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583: Trump – Another Brexit Moment? “US Election Special"


11-05-2016

PropertyInvesting.net team

Parallels:  The parallels between poll predictions, the run up to the actual vote and what has happened so far between the Brexit Referendum and the US Presidential race are quite remarkable. Like Brexit – there has been a late run up in support for anti-establishment Trump partly off the back of an FBI announcement to re-start investigations into Clinton over the use of private servers for confidential emails. Trump is now within 2% of Clinton with five days before the vote on 8 Nov.  Most people still believe Clinton will win the vote, but we are far less certain than most. Like Brexit, it’s to do with the voter enthusiasm, demographics and turn-out.

Anti-Establishment Protest Vote: Part of the reason why Trump is so popular, is because he represents the anti-establishment vote – the protest vote. He believes Washington and the liberal democratic elite and their bureaucracies cannot be trusted and are corrupt – it’s an anti-big government vote. A vote against the ruling liberal elite, with Hilary the wife of Bill Clinton, and Bill was a similar person – his affair with Monica Lewinsky has not been forgotten by many Republicans in the “bible belt”.  Too many US citizens, particularly those living in rural areas and areas far from Washington and the big cities – feel like their lot has worsened over time and their living standards have deteriorated – and Trump is promising them better days ahead with his more nationalistic rhetoric. Let’s face it – a decade of money printing to prop up failed banks that led to stagflation – prices rising with living standards for all but the top 10% declining has upset many middle American voters and Trump is promising them a return to the American glory days. He has blamed the Mexicans, a deeply unpopular move by most particularly in the centre ground.

Profile: The Trump voters (like the Brexit voters) tend to be:

·         Older

·         White

·         Have strong opinions

·         More likely to be religious

·         More likely to be nationalistic

·         More likely to be from rural and less urban areas

·         Are more enthusiastic to vote - many are angry - many are highly motivated 

·         More likely to have transport to get to the voting station

This is a very similar profile to Brexit voter.

Change in Voting Intentions: A small minority will also vote Trump even though they say they will vote Clinton, because they are a bit embarrassed to admit it to pollsters when interviewed (just like some Brexit voters were embarrassed).

Too Close to Call: Because the polls have Clinton only two points ahead, just like it was for the Remain campaign prior to the Brexit referendum, it’s quite possible the Trump turn-out will be far larger and this will be enough for Trump to win the Presidential vote.

Unpopularity of Both: Many people in the USA are not enthusiastic about either candidate – Clinton’s popularity is not strong. People that want to vote for Trump are definitely more motivated and enthusiastic to cast their vote. The bottom line is – don’t be surprized or too shocked to see another “anti-establishment” vote for Trump - just like Brexit. Then some "buyers remorse" on reflection.  Furthermore, objectively if you look at Clinton’s track record as Foreign Secretary – she went to war with so many countries over so many years and the final outcome was the rise of ISIS and countries like Syria, Libya, Tunisia, Yemen and northern Iraq imploding – all US foreign policy disasters. We can’t think of an example where the US military involvement seemed to help and Hillary Clinton was right there guiding this disaster.  

More Uncertainty and Potential “Shock”: We have to point out that a Trump victory would create huge uncertainty and a shock to the US financial system. He is considered a “loose cannon” and the US foreign relations would likely deteriorate markedly with his brash rhetoric. The chance of a regional or even world war would probably increase under Trump and it certainly would spook most people around the world – probably more to do with the “fear of the unknown” – with a higher chance of a massive downside.

Poor Candidates: In our view – it’s quite incredible that these two candidates are the best the US can come up with – both have major faults. The concern for Clinton supporters is that they will have a low turnout because of people’s lack of trust in her judgement after all the media stories of email/servers. Trump’s record is no better – probably worse – though he seems to be able to brush off the accusations partly because he has been in the private sector all his life.

Mobilization: If Clinton cannot get her supporters out to vote, its curtains – she is having problems mobilizing her support, and her health problems a month ago did not help either. Many people that have said they will never vote Trump – may change their minds at the last minute.

