Scoot on over to Trend Macrolytics which has correctly predicted the victor in the Electoral College in the past 17 presidential election cycles (1952-2016). An updated analysis has flipped over the last six weeks to show Trump now winning definitively in the Electoral College, 410 electoral votes to 128 electoral votes. Do I think Trump will break 400 electoral votes? Probably not. But the only thing that Trend has gotten wrong since 1952 is the margin of victory. It has always correctly predicted the ultimate winner.
Economy slowly recovers as businesses navigate complicated reopening process; TrendMacro chief investment officer Donald Luskin weighs in.
Friday’s blowout jobs report for August reveals a labor market and economy that continue to recover in encouraging fashion... The recovery after the 2008-2009 recession took three years to make this much progress, and the jobless rate was still 8.1% in August 2012...
Our contributor Donald Luskin notes that the number of Americans receiving Social Security disability payments is 9.8 million, one million fewer than in August 2012.
Trendmacro CEO Donald Luskin says his research has shown there is no correlation between the degree states locked down to the controlling coronavirus or deaths from coronavirus.
SAN DIEGO (KUSI) – Economic lockdowns were the government’s answer to the COVID-19 pandemic, we were told it would be short period of time to get through it.
Chief Investment Officer of the analytics firm “TrendMacro,” Donald Luskin, wrote an opinion piece in the Wall Street Journal titled, “The Failed Experiment of COVID Lockdowns” to detail why he believes they did not work.
Luskin started the piece writing, “the results are in. Counterintuitive though it may be, statistical analysis shows that locking down the economy didn’t contain the disease’s spread and reopening it didn’t unleash a second wave of infections.”
Luskin explained that the period of time with the strictest lockdowns didn’t result in a reduction of spread whatsoever. Luskin wrote, “Measuring from the start of the year to each state’s point of maximum lockdown—which range from April 5 to April 18—it turns out that lockdowns correlated with a greater spread of the virus. States with longer, stricter lockdowns also had larger Covid outbreaks. The five places with the harshest lockdowns—the District of Columbia, New York, Michigan, New Jersey and Massachusetts—had the heaviest caseloads.”
Luskin joined KUSI’s Paul Rudy on Good Morning San Diego to discuss his article in depth.
TrendMacro CIO Donald Luskin adds his perspective on how a Biden administration could impact the economy and markets, the difference between being rich and being wealthy and a proposed California wealth tax.
What Happened to Non-Covid Care? Don Luskin of TrendMacrolytics writes today in a note to clients:
"The single worst contributor to the worst quarter in the history of US GDP was health care services. It contracted less than some other sectors, but it is such a large share of overall GDP it has an outsized impact. Hospitals and clinics were shut to everyone but Covid-2019 patients, so standard treatments, tests and screenings could not take place. The capacity needed for Covid patients was wildly overestimated, which itself is good news. But there is both an economic and public health cost to denying health care to other patients."
Consumer spending fell 34.6% and accounted for some 25 percentage points of the GDP decline. ...the biggest surprise was the plunge in health-care spending during a health-care crisis. Health care represents about 12% of the U.S. economy and its collapse subtracted 9.5 percentage points from GDP.
How does that happen in a pandemic? The answer, as our friend Don Luskin points out, is that politicians panicked in March and waited for a surge of Covid-19 patients that the pandemic modelers told them would arrive. Blessedly, the modelers were wrong, and far fewer hospital and intensive-care beds were needed. But the economic harm from stopping all elective surgeries and barring visits to doctors was severe and unnecessary.
It was also a terrible public-health blunder. That harm will play out for years as Americans discover cancer, heart-disease and other diagnoses that were missed or delayed.
On their business network, FOX brought on Donald Luskin to provide a take on this new information, and he certainly delivered, stating that:
“…I guess I’m one of those people who plans never to retire. I mean, is bowling that interesting? Is fishing that interesting? I happen to love my work. Why do I want to stop it? It’s not like it hurts. Why would I stop it? This is great. What a great country where we have the opportunity to keep working. What a miracle where our lives are long enough and we’re healthy enough and mentally alert enough so we don’t have to retire like generations before us. This is a great blessing. You should embrace it.”
