new laws, the new president can change the Fed with new appointments: The terms of both Yellen and Fed Vice Chairman Stanley Fischer expire in 2018, and there are already two vacancies on the seven-member Fed Board in Washington.
Another possibility, according to this author: If Trump wins, Yellen might resign.
Cato Institute: More wars under Clinton
Many analysts and voters see Trump as a warmonger and risk to national security. They cite his comments on NATO, nuclear weapons and more.
But many also see Clinton in a similar light. Cato senior fellow Doug Barndow, for example, provides a list of Clinton’s actions and views regarding military conflicts:
- While she was first lady, Clinton pushed for U.S. intervention in the Balkans, attacking the Bosnian Serbs and then Serbia.
- As a senator, she backed the Iraq invasion.
- Clinton supported the Obama administration’s decision to double down, twice, on its nation-building mission in Afghanistan.
- She was partly responsible for America’s Libyan misadventure, another attempt at regime change on the cheap.
- Her insistence on the ouster of Syria’s President Bashar Assad discouraged a negotiated settlement.
- Clinton advocated lethal aid to Syrian rebels, who displayed a tendency to surrender and turn weapons over to radical groups.
- She later urged direct U.S. military intervention in the form of a “no-fly” zone.
- Clinton backed NATO expansion up to Russia’s borders, which poisoned bilateral ties.
Billionaires pulling cash from US stocks & banks?
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Our view: As Larry Edelson has predicted clearly and repeatedly, a powerful war cycle is ramping up through the year 2020, and it’s this cycle that’s often driving global events — not individual decision makers.
Thus, in the 1990s, Hillary Clinton, Donald Trump and even Vladimir Putin were far more dovish. Fast forward two decades to the world after 9/11, the Crimea, Paris attacks and Syria … and those same three individuals are far more likely to threaten, join or even initiate major conflicts.
So much for the survey of other analysts and opinions. Now, here again is …
The Big Elephant in the Room: U.S. Domestic Instability
Never forget: Until now, global investors have viewed the U.S. markets as the world’s largest and most liquid safe haven.
Whenever they’ve fled turmoil overseas, they’ve consistently moved money into high-quality U.S. stocks, real estate and businesses.
It’s this tide of flight capital that has been a big driver of the Dow to all-time highs.
It’s this capital flow that’s helped stimulate a recovery in the U.S. real estate market.
And it’s this tide which we have called the Great Money Tsunami.
But it’s also a tide that could begin to reverse as we see more civil and political strife in the United States.
Indeed, when he warned about the war cycle over three years ago, Larry also declared that, at some point, it would also include U.S. domestic unrest.
At the time, many investors felt this aspect of his forecast was unbelievable. Others thought it was wildly premature. Some simply said he was nuts.
Suddenly, however, it’s a vision that’s widely accepted …
- If Trump is elected, 65% of voters, including many Trump supporters, think there will be race riots, according to a Lincoln Leadership Initiative poll.
- In the context of a Clinton win, two-thirds of Republicans say they will distrust election results. Worse, “American conservatives may have to resort to physical violence to protect their values from liberalism,” says Kentucky Governor Matt Bevin.
Look. Regardless of whom you support, you cannot deny that the tide of violence — and threats of more — are no longer just theory. They’re real and tangible.
We know that active shooters are appearing more randomly, more frequently, and alas, more tragically.
We know that there is growing venom and strife between black and white, rich and poor, old and young, coast and heartland.
If this trend continues, step by step, the U.S. could lose its safe-haven luster. Global investors could cast the U.S. into virtually the same category as other “let’s-get-the-heck-out-of-here” regions of the world.
And in that scenario …
- U.S. long-term government bond prices, 80% supported by foreign investors, could fall.
- The U.S. stock market would turn south.
- U.S. real estate — one of the prime beneficiaries of massive capital inflows from Europe, China, Russia and Latin America — could sink anew.
- The bull market in the U.S. dollar would end.
- And contra-dollar investments like gold would begin a major ascent.
But these are just the financial consequences of growing domestic turmoil. In the long term, economic and cultural schisms that are already sweeping the nation could fracture American society like never before.
Unless you have a concrete self-defense plan, investing could become a nightmare. Unless you know how to find the true safe havens in the world today, you could lose not only money, but also your peace of mind.
Thank God if I’m wrong! But if I’m right, my team and I are dedicated to helping you through it with a solid plan for your financial and physical safety.
Good luck and God bless!