Words Of Wisdom

In his 1987 letter to Berkshire Hathaway shareholders, Warren Buffett shared this wisdom...

Ben Graham, my friend and teacher, long ago described the mental attitude toward market fluctuations that I believe to be most conducive to investment success. He said that you should imagine market quotations as coming from a remarkably accommodating fellow named Mr. Market who is your partner in a private business. Without fail, Mr. Market appears daily and names a price at which he will either buy your interest or sell you his.

Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market’s quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can see only the favorable factors affecting the business. When in that mood, he names a very high buy-sell price because he fears that you will snap up his interest and rob him of imminent gains. At other times he is depressed and can see nothing but trouble ahead for both the business and the world. On these occasions, he will name a very low price, since he is terrified that you will unload your interest on him.

Mr. Market has another endearing characteristic: He doesn’t mind being ignored. If his quotation is uninteresting to you today, he will be back with a new one tomorrow. Transactions are strictly at your option. Under these conditions, the more manic-depressive his behavior, the better for you.

But, like Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up some day in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren’t certain that you understand and can value your business far better than Mr. Market, you don’t belong in the game. As they say in poker, “If you’ve been in the game 30 minutes and you don’t know who the patsy is, you’re the patsy.”

Quote Of The Day

In the short run, the market is a voting machine but in the long run it is a weighing machine.

- Ben Graham

Tariff Fatigue

Depending on various factors, opening an automobile assembly plant typically takes 2 to 5 years.  

 

Here’s a breakdown of the timeline:

 

1. Planning & Site Selection (6 months – 2 years)

• Finding a suitable location

• Negotiating land acquisition and incentives

• Conducting feasibility studies and regulatory approvals

 

2. Design & Permitting (6 months – 1 year)

• Designing the plant layout and infrastructure

• Obtaining environmental and construction permits

 

3. Construction & Facility Setup (1 – 2 years)

• Building the factory, utilities, and support structures

• Installing assembly lines, robotics, and automation systems

 

4. Hiring & Workforce Training (6 months – 1 year)

• Recruiting workers and management

• Training employees on assembly processes and safety protocols

 

5. Testing & Production Ramp-up (6 months – 1 year)

• Testing machinery, refining processes, and ensuring quality control

• Gradually increasing production to full capacity

 

Factors That Can Affect the Timeline:

 

• Government approvals and incentives

• Supply chain readiness and equipment availability

• Labor market and workforce training needs

• Complexity of the vehicles being produced

 

Consider this; Tesla’s Gigafactories typically take 1.5 to 2 years, while traditional automakers can take 3 to 5 years to fully operationalize a new plant.

 

The bottom line is this is exceedingly complex and expensive.  It is not easy.  

 

Last week we were witness to serious stock market volatility following the President's announcement that tariffs would go into effect on all automobiles manufactured outside of our borders.  We can argue all day long about who should have seen this coming; but the markets don't like tariffs.  Nonetheless, it looks like Howard Lutnick, former head of Cantor Fitzgerald, who is a moderate on trade and is now commerce secretary may have gotten the ear of President Trump.  

 

One of the endearing qualities of Donald Trump is his fascination with the stock market as a barometer of his success.  Consequently, the White House has paused tariffs on automobiles assembled in Mexico and Canada for 30 days so that Ford, General Motors and Stellantis can produce their plan for re-shoring all of the manufacturing and assembly to the US.   As White House Press Secretary Karoline Leavitt put it:  Get on it., start investing, start moving, shift production here to the United States of America, where they will pay no tariffs.

 

This is easier said than done because in the many decades that have passed since the North American free trade zone was created in 1992 automakers have built complex supply chains that cross multiple borders.

 

You're probably scratching your head and wondering what the heck.  It's not rocket science. Manufacturers achieve economies of scale by means of multiple large plants both here and abroad to supply assembly operations across North America* with stuff like engines, EV batteries and motors, transmissions, suspensions, body panels, seats and wiring harnesses.  Everything that is required to build an automobile.  I couple of years ago a handful of us got a tour of a Volkswagen assembly plant located in Dresden, Germany.  This is not unique to North America.

 

The brilliance of this manufacturing model is vehicles would be less affordable if all of their component parts had to be made in one country.    

