Trumpton - an imaginary world
Now, I'm genuinely too young to remember Trumpton but I'm told by a reliable source that there was a 60s childrens’ animation set in an imaginary town called Trumpton. I do remember though that Trumpton came to life in the UK election campaign, when a fake Twitter account was set up for UKIP in the town's name. If you want a chuckle (be warned, it’s not for children), then Google it.
Well, it looks like Trumpton is back. As I write this I'm sitting at home, early on Wednesday morning, digesting the results of Super Tuesday. Whilst not definitive, with more delegates awarded than on any other day of the presidential race, Super Tuesday has given us ominous clarity. It looks likely that we have entered a world that we could barely have imagined 12 months ago. A contest to end this November; for arguably the most powerful political position in the world, President of the United States, seems increasingly likely to be between Donald Trump and Hillary Clinton.
If that proves to be the case then I can imagine there may be many thinking they've entered another imaginary world bearing more of a resemblance to Richard Pryor and his 'None of the Above' campaign in the 1985 classic, Brewster’s Millions. When Trump entered the race, the Republican establishment laughed and most commentators saw this as little more than a publicity stunt by the property mogul.
No-one is laughing now and, if this is a stunt, well, it’s pretty impressive.
Would a Trump presidency really be that bad?
Some of the headlines would say so. Two former Mexican presidents have compared him to an infamous character from history. The leader of a rather unsavoury political group in the US has endorsed him as the Republican nominee. Vladimir (we're on first name terms) called him a 'very colourful and talented man'. So with the prospect that Trump will be running for the White House, what would the world look like if its most powerful nation was run by the same man who suggested that 'global warming was created by and for the Chinese in order to make US manufacturing non-competitive', whilst also arguing that 'it’s freezing in New York… we need global warming'.
The reality? I suspect Trump is a lot smarter than some of his madder quotes might suggest. We should not underestimate him as a tactician. We've already seen last night a much more subdued and measured victory speech (by his standards anyway). The 'Donald' is now assuming he is going to be the candidate for the GOP (however much the Republican leadership would wish otherwise). I suspect he will steadily reposition himself over the weeks and months to come to be a (slightly) less frightening candidate. Expect a few less fireworks, a few less references to expelling 11 million people, building walls or banning Muslims. There will be some of this stuff, publicity is oxygen, but I think he'll dial it down and start to position himself for the battle with the Democrats for the Presidency.
Nevertheless, it’s just more uncertainty...
In the markets, 2016 has continued the seemingly endless state of uncertainty that has existed in recent years. The FTSE 100 has again passed the 6000 mark (this time on the way up). Oil prices have, for the moment, regained some measure of stability and now hover in the mid $30s. Is this a sucker's rally? Have we seen the oil price bottom out? There are now three billion plus barrels of oil in storage with hundreds of millions of barrels parked in tankers at sea. This will weigh for some time, whatever the Saudi/Russian led peace talks (in the oil wars) really mean.
China continues to report unflattering figures, the latest of which show the manufacturing sector shrank more than anticipated in February, and questions remain over the stability of the country’s stock exchange, property markets and the legitimacy of its quoted growth figures. That said, the authorities have unveiled yet another stimulus package to try and inflate the bubble. Meanwhile, in the US, manufacturing data is strong and the odds of more Fed rate rises later in the year are increasing. Contrast that with the quarter of the world led by Japan, the Eurozone and Scandinavia, who are experimenting with negative interest rates.
And of course there is a potential Brexit on the cards. Not to mention the conflagration burning in the Middle East and the consequent migrant crisis threatening to unravel the European unity of the last 40 plus years.
I've got a headache...has anyone got any paracetamol?
But has anything really changed?
Perhaps not. As you get older you realise things don't change that much.
A wild card Republican presidential candidate with a real chance of winning. Read what they said about Reagan and a Reagan presidency.
War in the Middle East? Not exactly a new phenomenon.
Oil prices collapsing? In the 1980s Saudi Arabia also got fed up of their stabilising role as the swing producer and opened the spigots, causing oil prices to collapse to as low as $7 per barrel. In the end, this will have a positive impact on the world economy; it just takes time to feed through.
A speculative property and stock bubble bursting in China? Read across to the emerging markets crisis in the late 90s, the US savings and loans crisis in the 80s, and the UK secondary banking crisis in the 70s.
Brexit? Schmexit, there were similar dire warnings about the UK choosing not to go into the Eurozone. We have no particular view but what does seem clear is that whether the UK does or does not exit is unlikely in the long term to be as dramatic as the sound and fury of the impending campaign will suggest.
Sometimes you need a long perspective. Someone who famously has one is that legendary investor, Warren Buffet. What does Warren say? Perhaps things aren’t that bad? In his annual letter published a few days ago to shareholders he argues as much: 'the babies being born in America today are the luckiest crop in history'.
At RSM, we retain a sense of optimism. Yes, there are uncertainties, things to worry about, and terrible things happening in the world. However there have always been uncertainties, things to worry about and terrible things happening. That doesn’t mean we should all just give up.
In my particular world of M&A we're seeing great deals done; a sense of underlying optimism, some fabulous entrepreneurs doing fabulous things (helped by our private equity, public markets, banking and legal friends). If that sounds like you, come and talk to us and we'll try to help you.
Back to Trumpton?
Who will win the election? Who knows? Trump must now have a very real opportunity, only a fool would suggest otherwise. However don't count Hillary out. There is a lady with some incredible stamina and determination. It’s just possible either could make a great president.
Either way this is real, not imaginary.