After one of the longest, weirdest, and most exhausting election seasons in our history, we are only six days away from (finally) choosing a new president. As importantly, 34 Senate seats and all 435 House seats are up for grabs.
Investors are justifiably nervous about the outcome. Yesterday’s selloff was probably a symptom of that unease. Betting markets currently predict Hillary Clinton has a 70-75 percent chance of winning. I suspect her odds are much better. Four years ago Obama’s five million vote victory was fueled by a 56 to 44 percent majority of female voters and an even greater 74 to 26 percent majority of Hispanic voters. I am 99 percent certain Trump will do worse with both groups. Ever since he announced his candidacy Republican leaders (and media talking heads) have known that women and Hispanics would be his Achilles heel and yet, shockingly, he has made no effort to improve his appeal to these voters. Either he is delusional about his chances or simply refuses to learn the daunting math required for a Republican to win the general election.
The Donald’s only hope is the fact middle-of-the-road voters seem to dislike Hillary almost as much as they dislike him.
I have to admit, I’m looking forward to the Republican debate on Wednesday. Love him or hate him, Donald Trump’s candor is entertaining. It’s somewhat fun to watch him dismiss his political opponents (including the sitting president) as “losers” and “lightweights,” and his critiques of my industry—which he refers to as “those hedge fund guys”—are mostly spot on. Too many big fund managers really are little more than under-taxed, economically destructive financial engineers. Trump’s strident anti-immigrant rhetoric is far more troubling, but it’s not hard to see why it appeals to voters who feel left behind by globalization and the increasingly polyglot composition of America’s electorate.
Most economic studies show that immigration, legal and illegal, is a net contributor, not a cost, to economic growth. Three decades ago, the legendary University of Chicago economist Milton Friedman noted that the majority of illegal immigrants work, pay income and payroll taxes, but rarely receive government benefits like Social Security and Medicare. Mr. Trump, on the other hand, has frequently been on the receiving end of government largesse. Despite his professed belief in free markets, he is the prototypical crony capitalist. Without all sorts of tax breaks, debt forgiveness, and giveaways, he would be far less rich.
This morning, the San Francisco Chronicle has a heartbreaking story about the thousands of immigrant children seeking asylum in our country. It’s been a contentious issue all summer, with angry protestors blocking buses carrying the children to holding centers.
I cringe when I see this kind of hatred directed at kids–and not just because I think it’s immoral for the richest country in the world to turn its back on people seeking a better life. There’s a much more practical, economic reason for my revulsion. Immigration is one of the main reasons, if not the main reason we became the richest country in the world–and continuing to welcome honest, hard working immigrants is the key to us staying that way.
The core problem with America’s immigration system is not that we let too many people in. It’s that we let too few in.
Despite the unendingly grim economic news out of the euro zone, most major European stock markets have shown robust growth over the last year. The German DAX is up over 32 percent since June of 2012. The Swiss Exchange is close behind at almost 30 percent growth over the same time period, and the Euronext 100 and CAC 40 have both risen by almost 25 percent. Heck, even the Athens Stock Exchange seems to have temporarily risen from the dead. It’s up more than 77 percent in the last twelve months.
So is it time to put aside our fears and jump into this rally? I have three answers: no, hell no, and don’t you dare.
Europe is a dead-continent-walking. These short term gains notwithstanding, European stocks may very well be the biggest value trap in the history of capitalism–though the reasons why might surprise you. It’s not just because of the region’s low-to-no economic growth, crushingly high debt levels, and disastrous austerity policies. Europe is “going to zero” in a different, more fundamental area, as well.