The following is an excerpt from the report mentioned in the video. Please consider taking a complementary IOI membership to read the entire report.
During a Charlie Rose interview, Bridgewater Associates’ founder Ray Dalio made the comment that he didn’t get paid for taking sides, but for having a clear-eyed view of reality and acting on his insights for the benefit his investors.
The author of this report gets paid somewhat less than Dalio (over $1 billion in 2015 per the NY Times), but admires Dalio’s approach and attempts to do the same. It is in this spirit of callin’ ‘em like I sees ‘em that we look at issues separate from policy that we believe have the potential to affect investments during the Trump administration.
As we see it, the first role of the president is to establish the framework by which the legislative agenda and political discourse during the administration is organized. President Carter was an intelligent, earnest leader, but did a poor job of setting and articulating his agenda, and is thus considered a failure. President Reagan was likely not as intelligent as Carter, but was a master of articulating his political agenda and is thus considered a success.
After setting and articulating an agenda, the president is responsible for pushing it forward by gaining acceptance of his proposals among members of his own party, opposition parties, and the public at larger. President Clinton was a brilliant communicator who set and articulated his agenda for a major change to the healthcare system as the centerpiece of his first administration. However, his inability to garner acceptance of his proposal within even his own party doomed it to failure and allowed Republicans to take control of the House in 1994.
Considering these presidential goals, we believe the key skills of a president are as follows [1]:
- Clearly articulate a vision for the country
- Craft a strategy for implementing proposals consistent with that vision (strategic planning)
- Create consensus within his own party regarding his vision and strategies (tactical execution)
- Create consensus among politicians from opposing parties that supporting his vision will create more good for them than it will create damage (tactical execution)
- Engineer support for his policies within the populace at large, at least to the extent not to lose seats in the mid-term elections (charisma)
The successful administration is one that creates an environment in which individuals and businesses understand and buy into the president’s vision and are given the fair opportunity to prosper by supporting it. In this socioeconomic environment, businesses thrive, individuals prosper, and the wealth of the nation increases.
In contrast, the most damaging things a president can do is to create a chaotic and uncertain environment through confused or contradictory messaging, to fail to take the strategic and / or tactical steps needed to make his chosen agenda succeed, and to apportion rewards in an inequitable manner. In this socioeconomic environment, resources are wasted and opportunities missed, the level of enmity in the society increases, and people come to believe that the system has failed them.
During the campaign and in this transitionary period, President-elect Trump has, in our opinion, exhibited evidence that his administration is likely to be a chaotic, divisive, and unproductive influence on the society, and this quality represents risk that we believe an investor must recognize and manage.
In this section, we outline current examples of President-elect Trump failing in each of the presidential skills articulated above and attempt to assess whether his history as a businessman supports or refutes this evidence. We conclude by offering a best- and worst-case scenario for the socioeconomic environment under a Trump Administration.
Articulate a Vision
“Make America Great Again” is a simple, bold vision statement. However, when pressed on details, President-elect Trump’s vision becomes cloudy, and he tends to go back on statements and promises he has previously made. This backtracking blunts the vision and creates uncertainty regarding what the real goals of the administration are.
Examples
- Repeal Obamacare on day one is the stated policy on Trump’s website, but a few days after the election, the Wall Street Journal reported that he may keep some key provisions.
- Climate change is a hoax perpetrated by the Chinese was Trump’s stated position (perhaps to curry votes among carbon-based energy producers), but has recently said that climate change is real and may be caused by humans.
- Trump promised to build a big, beautiful, powerful wall along the Mexican border, but recently has said parts of the wall may have to just be fencing.
- During the campaign, one of the main rally cries of Trump supporters was to “Lock her up!” with the ‘her’ being, of course, Hillary Clinton. However, after the election, Trump has described the Clintons as ‘good people’ and has dropped his call for a special prosecutor.
Historical Examples
While not related to a political vision, there are ample examples of businessman Trump going back on business agreements and stiffing his contractors. In a sense, Trump was articulating a vision to contractors (“You’ll make a lot of money on this deal”) and then did not follow through in executing that vision.
We believe Trump’s historical actions supports a view that Trump’s vision is changeable according to circumstance and expediency, see this as a negative trait in terms of executive efficacy, and believes that it will add to uncertainty in the investing world.
NOTES:
[1] There is one more essential skill, which we will only touch on in this report: “Manage relationships with other nation-states skillfully and minimize the impact of or head off threats (military or economic) from foreign powers.” It is very had to assess the ability of president Trump to do this, though, in our opinion, his reluctance to attend intelligence briefings as well as his potential conflicts of interest (Russia, China, Germany, US Banks) do not bode well in this area.
Please register for a trial membership to continue reading! Members of the press, please contact Erik for a copy.