This will chill your investor blood
Monday, 17 December 2018
By Bernd Struben
- You can almost hear his call to arms now
- ‘Left-Wing Protesters Reveal Cracks in Labor’s Façade’
‘I think that the people would revolt if that happened.’
US President Donald Trump, on the prospect of his impeachment
Politics and stock markets have long been intertwined.
Decisions on whether to go to war, for example, have historically had massive impacts on stock and commodity markets’ performance.
As did Richard Nixon’s 1971 decision to take the US dollar off the gold standard.
Then there are the myriad smaller issues like tax and interest rates levels, and which corporate sectors happen to be in or out of favour with any given administration.
Will coal companies get the boot while windfarms get government handouts?
Will Bill Shorten’s plan to end negative gearing see even steeper falls in Aussie house prices…if Labor wins next year’s election?
And let’s not forget the old royal commissions.
Which sector will be the next to fall under the scrutiny of a royal commission? And what will the fallout be?
While much needed, you’ve seen the results of the Banking Royal Commission on the banks’ sliding share prices.
National Australia Bank Ltd. [ASX:NAB] for example, is down 21% since 1 December 2017.
Westpac Banking Corp [ASX:WBC] is down 22% in that same time.
Of course, not all of the share price rout can be blamed on the incriminating findings of the royal commission. But certainly it deserves some of the, erm, credit.
Now, the royal commission was officially established on 14 December 2017. But the writing had been on the wall for some time. And I use the 1 December date for a reason.
Well, here’s what I wrote to you on 29 November 2017:
‘Is it time to sell the banks and buy bitcoin?
‘The world’s largest cryptocurrency passed the US$10,000 milestone since I penned yesterday’s Port Phillip Insider…
‘Cryptos’ rapid evolution and huge price gains, and losses, have many analysts concerned.
‘Yet, despite some grumbling from regulators across the globe, the crypto market remains almost entirely unregulated. Or, more accurately, almost entirely self-regulated.
‘Not so the humble banks. And a royal commission into Australia’s banking industry looks increasingly likely…
‘Mere speculation of a banking enquiry has already put the big banks’ share prices under pressure. And in the lead up to the enquiry, banking stocks could suffer a good deal more.’
I’m not writing this to toot my own horn. Well, maybe a little. If you unloaded your bank shares back on 1 December, after all, you’ll have saved yourself some painful losses.
And if you bought bitcoin and sold it near its peak on 17 December 2017, then you could have roughly doubled your money.
Of course, that last part is pure hindsight. I make no brash claims of having forecast bitcoin’s peak.
The point here is that, like it or not, politicians’ actions play a big role in financial markets. Meaning it’s important for you, as an investor, to keep an eye on what’s brewing on the horizon.
With the rise of social media and round-the-clock news — and fake news — this has never been truer than today.
Trade wars and sanctions on oil rich Iran may have dominated the headlines. But there’s a much more dangerous risk looming in the shadows. And I’m not talking about a shooting war with North Korea.
We’ll get back to that right after a look at the markets…
Over the weekend, the Dow Jones Industrial Average closed down 496.87 points, or 2.02%.
The S&P 500 lost 50.59 points, or 1.91%.
In Europe the Euro Stoxx 50 index finished down 19.57 points, or 0.63%. Meanwhile, the FTSE 100 fell 0.47%, and Germany’s DAX closed down 58.93 points, or 0.54%.
In Asian markets, Japan’s Nikkei 225 is up 139.39 points, or 0.67%. China’s CSI 300 is down 0.28%.
In Australia, the S&P/ASX 200 is up 58.90 points, or 1.05%.
On the commodities markets, West Texas Intermediate crude oil is US$51.38 per barrel. Brent crude is US$60.34 per barrel.
It’s looking a lot like oil may have found a bottom around this price level. That’s as expected, given that prices below US$50 per barrel would see many US shale operators begin to struggle to deliver profits.
But for oil bulls hoping to see WTI return to US$70 per barrel or higher, a friendly reminder:
The world is awash in oil.
And it’s not just the US, Russia and Saudi Arabia pumping at near record levels.
