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Thu, 29th June 2017

Anirudh Sethi Report

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Archives of “election day” Tag

Overnight US Market :Dow Closed +303 points.S&P 500 Up 32 points

The Trump Rally is back on again.

Wall Street didn’t get the nitty gritty details it wanted on policies such as tax reform and trade from President Trump Tuesday night in his speech to Congress, but the commander-in-chief’s “presidential” tone set investors at ease and they pushed the Dow up more than 300 points to a record-setting close above 21,000.

Investors are taking Trump’s measured and positive demeanor as a sign that he will have a better chance of getting his economic agenda through Congress.

In his address to a joint session of lawmakers, Trump reiterated his push for “historic tax reform” that will put American businesses on a level playing field with foreign competitors, repeated his calls for a $1 trillion infrastructure spending plan and noted that his administration has “undertaken a historic effort to massively reduce job‑crushing regulations.” The president also repeated his promise to repeal and replace Obamacare.

Wall Street was also listening for the things Trump didn’t say. He didn’t echo recent attacks on the media, complain about fake news or mention spats with celebrities and other topics considered “off message.”

Priebus: Trump “Accepts” That Russia Played A Role In Election Hacking

In a surprising twist, incoming White House chief of staff Reince Priebus said Sunday on Fox News that President-elect Donald Trump accepts that Russia played a role in hacking the Democratic National Committee and Clinton campaign Chairman John Podesta.

Priebus, the former RNC chairman, said Trump understands that Moscow was behind the intrusions into the Democratic Party organizations. “He accepts the fact that this particular case was entities in Russia so that’s not the issue” and added that Trump “is not denying that entities in Russia were behind this particular hacking campaign.”

“But here’s the thing that I think everyone needs to understand — when this whole thing started, it started from the Russians 50 years ago … This is something that’s been going on in our elections for many, many years.” Priebus said it “happens every election period.”

“In this particular case, it started way back in 2015 before either nominee of either party was chosen,” Priebus said. “And it started … as a spearfishing expedition over many different institutions.”

Additionaly, Priebus blasted the Democratic National Committee (DNC) for its lack of IT defenses. The DNC was warned multiple times by the FBI before being hacked, Priebus added, and officials didn’t respond. “So yes, we have bad actors around the world,” Priebus said.”But we also have a problem when we have a major political institution that allows foreign governments into their system with hardly any defenses or training.”

As Reuters notes, Priebus’ comments marked a major shift in the official Trump narrative: the president elect has repeatedly dismissed claims that the Russians were trying to help him, arguing that those charges are the product of his political opponents trying to undermine his victory. 

So far, Trump has only indirectly acknowledged the intelligence community’s conclusion that Russia interfered in the election and has consistently downplayed its significance — and the president-elect has a history of later contradicting what his surrogates tell the media.

On Friday morning, shortly before being briefed by US intelligence, Trump tweeted that “Gross negligence by the Democratic National Committee allowed hacking to take place.The Republican National Committee had strong defense!” He then tweeted two follow-up comments, first that “Intelligence stated very strongly there was absolutely no evidence that hacking affected the election results. Voting machines not touched!” followed by “Only reason the hacking of the poorly defended DNC is discussed is that the loss by the Dems was so big that they are totally embarrassed!”

After the briefing, Trump stated, “While Russia, China, other countries, outside groups and people are consistently trying to break through the cyber infrastructure of our governmental institutions, businesses and organizations including the Democrat National Committee, there was absolutely no effect on the outcome of the election including the fact that there was no tampering whatsoever with voting machines.”

Global Debt Hits 325% Of World GDP, Rises To Record $217 Trillion

While we eagerly await the next installment of the McKinsey study on global releveraging, we noticed that in the latest report from the Institute for International Finance released on Wednesday, total debt as of Q3 2016 once again rose sharply, increasing by $11 trillion in the first 9 months of the year, hitting a new all time high of $217 trillion. As a result, late in 2016, global debt levels are now roughly 325% of the world’s gross domestic product.