In our household we have two newer vehicles.  A Ford Mustang Mach-E; assembled in Cuautitlan, Mexico with parts sourced in Europe and North America.  In December we purchased a Honda CR-V Hybrid; assembled in Greensburg, Indiana with parts sourced in Japan and North America.  We still have our trusty 1998 Chevy Silverado.  It was assembled in Pontiac, Michigan with parts sourced in North America.

 

A vehicle is considered an import when it is shipped to the states after final assembly in another country.  Factually, because of the complexity of supply chains nowadays it is almost next to impossible to tell an American car from and import by simply looking at the brand.

 

With the exception of the Great Recession and COVID; over the past couple of decades the annual number of imported vehicles sold in the US has consistently hovered around 8 million units.  Countries of origin, ranked from high to low are as follows:  Mexico, Japan, South Korea and Canada.  Domestic production peaked at 13 million units in 1999, fell during the Great Recession and rebounded to 12 million as consumer confidence returned.  Annual production since has been 10.6 to 11 million units.

As a recovering financial guy and erstwhile observer of all of the drama my take goes something like this:

• The threat of tariffs appears to be real.  Is Trump bluffing?  Or is he willing to kill the hostages?  Who is the angel and devil sitting on his shoulders?

• Last month, Ford CEO Jim Farley warned that 25% tariffs on Mexico and Canada would blow a hole in the US auto industry; the largest manufacturing contributor to domestic GDP.

• Moving everything to here is disruptive and would unnecessarily hobble the US auto industry.  Besides, it has the stink of Soviet central planning and government meddling with business all over it.

• US automakers built their business models around government trade agreements; NAFTA (Clinton) and USMCA (Trump).  Commencing the undoing of more than thirty years of sophisticated business in thirty days is complicated and expensive.  It is not easy.  Much of it would be unfinished when Trump leaves office in four years.
  

• There is that nagging likelihood of negative first quarter GDP.  The growing polarization of Elon Musk, falling consumer confidence, no budget reconciliation (yet), a looming debt ceiling and threat of government shutdown and the chaotically messy on-again, off-again policy messaging from the White House.  Business and markets abhor uncertainty.  
  

•  Trump is sensitive to market volatility, drops in particular.  He's also sensitive to polling of his approval rating.

• Finally, there is this immutable Rule of Thumb:  two consecutive quarters of negative GDP growth = Recession. 

We shall see what we shall see.......

*North America includes Canada, Mexico and United States

 

 

Volatility

Up early for a trip to the Naked City and back.

Upon arrival I checked emails and what the markets might be up to.

Oh Boy Howdy!

Took only two days to erase all the post-election gains in the equity market.

Good thing I've laid-in four cases of Canadian beer to my strategic reserve.

Replaced all the appliances, new water heater, stand-by generator, two new cars, new laptop and an iPhone.  Best I can do to Trump-Proof my personal situation for the trade war......

 

Is It Only The Economy, Stupid?

A variation on the title of this post was coined by strategist James Carville as a missive to campaign workers leading up to Bill Clinton's successful 1992 presidential campaign against incumbent George H. W. Bush.  I've written about the subject many times over the years.  Is it only about the economy?  Or is there more?  I would postulate that it is the economy and much  more.

Tomorrow Donald J. Trump will be sworn-in as America's 47th President.  Who, in the lead-up to the festivities, would tell you that he alone can fix our country's hellscape of lawlessness, disorder, economic collapse, inflation, energy dependence, mobocracy, crisis and chaos.

Perhaps you share that view.  Not me; I would submit that by any rational measure of the condition of the United State of America the president-elect will be taking over a country in rather decent condition. Let's take a walk thru the relevant numbers.

Contrary to what the president-elect will tell you drug overdose deaths are down and the manufacturing sector has created more jobs than at any time in the last decade and a half.  Although some prices remain stubbornly high; inflation is down significantly.  Inasmuch as federal largess under both Trump and Biden contributed to the expansion of the money supply Trump now shoulders the burden to reduce the cost of my groceries.  Fair is fair. 

