November 18, 2016
What We’re Reading this Week
Well this is truly the dawn of a new era…so to speak. Donald Trump is President-Elect. Like most topics, I am only really interested insofar as it relates to investing or money. This is no exception. Everyone from Peter Thiel to Bill Ackerman has an opinion on what Donald Trump means to them. I suppose Donald is not the first candidate to be different things to different people. Maybe that’s the nature of politics? I guess I’m really getting hit with life lessons today. Even before his presidency starts Donald Trump is like St. Nicholas. Sometimes he is a jolly man dressed in red, sometimes he puts coins in your shoes, sometimes he will put you in a sack and take you to Spain for being bad; it really depends on who you are and what you believe. Will Trump privatize Freddy Mac? Will he actually build a wall? Will he put us on a gold standard? Sure, during his campaign he took every possible stance on a lot of issues and essentially told voters, in the words of Pedro, “Vote for me, and all your wildest dreams will come true.” This can be very confusing for some people. It also seems like Mr. Trump doesn’t really have to say anything. Despite making statements to the contrary many investors have chosen to see what they want to in Trump. The mere idea of Trump in the Whitehouse has been enough to spur market growth. Which means right now the market is fueled…by hopes and dreams? This past week my kids gathered in the yard to witness a once-in-a-lifetime “Supermoon”. Inspired, I took them inside to look at stock charts. Maybe I’m just used to a more cynical market but they were not as impressed as I’d hoped.
Commission Chairman Mary Jo White announced her decision to step down at the end of the Obama administration. This leaves three out of the five commissioner seats unoccupied. It also fuels hopes that the President will be able to dismantle many of the regulations and rules the SEC has been focused on the last six years, including Dodd-Frank. Mr. Trump has asked Paul Adkins, a former SEC commissioner to help with the transition until the vacancies are filled but the administration has not settled on any firm choices. I like to think of prospective Trump policies more as lore, and not actual positions, mostly because he has an interesting habit of being vague about his intentions. “His transition team on Nov. 10 issued a statement saying it was crafting a plan to dismantle the Dodd-Frank Act,” in one of my favorite pieces of Trump lore. Akin to this are Trump’s threats (promises?) to reinstate Glass-Steagall, which is (slightly) more interesting to me. Repealing or at least weakening Dodd-Frank would have a greater impact on the financial services industry by eliminating the Financial Stability Oversight Council, abating the Vlocker Rule, and loosening mortgage restrictions, amongst others; but Dodd-Frank has only been here since 2008. Glass-Steagall was repealed in 1999 during the Clinton administration. We’re not really used to Dodd-Frank but we are super comfortable with the Gramm–Leach–Bliley Act, the legislature that partially repealed Glass-Steagall. It’s a great example of my point in the previous paragraph, that many voters hear what they want to hear from Trump. You see, these two ideas are closely tied together. On one hand, Trump says, “I want to dismantle Dodd-Frank,” and liberals say, “Oh, he’ll probably change it a little…” Trump says, “I want to reinstate Glass-Steagall,” and conservatives hear, “I want to dismantle Dodd-Frank.” Let me s’plain…no, there is too much. Let me sum up. Here is the overly simplified timeline. 1999: Glass-Steagall was repealed by the Gramm–Leach–Bliley Act…we got into a big financial pickle. 2008: Said pickle came to a head. 2010: Dodd Frank was passed. Post-2010: Banks were unhappy with all the new rules and regulations. Post-2008 many liberals pushed for the Gramm–Leach–Bliley Act to be repealed. Bernie Sanders wanted to repeal it! Trump wants to repeal it! He doesn’t just want to get rid of Dodd-Frank, he sees it as an overly complicated answer with a much simpler solution. Conservatives (and big banks, where many conservatives are born) are super excited to have Dodd-Frank eliminated but seem to be sort of drifting off towards the end, where Trump says, “…and we will bring back Glass-Steagall.” My kids do this. If I told them, “Tonight we’re going to the movies…to watch a documentary.” They would say “Yay!!! Movie!! Can we see Trolls?!?”
Maybe one reason why so many people seem confused by Trump policies has to do with Facebook. Anyone that uses the site is well aware that it is plagued by “fake news.” News that looks real, but isn’t. We’re not talking about satire, which is the fun form of fake news. We’re talking about news that is meant to look real. Satire is fun, fake news is…terrifying. Well, it turns out roughly 44% of Americans get their news from Facebook and I can’t decide if that’s more terrifying. Facebook executives are aware of the problem and sought to update newsfeeds to eliminate much of the fake news. Their research found that the update would disproportionately downgrade or eliminate right wing news sites and would go against Facebook’s policy of avoiding political bias so the project was scrapped. This came to light under accusations that the social media site and fake news directly led to Donald Trump’s election. I’m sorry, what is the goal here? No Trump? No Facebook? Will Mark Zuckerberg make reparations to Hillary Clinton supporters? Gutenberg never had to deal with this. Facebook does not have the same editorial standards as the Wall Street Journal. I can’t hold them accountable if a family member posts a recipe and I make it but it doesn’t turn out as well. Zuckerberg appropriately called the notion “a pretty crazy idea.” No one is denying that fake news is a problem and personally, I would love for it to go away. In the weeks that follow I suppose it’s too much to expect “the other side” to lose gracefully but this is a stretch. I still can’t figure out the desired outcome. It doesn’t matter if Donald Trump supporters got their news from a talking donkey under a pear tree, he was elected as president. No matter how many apologies Facebooks makes, the election is over.
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