Rattle the jingle bells and deck the halls with holly, because Christmas sure came early for Donald Trump.
--Not only has he bagged the White House, the US economy is really starting to move now.
--The Financial Times reports that wage growth accelerated at [o1] its fastest pace since 2009 in the US. Private sector hiring is on a record streak.
--I’m sure Trump won’t mind letting the world know now that he’s in power. He can do what every politician does and change the narrative if it suits him.
--The ‘feelgood’ factor from this might just come in handy for his first 100 days, once the facts start getting out. He can drop the campaign rhetoric about an ailing America to get US consumers spending even more and out of a fearful mindset.
--Trump is no stranger to shifting positions. Already there are reports his website is dropping [o2] previous election policies and promises. The crazier stuff will no doubt get the flick so he looks more Presidential.
--There’s one particular policy that won’t change, however, and that’s Trump’s intention to ‘dismantle’ the Dodd Frank Act. This is legislation brought in after 2008 to regulate the US financial sector. In fact, this is one policy already confirmed now that he’s elected[o3] .
--Phil Anderson over at Cycles, Trends and Forecasts [o4] had this outcome flagged as far back as June. He sent out an email at the time saying the following:
‘Donald Trump just got a massive boost to his chances of ascending to the US presidency — thanks to the US banks.
‘But you won’t see this reported on the front pages of any newspaper or magazine.
‘Here’s why. Several weeks ago, Jeb Hensarling — Chairman of the US House Financial Services Committee — put together measures to specifically help US banks by dismantling the Dodd-Frank Act.
‘That’s the Act brought in after 2008 to better regulate the banks and ensure ‘another financial panic would never happen again’.
‘Trump has endorsed these measures and vowed to ‘pull apart’ the former Act….
‘Banks will now undertake a prodigious effort to ensure Trump ‘looks’ more presidential than he is. US banks will now make every effort to get him elected. Then they’ll look for their payback.’
--And holy moly, the Wall Street Journal now suggests that Trump is considering appointing Hensarling as Treasury Secretary[o5] .
--Over at Cycles, Trends and Forecasts we often write about the property cycle that underpins the US economy. If you had to boil it down to two factors, it’s the property market and banks of course.
--Now we have a real estate President in charge who wants drop property taxes and lift regulations off the financial sector. This cycle is really rumbling now. There’s a boom brewing.
--Things get even more interesting at this point. China and the US have been discussing a new trade and investment framework that would allow Wall Street banks to open up their own investment banking businesses in mainland China. This is a big deal.
--You might have missed this one because it was reported in the Wall Street Journal the day before the recent election[o6] . Donald Trump has clearly stated he wants to renegotiate everything with China. This could be a part of that.
--At the moment these Wall Street banks can only operate in China if they pair up with another Chinese bank. You can imagine the hesitation in doing that (losing proprietary information for starters).
--But if the Wall Street banks could operate on their own they could underwrite initial public offerings on the local Chinese exchanges and they’re up for a lot more business. This is a highly profitable activity.
--Now it’s too early to say if anything will come from all this in terms of the US banks penetrating into China. But just right now, view this development in terms of of the real estate cycle I just mentioned earlier.
--Phil Anderson has said for years that this current real estate cycle – which has never failed to turn, since at least back to 1800 in the US and back to 1600 in the UK – could really kick off in a big way if US banks got access to Mainland China. In turn, Chinese banks became part of the global system, which they are not presently.
--Events just keep coming in to keep this cycle turning. Cycles, Trends and Forecasts has said the same thing since it launched: the world is on track for the biggest boom of all time.
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CALLUM NEWMAN is an editor at The Daily Reckoning, Australia’s biggest daily financial email. He’s also the associate editor of investment advisory Cycles, Trends and Forecasts and hosts The Daily Reckoning Podcast. Originally graduating with a degree in Communications, Callum decided financial markets were far more fascinating than anything Marshall McLuhan (the ‘medium is the message’) ever came up with. Today Callum spends his day reading and researching why property markets, commodities and stocks move like they do. So far he’s discovered it’s often in a way you least expect.