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impeachment

  • US Policy
Oct 25, 2019

Last week’s testimony of long-time foreign service officer Bill Taylor in the House of Representatives appears to have made even more certain the lower house will approve a bill of impeachment against the President before year-end. Meanwhile, this all might look like an American version of a Kabuki play, as the Senate seems poised to conduct a quick trial and not convict the President. This week Senator Graham (R, SC) introduced a bill critical of the House impeachment process and he got all but six Republican Senators to sign on. Trump only needs 19 of the 53 Republican Senators to vote against impeachment to prevail. The focus on the impeachment debate means that the needed bipartisan talks to prevent a government shutdown on November 21 have not moved forward. While both sides would like to see the higher spending levels agreed to in the plan approved last August, the U.S. government has been operating under a Continuing Resolution (CR) that maintains spending at FY 2019 levels, which neither side supports. Of course, as is so often the case under President Trump, no one can predict where he will end up on the new spending legislation and on avoiding a government shutdown on November 21. The President has an uncanny instinct on how to control the news cycles and a tweet that favors a shutdown over new spending could move attention away from impeachment. It might be a strategy the President wants to pursue. Vice President Pence gave a highly anticipated speech this week on China. There had been some concern that Pence, a human rights hawk, would make strong attacks against China over Hong Kong and the detention of the Uighurs, and that China could have been forced to retaliate and withdraw from trade talks. Instead, the Veep steered clear of that line and both sides have issued recent statements that point to an agreement to be signed when President Trump and Xi meeting in Chile on November 16-17. Figure: Top Trump Tweets The Federal Reserve is derelict in its duties if it doesn’t lower the Rate and even, ideally, stimulate. Take a look around the World at our competitors. Germany and others are actually GETTING PAID to borrow money. Fed was way too fast to raise, and way too slow to cut!— Donald J. Trump (@realDonaldTrump) October 24, 2019 …. USA has gained Trillions of Dollars in wealth since November 2016. All others way down. Our power is Economic before having to use our newly rebuilt Military, a much better alternative. Oil is secured. Our soldiers have left and are leaving Syria for other places, then….— Donald J. Trump (@realDonaldTrump) October 25, 2019

House Testimony Could Push Trump Impeachment Forward
  • US Policy
Oct 18, 2019

Impeachment House Distraction May be Good News for Trump

The potential impeachment of President Donald Trump and the ongoing military conflict in Syria continue to dominate the headlines, with little else able to generate interest. Ironically, this could be good news for the President, as the Democrats’ 2018 gains were due to Americans’ concern with health insurance, prescription drugs, and climate change. But these Democratic issues have been pushed aside in the headlong dive into impeachment. Indeed, the Democratic debate got little attention in this environment. Nevertheless, Mick Mulvaney, the acting chief of staff, seems to have dug the hole deeper for President in the House of Representatives, when Mulvaney admitted in a press conference that a Ukrainian military aide was held hostage to political agenda. It seems hard to see how Mulvaney can survive as Trump is likely to look for scapegoat for political mess the chief of staff created, or how he can walk back a comment said at the White House briefing room and taped by all the media outlets. With the troubles in Syria, China trade talks, and impeachment imbroglio, President Trump will need some help to manage the issues, and it will be a tough time to look for a fourth chief of staff. Though the trade talks with China apparently have taken a back seat to impeachment and Syria, negotiations have continued to finalize language on the agreement announced by the President last week. It appears that whatever finally emerges will be formally adopted by both countries at the APEC meeting in Chile on November 16-17. However, with the meeting nearly a month away, issues ranging from Hong Kong protests to a change of heart by a mercurial president could cause problems for the deal and see a renewal of tariff hikes. The market won’t like that. On the budget front, the Senate fell well short of the margin needed to override a Presidential veto of legislation that would void a funds transfer to border wall building from the military budget. While ten Republicans supported the override it would require 20 Republicans to get to the 2/3rds majority. Last year it was a deadlock over the wall that cause the government shutdown, and the same issue could emerge as a deal breaker next month as the new deadline of November 21 approaches. The President will need to weigh the benefit of the crisis environment he seems to relish versus the pain that can be caused by a government shutdown. Across the Atlantic, this weekend all eyes will be on London where the Parliament is scheduled to vote on Saturday on the Brexit agreement Prime Minister Boris Johnson reached with the EU. It appears the Northern Ireland Unionists are not willing to vote with the Conservatives, meaning Johnson will have to find some support among independents, Labor or Liberal Democrats to break with their party and support the Brexit plan. There are nearly 20 Labor members who represent districts that voted for Brexit and they are the likely targets of last-minute bargaining in the House of Commons. Figure: Top Trump Tweets Guatemala, Honduras & El Salvador have all signed historic Asylum Cooperation Agreements and are working to end the scourge of human smuggling. To further accelerate this progress, the U.S. will shortly be approving targeted assistance in the areas of law enforcement & security.— Donald J. Trump (@realDonaldTrump) October 16, 2019 Just out: MEDIAN HOUSEHOLD INCOME IS AT THE HIGHEST POINT EVER, EVER, EVER! How about saying it this way, IN THE HISTORY OF OUR COUNTRY! Also, MORE PEOPLE WORKING TODAY IN THE USA THAN AT ANY TIME IN HISTORY! Tough numbers for the Radical Left Democrats to beat! Impeach the Pres.— Donald J. Trump (@realDonaldTrump) October 15, 2019

