The Establishment Gets Trumped It’s a scary new world for many…a brave and exciting one for others. Dear John, As I was driving into work today after a long night of watching history being made, a radio DJ dotted the “i” on the whole experience.
He played the Beatles’ “Revolution.”
In truth, that’s what we saw last night. The American people, to paraphrase William F. Buckley, stood athwart the social and political trends eroding our founding ideals and yelled “Stop!”
This is exciting, even thrilling, for those of us who believe in free markets and personal liberty. Now we watch to see how much of our beliefs are shared by Trump and his inner circle.
As I noted in a number of social media posts last night, I’m not a fan of Donald Trump. He’s a populist, with no bedrock political or economic principles. He doesn’t understand free markets.
I don’t think he’s very smart.
But all that said, there’s no denying what he has been able to accomplish, perhaps as no one else could have.
He has toppled the political establishment, confronted the political correctness eating away at free speech and other uniquely American ideals, and created a movement that — at this point minus only pitchforks and torches — is determined to continue the assault upon the Washington insiders.
Unfortunately, some of the stated goals of this new populist movement are at odds with many of the aforementioned principles of free markets and personal liberty.
So the future of gold, silver and the investment markets, much less American politics, will depend upon what policies Trump finally settles upon, which advisers rise to power in his administration, and how much he is willing to listen.
I talked with one of his key economic advisors before the election and came away a bit worried about Trump’s commitment to trade protectionism. By the same token, those who think Trump is unshakably steadfast in his stated positions should remember his attempt to walk back his hard-core immigration stance awhile back.
The fact is, Trump is malleable, ungrounded in any political or economic ideology, and the consummate negotiator. If Paul Ryan remains Speaker and is able to work with Trump to get much of the House fiscal plan passed, we will see U.S. economic growth finally take off.
So if it’s possible to be hopeful and worried at the same time, that about sums up my feelings right now.
The markets have been similarly confused. Last night as it became apparent that Trump could win, Dow futures crashed as much as 800 points. Trading in the S&P 500 futures was halted at 5% limit down.
Gold soared as much as $62.
You’ll remember that I’ve advised against investing based upon such geopolitical flashpoints, because they almost always quickly reverse.
And that’s precisely what happened, as U.S. equities bounced right back, with the Dow regaining all the losses and moving at one point over 300 points into the green today.
Gold gave up all of its overnight gains, and is trading essentially flat.
So what does the future hold?
Trying to peer down the road for gold and the equity markets, it’s apparent that the Federal Reserve and interest rate policies will still determine much going forward. It’s too early to tell what Trump thinks about Fed policy…or what effect his election and potential policies will have in this area.
Will the Fed go ahead with their December hike, desperate to get some room above zero before the next recession (possibly induced by Trump uncertainty) forces them to renew easing?
The Fed funds futures, which have now halved the odds of a December hike from around 80% to around 40%, would argue against this. The Fed may be inclined to maintain easy money, and Trump has already made it known that he’s a “low interest rate” kind of guy.
So, too early to tell.
One big factor for gold that has been completely overshadowed by the election is the turmoil in India, where Prime Minister Modi yesterday announced that the 500 rupee and 1,000 rupee notes would be eliminated in a war against cash transactions.
Banks went on immediate holiday to prepare for the transition, which didn’t prevent citizens from surrounding the banks in protest and concern. Our friend and noted libertarian Jayant Bhandari, reporting from India, notes that “Indian physical gold price has suddenly gone up about 15% to 25%. The gold market is flooded with people trying to convert their cash into gold.”
Interestingly, the financial media is reporting precisely the opposite, claiming that the war on cash will negatively impact demand for gold, which has traditionally been a cash market.
My view is that India will largely remain a cash economy, but that the currency being used going forward will be gold and silver. Until the government finds a way to crackdown on these metals, demand should surge. Seek Safety For Now Putting the dramatic events of the past 24 hours in context, it seems that, given the uncertainty for economic policy and gold going forward, we should take advantage of what’s left of the rally in gold and gold stocks to book some profits in the producers.
That said, I do believe that Trump will be very positive for the U.S. economy over the long term. The stock market will have to reorient itself from the assumption of a market supported by easy money to one based, once again, upon fundamental economic growth. The transition will be bumpy, as it has already been.
More-industrial metals, like copper and zinc, will benefit, and both had been enjoying pre-election rallies. There are opportunities for profit in these areas, as I’ll continue to document in Gold Newsletter.
In fact, in our upcoming year-end, double-issue of Gold Newsletter, I’ll recap much of the advice and tips provided at our recent New Orleans Investment Conference, and unveil some new junior mining stock recommendations that I feel will be among the big winners going forward.
Many of last year’s recommendations multiplied in price, some soaring as much as five times over in value.
So if you’re not already a Gold Newsletter subscriber, this is the time to do so. I urge you to sign up now by CLICKING HERE.
Summing up, this is simultaneously an exciting and worrisome time in American politics, and in global geopolitics. There will be great risk and great opportunity going forward.
Rest assured that we’ll keep you up to date on how to protect yourself and profit.
In the meantime, it’s prudent to take some profits in the mining shares with an eye toward redeploying next month into some of the new opportunities I’m evaluating for Gold Newsletter. All the best,
Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference |
