Changing Tides - The Return of President Trump
What the future may bring.
The greatest investors of all time, like Stanley Druckenmiller, George Soros or Paul Tudor Jones (PTJ) all share the belief that you need to be able to draw conclusions from the past and imagine the unthinkable. Like George Soros and Stanley Druckenmiller betting to break the Bank of England or PTJ profiting from an unheard Commodity Bull market.
We believe, we are at a similar turning point today with the election of Donald Trump as the manifestation of it. The Woke/Green Agendas have had their place in the sun but have now been put away for a more pro-growth, merit based economic agenda. Everything is cyclical, so we believe this to be the turning point that the world was waiting for and was not ready for in 2016 or 2020 but will last for a long time. Woke/Green ideology has their roots in the culture revolution of the 60s, so we believe this cycle might as well last several decades.
We will pick up this theme again in the future, but until then we would like to focus on the policy changes at hand. Donald Trump stated in his “Winners Speech” that his term will be about keeping promises, so we will take a look into what the most important ones are and how to potentially profit from them.
If you would like to get more frequent insights and a reminder to our new writings, you can join our newly created Telegram Group @thehapticmarketlens where we will share more in-depth analysis and ad-hoc information.
Trump's Economic Agenda: A Shift in Global Trade Dynamics and a Boost to Cryptocurrency
Donald Trump's economic policies have significant implications for various sectors of the economy, including manufacturing, energy, finance, and real estate. The implementation of these policies could lead to shifts in global trade dynamics, domestic production, and investment patterns.
Immediately after the election victory, crypto markets and bank shares, as well as bank ETFs, took the limelight with huge increases. According to initial assessments, the market is probably expecting deregulation in many areas.
One of the key aspects of Trump's economic agenda is his trade policy. He plans to impose a universal tariff of 10% or 20% on all imports, with a 60% tariff on Chinese goods and a 100% tariff on Mexican-made cars or products from companies relocating production from the U.S. to Mexico. This move is expected to have a significant impact on global trade dynamics. This will likely push countries like Germany or France into further trouble as energy costs in the US are significantly lower and the US is a major trading partner. A relocation into the US for German companies could be devastating for the country. Germany has been suffering from massive economic pressure for some time now. This was also demonstrated by our analysis of the German automotive industry (The Decline of Germany's Automotive Industry, September 13) and German industry (Barbarians at the Gate: German industry tales, October 10).
It is crucial to keep an eye on policy responses from Europe.
In addition to his trade policy, Trump also plans to extend individual income and estate tax reductions from the 2017 Tax Cuts and Jobs Act (TCJA) and reduce the corporate tax rate to 15%. He also aims to eliminate federal taxes on tips, Social Security benefits, and overtime pay. These tax policies are expected to boost economic growth and increase investor sentiment.
These measures could also be accompanied by a significant increase in productivity and employee motivation, as employees are offered attractive incentives to work longer hours.
Trump's energy and environmental policies also have significant implications for the economy. He plans to increase oil and gas production by allowing more drilling and reducing regulations. He also aims to rescind unspent funds from the Inflation Reduction Act, a climate law supported by the Biden-Harris administration. This move is expected to have a significant impact on the energy sector, potentially leading to an increase in oil and gas production – Drill baby Drill!
One of the most significant aspects of Trump's economic agenda is his support for cryptocurrency. He plans to make America the "crypto capital of the planet" by halting regulation and being more open to innovation. He also aims to establish a "Bitcoin and crypto presidential advisory council" to provide regulatory guidance and promote innovation. This move is expected to have a significant impact on the cryptocurrency market, potentially leading to an increase in the value of Bitcoin and other digital assets.
If mining is also relocated to the USA, this will provide an additional incentive to guarantee low electricity prices, which would benefit not only the industry but also the consumer.
Trump's plan to create a strategic Bitcoin reserve is also a significant aspect of his economic agenda. He aims to maintain 100% of the Bitcoin the U.S. government currently holds or acquires in the future, which is estimated to be around 200,000 Bitcoin. This move is expected to have a significant impact on the cryptocurrency market, potentially leading to an increase in the value of Bitcoin.
This could also be a signal of confidence and trust. While less stable countries such as El Salvador have been backing Bitcoin for years, large positions by the US as a leading industrial nation could have a confidence-building effect on the image of the cryptocurrency.
The implementation of Trump's economic policies could also have significant implications for various companies and industries. For example, Tesla and SpaceX, led by Elon Musk, are expected to benefit from Trump's policies, particularly in the area of energy and space exploration. Occidental Petroleum, Energy Transfer, and Cantor Fitzgerald are also expected to benefit from Trump's policies, particularly in the area of energy and finance.
With Trump, there will also be an All-Star Team from the Silicon Valley world move into focus. Elon Musk will potentially head the Department of Government Efficiency (DOGE – which is also Musk’s favorite crypto coin apparently). JD Vance has previously been in the VC world and is well connected with Peter Thiel for example. Tesla, Palantir and other portfolio companies will therefore also be on the short-list of potential profiteers.
Also, the current M&A environment in the US is more or less frozen under the Biden/Harris administration, so there will be a massive unlock of capital for many VCs who are trying to exit their shares for investors.
Besides the mentioned ones, a select group of companies and their executives have emerged as key players in Trump's policy proposals, and their influence is likely to shape the future of American politics.
Other companies, such as Occidental Petroleum and Energy Transfer, have also thrown their weight behind Trump. Occidental Petroleum's CEO, Vicki Hollub, co-hosted a fundraiser for Trump and benefits from carbon capture tax credits, while Energy Transfer's CEO, Kelcy Warren, is a longtime Trump supporter and participates in projects supported by IRA tax credits.
Cantor Fitzgerald's CEO, Howard Lutnick, is another key player and strong Bitcoin proponent, serving as Trump's transition team co-chair and a high-dollar fundraiser. The company's infrastructure fund has invested heavily in renewable energy companies like Invenergy and NextEra Energy, highlighting the complex interplay between Trump's policies and the business world.
Deloitte, a consulting firm that faced backlash from Trump allies over leaked messages related to J.D. Vance, may find itself at odds with the administration.
The mortgage giants Fannie Mae and Freddie Mac are also on Trump's radar, with his allies expressing interest in privatizing the companies. General Motors and John Deere, on the other hand, have been targeted by Trump in the past, with the president threatening to impose high tariffs on the companies.
As the Trump administration continues to take shape, one thing is clear: the business world will play a significant role in shaping the future of American politics. Whether through supportive relationships or adversarial ones, these companies and their executives will be instrumental in shaping the policies that will define the next chapter of American history.
In conclusion, Trump's economic agenda has significant implications for various sectors of the economy, including manufacturing, energy, finance/crypto, and real estate. The implementation of these policies could lead to shifts in global trade dynamics, domestic production, and investment patterns. While there are significant challenges and concerns, Trump's support for cryptocurrency and his plan to create a strategic Bitcoin reserve are expected to have a significant impact on the cryptocurrency market. It can certainly be said that a stringent business plan has never done anyone any harm.
Politicians and their plans must be competent, not likeable.
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