  • US Policy
Oct 11, 2019

It's All Impeachment, US-China Trade All the Time

Unless you were sitting under a rock somewhere, you know that the potential impeachment of President Donald Trump dominated the news last week, kind of like the New England Patriots and football. That’s likely to continue for a while. Anyway, while the House of Representatives might indeed approve articles of impeachment against him, investors need to focus on the fact that there remains little support among Senate Republicans to convict him. For those of you who don’t remember your high school civics class, the effect of impeachment alone is limited. An impeachment is equivalent to an indictment in criminal law, and only the statement of charges against an official. While a House vote to impeach only requires a majority, which the Democrats have, a conviction in the Senate requires a 2/3rds majority, which the Democrats don’t. It’s far out of reach today. As noted in the piece by my colleague Tom Lee on page 3, investors need to look more deeply into situations the market is evaluating. And ironically, impeachment may actually help the President next year, as the political conversation ahead of 2020 Federal elections moves from issues such as health insurance, prescription drugs, and climate change to talks between two leaders and whether or not the President may have violated campaign finance rules during the conversation. Remember, the Democrats captured control of the House because of the issues that impact voters, not campaign finance issues. More fallout from this also hits former Vice President Joseph Biden, who’s been hurt by the talks of the role he played with respect to his son’s activities both in Ukraine and China. The talk of Biden in this negative light could help Senator Elizabeth Warren as she continues to climb in the early polls. And here’s another thing: President Trump has shown he is street brawler who will fight hard to be re-elected. Trade took second place last week in the market’s sights. For more on this see page 1. China and the U.S. have announced a new round of trade talks in Washington, D.C. to occur October 10-11. The Chinese seemingly have shown goodwill by permitting the purchase of soybeans and pork from the U.S. ahead of the talks. While a big comprehensive deal isn’t in the cards, a smaller agreement could be reached in the coming months. An agreement would likely have Chinese agricultural purchases and the US permitting export licenses to be given to American companies that supply Huawei. The Congress avoided a federal government shutdown next week by approving a Continuing Resolution postponing spending decisions to Nov. 19. Kick the can down the road. Figure: Top Trump Tweets The President of Ukraine said that he was NOT pressured by me to do anything wrong. Can’t have better testimony than that! As V.P., Biden had his son, on the other hand, take out millions of dollars by strong arming the Ukrainian President. Also looted millions from China. Bad!— Donald J. Trump (@realDonaldTrump) September 26, 2019 Sounding more and more like the so-called Whistleblower isn’t a Whistleblower at all. In addition, all second hand information that proved to be so inaccurate that there may not have even been somebody else, a leaker or spy, feeding it to him or her? A partisan operative?— Donald J. Trump (@realDonaldTrump) September 27, 2019