December delivered an overall blowout jobs report and wages are up and continuing to rise, all the while unemployment is at levels before the COVID shitshow hit the fan.  Domestic energy production of crude oil and natural gas are at record levels and we are now the global leader in production and export of crude oil.  Meanwhile, a gallon of regular unleaded, around here anyway, will set you back less than $2.50.  We are awash in an embarrassment of energy and production.

Nevertheless, it goes beyond the economy.  Illegal immigration is belatedly, but at long last down and we've found ourselves with the lowest violent crime rates in fifty years.  No American military forces are in a hot war elsewhere in the world and Trump's go-to Gold Standard for how he's doing - the stock market has set a new record for the past two years.  Finally, Americans have shown signs of coming around to actually recognizing and accepting the reality that conditions on the ground are pretty darn good.   

I'll bet you a steak dinner that in reasonably short order President Trump will take credit for the strong economy he is about to inherit.  That's because as I gaze across my landscape I don't see a hellscape; I see prosperity and the best economy on the planet.  If you think I'm making this up out of thin air; fight me.

Do not get the impression I am diminishing the reality that not each and every single last American, shares the same upwardly economic prosperity and living conditions.  Poor people and economically disadvantaged families are real.  Nor am I blind to politics.  It is certainly in Trump's self-interests to paint as bleak a landscape a possible for his base.  Nothing new under the sun there.

As Trump assumes office there are no shortage of challenges ahead.  Russia, China and Iran are failing states.  Russian and North Korean military personnel allegedly execute Korean wounded to erase evidence of North Korean involvement in the war against Ukraine. Ugh.

Here at home, domestic terrorism has, again, reared its head.  There is funding the budget and passage of a reconciliation bill, the DOGE, the debt ceiling, tax policy, Social Security and Medicare.  Will there be a comprehensive immigration policy?   99 cent a dozen eggs?

Placing a higher value on action I try to tune-out the talk.  Consequently, I'm looking forward to detailed policy to materialize.  You know, policies which will improve your and my prosperity and general lot in life.  And maybe make the world a safer place.

Donald Trump has been dealt a solidly good hand and I'm looking forward to being witness to how he plays it.

Bring it on.....

Inflation By Any Other Name

This subject has come-up here from time-to-time and I have tried my darnedest to remain circumspect, intellectually honest, good-humored and resist any snarky impulses to poke fun of individuals who seemingly believe that presidents posses cryptic powers to turn inflation on, and off, like a switch.  When it comes to lazy economic thinking the struggle is real.  Thankfully, understanding inflation is not rocket science.  If you have a basic grasp of the interplay between excess liquidity (M2) and demand economics it is not very complicated.  But I digress.

Inflation figured significantly in both the run-up and results of last month's presidential election.  In his interview with Kristen Welker several weeks ago president-elect Trump said: I won on two things; I won on the border and I won on groceries.  And at the RNC convention of last summer Trump declared he would:  End the devastating inflation crisis immediately.  Trump took credit for low inflation in his first term of office; he might take the blame for price inflation in his second term.  Time will tell.

As an old guy I am mildly bemused at the notion that younger voters have no institutional memory of inflation, soaring energy costs and the accompanying astronomical interest rates, of the late 1970s and early 1980s.  By those hardcore economic standards today's historically low inflation, low energy costs and interest rates are the modern equivalent of lotus eating.  Nevertheless, the president-elect has promised to bring inflation down and if he doesn't the voters might become restive. He's certainly got his work cut out for him as there's not much a chief executive can do to immediately influence forces at play in an economy as large and complex as ours. 

Complicating this already challenging task is the potential interplay of tariffs and immigration policies. Consider this.

Tariffs are a tax.  If I own an import-export business and import an item subject to a tariff or duty I have to pay the US Treasury the tax due upon receipt.  The country of origin does not pay the tax - the importer does.  To cover the tax I'll mark-up the price of the imported item when it lands with a distributor.  As a consumer purchases the item from a retailer it is that buyer who ultimately pays the mark-up.  Consequently, tariffs can contribute to inflation as the price of retail goods rise. Trump's challenge is the use of tariffs as a negotiating tactic or to surgically target specific imported goods.  It's a high wire balancing act.  

Almost two million undocumented workers are integrated into our food supply chain.  Another 30% of construction workers are immigrant labor - documented or not.  Immigrant labor is a significant contributor to what we pay for everything from fruits and vegetables at the grocery to a replacement roof.