In terms of composition, emerging market debt rose substantially, as government bond and syndicated loan issuance in 2016 grew to almost three times its 2015 level. And, as has traditionally been the case, China accounted for the lion’s share of the new debt, providing $710 million of the total $855 billion in new issuance during the year, the IIF reported.

Joining other prominent warnings, the IIF warned that higher borrowing costs in the wake of the U.S. presidential election and other stresses, including “an environment of subdued growth and still-weak corporate profitability, a stronger (U.S. dollar), rising sovereign bond yields, higher hedging costs, and deterioration in corporate creditworthiness” presented challenges for borrowers.

Additionally, “a shift toward more protectionist policies could also weigh on global financial flows, adding to these vulnerabilities,” the IIF warned.

“Moreover, given the importance of the City of London in debt issuance and derivatives (particularly for European and EM firms), ongoing uncertainties surrounding the timing and nature of the Brexit process could pose additional risks including a higher cost of borrowing and higher hedging costs.”

For now, however, record debt despite rising interest rates, remain staunchly bullish and the equity market’s only concern is just when will the Dow Jones finally crack 20,000. 

Sadly, since we don’t have access to the underlying data in the IIF report, we leave readers with a snapshot of just the global bond market courtesy of the latest JPM quarterly guide to markets. It provides a concise snapshot of the indebted state of the world.

Shifting Paradigms and the Market Adjustment

Around the middle of the year, St. Louis Federal Reserve President James Bullard revealed his new economic approach.  He argued that during economic phases, or paradigms, economic relationships wee fairly stable, such as unemployment and inflation.  
We cannot predict when a new paradigm emerges.  Economic forecasts must assume the continuation of whatever is the current paradigm.  Bullard accepts the need for one more interest rate, perhaps next month to bring the Fed funds to a neutral target within the existing set of economic relationships.  
Investors see two trends which could very well portend a changing paradigm.  First is reflation.  It was clear that whichever candidate won the US presidential election, fiscal policy was set to turn more accommodative.  Trump promised a large stimulus package, which included tax cuts as well as spending increases.  The size of the package he talked about during the campaign, and his economic advisers are maintaining after the election, is on par with the February 2009 measures when the economy was in the throes of the credit-crisis-induced recession.   
The limits of monetary policy were gradually becoming recognized and emphasized by economists and policymakers.  A few countries, such as Canada, led by a new Liberal government, provided modest fiscal support.  The UK is also widely expected to increase government spending.  Investors anticipate that Hammond, the UK Chancellor the Exchequer, will outline an increase in infrastructure investment (rail and roads) in the Autumn Statement on November 23.  Trump’s campaign rhetoric stands out for its size and the fact that it is for a US economy that is already growing near trend, which the Federal Reserve estimates near 1.8%.  The inflationary implications of provided significant stimulus under such pre-existing conditions are not lost on investors.  

Time Magazine Goes Full Propagandist

Time magazine’s parent company is a top donor to Hillary Clinton’s presidential campaign — a factor that may help explain the publication’s obsession with blaming Russian president Vladimir Putin for “rigging” the U.S. presidential election.

This year, alone, Time Inc., the organization behind Time — one of the most prestigious American weekly news magazines in history — donated nearly $15,000 to the Clinton campaign. A second organization, Time Warner, which was deeply tied to Timeuntil 2014, is also a major Clinton fan. The company gave her campaign $327,308 in individual contributions in 2016, alone.

But perhaps most telling of the organization’s preferences is the presence of Nancy Gibbs as Time’s managing editor. At the tender age of 53, she “shattered a glass ceiling” by taking over for Richard Stengel, who in 2013 “[stepped] down from his news magazine job to join the Obama administration at the Department of State,” Politico reported.