  • US Policy
Oct 4, 2019

Impeachment Fever, Trade Talks; DC In Full Circus Mode

Impeachment fever has taken over Washington, D.C., but the business of governing is attempting to proceed around town. The big news next week will be the arrival of a high-level Chinese trade negotiating team. Figure the market will hang on every word, sorry, make that tweet, that comes either from the President or the Chinese delegation. The latter is less adept at tweeting— so far, of course. However, the unrest in Hong Kong poses a wild card risk to the talks as it will be hard for the U.S. to stay mum if protesters there start to be hurt or killed. The Chinese are highly unlikely to help Trump with trade talks if he interferes in what they consider a domestic matter. That said, both sides have incentives to reach a mini-deal that could help President Trump secure his support in rural America with some Chinese purchases of agricultural products and the US giving needed licenses to Chinese technology giant Huawei Technologies. Talks are scheduled for next Thursday and Friday. Also on the trade front, the World Trade Organization handed down a final ruling favoring the U.S. in its complaints against the European Union over subsidies to Airbus (EADSY). The decision allows the US to place tariffs on EU imports and, surprise, surprise, the tariff-happy Trump Administration responded with over $7 billion of tariffs on EU goods ranging from clothing to cheese. The EU is expecting a similar ruling in their favor by the WTO focused on aid by state governments to help Boeing (BA). The EU has threatened to impose retaliatory tariffs on U.S. products. Both sides will start talks in the coming months to try to tamp down the tensions. And the tariff beat goes on. An interesting side story to watch in the coming weeks is whether or not the Trump Administration has any interest in working with Congressional Democrats to demonstrate that government business can be conducted during the impeachment investigation. Two areas have been the focus of some initial discussions: approval of NAFTA 2, or USMCA as it is now known, and action aimed at lowering the price of prescription drugs. Time will tell if the passion of impeachment blocks all other business. Congress and the President will need to take some action on government spending prior to the next deadline of November 19. Finally, the weak ISM data that came out this week likely points to another 25bps cut by the Fed at their end of the month meeting. For more see pages 1 and 6. Figure: Top Trump Tweets The U.S. won a $7.5 Billion award from the World Trade Organization against the European Union, who has for many years treated the USA very badly on Trade due to Tariffs, Trade Barriers, and more. This case going on for years, a nice victory!— Donald J. Trump (@realDonaldTrump) October 3, 2019 Massive sections of The Wall are being built at our Southern Border. It is going up rapidly, and built to the highest standards and specifications of the Border Patrol experts. It is actually an amazing structure! Our U.S. Military is doing a GREAT job.— Donald J. Trump (@realDonaldTrump) October 2, 2019

Impeachment, Trade Talk Whipsaw Investors, Dent Stks

Call it a wobbly market, pushed one way by impeachment chatter and another by the prospects—however ephemeral so far—for a resolution, even a minor one, of the ongoing U.S.-China trade spat. Last week impeachment won the day in terms of sentiment, and stocks fell. For more on politics, see page 10. Readers of a certain age might remember the children’s toys popular in the 1970s called Weebles, with the marketing line: “Weebles wobble but they don’t fall down.” These figures, shaped like Russian nesting dolls, had rounded bases and would wobble around when pushed but, that’s right, not fall down and bounce right back up. The market action, basically stuck in a wide band for the last 12 months, taking blow after blow, reminds me of that. And while we’re talking about U.S. stocks here, it seems that there’s plenty of political uncertainty in the major Western developed markets. The Brexit mess and constitutional crisis in the U.K. seems no closer to any resolution. That must weigh on stocks even over here. The reality is that market is actually directionless, despite the occasional 1% and 2% daily upticks and downticks. For example, last week it went down a bit, reacting to the increased talk in Congress about a potential impeachment of the President. While that’s bad, it is unlikely to send the market reeling for a sustained time. A conviction in the Senate—highly unlikely—might . But, as my colleague Tom Block points out on page 10, that ain’t gonna happen. Last week was and up and down but mostly down week. The Standard & Poor’s 500 index fell a little more than 1% to 2961.79, with each day reacting to snippets of impeachment news and trade talk. Trade was seemingly pushed aside in terms of market influence, but then late Friday, for example, after ignoring the impeachment talk and spending much of the day higher, the market turned lower after a report out that the White House is weighing limiting investment in China. Bloomberg reported that the U.S. is considering delisting all Chinese companies, and banning U.S. pensions from investing in Chinese stocks. There were no details so take this with a grain of salt. It smacks of a negotiating ploy by the U.S. Back to impeachment. According to CNN, 219 House Democrats — more than half of the 435 members — have publicly stated support for impeachment proceedings. That said, when President Richard Nixon was impeached, the market fell. When President Bill Clinton was impeached, the market continued higher. Frankly, given Vice-President Mike Pence’s personal stability and probity, it might even be a good thing if Trump is impeached and convicted. Just saying. Impeachment is serious but…. I think investors should really wonder how important each of these factors are when the market doesn’t show very big moves one way or another. When the impeachment news gets hot, the market falls—but for one day, followed by a nice up move the next day, which, in turn, doesn’t see any follow through either. In the way of anecdotal evidence, another potential indicator of positive sentiment is the market’s nonchalance when it comes to a spate of initial public offerings of unprofitable companies that, while not failures, haven’t done too well, such as Uber (UBER), Lyft (LYFT), and those that have been pulled or delayed, like We Company (WE) and Endeavor. The IPO pushback by the market suggests to me that investors aren’t swooning for such new “growthy” stocks, aren’t being swayed by hype, and that there isn’t the kind of wild and unbridled enthusiasm seen at past market tops, as in 2000. In such times of indecision one of the better and most trustworthy signals is the Advance/Decline line and that, fortunately for bullish investors, remains supportive. By the way, despite the volatility, we are just a few percentage points below the all time high set last July 26 of nearly 3026. Separately, in the way of U.S. data, August inflation slowed after a pickup in the previous month, thanks to lower energy, food and durable goods prices. Friday, the Commerce Dept. said the personal-consumption-expenditures (PCE) price index rose a seasonally adjusted 0.03% last month from July. It’s just one month of data. While the Fed bemoans the lack of inflation, or at least inflation that meets its 2%, target I’ve always failed to understand how lower inflation is bad for anyone, poor, rich or middle class. So far, the usual scary month of September is not living up to its historical average as the worst month of the year for investors: down 1% and negative 60% of the time. Sure, there has been lots of volatility, but as of Friday’s close, with one trading day left in the month, the S&P 500 index is up a few points. Quote of the Week: From The Wall Street Journal about the We Company (WE) IPO troubles: “Corporate governance has deteriorated in lockstep with the increase in available capital from people who haven’t traditionally been private-company capital sources,” says Adam J. Epstein, an adviser on corporate governance to CEOs and their boards. Investors “have to play nicely to be allowed into these deals.” Looking Questions? Contact Vito J. Racanelli at vito. racanelli@fsinsight. com or 212 293 7137. Or go to

