The Presidential Election and The Stock Market - Mike Swanson (11/03/2016)
It's time to talk about the stock market and the election.
I'm not going to talk about who you should vote for, because you got your own thoughts on that.
But a lot is being said about how this or that candidate will impact the stock market and I want to focus on that with you today.
On one hand Donald Trump has said that the stock market is a giant bubble several times and he himself sold many of his individual stocks before he ran for President, even boasting of having done so in his book Make America Great.
Here is Trump saying this on Bloomberg in August of 2015 right as he got into the Republican Primary.
Trump was right about this and the stock market has basically done nothing since that interview.
The stock market is a dangerous bubble even if saying that makes many angry.
The truth is it simply reached a high valuation thanks to zero rate interest rates that punished savers and a QE bond buying program that has created a truly dangerous bubble in the corporate debt market all to the effect of doing NOTHING for the real economy.
That's why Clinton has big support with fancy suits and talking heads who only know how to make more money when the stock market goes up and little support in areas of the country like where I live where the economy never recovered.
But more importantly the fact that the stock market reached a manic valuation level is why it has not been able to do anything for months now.
Eventually it will all lead to a big stock market mess.
What I advocate and do myself in response is simple - the solution is diversification, including investing in gold, and at this moment in time to even have some cash reserves.
Trumps statements on the financial markets and Federal Reserve have made Wall Street types angry and I have even seen bubble bulls on CNBC get upset about them.
Wall Street CNBC people and New York traders I see on Twitter as a whole oppose Donald Trump.
People in DC area who work for the government also favor Clinton in the polls.
These views are all being reflected on the TV media and in the New York Times and Washington Post.
One CNBC talking head reporter has been exposed in Wikileaks as being a Hillary Clinton helper instead of being a real journalist.
I have seen many of these bubble bull types say that they believe that the stock market will drop if Trump is elected President.
They cite his trade policies and the uncertainty Trump may bring to the White House.
I have Libertarian friends who say that Donald Trump is a "fascist."
The best argument made for that view is by Jeffery Tucker in an article on Newsweek in 2015.
He spoke at FreedomFest in July in Las Vegas and articulated this view in this video:
I do not believe Trump is a fascist, but I do believe he is an authoritarian populist.
I think that is obvious and there are things Trump says that I do not like.
I also know that Clinton plans on jacking up taxes - including moves that will essentially abolish the long-term capital gains tax.
Currently if you hold a stock or any investment for more than a year you are taxed at 0% if you are in the 10-15% tax bracket and up to 20% if you are in the top income bracket.
Clinton says she wants to make many people have to hold an investment for up to six years in order to get the lower long-term rate!
This would jack up the taxes everyone in the stock market is forced to pay and crush people who want to build real wealth or start businesses.
Warren Buffett has publicly backed this tax plan.
I wonder if he does so because he already has made his billions and simply does not want ANYONE else to be able to amass serious wealth.
Or maybe he simply wants people who own his Berkshire Hathaway stock to feel like they are trapped in it so they won't ever sell it?
Right now Warren Buffett is quietly building massive cash reserves so he is positioned to buy the next time there is a big stock market drop even though he always cheerleads the stock market when he is on CNBC.
You can read the details of Clinton's tax hikes here on CNN - don't be fooled by the headline though as the plan will impact anyone in the stock market:
Now over the past few years we have seen the rise of independent populists in several European elections.
The movement that supported BREXIT in the UK was led by such people.
The bubble bulls against Trump seem only to oppose him because they think he will make the stock market drop.
That seems to be all they care about and I have seen them try to shame voters into opposing Trump as a result on Twitter.
There are two problems with the bubble bulls here.
First they are lazy and have no way to make money, but to be in the US stock market and have it go up for them.
Without that they have no way to make money so they fear losing clients, and throw fits at people who try to help people diversify.
That's probably why that one CNBC bubble head lashed out at William Fleckenstein last month on the day the S&P 500 made its last top in a disgraceful segment as "Fast Money" sunk to new lows for warning about what the Fed has done to the stock market and the economy.
Their emotional fears of any stock market drop have been translated into fears of Donald Trump.
But you do not need to be fully invested in the stock market to make money. You can buy gold and diversify into other markets. You do not have to be a lazy brain like the stock market bubble heads are and it doesn't take much work to diversify.
What it takes is common sense!
But what is common sense to a Goldman Sachs banker who funds Clinton and expects to get another bailout if he demands one?
Secondly the bubble bulls may be right that the stock market will fall if Trump wins simply because they have convinced so many people that it will.
However, no matter who wins I actually do not think that the results on Tuesday in themselves will have any meaningful impact on the stock market beyond a few days.
It will not change the big trend of the market no matter who wins.
It may go up or down for a day or two or whatever as part of the "news cycle," but that's about it.
There has never been a Presidential election in US history that created a new bull market or created a new bear market.
When FDR got elected during the Great Depression the stock market had already bottomed months beforehand.
I personally am not making trades or investing decisions based on who may or may not win the election next week.
I may have to make tax decisions afterwards, but that's another story.
What I am doing is what I always do and that is align my positions to the big trend of the market the best that I can.
And that means focusing on the new bull market in gold stocks that began this year, which has an intermediate-term trend that is sideways and short-term trend that turned up a few days ago. The shorter the time frame though the harder it is to be right and that is why I hold core positions with a rebalancing money management strategy.
And as for the US stock market it's simply dead money in a giant topping phase after hitting the an extreme high in valuation according to the CAPE ratio seen only three previous times in the past history of the entire US stock market.
THIS is the reason the stock market is not going up anymore and why it is likely to fall in the future into a new bear market no matter who is elected next week.
But the bubble bulls cannot talk about that, because they do nothing but convince themselves that the stock market always goes up no matter what and so they want to believe that only Trump can make it drop.
And that is why so many of the Wall Street types and CNBC "reporters" are supporting Clinton and opposing Trump.
As I said I do not believe their arguments at all.
You may have other arguments in favor of Clinton or Trump.
That is fine.
But the arguments of the bubble bulls are false - and the long-term impact that the election will have on the US stock market is being vastly overrated - and over hyped.
You can decide and think for yourself who you want to vote for and how you want to invest and you do not need television talking heads to tell you what to do.
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