December 08, 2016

Greg Silberman CFA CAIA CA(SA) @ Atlanta Capital Group

Chief Investment Officer at Atlanta Capital Group

2 Reasons Trumpanomics Will Not Deliver

Who knew?

Curt Cobain was a prophet.

{Many people most likely.}

Turns out the above quote is a

hoax

But this Tweet

by the President

elect was not:

“I’m saying that the Tea Party, perhaps by another name, will soon have another big moment

–

and will

be a major factor in victory!”

Donald Trump

, February 24

, 2013

Or this one:

“

Republicans better start listening to and respecting the Tea Party!

”

Donald Trump

, February 23

, 2013

WE ARE NOT POLITICIANS AND WE DON’T TAKE SIDES!

We are merely financial analysts

trying to decipher how events will impact equities, bonds and

currencies.

What did happen to the Tea Party?

Their message of fiscal conservatism and social liberalism echoed into the embodiment of the President

elect.

Here’s what we think:

●

Wealth inequal

ity brought about by the Fed’s suppression of interest rates favored the asset

rich over the asset poor and brought about large social dissatisfaction.;

●

Technology

rapidly made redundant large swathes of blue and some white collar jobs. Breeding

further s

ocial discord

Unemployment is now at 4.6% Participation rate at 62.7% (

year

low). Soon Unemployment will be AT ZERO AND NOBODY WILL BE WORKING!

●

Brexit demonstrated to the world that populism

was growing

and the media was not reporting

it (

poll

or maybe just ignoring it. Social media however was not censored and people turned

to it

for coverage.

Donald Trump is

the

consummate salesman and was able to tap into th

source

of dissatisfaction to

position himself as the victor.

Tallyho!

“The people quietly wielded their enormous power”

alter Mondale

From our 2016 market forecast:

How this fits into the current economic picture is unclear. How many election ‘promises’ were pandering

s opposed to real actionable issues? We will no

doubt find out.

We have seen much analysis on the

‘

winners

’

in a Trump administration so we won’t rehash but point

readers to

Never bet a

gainst Donald J. Trump

by Ziad Abdelnour a fellow contrarian!

For our ramblings we prefer to focus where the crowd is not looking ....

Asking

ourselves the question

it the man that makes the times or the times that makes the man?

From

our

2016 Market forecast

(pub.

January 2016

)

“

In a recent article, A Painstaking Move Ahead for 30

Yr Int

erest Rates, we postulated that

long

term interest rates could correct higher merely as a consequence of its 25

year price

pattern oscillating within a rising band. This may or may not be the long awaited bear

market in bonds but merely a natural correctiv

e action of a market that breathes in and out.

That said, such an oscillation could easily take the 10

year rate to 3.0% and as high as

3.5%

for our prediction we will take the mid

point at 3.25% by the end of 2016.”

Boy we sure looked wrong most of

the year on that call.

But since the November 8

elections the long

bond has had a head of steam (more deficit spending?)

and the 10

year is at 2.4% as we write.

Still well shy of our 3

–

3.5% forecast.

Figure

year rates moving swiftly higher since 8th November

So while the equity market is busy weighing up the winners and losers from the ‘surprise’ election (we

weren’t surprised just for the record).

We are pondering the effect of a 78 basis point incre

ase in the risk free Treasury rate on $65 Tril

lion of

Debt Market securities.

That’s an increase of $507B in interest e

xpense looking out 1 to 2 years!

About 20% of that will land on

corporate income statements.

Taken in conjunction with this analysis by o

ur friend Garic Moran

TG Moran Capital

we don’t

believe the picture is as rosy as everyone makes out;

“

Corporate profit margins have always reverted to the mean; wages will go higher over time, inflation

will follow. There will be winners and losers in

side the S&P 500 index, something passive investors

[GS:

ETFs]

cannot analyze.

Companies who have borrowed money to buy back stock or make acquisitions while outsourcing their

manufacturing are clear losers.

Domestic companies with high tax rates and are in a position to benefit from infrastructure spending are

clear beneficiaries.

[GS; Mid

Stream Energy?]

wo More Factors

worth consider:

The current Bull market is the second longest in history at 2,827 days

(the longest being 1987

–

2000 @ 4,494 days). The old adage of trees don’t grow to the sky may be applicable.

The devaluation of the Chinese Yuan has been relentless. Once thought to be the ons

financial doom, this depreciation has taken place with

out

much

a ripple.

Figure

Source

Pacific Exchange Rate Service

Chinese reserve holdings of US Treasuries ha

decreased implying the government is selling

Treasuries in order to prop up the currency but it’s

not

wor

king.

"Did China ask us if it was OK to devalue their currency (making it hard for our companies to

compete), heavily tax our products going into their country (the U.S. doesn’t tax them) or to build

a massive military complex in the middle of the South C

hina Sea? I don’t think so!" President

elect Donald Trump tweeted on Sunday after it was reported that China was upset with his

phone call to Taiwanese President Tsai Ing

wen, the first by an American President or President

elect in more than 30 years.

Donald Trump tweet

–

12/4/16

So risk

abound!

Best not to get over exuberant

with this current leg

up in equities,

but remain somewhat balanced and

close to strategic we

ights!

Best

Greg

---

Thank you for reading my post. I regularly write about private market opportunities and trends. If you

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Twitter

or via

Atlanta Capital

Grou

p Investment Management

Greg Silberman is the Chief Investment Officer of Atlanta Capital Group

Investment Management

[ACGIM]

. Atlanta Capital Group

Inves

tment Management

specializes in creating custom private market

solutions

for RIA/Family Office clients.

Advisory Services offered through Atlanta Capital Group

Investment Management

Nothing in this article should be interpreted as a recommendation to buy

any security. Please conduct

your own due diligence.

More from Greg Silberman CFA CAIA CA(SA)