My hope is that the Trump administration finesses this stuff.  Get too aggressive on immigration and tariffs and prices could rise.  Fail at one or the other and you tread at your own peril with an economy-stalling bout of deflation.  If only there was a magic switch in the White House bunker.

Trump naturally supports the sweeping reform of government regulation.  Furthermore, efforts to re-shore manufacturing to our hemisphere implies efficiencies, retraining a labor force and other productivity gains.  This shrinks inflation pressures but takes time to trickle down in a network economy.  Because 70% of our economy is driven by consumer spending these gains would be modest at best.  

Last, but not least, there is: drill, baby, drill.  Trump has promised to increase domestic energy production by lifting environmental restrictions and fast-tracking permitting.  It isn't clear to me precisely how this will dramatically reduce inflation and shrink the price of my groceries; nor has the former president elaborated.

Transportation costs already benefit from lower energy pricing because domestic energy production has been at record levels for years.  Several weeks ago I filled-up the Honda with regular unleaded and paid less than $2.50 a gallon.  Prices fell further over the busy Christmas Holiday travel season.  Go figure.

I own shares of energy and related companies and in a world where CEOs answer to shareholders; further retail price reductions will be challenged by sustaining record profitability, dividends and share prices.   Besides, oil is a fungible commodity, traded in dollars.  Accordingly, global markets play an outsized role in pricing.  My sense is that lower energy costs are largely baked-into the cake so we'll have to see how this plays-out.  What I know for sure is government doesn't drill for oil and gas.  (Like I said, the struggle is real.)

In closing, inflation is relatively easy to explain; it is far more difficult to bend to your political will.  It is possible that the in-coming president is beginning to wrestle with boastful promises made during his campaign.  As I said to a pal several months ago:  I'm looking forward to detailed policy which will improve my prosperity and general lot in life.

Meanwhile, all of our major appliances have been replaced, a new water heater installed, a new car for me, new car for Jill and a contract for a replacement metal roof on the house in 2025.  If tariffs materialize I think we may have dodged the major impact of any Trump tax increases.  Only time will tell....

Edit To Add:

Got home around noon following an overnight road trip and topped-off the tank of the Missus' new Honda.  Local pricing for regular unleaded:  $2.479....

Don't Forecast The Election

Last week, and before I left for South Dakota for a vacation and escape from the election nonsense, an email from a neighbor showed-up asking for me to make sense of an October Market Recap he had received from his financial guy.  This was a lay-up for me and I notified my pal that I would be happy to oblige - after I had returned from my ringneck-chasing getaway.  

I emailed him last evening as my last task before going to bed bone-tired.  What follows is a distillation of what I shared:

Neighbor...

What you received from Mr. So And So, CFP® is a rather detailed recap of the investment market's out-performance for YTD 2024.  It is nicely summarized and annotated with supporting details.

Contrary to some of the political rhetoric we've been subjected-to in the run-up to the election is the fact that the US economy is on a tear in most all of the sectors that matter.  Inflation has returned to normal and I paid $2.77 last week at the Brussels BP for a tank of unleaded regular.  You needn't look any further beyond the same observations and additional stats your guy provided.  None of that data is imaginary and the markets reflect it.  You, myself and others similarly situated in the 'ownership class' (retired owners of stocks, bonds and real estate with little if any debt) benefit greatly from an economic cycle such as this.  Emancipated from raising and educating our children our focus turns-back to children, grandchildren and great-grandchildren - but without the demands of a day job.

Getting back to the markets, and pointing out something your financial guy did not address, is an interesting implication for tomorrow's election.  When the S&P 500 Index rises in the final three months before the election the incumbent party typically remains in office.  Conversely, a drop in the index has historically indicated that the opposition will claim victory.

In 12 out of the 15 presidential elections since 1926 the ruling party has benefited from a strong stock market performance in the three months leading up to the election and went on to win.  That is an 83% streak.  

While a streak such as this would signal a Harris win; a streak is nothing more than a streak.  Streaks can be broken and I happen to believe that this election is too close to call.  Even the betting markets are evenly divided tonite.

If I was still in the day job, and was communicating with my clients, I would be telling them something on this order:  'It is important to be mindful that the outcome of the election (whether it suits your personal politics or not) is not a reason to react emotionally.  That invites investment mistakes.  If you don't like the outcome of this election, there is a high probability you will be pleased with the mid-term elections in 2026.  This is because the party that loses the race for the presidency this year will likely win the House in two years putting a halt to the new President's legislative agenda.  That's just the way things happen to play-out most of the time. '

I went on the explain that polling suggests that neither party will hold a super-majority.  In other words there will be divided government much as the Founders intended.  This will require compromise.

So, as we watch the returns tonite we should remain mindful that our Constitution has survived 235 years.  This will not be the last election and if the people dislike the policies they get; they'll get around to changing them eventually.   Blah, blah, blah.

I closed with an admonition on a subject (I have blogged about many times) - that being the federal debt and deficit.  The budgets under both Trump and Biden have manifested unprecedented deficits.  Given the reality of record high employment and our country not being at war this aberration absolutely requires attention in the years ahead.

What I did not share is my skepticism over either candidate rising to this task.  So time will tell.

All I gotta say is it has been a terrific game to watch for the last 16 weeks.  Sudden Death Overtime?  Who knows?

Sometimes elections, investment markets and football, are a roll of the dice.

See you all on the flip side....

Fact Checking

When we handed over a stock market that was substantially higher than just prior to COVID coming in, did a great job, never got credit for that.

- Donald Trump

Over the course of the administration under the former guy the rise of the stock market was frequently trotted-out as a personal barometer of the success of his presidency.  Until it wasn't.  Let's look at the stock market; which crashed in 2020 the last year of the Trump presidency.  

In what became known as Black Monday II, this was one of three days in March of 2020 that the sell-offs were so extreme that the New York Stock Exchange temporarily suspended trading.  The Dow Jones Industrial Average plummeted nearly 3,000 points, wiping out 13 percent of its value. It was a chaotic time for the chaos president.

The cratering stock market presaged the coming economic calamity including a unemployment rate that would more than triple to a high of 13 percent. 

To be clear, I think presidents get too much blame for bad economies and take too much credit for strong economies.  Truthfully, it is a heavy lift for a president to move something as complex as the US economy.  Nevertheless, as of the publication of this post the broad market indices have doubled since their nadir in 2020.

The S&P 500 index gained about 70 percent during Trump's first term.  It has risen another 50 percent under Biden. Obama beats them both.

Of course I'm smart enough to know markets periodically correct.  And investing in a single index does not constitute a diversified portfolio or appropriate investment policy.  I am also smart enough to understand you should not solely conflate the rise of a stock market as a barometer of economic success.  That can lead to a bad case of schadenfreude. 

Pro Tip - Significant market corrections can present opportunity for savvy investors.  Another reason I prospered as a consequence of all four years of the Trump presidency.  Same for Biden.

Economics 101

Am I better off today than I was four years ago?  How about you?

Over the course of the administration under the former guy the rise of the stock market was frequently trotted-out as a personal barometer of the success of his presidency.  Until it wasn't.  Let's look at the stock market; which crashed in 2020 the last year of the Trump presidency.  

In what became known as Black Monday II, this was one of three days March of 2020 that the sell-offs were so extreme that the New York Stock Exchange temporarily suspended trading.  The Dow Jones Industrial Average plummeted nearly 3,000 points, wiping out 13 percent of its value.

The cratering stock market presaged the coming economic calamity including a unemployment rate that would more than triple to a high of 13 percent. 

To be clear, I think presidents get too much blame for bad economies and take too much credit for strong economies.  Truthfully, it is a heavy lift for a president to move something as complex as the US economy.  Nevertheless, as of the publication of this post the broad market indices have doubled since their nadir in 2020.

Since I no longer have a day job I have to rely on my savings and investments for income.  So, yes, I am better off today than I was four years ago.

Of course I'm smart enough to know markets periodically correct.  And investing in a single index does not constitute a diversified portfolio or appropriate investment policy.  I am also smart enough to understand you should not solely conflate the rise of a stock market as a barometer of economic success.  That can lead to a bad case of schadenfreude. 

