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Fri, 20th January 2017

Anirudh Sethi Report

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Archives of “Election” Tag

FOMC Minutes: Saw gradual rate hike pace appropriate for now -Full Text

Highlights of the Minutes of the Dec 14 FOMC meeting

The Fed hiked rates by 0.25% at this meeting

Highlights of the Minutes:

  • Almost all officials saw upside risks to growth on expectations fiscal policies will be more expansionary under Trump
  • About half of policymakers incorporated those assumptions into forecasts
  • Many saw increased chance of faster rate hike pace due to higher risk of sizeable undershooting of longer-run normal unemployment rate leading to higher inflation
  • Policymakers emphasized their considerable uncertainties on timing, size and composition of legislative and spending changes
  • Almost all members saw unemployment rate running below longer-term normal level
  • Generally agreed o continue to closely monitor inflation
  • Full text

There is never as much detail or conviction in the Minutes as market-watchers hope for. This is the closest thing there is to guidance:

“At this meeting, members continued to expect that, with gradual adjustments in the stance of monetary policy, inflation would rise to the Committee’s 2 percent objective over the medium term as the transitory effects of past declines in energy prices and non-energy import prices dissipated and the labor market strengthened further. This view was reinforced by the rise in inflation in recent months and by recent increases in inflation compensation. Against this backdrop and in light of the current shortfall in inflation from 2 percent, members agreed that they would continue to closely monitor actual and expected progress toward the Committee’s inflation goal.”

The knee-jerk reaction in the FX market was disappointment and the US dollar fell 30 pips but it quickly rebounded back to unchanged.

On the election, here is what the Minutes said:

Here’s How Trump Could Still Actually ‘Lose’ The Presidential Election

On Wednesday night, controversial filmmaker Michael Moore made yet another mind-numbing prediction: He strongly suggested to late-night talk show host Seth Meyers that the Electoral College would deny President-elect Donald Trump a victory prior to his January 20th, 2017 inauguration. Moore previously stunned everyone by predicting Trump’s victory at a time when the analytics — and the political-media establishment — all favored Hillary Clinton.

There is a mechanism for what Moore is suggesting, however unlikely, and it exists within the Electoral College itself in the form of a decentralized, existential bunch of wonks. And, historically speaking, they have never actually asserted their power and changed a presidential election. They’re called ‘faithless electors,’ people nominated to represent the will of the people but who may, constitutionally speaking, revoke their duties. So far, there are seven ‘faithless electors’ who have defected from voting for Trump in the Electoral College. Count ‘em, seven — out of 270. That’s not a lot, obviously, but the mind balks at how quickly momentum could swing against a candidate that garnered over 2.5 million fewer votes than his challenger in the popular vote.

As of Thursday evening, the first Republican ‘faithless elector’ declared he would not vote Trump and that the presidency “is not a done deal.”

Here are three reasons why I believe Trump could, incredibly, still lose this election:

Trump has revealed himself to be fully in support of the establishment.

With his selections for pretty much the full gamut of cabinet positions, Trump has revealed himself to be an establishmentfigure, which is exactly the perception he ran against. Will his voters turn against him? Mostly no (or, at least, not yet). Will the other 74.5 percent of Americans who did not support him reject his victory? Possibly. Will this alone cause Trump to end up losing the vaunted Electoral College? No. Of course not! That’s why there are two more reasons.

Hillary won the popular vote by over 2.5 million.

This is fact. The number is actually growing. It’s historic; it’s actually disgusting if one is prone to be disgusted by electoral politics. Will this alone — or in conjunction with reason one — cause Trump to lose? No. Of course not! That’s why there’s one more, important, reason.

Elections can be stolen.

This happens. It happens more than you think. Usually, it happens before the popular vote – you know, when the votes are actually coming in, in the form of vote flipping and “magic fractions.” The 2000 election was stolen for Bush, the 2004 electionwas stolen again for Bush, and the Obama elections probably would have been stolen except that he won by such huge margins it would have been obvious. And many, many elections have been rigged or gerrymandered in some way.

Things moving quickly in Italy – new govt soon, then elections, bank bailout

Reuters with a run down on developments in Italy:

  • Italian President Sergio Mattarella looks likely to nominate (current) Foreign Minister Paolo Gentiloni to head the next government
  • Gentiloni could potentially take office next week
  • He’ll oversee new elections, but before any vote can take place Italy needs a new electoral law
  • Meanwhile, the country’s third-largest lender, Monte dei Paschi di Siena looks as it needs an more or less immediate bhelp via state intervention to avoid collapse

Italy’s Approval of Constitutional Reform to Put EU Integration Back on Track

In case Italian voters approve constitutional changes in a referendum, it will stimulate the European integration process as a “yes” vote will boost positions of Prime Minister Matteo Renzi’s center-left government in Europe against the Italian populists and right-wing parties, Alessandro Maran, a lawmaker from Renzi’s Democratic Party (PD), told Sputnik on Saturday.

