Author: stephenmbrennan

End of China’s High Tech Aspirations

Forget a gradual decoupling from China. In October, the Biden administration announced new export controls and rules that effectively decapitate China’s semiconductor industry. The ramifications go beyond semiconductors to everything touched by them, including potentially ending nearly all of China’s high-tech aspirations.


Russia, Ukraine and Energy

Energy is only one reason for the Russian invasion of Ukraine. But it is an important reason. It’s not in the interest of Russia for a major alternative energy supplier for Europe to emerge. Ukraine enjoys major untapped energy deposits coupled with already existing pipeline infrastructure into Europe.

Despite this it is not likely to become an energy supply competitor to Russia. A quick look at the following two maps shows that Russia’s occupation overlaps with much of Ukraine’s oil and gas reserves. Supplies around the Crimea and eastern Ukraine are a big reason for both the Russian invasion and Ukraine’s resistance to trading land for peace, since in this case the land in question could be the difference between being a wealthy or poor country for Ukraine.


Election Uncertainty

To most people who understand politics it seems clear that Joe Biden will be the next President of the United States. Most polls show a Biden landslide. Demographics have been increasingly favoring Democrats, based on past voting patterns. The electoral map requires that to win almost everything must go right for a Republican candidate.

Trump basically needs to run the table of swing states. And the polls show this is incredibly unlikely to happen. The betting markets also favor a Biden win. Lastly, Trump seems to be struggling with suburban women and unlikely to reassemble his previous winning coalition.

So, case closed; Biden wins?

Not so fast.

Don’t start buying and selling stocks based on a Biden presidency.

There is a chance Trump could pull off the upset again.

Here are five reasons why Trump could win:
1. Trump has an enthusiasm advantage, particularly in battleground states. His voters are more likely to vote. Biden voters are mostly voting against, rather than for something, and that usually is a losing proposition.
2. Polls are more likely to overweight admitted or likely Democrats and Biden voters. And we’ve seen pollsters get it wrong with Trump last time.
3. Some number of Trump voters are also unwilling to take part in polls or lie about supporting Trump, unlike Biden supporters who appear eager to talk to pollsters.
4. Trump is making inroads with black and Latino males. Democratic election math is predicated on doing very well with Latinos and dominating the black vote.
5. The Trump campaign is registering more new voters in battleground states.

It is clear to me that the Trump campaign isn’t trying to win the old election game. That is smart. Because they have likely lost that game. They are trying to change the presidential election paradigm.

The campaign did not spend so much time speaking to black and Latino voters during the convention, because they wanted to look good for white suburban women—they are actually trying to reach black and Latino voters, particularly men. Beyond strong personal predilections, this is a reason why Trump has gone so alpha male. Recall after his very aggressive first debate, polls were mixed about his performance, but the Telemundo poll showed Trump clearly winning.

The Trump campaign is seeking to win by getting people, particularly blacks and Latinos, who never voted for a Republican to do so for Trump, and to turn out people who don’t typically vote. And I believe they have been focusing a ground game and analytics on identifying and turning out new voters his non-politician, bigger-than-life persona resonates with.

If they can change the election map—and as unlikely as that proposition sounds there are some signs of progress—Trump has a path to winning a second term.

Where Are Stocks Headed?

In February of 2020 the S&P 500 made a new all-time high of nearly 3,400 points. Then the selloff began that would see an intraday low below 2,200 points. That is a 35 percent loss. But the market has since rebounded recovering to 2,846 points as I write this. This represents an almost 30 percent gain from the low, and has cut the market’s loss in half. In my view, it’s a great spot for investors who have not gotten defensive to sell some stocks and raise cash.


Prognosis for the Stock Market

ICangles Investment Post

The future for U.S. stocks over the next decade appears worrisome, regardless of the impact of the Corona Virus. Why? Because valuations matter. And stocks at the end of February were priced for perfection. Any significant negative development was poised to drive them lower.

The COVID-19 Virus that shutdown the U.S. economy has certainly qualified as a significant negative development. From that February peak, the U.S. stock market as measured by the S&P 500 has already lost about a quarter of its value. But even if stocks had continued to climb in the near-term, without the virus emerging, the decade plus outlook was still poor.