Pro Tip - Significant market corrections can present opportunity for savvy investors.  Another reason I prospered as a consequence of all four years of the Trump presidency.  Same for Biden.

Shell Game With A Shell Company

Recently there has been significant chatter in the main stream media about Donald Trump's inability to obtain bonding to advance appeal (and hopefully reversals) of significant judgements due to fraud and defamation convictions.  I'm going to go out on a limb and suggest that this is likely made-up reality television drama - a narrative Mr. Trump employs regularly.  Hear me out.

There will be no bankruptcy and nobody is going to seize any Trump properties.

Some time ago Donald Trump set in motion the monetization of Truth Social by means of a thing called a SPAC (Special Purpose Acquisition Company).

 

Unlike a traditional IPO (including troublesome stuff like disclosure or sales, earnings and more) this is not in my wheelhouse; nevertheless, it is an investment opportunity.

If this works as planned Trump will raise sufficient funds to meet the cash bond and probably pocket $3 billion+ of additional walking-around money.

WSJ published excellent coverage yesterday - but it is behind a paywall. This link may work.

 

Stay tuned.....

Election Economics

It should come as no surprise that for many individuals and households their standard of living improved during the time Donald Trump was in the White House.  That's not to say that things ended badly with the COVID pandemic and recession at the close of his term of office; people tend to remember the positive and discount the negative.

It is textbook economics that massive stimulus spending and supply chain disruptions during both the Trump and Biden administrations are the causal contributors to the recent spike in inflation.   The impact of inflation materialized during Biden's occupation of the White House.  Consequently, many individuals associate inflation as something Biden is solely responsible-for.  Surprised?  Voters aren't economists. Economics is complicated stuff for anybody who drinks from the Face Book cesspool of lazy economic thought.  Excess liquidity and stimulus largess was the primary cause and interventionist action by the federal reserve is the prescribed cure.  Sure, I get the politics of gaslighting the inflation issue.  But I digress.

Under Biden many individuals and families have struggled with inflation.  And while conditions have improved this may not be enough for some voters.  For Biden that is a burdensome problem.

Trump has any manner of personal flaws, admires bad guys like Vladimir Putin, tried to steal an election, fomented a riot and continues to deny his 2020 election loss.  For Trump that is a burdensome problem.

For both Trump and Biden their administrations enjoyed the benefit of economic success and the challenges of economic headwinds.  Nothing new under the sun there.

There are voters that loathe Donald Trump and there are voters who loathe Joe Biden.  Voters frequently judge their presidents based upon their personal economic gains or losses coincident with a given administration.  Confirmation bias too.  Because I go out of my way to not allow politics to infect financial decisions I've prospered during the reign of both of these presidents.  Actually every president for as long as it mattered.

As a recovering financial guy it's easy for me to view the current economic condition with a rational eye.  What I see is an American economy that grew at a healthy clip in 2023.  Unemployment remained low, inflation continued to drop, job growth is holding steady, real wages (adjusted for inflation) exceed pre-COVID levels.  And exceeding forecasts, GDP growth climbed by 3.3 percent in the last quarter.  Speaking of forecasts, a year ago expectations were for a recession.  Today it is expected that while growth may slow in 2024; in the absence of an unexpected outside event (read: wider middle east war), no major downturn.  Consumer sentiment should continue to rebound.

If you want to throw your support to Biden because you believe you'll prosper knock yourself out.  If you're a Trump backer because you're convinced the current economy is a hell hole; hey, knock yourself out.  Know this:  election outcomes are more frequently determined by rational individuals found in the middle.  Namely independent and disaffected voters.

Just last month, polling by Gallup highlighted that more voters now identify as independent - forty-three percent - tying the previous high not seen since 2014.  Ponder the implications of this shift in light of the 2024 election.

The impact of a single president over something as huge and complicated as our economy is frequently overstated.

A platform of grievance and retribution doesn't cut it for me.

That's my nuance.

P.S. - At the time this is published the markets have also set record highs. Nevertheless, I acquired shares of BA at a significant discount recently.  An assembly mistake is not the same as a design defect.

Let The Games Begin

Apologies, in-advance, for the brain dump.