Donald Luskin, if I’m being honest, deserves some credit. It’s actually incredible how someone could encompass every single thing people hate about capitalism, and fit it in to such a small number of sentences.
Writing from Dallas this week, Don Luskin of Trend Macrolytics reports: “Joy and renewal are palpably in the air. We wish all our clients and friends the patience and good health to endure what we hope are the final throes of the Covid-19 crisis, and the resiliency to enjoy a speedy re-opening.”
He adds that as economies reopen, “The early adopters will be the healthy young, who have probably chafed the most under the boring and repressive rigors of lockdown, and who – it is now becoming known – are largely invulnerable to Covid-2019 anyway.” Mr. Luskin predicts: "FOCI (fear of Covid infection) will be replaced by FOMO (fear of missing out)."
Readers have by now learned to be skeptical of predictions about the virus, but are no doubt hoping Mr. Luskin is right on target.
The investment strategists at Trend Macrolytics have begun sending their clients “a daily reality-check” of the influential model from the University of Washington’s Institute for Health Metrics and Evaluation (IHME). “Even the most recently updated versions of it continue to over-estimate new fatalities,” says Trend Macrolytics today.
A model assembled by Trend Macrolytics — using six measures of macroeconomic and personal financial wellbeing to predict every winner in presidential elections dating back to 1952 — still predicts a Trump victory by a wide margin.
Donald Luskin, the firm’s chief investment officer, notes the model has only incorporated two variables that updated recently, oil prices and payrolls, and those “have basically been a push.”
But that will likely change if a recession persists deeper into the calendar this year. “It’s just a race to see how quickly we can end this man-made recession and put people back to work,” Luskin says.
Until that picture becomes clearer, he says forecasters should operate with a healthy dose of humility. “The nature of the emergency itself brings up issues of personal safety and gets people’s minds operating in ways that are unusual,” he says. “I have no idea how exogenous factors the model can’t account for could influence the election. I’d be a fool not to admit those uncertainties.”
Donald Luskin, chief investment officer for Trend Macrolytics LLC, gave his opinion on many of the questions some people have about protecting their finances during the coronavirus pandemic, in an interview with the Daily Caller.
Luskin goes over what you should do with your 401(k)s, what would be a good investment, and the winners and losers during the coronavirus pandemic.
“There have been many panics of different kinds that have happened, and when panics happen, that’s when chaos happens, that’s when unknowns happen, you don’t know how bad it could get. When that happens, risky assets like stocks have to sell at a cheap price so that only the bravest will hold them,” Luskin said.
Regarding Donald L. Luskin and Chris Hynes’s “Worst Coronavirus Idea: A Ban on Share Buybacks” (op-ed, March 23): The issue facing legislators isn’t whether to forever ban share buybacks by companies receiving federal aid, but whether to impose such a ban for a limited period, say two years. The authors don’t address this question, and their obvious points completely miss the uniqueness and urgency of the moment. I am in favor of such a ban...
Economist Don Luskin discusses the coronavirus outbreak and whether it has been overly politicized.
Economist Donald Luskin explains why China's open animal markets are breeding grounds for contagious diseases such as the coronavirus.
The Mount Sinai Hospital director of Infection Prevention and Control Waleed Javaid, M.D., discusses the coronavirus and why he is not worried about the outbreak. Then, TrendMacro CIO Donald Luskin discusses the economic perspective.
TrendMacro CIO Donald Luskin discusses the liberal media's decision to prioritize President Trump's impeachment trial over phase one of the U.S.-China trade deal and the USMCA.
TrendMacro CIO Donald Luskin discusses how those with lower incomes have witnessed higher income gains under the Trump administration.
TrendMacro CIO Donald Luskin says the U.S. shouldn't worry about oil production or the economy after an airstrike struck and killed Iranian top general Qassem Soleimani.
TrendMacro CIO Donald Luskin believes the new contenders entering the 2020 Democratic presidential race are actually 'weakening' the party.
TrendMacro CIO Donald Luskin discusses the impeachment inquiry and provides logistics on the China tariffs and the hype surrounding them.
Economist Donald Luskin weighs in on Sen. Elizabeth Warren (D-MA) and her potential wealth tax.
As President Trump announces he will leave New York for Florida, TrendMacro CIO Donald Luskin discusses a ‘mass exodus’ from blue states, like California and New York.
Economist Donald Luskin explains why he believes the wealth tax proposals of Sens. Elizabeth Warren and Bernie Sanders are unconstitutional.
TrendMacro CIO Donald Luskin discusses the strength of the U.S. economy, despite differing opinions.
TrendMacro CIO Donald Luskin emphasizes how the individual is more important than the collective when discussing big businesses and China.
Another model, assembled by Trend Macrolytics, accurately predicts every presidential victor back to 1952 by focusing on the effects of the economy and incumbency on the electoral college, according to Donald Luskin, the firm’s chief investment officer. It projects Trump will win reelection next year with 354 electoral votes — a margin that seems staggering on its face. “To get something that high, you have to go back to Ronald Reagan, and that may not be possible in the red-blue world we live in now,” Luskin tells me.
The model stakes first-term incumbents with a heavy advantage. (That edge curdles into a disadvantage for candidates running to extend their party’s hold on the White House into a third or fourth term. See: George H.W. Bush in 1992 or Al Gore in 2000.) And then it factors in six economic indicators, including oil prices, personal income, inflation and tax burdens.
One seemingly important measure the model doesn’t include: The president’s approval rating. Luskin says it actually doesn’t carry much predictive power. And besides, Trump’s remains in the middle of the pack for presidents around the 1,000-day mark in their first term.
Of his own model’s projection, Luskin says “it is directionally correct, and I’m willing to put real money that Trump is going to be reelected, assuming all the model inputs are the same as they are today.” But he adds that “you and I and Mark Zandi should take a humility pill here. We still live in a world of imponderables, and these are very rough navigation tools.”
Wells Fargo Senior Economist Mark Vitner and TrendMacro CIO Donald Luskin discuss President Trump's progress on trade.
Trendmacro CIO Donald Luskin discusses the record-low unemployment rate, the Federal Reserve and the 2020 election.
TrendMacro CIO Donald Luskin joins FOX Business to discuss 2020 Democrats’ plans to pay for proposed for climate change
TrendMacro CIO Donald Luskin reacts to the August jobs report and the U.S.-China trade dispute.
TrendMacro CIO Donald Luskin reacts to 2020 Democratic candidate Pete Buttigieg’s comments about the economy under Barack Obama.
TrendMacro CIO Donald Luskin discusses how China is hurting from President Trump’s tariffs.
TrendMacro CIO Donald Luskin and Fox News contributor Bill McGurn discusses the strength of the U.S. economy and the concerns over a global recession.
TrendMacro CIO Donald Luskin discusses the ongoing U.S.-China tariff war and why he is critical of Federal Reserve Chairman Jerome Powell.
TrendMacro CIO Donald Luskin says the Democrats’ impeachment proceedings is to harass a president they disagree with and do not like.
An economic model developed by investor Donald Luskin suggests that Trump would receive 340 electoral votes, significantly more than the 270 needed to win the presidency.
But he cautioned that the new tariffs presented an “unlikely but credible nightmare scenario” in which China spiraled into a recession. That could then lead to a downturn in the United States and erode the president’s relative strength on the economy.
“It’s not that we can’t take China down,” Luskin said. “It’s that we can’t take China down without taking ourselves down.”
Economist Donald Luskin discusses how the Treasury Department declared China as a currency manipulator.
An excerpt from Donald Donald and Andrew Greta’s I am John Galt: Today’s Heroic Innovators Building the World and the Villainous Parasites Destroying It (Wiley). Note the last two paragraphs refer to his death. When the book was written, that event was still in the future.
TrendMacro CIO Donald Luskin on the cost of Sen. Bernie Sanders’ (I-Vt.) Medicare-for-all plan.
Trend Macro Chief Investment Officer Donald Luskin on the economic factors that lead to young people having a sense of entitlement and the state of the markets.
On Monday’s broadcast of “Making Money with Charles Payne,” Trend Macrolytics’ chief investment officer Donald Luskin said working forever and not retiring “doesn’t worry me personally.” In fact, he described having to work until death “as a great blessing.”
Payne asked Luskin about the people who want to retire, but can’t afford to do so.
Luskin acknowledged it is “a problem,” but said questions had to be asked.
“Were you the profligate grasshopper instead of the ant who saved up? I mean, were you just messing around when you were a kid and you didn’t contribute enough to your 401k, or did the economy just fail to provide a job for you, it’s hard to know,” he added.
"Let's ask Trend Macrolytics CIO Donald Luskin," Payne continued, introducing the guest onto the show. "These kinds of polls are always around. Bank rate does some things, other folks. It is always alarming, 32 percent say they will retire before age 65, which might be unrealistic but 23 percent say never. Is that worrisome for you, Donald?"
"Doesn't worry me personally," Luskin responded. "I guess I'm one of those people who plans never to retire."
The 65-year-old Chief Investment Officer appear to then criticize the notion of retirement, before enthusiastically praising America for allowing its citizens to work until they die.
According to one Fox Business Network guest, being forced to work until the day you die should be seen as a “great blessing.”
Appearing on Making Money with Charles Payne on Monday, Trend Macrolytics chief investment officer Donald Luskin was asked by host Charles Payne to react to a recent poll that shows 23 percent of Americans believe they are never going to retire. The survey also found that another quarter of workers believe they won’t be able to retire until after they’re 65 years old.
“Is that worrisome for you, Donald?” Payne questioned the frequent Fox guest.
“Doesn’t worry me personally,” Luskin replied. “I guess I’m one of those people who plans never to retire.”
The way the consulting firm executive sees it, spending your twilight years enjoying leisure activities is boring.
In a chat with Fox Business Network, Luskin went on to blow off the very idea of retiring and heap praise on the notion of endlessly working.
“What do people do when they retire? You know, how do you spend a day?” he said. “I mean, is bowling that interesting? Is fishing that interesting?”
Luskin says he loves his job. “Why do I want to stop it? It’s not like it hurts.” He’s lucky in that way. Not everybody, of course, wants to work until the grave, yet a growing number of Americans feel they’re left with not choice.
About one-third of older adults feel unprepared, while 56% of younger adults say they don’t feel prepared for retirement, according to the poll.
“It is part of your destiny to be productive and to work,” Luskin said, acknowledging that this concept means different things to different people.
TrendMacro CIO Donald Luskin on the potential impact of Sen. Bernie Sanders' plan to tax stock transactions in order to cancel out student loan debt.
Prior to Mr. Xi’s agreement this morning to meet with Mr. Trump next week, the always interesting Donald Luskin of Trend Macrolytics had predicted that Beijing would come back to the table because of a “game changer” in the negotiations. According to Mr. Luskin, a separate Trump negotiation recently put Mr. Xi on notice that China was not going to win a tariff battle with the United States. In a Friday video, Mr. Luskin observed:
"Mexico just agreed to expend its resources to stem the flow of migrants from Central America through Mexico into the United States. In essence, Trump just delivered on the biggest, craziest campaign promise in history. He just used tariffs to get Mexico to agree to pay for the wall."
Trendmacro CIO Doanld Luskin on whether President Trump is jeopardizing the tax cuts and the new NAFTA deal with the latest tariff threats on Mexico.
FOX Business’ Trish Regan, Fox News contributor Jason Chaffetz and economist Donald Luskin discuss the crisis at the southern border.
It’s worth noting that the Fair model is hardly alone in its forecast. Mark Zandi, the chief economist at Moody’s Analytics, has looked at 12 models, and Mr. Trump wins in all of them. Donald Luskin of Trend Macrolytics has reached the same conclusion in his examination of the Electoral College.
The White House acknowledges talks have taken a big step backwards. What does that mean for the U.S. economy?
TrendMacro CIO Donald Luskin on the trade negotiations between the U.S. and China.
S&P Global portfolio manager Erin Gibbs and TrendMacro CIO Donald Luskin discuss how the U.S.-China trade war is affecting the markets.
Meanwhile Donald Luskin of Trend Macrolytics generally sees the art of the deal:
"Just because we are seeing such things now does not mean the deal is falling apart. To be sure, it might mean that. Mistakes can happen. But more likely it signals the highly turbulent edge of chaos – the existential interface between “yes” and “no” – that all negotiations have to pass through before they end.
"...And at the end of the day, we can’t rule out that Trump never wanted a trade deal to begin with, but began his trade war to break China’s economy before it overtakes the world – indeed to break China itself, the way Ronald Reagan broke the Soviet Union... But remember the fundamental truth here. Trump wants you to worry about just that kind of possibility. He wants you to think he’s crazy. He wants to you to fear him. Because if you aren’t afraid of him, Xi Jinping won’t be either. And if Xi isn’t afraid, he has absolutely no reason to give a millimeter on trade."
If stoking alarm among the advocates of open markets is part of the plan here, Mr. Trump’s mission is accomplished.
Let’s not go overboard. As Don Luskin of Trend Macrolytics points out, beneath today’s headline GDP number, growth in consumer spending and business investment was not as strong as we’d like. But overall the economy continues to show a remarkable vitality that has been especially surprising to the Democratic economic establishment.
TrendMacro CIO Donald Luskin on President Trump’s Federal Reserve picks and whether earnings will continue to propel the stock market higher.
TrendMacro CIO Donald Luskin said that the trade talks between the world's two largest economies are vital to the global economy. "This is simply the biggest negotiation that's ever happened in the history of the world," he told FOX Business' Liz MacDonald on "The Evening Edit"Opens a New Window. on Thursday. "They have to figure out how to play well together or there will be a global depression." He also praised Trump for what he described as a unique negotiationing style. "What is so special about Trump as a negotiator is that he keeps you guessing," he said. "He tricks you into negotiating against yourself.”
TrendMacro CIO Donald Luskin on the Trump administration’s push to make a trade deal with China.
Trend Macrolytics CIO Donald Luskin says President Trump will win in 2020, as long as the U.S. economy remains strong.
“The economy is just so damn strong right now and by all historic precedent the incumbent should run away with it,” Donald Luskin, the chief investment officer of TrendMacrolytics, a research firm that predicted Trump’s 2016 win, told Politico. “I just don’t see how the blue wall could resist all that.”
...Still, the economy is generally seen as the most important factor when it comes to how voters cast their ballot and Luskin says there would need to be a major decline in economic growth and uptick in unemployment for Trump to lose. Luskin’s current model – which tracks GDP growth, gas prices, inflation, disposable income, tax burden and payrolls – has Trump winning in a blowout with 294 electoral votes.
“The economy is just so damn strong right now and by all historic precedent the incumbent should run away with it,” said Donald Luskin, chief investment officer of TrendMacrolytics, a research firm whose model correctly predicted Trump’s 2016 win when most opinion polls did not. “I just don’t see how the blue wall could resist all that.”
Models maintained by economists and market strategists like Luskin tend to ignore election polls and personal characteristics of candidates. Instead, they begin with historical trends and then build in key economic data including growth rates, wages, unemployment, inflation and gas prices to predict voting behavior and election outcomes.
...Still, Luskin, Fair and other analysts who use economic data and voting history to make predictions also note that a sharp decline in growth and an increase in the unemployment rate by next fall could alter Trump’s fortunes.
“It would have to slow a lot to still be not pretty good,” Luskin said, adding that what really matters is the pace of change. Even if overall numbers remain fairly strong, a sharp move in the wrong direction could alter voting behavior.
Luskin’s current model — which looks at GDP growth, gas prices, inflation, disposable income, tax burden and payrolls — has Trump winning by a blowout margin of 294 electoral votes.
Economist Don Luskin discusses the U.S.-China trade negotiations and why President Trump is keeping tariffs on China in place.
TrendMacro CIO Donald Luskin and Patriarch Organization CEO Eric Schiffer on whether investors should be cautious about buying Lyft and the problems surrounding the tech sector.
TrendMacro CIO Donald Luskin discusses how the U.S. is allowing citizens to sue certain Cuban businesses amid the crisis in Venezuela.
Raymond James chief investment strategist Jeff Saut and TrendMacro CIO Donald Luskin discuss how earnings will affect the U.S. market and whether investors should be concerned about special counsel Robert Mueller’s investigation.
TrendMacro CIO Donald Luskin and Belpointe chief strategist David Nelson on the state of the U.S. stock market and whether people should invest in China.
Trendmacro CEO Donald Luskin says President Trump’s optimistic approach towards a U.S-China trade resolution is helping the markets.
TrendMacro CIO Donald Luskin discusses how Russia is helping disputed Venezuelan President Nicolas Maduro and whether the U.S. should block the country’s oil shipments.
TrendMacro CIO Donald Luskin discusses the economic problems facing Venezuela and President Trump’s upcoming State of the Union address.
TrendMacro CEO Donald Luskin on the U.S. economic outlook and Trump administration trade negotiations with China.
Investors are turning their attention to this week’s Federal Reserve policy meeting. How will the markets react? TrendMacro CIO Donald Luskin and Erin Gibbs of S&P Investment Advisory Services with more.
Investors remain on edge as earnings woes raise fears over global growth. Will the markets re-test December lows? Erin Gibbs of S&P Investment Advisory Services, TrendMacro CIO Donald Luskin and Efficient Advisors CIO Larry Shover weigh in.
TrendMacro CEO Donald Luskin on U.S. trade negotiations with China and the outlook for stocks.
Economist Donald Luskin says that the Democrats are the economy’s worst enemy.
FBN’s Trish Regan, TrendMacro chief investment officer Donald Luskin and former Reagan economic adviser Art Laffer discuss how former President Barack Obama tried to take credit for the booming U.S. economy.
TrendMacro CEO Donald Luskin on the outlook for the Federal Reserve's interest rate hikes and the Fed's impact on the markets and U.S. economy.
All of this suggests that the communist who runs China has no interest in embracing freer trade with the United States. But Don Luskin of Trend Macrolytics argues that to avoid an economic calamity and resulting social unrest, Mr. Xi will have to cut a deal with the U.S. In a note to clients this week, Mr. Luskin writes that the arrest in Canada of Meng Wanzhou, chief financial officer of Chinese telecom giant Huawei, is only adding to the pressure on Mr. Xi:
"Indeed, the greatest effect of the Meng arrest, we think, has been to elicit an outpouring of global support for the move and condemnation of China, and a catalyzing of what is developing into a global boycott of Huawei and ZTE products. With the US’s global allies having been conspicuously silent on trade issues, it would seem that there is nevertheless a great willingness to stand up and be counted on security issues.
"Since the Buenos Aires summit – falsely called in the media a mere 'truce' – the US has continued to exert every form of pressure that was in place before (indeed, added pressure through the Meng arrest), while China has laid down its arms: it has resumed buying US agricultural products, dropped retaliatory tariffs on US autos, and announced it will re-engineer its provocative – and seemingly sacrosanct – Made In China 2025 doctrine.
"So make no mistake about it – we are getting to 'yes' with a very high probability."
Let’s hope Mr. Luskin is right on China. No word yet on whether he can persuade Times contributors to stop contemplating mass suicide.
TrendMacro chief investment officer Donald Luskin discusses how a federal judge ruled that ObamaCare is unconstitutional, and market volatility.
While nobody on Wall Street believes the road to a broad, final trade agreement between the two nations will be easy or free of risk, the thaw in relations has boosted investors' hopes for a deal. "Negotiations over those 90 days will no doubt be rocky, but this is the all-clear signal that nobody is going to walk off a cliff," noted Donald Luskin, chief investment officer at research firm TrendMacro.
The job market has been strong, and small business confidence remains high, but those tend to be lagging indicators. With the world economy showing strains, the chances of a significant U.S. growth slowdown can no longer be ruled out. We’d note that our contributor Donald Luskin, the financial adviser and long-time growth optimist, has put himself on recession watch.
Trend Macro chief investment officer Don Luskin on the possible causes to the market selloff.
Trend Macro Chief Investment Officer Donald Luskin discusses the recent market selloff and how the U.S. detained an alleged Chinese spy, who is facing charges of trying to steal trade secrets from companies including GE Aviation.
Donald Luskin, chief investment officer at Trend Macro, discusses the left wing media’s attacks against the current state of the economy, how Democrats have criticized President Trump’s tax policy and the U.S., Mexico trade deal.
Don Luskin, chief investment officer at Trend Macro, joined SiriusXM host Rebecca Mansour on Monday’s Breitbart News Tonight to discuss his recent Wall Street Journal op-ed, “China Is Losing the Trade War with Trump.”
There is a reason Jason Furman didn’t cite any specifics to back up his claim that “financial markets reacted” to President Trump’s tweet about Friday’s jobs report “with unusual volatility for the early morning hours” (“The Economic Risks of Trump’s Premature Tweeting,” op-ed, June 4). The reason is that they didn’t. In the 69 minutes between the tweet and the actual release, futures contracts on the S&P 500 meandered randomly in a narrow range of about one-tenth of a percent of the index’s value. The yield of the 10-year U.S. Treasury bond rose less than two one-hundredths of 1%, moving in the same direction and at the same pace as it had been all night.
The more notable aspect of Mr. Furman’s commentary is that it may mark the first time that a former Obama administration official has admitted that one of President Trump’s tweets was truthful.
Donald L. Luskin
CIO, Trend Macrolytics LLC
...Don Luskin of Trend Macrolytics wrote to clients about Mr. Trump’s plan for new tariffs—essentially taxes on steel and aluminum consumers: "Trump’s economic record has been excellent, and we draw assurance from that. But the very fact that this is his first big mistake requires markets to let him know he’s making it – which is one reason we think this has to prolong the present stock market correction. Considering that Trump has bragged so often about the rising stock market, presumably he would listen when it sends him a message."
Let’s hope so. Mr. Trump’s tweets this week suggesting it’s all just part of a NAFTA renegotiation may have some investors feeling less concerned, and perhaps that’s reflected in a more cheerful market as of this writing. This column thinks Mr. Trump is playing with fire. But on Friday Mr. Luskin suggested that the anti-growth tariff plan might be watered down a bit and expressed the hope that we are simply witnessing “the classic ‘big ask’ gambit in the art of the deal, designed to wring concessions out of counterparties. The negotiations will overlap with the ongoing NAFTA wrangling, as Canada and Mexico are the number one and number three exporters of steel to the US, respectively.”
Donald Luskin, chief investment officer at TrendMacro, offers a simpler reason why stocks eventually stop going down. “It halts once the algos and investors run out of stuff to sell,” he said, adding that a rebound gives investors “hope ... and that starts the healing.”
The Wall Street Journal editorial page has always been appropriately skeptical of the claims of former Federal Reserve Chair Ben Bernanke during the quantitative-easing era. So there’s no reason, today, to let his dubious rationales for QE be a basis for worry about stock prices now that these programs are finally being unwound.
In your Jan. 17 editorial “The Tax-Reform Stock Rally,” you say Ben Bernanke sold QE “as a tool to drive investors into riskier assets, including stocks.” But it isn’t true just because he said it. When the Fed buys bonds or mortgage-backed securities, it gives the seller, in payment, a cash deposit on the Fed’s balance sheet. In such a transaction, all that happens is that the duration-risk of long-term Treasurys and the prepayment risk of MBS is taken out of the market by the Fed, replaced with a riskless overnight deposit that earns the prevailing fed-funds rate. Whatever rationales Mr. Bernanke may have offered, the true boon of QE was simply to de-risk a market that was reeling from the worst financial panic in generations.
Nobody was driven into stocks, or into anything else. If for some reason an investor, who had sold his Treasury bonds to the Fed, decided to use the cash proceeds to buy stocks, then some other investor would have to sell those stocks. There is, of necessity, no change at all in the net ownership of stocks.
De-risking was important after the global financial crisis, so the Fed’s buying several trillion dollars of Treasurys and MBS may have actually made a difference, if only by calming things down a little bit. But the crisis has long been resolved, and markets don’t need to be de-risked any longer. In today’s more risk-tolerant environment, the Fed’s glacial runoff of its bond and MBS portfolio, through natural maturation, not outright sales, will drip a little risk back into the market one day at a time. Today’s market won’t even notice.
By unwinding its asset portfolio now, when the market can easily tolerate a little more risk, the Fed is not imperiling the economic expansion and the bull market in stocks, but prolonging them by returning to a more normal and predictable policy posture.
Donald L. Luskin
CIO, Trend Macrolytics LLC
...We’ve been hosting an op-ed debate on stock prices, and last week financial consultant Donald Luskin made his case for the running of the bulls as expected corporate earnings are adjusted upward due to tax reform. Harvard economist Martin Feldstein makes the case for caution nearby, arguing that equity prices are fated to fall as the Federal Reserve reverses its long period of asset purchases and low interest rates, and inflation makes a comeback. Both men could be right, depending on your investment time frame.
The bullish case is based on expectations of capitalized profits, which have risen smartly with the cut in corporate tax rates. The higher after-tax returns flow into higher asset values, all else being equal. The surprise is that stocks have kept rising this year, with the S&P 500 up some 4%. This suggests that many investors underestimated the possibility of pro-growth tax reform passing last year, and now they are catching up to the implications...
But the tax math will be tricky for many high-earners in states with the highest tax rates. The bill reduces the top federal tax rate to 37% from 39.6% and increases the threshold at which it kicks in to $600,000 from $470,000 for couples filing jointly. Our friend Don Luskin did the math and says that high earners in states with top rates exceeding 6.56% could see their tax bills increase.
Donald Luskin, chief investment officer for Trend Macrolytics, said that Republican Roy Moore’s loss in Alabama will be a big incentive for Republican leaders to “drive the negotiations to a conclusion.”
“It makes more urgent the need for the GOP to exploit its 2018 electoral map advantage in the Senate — tax cuts are the perfect trophy to bring the voters, now without the stench of Moore’s sexual misconduct scandals," he wrote in an analysis for investors Tuesday night.
The risk to financial markets is more about political unrest and instability in Saudi Arabia, rather than a dramatic drop to Prince Alwaleed's U.S. stock holdings, like Citigroup, which he has owned since 1991, and Apple.
"The risk for global markets is that the Saudi royal family destroys itself in a fratricidal game of thrones, opening the door to a new radical regime that would be hostile to U.S. interests or play games with oil supplies," said Donald Luskin, chief investment officer at the financial firm TrendMacro.
Don Luskin of Trend Macrolytics wrote to clients this morning about the aftermath of Charlottesville: "We think it’s a clinical case of mass hysteria – and one of the strangest we’ve ever seen. It’s not about the event itself. It’s about President Donald Trump’s reaction to the event, because he is the most famous and fascinating man who has ever lived, and what we’ve called the Trump Infamy Ecosystem profits from exploiting that strange fact. And it’s not even about whether Trump is a racist. It is self-evident that he is not, because there is no evidence that he is (just as it is self-evident that his campaign didn’t conspire with Russia to hack the election). His sin is that he has failed to express his outrage at the event in a particular way – or, more precisely, that he has expressed it in a way that doesn’t kowtow to the identity politics lobby."
Mr. Luskin points to a number of polls suggesting that the hysterical reaction to Mr. Trump is occurring within the media profession, not among the public at large. For example, an NPR/PBS NewsHour/Marist Poll finds that even a survey sample that gives Mr. Trump his standard lousy approval rating overwhelmingly agrees with the President that statues of Confederate leaders should not be torn down. Even a plurality of African-Americans agrees that the statues should remain in place as symbols of our history.
...Regardless, it is striking that after much of the media labored so hard this week to try to tie Mr. Trump to white supremacists, the public doesn’t seem to be buying it. In what was portrayed as perhaps his worst week in office, the RealClearPolitics average shows a slight improvement in his weak approval ratings. According to Mr. Luskin, this could be a buying opportunity for investors: "...we think Trump’s defiance of prevailing norms of identity politics has profound pro-growth implications. Whatever else it may bring along with it, its embrace by the electorate points to a generational 'turning' away from anti-business and risk aversion trends that have choked off growth in the Not So Great Expansion following the Great Recession. If this moment becomes a referendum on Trump, then it may also be referendum on that 'turning.' Our optimism that we are entering a new secular period of better growth and risk-tolerance has never come from Trump as a person, but rather from the cultural forces – the “animal spirits,” to use an almost pejorative term for them – that have welled up from the grass roots, choosing Trump as their best available representative."