Underdog and American Psych: Another important point is the American psych – they just love an underdog to come from behind and win. They love a good “race”. They love a dramatic news storyline. It’s like an American Football match – now that Trump has some momentum – many people may genuinely want the non-establishment “man of the people” to “win”, because it will create a bit of excitement in their otherwise rather dreary lives. They don’t call it a “Presidential race” for nothing. Even if they marginally think they want Clinton to win, they might not bother to vote because they are not sure of their intension - leading to a low Clinton turn-out. Many may just not want anything to do with either candidate.

Anyway – all of this has many parallels to what happened in the shock Brexit Referendum vote.

Property Investors Watch: For property investors in the UK, if Trump wins then our prediction is that the following will happen in fairly short order:

·         Dollar will drop 10-15% in value

·         The Fed will drop interest rates

·         The Fed will commence money printing again

·         Gold prices will increase 10%

·         Silver prices will increase 10%

·         Dow Jones will drop by 10%

·         Oil prices will rise by 10%

·         Sterling will rise by 5%

UK Property Prices: For the UK property market, it could initially be mildly positive since a lot of US money and bankers will probably want to switch some investment into Sterling and London property as a hedge. It would also support Sterling’s value, which would reduce UK inflationary pressures somewhat.

More Turbulence?  The 2016 to 2017 is shaping up to be another turbulent period with the key Brexit Referendum vote casting a long period of uncertainty over the UK’s economic prospects. We think a Trump victory would trump even the Brexit vote for the UK property investors. We have this view that you become what you are called – and Trump seems to have pulled out the trump card with the CBI investigation ten days before the election and it’s quite possible he will trump Clinton at the last minute – just like Nigel Farage trumped Cameron at the last minute.

Possible Late Shock: It's worth pointing out that their could be violence at the polling stations because of Trump's claims of a rigged election, the Russians may cyber-attack on election day, or their could be a terrorist incident or another late FBI or related scandal - don't be surprized if some late thing comes out of the blue to steer one way or the other - stakes are so high. This could be the most important global national election for decades. If Hillary Clinton loses, she may go to jail if Trump gets his way. The emotion seems to be intensifying.  

Ruling Liberal Elite Kicked Out: If Trump actually wins, we will be heading for a global period where the existing rule liberal elite and big government begin to be replaced by more nationalistic small government figures that want more power for their nations and less in-country alliances – more sovereignty. Certainly the Brexit vote was a vote against non-democratically elected European crony elites wielding power over independent sovereign states.  On top of Brexit, a Trump victory could become a tipping point – almost a Black Swan event – with the next threats being German and French elections and along with it, the future of the European Union. On top of this, we have the Russian threat – and war in Syria – with severe tensions between Russia and USA over Syria, along with continued threats from ISIS and other terror groups, and tension in the South China Sea from China, USA and surrounding nations. We would not be surprized to see some Russian military incursion into somewhere like Estonia in the next 1-2 years.

Gold Investment Hedge: It’s probably a good time to buy some gold and silver if you have not already done so. If a Trump victory leads to a dollar crash and thence financial turmoil with some banks collapsing, then gold and silver (plus gold and silver mining shares, along with oil) are probably going to perform the best in such a period of turmoil. A dollar crash would likely lead to very high inflation in the USA – so having physical assets like gold, silver, mining shares and property would be the way forward in such a turbulent environment. Large international gold mining-producing companies could be the best bet. Yes, their prices have doubled since Nov 2015, but they did drop 90% before that, from their highs in 2010. Rather than betting on the election result, may be it’s a good idea regardless to buy gold mining shares – since there are likely to be more shocks in the next few years. In any case, most expert investors will tell you that having 10-15% of your portfolio in gold is a good move – an insurance policy against a dollar collapse. Who knows what Trump would do – maybe he would abolish the Federal Reserve Bank (a secretive crony private enterprise with dubious gold backing and ownership) – he could also seize or tax physical gold in the USA so watch out! We are pretty sure he does not like Yellen and the Fed - since they are part of the ruling liberal elite, so he may try and change how banks are financial supported, who knows. If you are particularly sceptical, as we know Trump is a businessman – and this could be his way of making giant amounts of money himself. After all, he loves himself more than any other and he loves money – so it could be open season and he could end up seizing the opportunity and plundering assets for his own personal war chest.

Its too close to call - just like Brexit was. 

9/11.  Anyway, all will be revealed by around 4am Wed 9 Nov – for the UK that’s 9/11.

We plan to update after the result………………. 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

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