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What Trump’s stunning upset means for markets

Full Article: What Trump’s stunning upset means for markets 

By: Frank Holmes

 

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Call it Brexit 2.0: American Edition.

Like their British counterparts, who voted in June to cut ties with the European Union (EU), American voters resoundingly rejected globalism last week, calling into question the United States’ involvement in military alliances such as the North Atlantic Treaty Organization (NATO)—which is 72 percent funded by U.S. tax dollars – and international trade deals, from the North American Free Trade Agreement (NAFTA) to the Trans-Pacific Partnership (TPP). Over the course of his campaign, Donald Trump sharply criticized such groups, vowing either to renegotiate the terms or pull out of them altogether. The future of the Paris climate agreement, ratified by over 100 countries as of this month, has also been thrown into uncertainty.

We all remember how Brexit was inaccurately predicted, with polls saying the referendum would fail. In a modern-day equivalent of “Dewey Defeats Truman,” U.S. polls also got the presidential election spectacularly wrong, missing the forest for the trees. Many polls, including CNN, Huffington Post and the Princeton Election Consortium, had Clinton’s chances of winning above 90 percent.

Full Article: What Trump’s stunning upset means for markets 

By: Frank Holmes

 
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Clinton or Trump, Who is Better for the Markets and Gold?

Kal Kotecha PhD

Politics in the United States is dramatic and watches like a soap opera. But which candidate if elected will help the stock market and specifically the price of gold? Let’s breakdown the views of the frontrunners.

Republican Presidential front runner Donald Trump holds very controversial beliefs on immigration, tariffs and border security. On the flip side, Democratic front runner Hilary Clinton wants to “break down walls” and has no plans on placing huge tariffs on imports.

Trump wants to place a 45% tariff on imports from China. Why does he want to do this? Simply, he does not like China ‘dumping’ cheap products into the U.S. But perhaps he is thinking long term. Even though he did not specify outright, he may be thinking that multinational corporations operating in China and other Eastern nations may come back to the good Ol’ USA avoiding the import tariffs and building plants there resulting in the hiring of more Americans. Even some Eastern based corporations may relocate in the U.S. Will this work? I am not a big fan of most of Trump’s ideas – I do like this one. Even though it is not deemed to be a “Republican” view which takes more of a stance on company profits and free trade, Trump if elected, may be successful in bringing back jobs to the U.S.

I remember lecturing at the University a few years ago when a student asked me, “How can we bring more jobs back to Canada?” I pondered and stated: one way would be to place import tariffs on products that were not made in Canada. Even though in ‘theory’ this may seem to work, in practice it probably wouldn’t for Canada. The main reason being that in essence, no company really cares about the Canadian market versus the vast US market. Another reason why this may not work for Canada is because Canada does not have many multinational corporations. The likes of Blackberry and Bombardier are not the stellar darlings they were many years ago and may require government bailouts.

Corporations do not want to lose customers in the lucrative U.S. market. American companies like Microsoft, Nike and Apple, even though they might not have a big workforce in China, may bring back their plants/offices to the US. – especially if their competitors do so. Trump may even lean towards providing tax breaks to corporations willing to relocate back to the U.S.

Trump may be on to something for the U.S. market. If he gets elected, it may be projected that he is not “good for American Company profits”. Let’s be honest here, corporations exploit cheap human labour overseas and they will not be making the profits they are now if they had to move their operation back to the U.S. and pay 5-15 times the wages they are paying now to produce the same product.

On the flipside, Clinton is not expected to try to ‘encourage’ U.S. companies to bring jobs back to the homeland, nor place a huge tariff on Eastern imports. I believe the markets will laud a Clinton win.

In terms of gold, there is evidence that Trump holds gold. As reported by Business Insider  http://www.businessinsider.com/donald-trump-owns-gold-2015-7

Trump owned between $100,001 to $250,000 of gold on July 2015. They appear to be holdings in physical gold, not in specific company shares.

Westernjournalism.com reports:  Is gold better than cash? Donald Trump accepted three bars of it as a security deposit when a new tenant moved into his 40 Wall Street property in New York’s financial district. Michael Haynes, chief executive of APMEX, the tenant, convinced the real estate mogul that accepting gold offered the greatest security for him. “I figured, Trump is a smart guy, and he’ll realize that taking gold is a better idea than taking cash.”

Haynes gave Trump three 32 ounce gold bars for APMEX’s deposit, valued at over $100,000. At the time, Trump expressed concern about the nation’s currency. “It’s a sad day when a large property owner starts accepting gold instead of the dollar,” Mr. Trump told the Wall Street Journal. “The economy is bad, and Obama’s not protecting the dollar at all….If I do this, other people are going to start doing it, and maybe we’ll see some changes.”

Peter Reagan, financial market strategist at precious metals dealer Birch Gold Group, said, “Trump recognizes the vulnerability of the value of the dollar over time and the inflationary pressures on our economy due to Obama administration policies,” http://www.westernjournalism.com/for-trump-gold-is-better-than-cash/

Is this the start of Trump’s new gold standard? Seemingly he understands that to stabilize and secure the US dollar, gold must play a role.

I can find no evidence that Hillary Clinton supports gold or owns gold other than for jewelry purposes.

Therefore my prediction is that a Trump victory will not be favourable for the stock market initially but should be for the longer term as jobs are created and positive for gold.

No matter what happens, the drama and the bashing in American politics is a political version of The Young and the Restless. Enjoy the drama while it lasts.
Happy investing!

Kal Kotecha PhD