This headline come from Bloomberg, ‘Mexico’s New President Allocates $23 Billion for State Oil Company to Boost Output Next Year’. The article continues:
‘[Mexican President Andres Manuel Lopez Obrador] plans to build a new refinery and refurbish the run-down existing ones, while increasing domestic oil production to feed the plants…
‘Under a new six-year business plan, Pemex’s oil production will rise 52 percent to 2.624 million barrels a day by the end of 2024, up from 1.730 million daily barrels today, the company’s new chief executive officer, Octavio Romero said…’
Turning to gold, the yellow metal is trading for US$1,237.85 (AU$1,725.62) per troy ounce. Silver is US$14.64 (AU$20.41) per troy ounce.
One bitcoin is worth US$3,205.22.
The Aussie dollar is worth 71.71 US cents.
You can almost hear his call to arms now
So, what’s more dangerous than a shooting war between the US, its allies and North Korea?
For a clue to that answer have another look at today’s opening quote.
Now here’s the full quote from Trump to Reuters reporters in an Oval Office interview last week:
‘It’s hard to impeach somebody who hasn’t done anything wrong and who’s created the greatest economy in the history of our country… I’m not concerned, no. I think that the people would revolt if that happened.’
Does this send a chill through your investor blood? Or do you dismiss this as typical Trump bluster?
It’s easy to dismiss. After all, Trump certainly didn’t create the greatest economy in the world. All he did was give it a sugar hit with massive tax cuts when the economy was already humming along nicely.
But when he talks about the American people revolting over his impeachment, I think dismissing it as bluster is a mistake.
Not that every American would revolt. If they did, it would be a very one-sided revolution that would end in short order.
But Americans today are more divided along deep partisan lines than ever before. Or at least since the 1850s…in the lead up to the US Civil War.
Senate Minority Leader Chuck Schumer and House Minority Leader Nancy Pelosi (soon to likely be House Majority Leader Pelosi) are playing a dangerous game…with a dangerous man.
‘Chuck and Nancy’, as Trump likes to call his two Democratic opponents, are still being coy over their impeachment plans. But with each passing day it’s looking more likely that they will at least initiate impeachment proceedings against the president.
That alone would almost certainly be enough to further rile global stock markets.
But the Democrats only control the House of Representatives. Without the Republican controlled Senate casting two thirds of its votes for impeachment, Trump’s tenure is safe.
Like it or not, that’s the best case outcome once impeachment proceedings begin.
The real danger arises if Mueller or someone else digs up the right dirt to convince enough Republican senators to back an impeachment motion.
That’s when the fireworks could really begin.
Unlike Richard Nixon (who bowed out before being impeached) or Bill Clinton (who would have gone meekly), I just can’t see Donald Trump handing over the keys to the White House without a fight.
You can almost hear his call to arms now. And the torrent of Twitter outrage pouring into his supporters’ feeds.
Don’t forget, if Trump is impeached it will all be based on ‘fake news’ derived from a ‘witch hunt’.
‘I think that the people would revolt,’ could all too quickly become, ‘I think that the people should revolt.’
As divided as US politics has become — fuelled by left-wing and right-wing media alike — it’s far too easy to envision ‘Trump militias’ coming to the rescue. Perhaps patrolling the White House grounds to keep the ‘lefty Feds’ from dethroning their chosen leader.
Once the first shots ring out, it could all spiral towards a second US civil war. One that would upend global trade and stock markets in a way that no one living has ever experienced before.
I know this may sound farfetched and even conspiratorial to you today.
But it’s precisely what renowned futurist and US economist Harry S Dent warns about in his bestselling book, Zero Hour.
This is the same book where Harry forecasts a 50% fall in Aussie housing prices…by 2020. (You can secure you discounted copy here.)
And while I hope that Harry Dent is wrong, if the US Congress is foolish enough to try to remove Trump before the voters have their say in 2020, look out!
This danger has also been high on resource analyst Jason Stevenson’s list of concerns.
You can find out why — and three ‘gold shock stocks’ Jason expects to soar during the ensuing tumult — here.
Finally, here’s the latest in Aussie politics from The Australian Tribune:
‘Left-Wing Protesters Reveal Cracks in Labor’s Façade’
‘With the next federal election still likely five months away, rifts are already beginning to appear in Labor’s façade.
‘Alt-left factions seem intent to transform the Labor party into something resembling the Greens. That’s despite the rout the Greens just suffered in Victoria’s state election.
‘Undeterred by economic realities or the likely voter pushback to their extreme agendas, climate change warriors stormed…’
If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.
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