President Donald Trump signed executive actions on Tuesday to advance the Keystone XL and Dakota Access oil pipelines. Trump said the orders would create +28,000 new jobs in the United States, and that the pipelines would be built with U.S. steel and U.S. labor. “We will build our own pipeline, we will build our own pipes, like we used to in the old days,” Trump said. Keep in mind, his orders do not force the approval of either project but it does reopen the door to making them possible. Both pipelines require different approvals. Keystone, which would run from Alberta, Canada’s oil sands to the Gulf Coast in Texas, needs a presidential permit to build across the Canadian border. Dakota Access, developed by Energy Transfer Partners, needs an Army Corps of Engineers easement to build under Lake Oahe in North Dakota. Trump’s orders will expedite both. Trump also said he wanted to renegotiate terms with the pipelines’ developers, one of which could include getting a financial return from Keystone. TransCanada, the company developing Keystone, said they are already preparing their new application. Trump also met with executives from the big three Detroit automakers yesterday, promising to reduce “out of control” environmental regulations. Trump said that to a large extent, he is an environmentalist, but wants “regulation that means something.” Trump also stuck with his theme of reviving American manufacturing, urging the automakers to build new factories in the U.S.
There’s some concern brewing around the fact newly elected President Trump seems to be assembling a hard-lining team that could soon rock the boat with China and Mexico. The latest move inside Washington was Trump naming Robert Lighthizer, an official in the Reagan administration and harsh critic of China’s trade practices, to be his chief trade negotiator, responsible for better deals aimed at reducing U.S. trade deficits. For years Lighthizer has argued that China has failed to live up to commitments made in 2001 when it joined the World Trade Organization and that tougher tactics are needed to change the system, even if it means deviating from World Trade Organization rules. Keep in mind Lighthizer is one of the main players credited with stemming the tide of imports from Japan in the 1980s with threats of quotas and punitive tariffs. “Bob Lighthizer is very smart, very strategic and totally fearless,” said a Washington attorney who has worked with him for three decades but asked not to be named. “You can expect him to use every tool available to create leverage to get China and anyone else to stop the cheating. He is no fan of the WTO.” There’s early talk that Ligthizer will be instrumental in immediately renegotiating the NAFTA deal, meaning Mexico could also be in the hot-seat. Bottom-line, Trump is definitely going to try and negotiate better deals for the U.S. and the team he is assembling seem to be extremely serious about the task at hand. We have no way of knowing how foreign leaders will respond, but I have to imagine the initial knee-jerk could be to kick, scream and try to buck the proposals. Unfortunately the U.S. may have to take a couple steps backwards in the process before ultimately moving forward. This potential backpedaling has given the bears a slight nearby edge when talking U.S. agriculture. I think longer-term it’s bullish and will be healthy for the U.S. farmer, it’s just the initial taste might make it tough to swallow. We need to continue closely monitoring negations and relations with our biggest ag buyers i.e. China, Mexico, Japan, etc.. All the people Trump is assembling are clearly agents of “change” and seem to be people who get things done, so I fell like we have to expect some shakeups. (Read more at Reuters)
“Make America Great Again” rings through the headlines and the investment world takes several steps back in disbelief as they witness the biggest political upset in U.S. history. I hate to say I told you so… but I told you so!!! I’ve said time and time again, “expect the unexpected and never doubt Americans propensity to stir the pot and deliver change.” A good friend once told me that we are a nation of Hypo-maniacs, a nation of massive risk takers, it’s in our blood, and with that our reactions can be extremely unpredictable. The American people have spoken and the “establishment” as we know it has been turned upside down. The cards have clearly been reshuffled. I’ve been extremely patient and very conservative with my investment portfolio during this entire process… I’m sticking with the same simple play-calling and counting to a very long “three-Mississippi” before I make my next move. I want to eventually be a buyer but on a much larger break because I believe in the American economy, but I see no reason to get in a hurry at this juncture. Be smart, there’s a massive number of new players running onto the field and its going to take some time for the odds makers to learn how they play the game. Does the U.S. dollar continue to weaken as global investors become uncertain about our future? What happens to Janet Yellen and the Fed? What happens with the Supreme Court? What happens to the Speaker of the House? What happens to the IRS? What happens to government spending? What happens to trade deals and foreign relations? Bottom-line, there’s still a ton of unanswered questions. I continue to stay conservative. I suspect there will be a lot of things written about the “polls” and the self-proclaimed brainiacs who thought they had the election results figured out. Again, I challenge their ability to filter the massive wave of “noise” that we now have constantly in our ear. Technology is amazing in many ways and our access to it wonderful, but it has also made the “noise” that much louder and ultimately more difficult to hear the “music.” Rember it’s not the data that is to blame “KMIGAAARAEMEECRT” but much more about how people are going about interpreting it “MAKE AMERICA GREAT”.
Now that the Syrian cease-fire has officially collapsed, U.S. officials say Gulf states may arm Syrian rebels with shoulder-fired missiles to defend themselves against Syrian and Russian warplanes. These would mainly be supplied by Gulf Arab states, like Saudi Arabia, and possibly Turkey. Saudi Arabia in particular is unhappy with Russia’s involvement and growing influence in the region. The U.S. says it has effectively been able to prevent stepped up supplies of man-portable air defense systems, or MANPADS, by uniting Arab allies behind a strategy of training and use of infantry weapons. With the recent truce breaking down though, U.S. officials say Gulf states and Turkey may choose to stop following their lead and supply MANPADS to the opposition groups trying to oust Bashar al-Assad. Some U.S. lawmakers are trying to put more pressure on the Obama administration to do more to intervene in the conflict. Senators John McCain and Lindsey Graham, Republican critics of Obama, said in a statement that “Diplomacy in the absence of leverage is a recipe for failure” and are urging the White House to “compel” Russia and Syria to recommit to a diplomatic solution. International observers say the constant bombing of rebel-held neighborhoods in Aleppo have resulted in the deaths of more than 100 people every day for the last four day. The besieged residents are also said to be nearly out of food and fresh water, as well as basic medical supplies and blood for transfusions. Russia’s government responded to Western accusations of “war crimes” by saying their military campaign was a necessary response to terrorist groups. They went on to call the rhetoric and tone of Western diplomats “unacceptable”, implying they are prepared to continue their current course of action and further alienate the West and inspire more heavy handed involvement from Gulf States.
U.S. Presidential elections inevitably lend themselves to speculation about the potential impact on the U.S. economy and financial markets. Periods of strong or weak economic growth are always associated with the leader at the time, regardless of the president`s actual influence. Presidents, of course, do matter, particularly when it comes to major initiatives such as the tax cuts implemented under President Ronald Reagan or the New Deal under Roosevelt. The President alone is able to implement very little however without the cooperation of Congress. Consequently, it’s more informative to look at returns on the stock market under the political party combination for both the President and Congress. From the data analyzed, the combination that has corresponded with the highest average return for the S&P 500 has been a Democratic President with a Republican Congress, with an +18.2% return on average since 1928, followed by a Democratic President and a split Congress, where no single party controlled both houses. Under this configuration, the average return was +16.0%. The combination with the lowest returns was a Republican President and a Republican Congress, averaging just +2.1%. BNP Paribas noted in a similar analysis that these results should not be seen as having too much predictive value as there are far too few examples of each to be statistically significant. What’s more, the impact of the political party composition of the government is difficult to separate from other macro factors, and the business cycle does not necessarily follow the political cycle, but nonetheless they are interesting number to look at and consider. (Source: Investors Corner)