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A Theory of Donald Trump

By David Stockman  |  July 1, 2019

The process of “Peak Trump” continues, with more Trade War and Easy Money optimism helping the S&P 500 Index open at another new all-time high today.

There’s no question, of course, where the GOP, Wall Street, and Bubblevision stand. But I wonder how long “conservatives” and “capitalists” and “investors” will perpetuate the vaporous myth that  Donald Trump’s presidency is some big exercise in “The Art of the Deal.”

Donald Trump Is Winging It

The Tweeter-in-Chief has no strategy. He’s sliding by the seat of his ample trousers. It’s more Nixonian “madman” than Kennedyesque “great man” at work here.

There’s no design to MAGA. It’s all mercantilist baloney, strongman nonsense, and bile, bombast, braggadocio, and bullshit.

Donald Trump’s views trade – and immigration and international affairs and everything else – as a zero-sum game, all data and every fact colored by his xenophobic lens…

And, still, he conceded on his ridiculous-in-the-first-place Huawei sanctions without getting anything from China and President Xi Jinping in return. He also

Trade talks are back on, though. And that’s why equity futures surged in the pre-market. And that’s the major reason why indexes are still trading at or near all-time highs.

There’s also the fact that the federal funds rate futures market is pricing in an 83% chance of a second rate cut by September. The implication, of course, is that it’s 100% on for July…

The Donald Trump Trading System

When Donald Trump blasted the German auto industry because Daimler (OTC: DMLRY) sells a lot of Mercedes here, but General Motors (NYSE: GM) doesn’t sell a commensurate number of Chevrolets over there, he let his blithering ignorance shine.

You see, according to the Donald, if trading partners have a surplus with the U.S., its prime facie proof that they’re cheating. In his eyes, they’re literally robbing America’s piggy-bank. If bilateral accounts at the country or even product-line level are out of balance, it’s down to nefarious moves by foreigners or to stupid deals made by his predecessors.

Obviously, Donald Trump doesn’t much cotton to the German establishment and Frau Merkel. And, more often than not, he’s got a point. But…

It seems that General Motors purposefully stopped selling Chevrolets in Germany during 2015. Instead, it chose to promote its locally assembled and better accepted Opel and Vauxhall marques.

It Isn’t Always About Tariffs

I’ve been in the auto parts and components business on both sides of the Atlantic; I say with some confidence that tariffs had nothing to do with GM’s commercial decision to triage its enormous global excess of brands and production capacity.

Yes, there is a 10% tariff on U.S. cars coming into the EU. And, yes, there’s only a 2.5% tariff on passenger cars imported into the U.S. (Remember, though, that Detroit got a 25% tariff for pick-up trucks during the “chicken wars” of the 1960s and has ferociously defended it ever since…)

Still, you could make the EU tariff zero on Chevrolets and GM still wouldn’t sell any in Germany. That’s because it’s already drowning in excess capacity to make Opels and Vauxhalls in Europe. And it can’t easily close that capacity because of labor unions and socialism.

German car-buyers ain’t about to go slumming for a Chevy, anyway, even if it became 10% cheaper.

The Makings Of A Authoritarian 

So, here’s the thing: Heavy-handed intervention in foreign trade is not an appropriate function of the state under any circumstances.

If foreign countries are foolish enough to subsidize their exports, that’s a gift of foreign aid to foreign consumers, including Americans.

A foreign country could fill its harbors with rocks to keep out U.S. imports. Does that make filling our harbors with rocks an appropriate response?

Let’s work back from the experience of the end-customer. That makes sense, because most often, it’s an American.

Levying tariffs, laying quotas, and lifting all sorts of other barriers to trade is the functional equivalent of filling harbors with rocks. It’s neither enlightened nor productive.

I’m for Donald Trump when he’s on the path of “The Great Disruptor,” upending the Acela Corridor. As Einstein is said to have said, “Everything should be made as simple as possible, but not simpler. The Tweeter-in-Chief too often tends to the “simpler” – especially when it comes to the personal position of the Tweeter-in-Chief.

It’s the stuff of authoritarians and statism, not great disruptions.

For Self-Determination

Desperate times call for… “common sense” measures.

And these are desperate times… Markets are corrupted by monetary central planning. They’re confused. And the road back is going to be treacherous.

We’re looking at a major re-pricing for all financial assets. And thousand-point intraday or day-to-day swings are part of that equation. Those can be frightening… for “buy and hold” investors.

I have a different approach, one that combines strategy and tactics into a plan flexible enough for you to survive and thrive amid the coming chaos. It’s called “The Stockman Model.”

All we’re after is a little stability, perhaps a chance to pocket a windfall when opportunity presents…

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David Stockman

David Stockman is the ultimate Washington insider turned iconoclast. He began his career in Washington as a young man and quickly rose through the ranks of the Republican Party to become the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street.MORE FROM AUTHOR