iTrust Daily Insight

iTrust Daily Insight
Edition 10.9.2019

October 9, 2019: The Prospects of an Elizabeth Warren Nomination and Presidency

Market data as of about 1pm PT, 4pm ET, 9pm London time

  • Bitcoin:  $8,592 (up over 4% today) (Source: Coinmarketcap.com)
  • Digital currency price movement today: up 2-8% (Coinmarketcap.com)
  • Number of digital currencies with market cap over $1 billion: 12 (Coinmarketcap.com)
  • Market Capitalization of Bitcoin: $154.5 billion (Coinmarketcap.com)
  • Gold “F” futures contract: $1513 (source: Yahoo Finance)
  • Copper “F” futures contract: 2.570 (Yahoo Finance)
  • Oil “F” futures contract: $52.72 (Yahoo Finance) 
  • DJIA: $26,407  (Yahoo Finance)
  • S&P 500: $2,927 (Yahoo Finance)
  • FTSE (main London stock index): 7,167 (Yahoo Finance)
  • Shanghai stock index: 2,924 (Yahoo Finance)
  • Probability of 25 bps cut at Oct 30 meeting of US central bank (Fed FOMC): 83% (source: CME Group’s “CME Fed Watch Tool”)
  • Probability O/N rates are only 25 bps lower than now after Dec 11 FOMC meeting: 48% (source: CME Group’s “CME Fed Watch Tool”)
  • Probability O/N rates are 50 bps lower than now after Dec 11 FOMC meeting: 44% (source: CME Group’s “CME Fed Watch Tool”)
  • US 10 year Treasury yield: 1.537% (down 22+ bps in last 2-3 weeks) (WSJ.com)
  • US 2-10 yield difference: +0.15% (i.e., positively sloped — normal — yield curve) (WSJ.com)

Today’s big news:

  • 1) Elizabeth Warren is now the front-runner to be the Democrat Party nominee for US president
  • 2) a “hard” October 31 “Brexit” now looks increasingly likely
  • 3) President Trump in the US is under investigation by the US House of Representatives.  If they find him to have committed “high crimes or misdemeanors” the House may “impeach” him — which is to refer him to the Senate for conviction.  The Senate would have to vote 2/3 to 1/3 to “convict” President Trump and remove him from office.  Currently, there are more Republicans (members of President Trump’s party) than opposition Democrats in the Senate, so “conviction” and removal from office looks to be very unlikely.
  • 4) Turkey has started a military offensive against the Kurdish army who provided the ground-troops in the defeat of ISIS in Syria.  Both Turkey and the Kurds are US allies.  Turkey is a member of NATO.  The Kurds do not have their own country and formerly relied on US protection.  The US recently withdrew from Syria, leaving de facto permission for Turkey to attack the Kurds. The Syrian regime is backed by Iran and Russia so there is some risk that Turkey will get into a shooting confrontation with Iranian or Russian troops.

Today’s afternoon commentary: The prospects of an Elizabeth Warren nomination and presidency

From electoral-vote.com:

There have been five national polls of the Democratic field in the last week, from QuinnipiacPolitico/Morning ConsultIBD/TIPPMonmouth, and Economist/YouGov. Here are the results for all the candidates who exceeded 1% in at least one poll:

And, from the “Democratic delegate rules 2020” article on the Ballotopedia website, we learn that there will be 3768 “pledged” delegates to the Democratic Party national nominating convention and another 764 “superdelegates”.  This year, in the first round of the nomination process, the super delegates will not be allowed to vote.  In our opinion, his is really in deference to grass-root Democratic Party anger that Bernie Sanders won the popular vote but that Hillary Clinton had almost all the superdelegates in 2016 and then she lost in the general election to (now) President Trump.

So — here’s the math: if a single candidate can get 40% of the popularly elected “normal” delegates — he or she would not win the first round, which requires at least 50.1% of the vote of those “normal” delegates.  However, if a single candidate does win 40% or more of those normal delegates through the primary and caucus processes of all the states and territories (including Washington DC, Guam and Puerto Rico), he or she might be able to convince 100% of the super-delegates to vote for him/her in the second round.  In that case, the party nominee who was able to garner 40% of the delegates from the popular vote and then get all the votes of the super-delegates on the argument that he/she was the highest vote-getter anyway, then we can see a candidate only needs 40% of the “normal” delegates to win the party nomination.

Currently, no such candidate has that level of support.

And, there are too many permutations of possible alliances among the candidates how they may gift their “pledged” “normal” candidates to each other to understand at this time how such “horse trading” might shape the candidate-nominating process.  For example, maybe Bernie Sanders and Kamala Harris would gift their “normal” delegates to Elizabeth Warren in exchange for something (policy concessions, jobs in the cabinet, who knows).  Or maybe others might be afraid of there being too much of a shift to the left and many of the lower vote getters may gift their delegates to Joe Biden or some other candidate who might be seen as more “moderate” and therefore more likely to win the General Election November 2020 electoral college delegates from states with less progressive populations.

Most of the Democratic Party pledged “normal” candidates will already be pledged by the end of Super Tuesday on March 3.

As that date approaches over the next five months, we believe more and more people will be more and more aware of the differing likely policies of the incoming administration and what is likely to get passed in Congress.

For example, a Trump presidency may bring further expansion of the current economic cycle but it may come with looser monetary policy (lower interest rates) and higher budget deficits — both of which tend to increase inflation — which is bad for the fiat currency (the US dollar, in this case) and good (bullish) for traditional stores of wealth like gold and may come to be good (bullish) also for newer stores of wealth like digital (crypto) currencies.  The prospects of an Elizabeth Warren or Bernie Sanders presidency, especially if coupled with Democratic control of Congress, may also portend higher inflation — due to likely inflationary policies — but such policies would be weighed by the financial and commodity and currency markets against the prospect of anti-inflationary policies such as a wealth tax which would likely destroy wealth and limit income.  In such a scenario, wealthy individuals would be forced to liquidate assets to pay the tax and also would likely find non-economic alternatives — such as off-shore investments — to avoid paying the tax.

Along with US trade policy and US monetary policy, the differing outcomes for the US 2020 election is the most important issue for financial market, commodity market and currency market participants to pay attention to.  We will do our best to keep you informed.

As always we are happy to discuss further if you like.  Please contact iTrust Capital’s Blake Skadron with questions.  The economics team will get back to you as soon as possible.

Tim Shaler is Chief Economist of iTrust Capital.  He is a published Real Estate economist, was a portfolio manager and asset allocation expert at his previous firms and is an adjunct professor at Webster University. His MBA (Finance) and MA in Russian Economic History are both from the University of Chicago.

For all media inquiries, please contact Blake Skadron at b.skadron@itrustcapital.com.

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