  • US Policy
Sep 27, 2019

Growing Trump Impeachment Chorus Dominates Headlines

Unless you were sitting under a rock somewhere, you know that the potential impeachment of President Donald Trump dominated the news last week, kind of like the New England Patriots and football. That’s likely to continue for a while. Anyway, while the House of Representatives might indeed approve articles of impeachment against him, investors need to focus on the fact that there remains little support among Senate Republicans to convict him. For those of you who don’t remember your high school civics class, the effect of impeachment alone is limited. An impeachment is equivalent to an indictment in criminal law, and only the statement of charges against an official. While a House vote to impeach only requires a majority, which the Democrats have, a conviction in the Senate requires a 2/3rds majority, which the Democrats don’t. It’s far out of reach today. As noted in the piece by my colleague Tom Lee on page 3, investors need to look more deeply into situations the market is evaluating. And ironically, impeachment may actually help the President next year, as the political conversation ahead of 2020 Federal elections moves from issues such as health insurance, prescription drugs, and climate change to talks between two leaders and whether or not the President may have violated campaign finance rules during the conversation. Remember, the Democrats captured control of the House because of the issues that impact voters, not campaign finance issues. More fallout from this also hits former Vice President Joseph Biden, who’s been hurt by the talks of the role he played with respect to his son’s activities both in Ukraine and China. The talk of Biden in this negative light could help Senator Elizabeth Warren as she continues to climb in the early polls. And here’s another thing: President Trump has shown he is street brawler who will fight hard to be re-elected. Trade took second place last week in the market’s sights. For more on this see page 1. China and the U.S. have announced a new round of trade talks in Washington, D.C. to occur October 10-11. The Chinese seemingly have shown goodwill by permitting the purchase of soybeans and pork from the U.S. ahead of the talks. While a big comprehensive deal isn’t in the cards, a smaller agreement could be reached in the coming months. An agreement would likely have Chinese agricultural purchases and the US permitting export licenses to be given to American companies that supply Huawei. The Congress avoided a federal government shutdown next week by approving a Continuing Resolution postponing spending decisions to Nov. 19. Kick the can down the road. Figure: Top Trump Tweets The President of Ukraine said that he was NOT pressured by me to do anything wrong. Can’t have better testimony than that! As V.P., Biden had his son, on the other hand, take out millions of dollars by strong arming the Ukrainian President. Also looted millions from China. Bad!— Donald J. Trump (@realDonaldTrump) September 26, 2019 Sounding more and more like the so-called Whistleblower isn’t a Whistleblower at all. In addition, all second hand information that proved to be so inaccurate that there may not have even been somebody else, a leaker or spy, feeding it to him or her? A partisan operative?— Donald J. Trump (@realDonaldTrump) September 27, 2019

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