"Kee" Points with Jim Kee, PhD.

This past week Greg Valliere and I gave a series of talks to groups in Austin and Houston regarding the post-election investment landscape. Greg is a political analyst with over 30 years of experience as a Washington DC “insider” and political commentator. At the beginning of each talk we asked a series of audience polling questions, largely for entertainment but also for insight. Then I talked briefly about what I felt would be the most important outcome of the election (greater investment spending and growth) and then Greg gave his full political analysis of the election and the likely aftermath. I’ll be talking about the microeconomics of tax policy next week, along with a catch-up of international events besides the US election, so I’ll just give you the highlights from the polling data and from Greg’s talks:

Polling questions: Did your candidate win? The majority of Austinites said no, while the majority of Houstonians said yes. That supports the view that Houston is more conservative than Austin, or Austin more liberal than Houston. Neither group felt comfortable talking about the election results. Both groups felt that Republicans would continue to control congress in two years after the mid-term elections, and both groups said they would like to see substantial changes to both the Dodd Frank (banking) Act and the Affordable Care Act. Also, both groups said that Supreme Court Appointments were one of their top issues, though obviously for different reasons. More Houstonians felt that tax cuts would stimulate the economy than Austinites, and that the economy would be materially stronger in four years than it has been, but the differences in opinion here were not that great. Finally, in Austin, the vast majority of attendees felt that Charlie Strong would not be coaching UT in two years - and that was before the Kansas game!

Greg Valliere: Greg gave three reasons for Clinton’s loss, namely (1) the election result was anti-establishment, and she was part of the establishment, (2) the election was anti-trade, and she had been mostly pro-trade, (3) the election was anti-Wall Street, and she was seen as “the candidate of Goldman Sachs.” These three lost her the rust belt (according to Valliere). He also said that Trump became a better candidate in the weeks leading up to the election, largely thanks to his handlers. He felt that Republican control of Congress should actually increase in 2018 as far more (3 to 1) Democrat seats versus Republican seats will be up for grabs. He also mentioned that the age of Supreme Court justices means that Trump could appoint as many as four of them (e.g. Ruth Bader Ginsberg is 83 and battling cancer; Clarence Thomas may step down, etc.).

As for policy changes, Valliere felt that Trump would eliminate a lot of regulations and that the EPA (Environmental Protection Agency) would not be going away, but its influence would be greatly diminished. He felt that immediate efforts at deportations of those with criminal records would be announced, if only for the purpose of appeasing his base. He said that talk of “the wall” had weakened and that he was already hearing talk of a “virtual wall.” He also felt that there might be some immediate tariffs slapped on steel and a few other things from China for the same base-appeasing reasons. He felt tax reform was certain, including reduced taxes on corporate income earned overseas and brought back here (repatriated income). He also felt that infrastructure spending would ramp up. Interestingly, with all of the delays due to things like debt-ceiling debates, Greg felt that the strongest positive effect of Trump policies on the economy would start in earnest around 2018, or right around the time of the mid-term elections. Internationally, he expressed concern that the dollar might strengthen too much (hurting US multinationals), and he described the Trump-Putin relationship as a “bromance.” His biggest concerns were the possibility (not necessary probability) of a US-China trade war, and of increasing belligerence on the part of North Korea.