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Fri, 20th January 2017

Anirudh Sethi Report

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Archives of “United States presidential election” Tag

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.

Donald Trump Seals Electoral College Victory, Officially Becomes 45th US President

It’s finally over: Donald Trump has secured 304 Electoral Votes following the Texas vote (with 2 faithless electors), officially securing the presidency of the United States.  Of course, the now official President-Elect Trump took to twitter to confirm the victory:

Texas’ 36 electoral votes for Trump pushed him over the edge at around 4:30 Central Time, even though two rogue electors’ defections deprived Trump of one of those votes. That gave Trump 304 total electoral votes.

A quick recap of the day’s events from the WSJ:

 Members of the Electoral College meeting in state capitals across the country on Monday confirmed President-elect Donald Trump’s victory in the 2016 election, ending a last-ditch campaign to deny him the presidency. Mr. Trump amassed at least 270 electoral votes on Monday afternoon—enough to officially become the president-elect over his Democratic rival, Hillary Clinton, according to a tally of votes by the Associated Press.

Typically just a formality, this year’s Electoral College vote attracted an outsize amount of attention after a group of mostly Democratic electors made a late push to block Mr. Trump’s path to the White House. They argued the Electoral College had a constitutional duty to act independently of the will of the voters in extraordinary circumstances. Protesters gathered in several state capitols across the country to encourage electors to reject Mr. Trump.

Japan Overtakes China as Biggest Overseas US Debt Holder as Renminbi Drops

Mainland China has lost its status as the largest overseas holder of the US debt to Japan as the recent decline in the renminbi’s FX rate and the strengthening yen have affected the value of the two nations’ respective Treasury note portfolios.

The yen’s status as safe haven asset as fiscal stimulus effort have attracted investment capital to Japan, resulting in stronger yen, whilst China, struggling with low factory-gate inflation and weak international demand for manufactured goods, had to decrease its holdings of the US debt. Japan, now the biggest foreign holder of US Treasury debt, held $1.13 trln worth of US bonds in October, whilst China’s holdings shrank to their six-year lowest at $1.12 trln, according to the data from the US Department of the Treasury. Beijing has been selling US bonds in order to alleviate the downward pressure on the renminbi’s FX rate stemming from lingering economic turmoil. Mainland China uses the dollars obtained from selling the Treasuries to buyback the renminbi, currently at its 8-year lowest in offshore trading.

Japan, however, had been selling Treasuries in early autumn, too, due to the uncertainty surrounding the US presidential election. The subsequent developments in the form of the election of Donald Trump and the plunge in Treasury bond value accompanied by the rising benchmark 10-year yield have proven selling Treasuries the right move, but the yen’s ongoing appreciation has made Japan the largest international US bond holder.

Overnight US Market :Dow Closed +40 points

Stocks closed mixed Monday as the Dow hit a new all-time high and as oil prices jumped after several non-OPEC countries agreed to join the cartel in cutting output and as investors focused on interest rates. The S&P 500 and Nasdaq snapped 6-day winning streaks and retreated from record highs.

Investors were also focusing on interest rates as Federal Reserve  policymakers meet this week and most economists expect the Fed to announce a rate hike at the conclusion of the 2-day meeting on Wednesday.

The Dow Jones industrial average rose 39.58 points, or 0.2%, to a record close of 19,796.43, according to preliminary calculations. The Standard & Poor’s 500 index fell 0.1% to 2256.96,  after rising in early trading to set a new intraday record. The Nasdaq composite index dropped fell 0.6% to 5412.54.

Energy stocks got a boost as the price of U.S. benchmark crude oil jumped 2.6% to $52.83 a barrel as oil-producing countries outside of OPEC agreed to reduce production by 558,000 barrels per day. That comes after OPEC countries agreed in November to reduce production by 1.2 million barrels per day.

US 10-year yield climbs above 2.5%, stocks mixed

Oil prices surged to their highest level since July 2015 on Monday raising concerns about inflation and helped push the US 10-year Treasury yield above the 2.5 per cent mark.

The yield on the US 10-year, which moves inversely to price, climbed above 2.5 per cent for the first time in two years to 2.5005 per cent.

“The bearishness in the bond market is even more acute than the bullishness on equities,” David Rosenberg at Gluskin Sheff, said.

Alongside energy prices, Peter Tchir at Brean Capital also said the weakness in Japan “is concerning to global bond investors”. He noted the Bank of Japan had pledge in September to keep the 10-year yield on the Japanese government bond at or below zero per cent. Instead, the JGB is now at nearly 0.8 per cent. That “might be an indication of Central Banks losing their ability or willingness to suppress interest rates,” he said.

Despite the run up in oil prices, the S&P 500 was down 0.1 per cent to 2,257.67, while the Dow Jones Industrial Average was flat at 19,760.14 — less than 300 points shy of breaching the 20,000 level. The Nasdaq Composite was down 0.5 per cent to 5,420.70.

Investors appear to be pausing for breathe following the sharp run up in stocks in recent weeks.

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.  

Week Ahead :Watch for Week ahead: Trump, Yellen, Carney

With the dust having settled on the US presidential election, investors now watch for updates on President elect Donald Trump’s transition plans.

 Here’s what to watch in the coming days.

Donald Trump

Mr Trump has already met with President Barack Obama and on Friday said he will soon start revealing the names of people who he wants to serve in his administration. Mr Trump is expected to continue reviewing names for staff members including the White House chief of staff and his Cabinet. He is also expected to continue making calls to foreign leaders.

Mr Trump is scheduled to meet with Japanese prime minister Shinzo Abe in New York on Thursday at Mr Abe’s request. During his campaign for the White House Mr Trump has criticised Japan, and other allies, for not paying their fair share to support American military bases.

During his campaign Mr Trump had also said that he would withdraw from the Trans-Pacific Partnership, which the Obama administration signed in 2016 with Japan and 10 other countries, and which was seen as a counter to Beijing’s growing influence in the Asia-Pacific. The lower house of Japan’s parliament voted to ratify the TPP on Thursday. But President Obama’s administration is reported to have given up on the deal.

Investors will keep a close eye on markets too following the unexpected move in risk and safe haven assets after Mr Trump struck a conciliatory tone in his acceptance speech and as President Obama said his team was working with Mr Trump to ensure a smooth transition.

Trump Ahead Or Tied For 284 Electoral Votes — 14 More Than He Needs

Donald Trump, according to the latest polling, is ahead in states with 230 electoral votes and is tied in five states with a combined 54 more, giving him a potential haul of 284 votes — 14 more than he needs to win.

And that doesn’t count Florida where RealClearPolitics.Com shows Hillary clinging to a 1.2 point lead.

Trump is ahead in all the states Romney carried (including Indiana and North Carolina) and in Ohio (18 votes) and Iowa (6). He is tied in Pennsylvania (20), Michigan (16), Nevada (6), New Hampshire (4), and Colorado (8).

And he could still carry Florida and has an outside shot at Wisconsin.

So far so good.

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!