Nothing, or everything?

“It just doesn’t matter, and we’re taking it all too seriously.”

The veteran Bay Street dude whose name is on the door of a major brokerage firm paused in his conversation with me a few days prior to the American presidential slugfest.

“You know,” he added, “the planet is probably safer when the rest of the world is afraid of what the guy will do. Kamala should not be the candidate. She can’t carry an idea. Trump is an unpleasant personality, but if he was a decent person he’d win in a landslide. Having said that, it doesn’t matter who wins.”

Ask a financial advisor, and this is what you get.

Relax. Chill. The US has checks and balances. The dictator and fascist talk is dumb. The American economy is humming. Stocks are swelling. Rates are falling. “Biden should be doing high-fives all around for what he’s been able to accomplish.” So, friends, stop reading scary stuff or listening to CNN. Just stay invested. It’s all good.

Truth be told, we’d say the same thing to clients. Going to cash is an extreme reaction. Burrowing into GICs as rates fall and equities charge higher is hard to defend. We’ve been through lots of storms before, and they always pass. This piece of work called Donald Trump will also pass – whether is wins on November 5th or he doesn’t and causes a loser’s crapstorm.

That’s the advice. Hold your powder.

But some smart and respected people are also telling us to expect volatility, uncertainty and – if Trump actually becomes the 47th leader of the Free World – a new economic reality.

Cue Derek Holt. He’s the chief economist up there in Scotiabank’s bronze tower and what he dropped this weekend is worth your attention. This is his opening statement and summary:

Donald Trump’s proposed economic policies and likely debasement of democratic and market institutions would be ruinous to the US and global economies.

“That message needs to be shouted into the final full week before the November 5th election,” he adds. “The stakes are so high—the highest around a US election in decades if not ever—that the warnings must be written with a strong bite and absent reservations by global economists before American voters make a potentially big and irreversible mistake.”

Holt says he’s not a Kamala man. In fact he’s savaged her in past months as being protectionist and a lefty. She voted against NAFTA and is no special friend of Canada. She’s a tax-and-spend liberal. She and Biden messed up immigration. But having said that, the US has the best economy in the world right now. Unemployment is low. Inflation and rates are falling. American tech innovation is leading the world. And Springsteen likes K – even if Elon doesn’t.

So what’s rotten about Trump? Turns out it’s not the felon, election-denier, convicted fraudster and sex abuser with a penchant for dictators and a foul mouth that’s the problem. It’s his policies. If elected. And if he does this stuff.

First, Holt says this about Trump’s first term, which he calls a total failure:

Trump achieved nothing on infrastructure… His trade skirmishes ranged from ineffective, to costly to consumers, to much ado about nothing much at all like NAFTA… His tax cuts did not pay for themselves as almost any economist would say they wouldn’t; he inherited a deficit at about 2½% of GDP just before the 2016 election and widened it to almost double that just before the pandemic…His crisis management skills during the pandemic were nothing short of awful. His slagging of the Fed was obviously self-serving and unhelpful. His courtship of despots like Putin embarrassed America and made the country look like an unreliable and untrustworthy ally captured by dictators. His sore loser temper tantrum on Jan 6th put lives, institutions and a democracy in danger. His grift issues while in office were a flagrant abuse of power. And all that is without getting into his sundry and sordid character defects that make him out to be a truly awful person; a horrible example to younger generations looking for reasons not to be cynical toward their leaders.

And now? What are the dangers if the guy wins the Oval Office once again? Says the economist:

• Extreme protectionism that would invite retaliation, a large negative population shock and a surge of debt issuance to feed totally undisciplined fiscal policy, if delivered, would be extraordinarily damaging to the world outlook.
• Trump’s plans risk being highly destabilizing to world markets in a much more fractured world.
• The US needs to assert control over its borders, but Trump’s extreme immigration policies would severely damage the US economy.
• His clear preference toward allowing Russia to have its way with Ukraine, and China with Taiwan, would be the biggest foreign policy mistakes since Neville Chamberlain’s appeasement speeches were delivered starting in Munich 1938 (“Peace for Our Time,” allowing Germany to annex Czechoslovakia).
• Trump’s more extreme, impetuous ways today than during Trump 1.0 risk applying terrible, unglued judgement in volatile, sensitive circumstances.

Lower taxes may appeal to many on Bay Street, of course. But trading that for these other dangers would be, Holt says, “a mistake of epic proportions.” Trump would put American on an accelerated path to fiscal ruin, “and the more damage that’s done now, the higher taxes will go in future in a potentially more divided and more dangerous world.”

But everything’s okay, kids. Really.

About the picture: “Thanks for all the free financial advice over the years, I have been a faithful reader of the blog for the past decade,” writes Nick. “I recently had to say goodbye to my Dog Lola, who was my best little buddy this past twelve years.  I will attach a couple photos of her, it would be nice to see her on the blog some time.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2024/10/27/nothing-or-everything/