On Sunday, Italy is due to hold the referendum on constitutional changes primarily aimed at eliminating equal powers of two parliament’s chambers and thus avoiding political instability and frequent fall of governments. As far as Renzi staked his future on the outcome of the referendum, the opposition tried to use a vote on reforms as a tool to express overall dissatisfaction with PD policies and the prime minister’s record in office. “If, as I hope, the Yes camp prevails, Renzi’s government and PD will play a vital role in Europe. It would be a great opportunity for our country and could bring the European integration process back on track,” Maran, the Senate’s Constitutional Affairs Committee member, said. Polls cannot be published in the last two weeks of campaigning, but most polls before this time limit predicted that Renzi-lobbied reforms were unlikely to pass. A poll conducted by Ixe for Agora-Rai3 TV station showed that 42 percent of voters did not want constitutional changes, 37 percent are in favor of them, and over 20 percent of respondents remained undecided.

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.  

Oxford Dictionaries word of the year: “post-truth”

In 2015 the word of the year was an emoji showing tears of joy. This year’s selection raises the question of how much use its predecessor has seen since then.

Oxford Dictionaries has named “post-truth” as its word of the year for 2016, citing a spike in the frequency of its use in the context of the UK’s Brexit referendum and the US presidential election.

The word’s online entry:

post-truth (adjective) Relating to or denoting circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief

Oxford Dictionaries said that while the word has been around for a decade, it had risen to prominence in 2016, particularly when coupled to form the phrase “post-truth politics”.

Other words that made the short-list included “alt-right”, “chatbot”, “Brexiteer” and “woke”.

Trump Reacts: “It’s A Rigged System, Hillary Is Protected”; Paul Ryan, RNC, Trump Campaign All Issue Statements On FBI Decision

The stunned reactions to Comey’s shocking announcement are coming in fast and furious, as moments ago, Donald Trump – during a live speech – made the opening salvo by saying “it’s a rigged system, and she’s protected.”

Then, moments later, the official responses started flooding starting with House Speaker Paul Ryan, who has been notably on the fance regarding his support for Trump, and has failed to come to his support by naming him in recent public appearances, did just that, when in a statement said that “Regardless of this decision, the undisputed finding of the FBI’s investigation is that Secretary Clinton put our nation’s secrets at risk and in doing so compromised our national security. She simply believes she’s above the law and always plays by her own rules. This is a pattern with the Clintons, and the American people should not have to endure four more years of their scandal and baggage. Fortunately, the American people have the opportunity to ensure Secretary Clinton never gets her hands on classified information again. Let’s bring the Clinton era to an end by voting for Donald Trump on Tuesday.”

Market Indicator Gives Trump An 86% Chance Of Winning The Election

Back in January, when it still wasn’t certain that Donald Trump would be the Republican presidential candidate, let alone be neck and neck with Hillary Clinton in the polls days ahead of the election, we explained why Trump should be praying for a market crash, or rather not so much a market crash as a swoon in the market in the three months prior to the election. We were referring to a market-based indicator which had a near flawless 86.4% accuracy track record.

As we noted at the time, the old saying that “people vote their pocketbooks” is more accurate than the average political analyst thinks. While Wall Street typically worries about how politics might affect the market, presidential candidates are far more concerned about how the stock market might affect their political outcomes.

Here is why this is important: historically, the market performance in the three months leading up to a Presidential Election has displayed an uncanny ability to forecast who will win the White House… the incumbent party or the challenger. Since 1928, there have been 22 Presidential Elections. In 14 of them, the S&P 500 climbed during the three months preceding election day. The incumbent President or party won in 12 of those 14 instances. However, in 7 of the 8 elections where the S&P 500 fell over that three month period, the incumbent party lost.

There are only three exceptions to this correlation: 1956, 1968, and 1980. Statistically, the market has an 86.4% success rate in forecasting the election!

Overnight US Market :DOW Closed -29 Points.S&P Closed -9 points.

Stocks shifted into malaise mode Thursday afternoon with the looming election, sending the S&P 500 down for an eighth straight day.

That’s the longest losing streak for the broad market index since 2008, CNBC reported.

All three major indexes fell for the day after holding onto gains for at least much of the morning. The S&P 500’s loss was 0.4%, while the Dow Jones industrial average and the Nasdaq composite fell 0.2% and 0.9%, respectively.

Investors remain nervous about the outcome of the presidential election between Hillary Clinton and Donald Trump next week as polls tighten.

As expected, the Federal Reserve left interest rate policy unchanged Wednesday but kept the door open for a rate hike at its December meeting.

U.S. benchmark oil futures slipped again, falling 1.5% to $44.65 a barrel in electronic trading on the New York Mercantile Exchange.

Hillary Camp In “Full Panic Mode” As Early Black Voter Turnout Plunges In Key Swing States

A few weeks ago we pointed out that Obama enjoyed massive, unprecedented spikes in black voter turnout in both the 2008 and 2012 elections.  After hovering around 50-55% for decades, black voter participation soared to over 60% in 2008 and 2012.  That said, in the past we’ve raised serious doubts over whether Hillary should expect the same level of enthusiasm from black voters in this election cycle or whether overall turnout of black voters would revert back to pre-Obama levels. 

Unprecedented black voter turnout was a huge component of Obama’s victories in 2008 and 2012.  Per the chart below from the New York Times, after running in the low-to-mid 50% range for decades, black voter participation surged to over 60% for Obama in 2008 and 2012, the highest ever recorded.

So, the question is, should Hillary expect the same level of unprecedented black voter turnout that Obama was able to garner?  Apparently, her campaign is not convinced and that’s why, according to Leslie Wimes, President of the Democratic African-American Women Caucus, they’re in “full panic mode.”

Black Voter Turnout