Gibbs is a competent writer, whose impressive resume includes writing for Time for 28 years. This makes her “one of the most published writers in the history of the magazine, having been an essayist and lead writer on virtually every major news event of the past two decades,” according to Magazine.org.

But Time’s praise for Clinton since Gibbs became managing editor, much like her former colleague Stengel’s dedication to President Obama as the Under Secretary of State for Public Diplomacy and Public Affairs, is also part of her legacy. Gibbs, herself, has praised Clinton in her articles, and on one occasion, she participated in a Clinton Foundation annual meeting.

 Keeping that in mind, it’s apparent the writers under her watch are likely steered toward writing pieces she would see fit, ignoringfacts and reporting hearsay as truth despite a lack of evidence.

Trump Victory Predicted By Professor Who Has Called Every Presidential Race Since 1984

 

American University Professor, Allan Lichtman, has accurately predicted every U.S. presidential election since 1984 and now he’scalling 2016 for Trump.  Lichtman uses a system he calls the “Keys to the White House” which he developed after studying every election cycle from 1860 through 1980.

Lichtman’s “Keys to the White House” are the following 13 true/false questions, where an answer of “true” always favors the re-election of the incumbent party, in this case, Hillary.  If, however, the answer to six or more of the 13 keys is “false” then the incumbent loses.

Here is how Lichtman answered his “13 Keys to the White House”:

1.  Party Mandate: After the midterm elections, the incumbent party holds more seats in the U.S. House of Representatives than after the previous midterm elections.

Lichtman Answer:  False “They got crushed.”

2.  Contest: There is no serious contest for the incumbent party nomination.

Lichtman Answer:  True

3.  Incumbency: The incumbent party candidate is the sitting president.

Lichtman Answer:  False

4.  Third party: There is no significant third party or independent campaign.

Lichtman Answer:  False – “In his highest polling, Gary Johnson is at about 12 to 14 percent. My rule is that you cut it in half. That would mean that he gets six to seven.”

5.  Short-term economy: The economy is not in recession during the election campaign.

Lichtman Answer:  True

6.  Long-term economy: Real per capita economic growth during the term equals or exceeds mean growth during the previous two terms.

Lichtman Answer:  True

7.  Policy change: The incumbent administration effects major changes in national policy.

Lichtman Answer:  False – “No major policy change in Obama’s second term like the Affordable Care Act.”

8.  Social unrest: There is no sustained social unrest during the term.

Lichtman Answer:  True

9.  Scandal: The incumbent administration is untainted by major scandal.

Lichtman Answer:  True

10.  Foreign/military failure: The incumbent administration suffers no major failure in foreign or military affairs.

Lichtman Answer:  True

11.  Foreign/military success: The incumbent administration achieves a major success in foreign or military affairs.

Lichtman Answer:  False – “No major smashing foreign policy success.”

12.  Incumbent charisma: The incumbent party candidate is charismatic or a national hero.

Lichtman Answer:  False – “Hillary Clinton is not a Franklin Roosevelt.”

13.  Challenger charisma: The challenging party candidate is not charismatic or a national hero.

Lichtman Answer:  True

Dec. 14 likely to be election day in Japan

Dust off the ballot boxes: Sources say Japanese Prime Minister Shinzo Abe plans to schedule a general election for Dec. 14.

     The official campaign period, according to the rumored timetable, would begin Dec. 2. By holding a snap election at the earliest possible date, Abe hopes to leave a sufficient window for the government to compile a budget for next fiscal year, which begins in April 2015. Abe wants the budget to clear the bicameral Diet, or parliament, before the fiscal year starts. 

     Sources who spoke with The Nikkei expect things to play out like this: Abe would decide, possibly on Tuesday, to put off a consumption tax increase planned for October 2015. He would then dissolve the House of Representatives, the more powerful lower house of the Diet, to seek a new public mandate.

     Pushing back the election schedule even slightly would make it difficult to prepare the budget by the end of the calendar year, as is customary. That could result in the budget not being ready for implementation until late June.