The primary games are upon us and the Iowa caucuses are in the rear view mirror.  My takeaway?  110,000+ voters participated in the 2024 state caucuses - the smallest turnout ever.  This represents less than 15% of the state's 752,000 registered Republican voters.

The 2016 turnout was 187,000 - about 70 percent higher.  It is reasonable to conclude that the nasty cold weather conditions resulted in some voters staying home.  Or is it possible something else is in play?  Enthusiasm maybe? 

Without a doubt, Donald Trump, with his power of incumbency and to my eyes at least, the most loyal and motivated base of supporters ever.  His name recognition is off the charts.  His trajectory is that of the inevitable.  Yet he earned only half the votes of only a small number of the most committed GOP voters - roughly eight percent.

Consider this.

There is a population of Republican, Republican-leaning, conservative and independent voters who are unlikely to vote for Trump in the general election.  Nearly half of Nikki Haley's Iowa supporters claim they'd vote for Biden over Trump.  That is not to suggest they like or support Biden's policies - it is the suggestive of the strength of the Never Trump movement in conservative circles.  Polling suggests that twenty-five percent of GOP caucus-goers won't vote for Trump in November.  

I'm not making trouble or picking a fight over any of this; yet some of this polling data has implications for the general election in November.  

A Trump - Biden match-up in November is presently in the margin of error and promises to be a close and fraught election.  A couple of octogenarians going head to head.

A Haley - Biden match-up in November presently has Biden trailing by ten points.  A younger, brighter, aspirational UN Ambassador mops the floor with Biden going head to head.

Sure, I understand polls can get it wrong.  Yet a party platform of retribution, grievance and pay-back is, in my opinion, thin soup.  If the GOP is desirous of taking back the White House, retaining control of the House or taking-back the Senate; or any combination of the foregoing, then something needs to happen to capture the enthusiasm of Republican, Republican-leaning, conservative and independent voters who continue to be indifferent to Trump.  This will be a challenge.

As a recovering financial guy here are a couple of closing thoughts and an admonition to not commit an unforced financial error in 2024. 

• During an election year first quarter volatility in the markets is common as we approach Super Tuesday.  Expect first half weakness. 
  

• Reelection years tend to be predictably solid for investors.  Since 1944 the market has been up almost every year an incumbent president has run for reelection.  Expect second half strength. 
  

• In the absence of a recession the incumbent president wins. 

• If there has been a recession in the prior two years leading up to the reelection campaign the incumbent loses.  
  

Past performance does not guarantee future results; nevertheless, historic patterns share some predictive qualities.  I remain rationally optimistic about the art and science of basic economics and history.

Ponder this:

Where does Nikki Haley go after New Hampshire?

Is the next real race the one for for Donald Trump's VP?

Crash

I first heard this yesterday afternoon while cleaning guns in my basement workshop.  Donald Trump was prattling-on about his hopes for an economic crash.

When there's a crash, I hope it's going to be during this next twelve months, because I don't want to be Herbert Hoover.

Let's unpack that statement.  If Trump believes and wants the markets to crash,  then by extension, the general economic condition must be good.  Sure, running on the fumes of his administration; nevertheless, a good economy along with concurrent rising markets.  If the economy was in shambles and the markets down then it would be impossible to crash.

Similarly, if the economy was only in mediocre condition it couldn't crash.  It could slip into recession and the market would correct; but there would be insufficient room for a true crash.  An economy can only crash if it is performing at a sufficiently high enough level to fall.  And Trump is predicting, even hoping for, a crash.

Is Donald Trump inadvertently suggesting that Bidenomics ain't so bad?  That Biden set the price of regular unleaded at $2.34?  

Of course, I'm being facetious.  Sure, the market can crash.  As a consequence of a Black Swan event.  The immediate impact that any president has over an economy as large as ours is overstated.  However, Trump has shown a predisposition to confuse the stock market with the economy.  Nevertheless, I wonder if Trump's base might be feeling a twinge of cognitive dissonance over the prospects of their retirement being impacted.

Watch the opening thirty seconds of the clip below.  Watch all of it if you are inclined.  I rarely watch MSNBC and never watch Morning Joe.  I just want you to know I don't make stuff-up.

Crazy talk from the former POTUS.  Absolutely nuts.....