Blain’s Washington Porridge 6^th Nov 2024: Trump V2.1 – Not as bad as we fear….

“That was not in the script…”

I was there! Trump Wins. Get over it. Not the End of the World. The Democrats will be blaming themselves, but ultimately they lost because of inflation and how voters felt their economic situation had deteriorated under Biden. I must buy a Harris pin, and a MAGA hat…

Okay, okay… I called the election badly wrong when I predicted Harris would win. I got a very shouty message very early this morning from a reader: “YOU PREDICTED A HARRIS WIN. I’M UNSUBSCRIBING AND I’M LAUGHING AT YOU!!!!”

No Sh*t Sherlock! My short on Trump Social now looks to have been singularly ill-advised. The stock is up 50% this morning. Someone else reminded me not to insult Alligators before crossing a river. My second short was Tesla, and Musk’s fortune is also up 13%. You place your bets and roll the dice. This morning’s relief rally is spectacular, anticipating deregulation across Tech, Crypto, Banking and other sectors. My bad for taking the other side.

Also, apologies for this very late early afternoon Porridge. I am writing it with post US election hangover from Washington. (I flew in yesterday, and will be back for that meeting in London tomorrow.)

A very well-connected US friend invited me to attend his Georgetown Election Party. He is a prominent Republican – we are polar opposites but still great chums. I would not have missed it for the World. It was a fascinating cross section of the US political-financial-academic-intelligencia movers and shakers. It was politically mixed – belaying much of the nonsense about US polarisation and disharmony. The guests disagreed agreeably through the evening. There were a lot of increasingly confident Republicans, and dispirited Democrats. Lots of giggles and shocks, and at one point a former UK prime minister dropped in.. We had a great chat…

As the evening wore on, myself and other Yooropean guests learnt more in a few hours talking to our hosts than years reading any number of opinions from The Guardian or The Torygraph about what America really thinks. Worth the trip just to meet some fantastic people.

The USA is the USA, and a very singular place. I don’t think it is nearly as disunited and broken as we foreign observers fear. The vote did split rural from urban, college-educated from not, young people from old, and women from men, but not, I think, in an unrepairable way. If that sounds optimisic.. well maybe it is. “Things are never as bad as we fear, but never as good as we hope.”

Trump has won. I, half of America, and most of the rest of the Western World needs to get over it. He was measured and clever in his victory speech last night. Sure, I didn’t like the way the Trump clan were lined up behind him. I was waiting for Musk to bound on stage – he has businesses to run… apparently. It is not the end of politics as we know it. At least three prominent Republicans politely explained to me last night why it’s another “turning-point” – which seems to have become the fallback response to anything fundamental these days. (Yes, I have read all about fourth turnings and all that.. not sure I buy it.)

Trump might not be to everyone’s taste – but he won the bulk of the vote because American’s trust him more than they did Harris to rectify the problem they see at the centre of their national problem: They feel poorer today than they did 4 years ago. Inflation kicked them in the wallets, and interest rate rises have left that wallet half empty.

Harris failed to engage or excite the electorate. Trump, loathe him or love him… did. He won because American workers expect him to deliver.

There is no denying Trump’s victory is going be consequential:

• I fear Trump will struggle with inflation – especially if his promised tariffs kick in and further destabilise global supply chains. I don’t see significant easing in interest rates ahead – central banks will seek to keep rates normalised (around 4-6%). They are not going back to 2%. That is likely to leave Trump frustrated and angry. If he is seen to over-react in the inevitable insults about the Fed, it will shake confidence. His choice of Treasury Sec will be critical.
• The implications of tariffs and the deficit for the US Treasury market are huge – but maybe not immediately. It seems Trump has not won the full sweep he claimed, but assume the US deficit will widen as he keeps taxes low and borrows more.
• That becomes a more significant problem if de-dollarisation occurs, reducing overseas investment of commodities and resources into treasuries. That is also a longer-term trend.
• Short-term. Risk-on on US stocks. Tech, Banks, Oil & Gas, Crypto… and the rest. Not so great for stocks depending on govt largesse – except, maybe defence.
• Ukraine will be an issue. I was “informed” by party guests Trump will enforce a peace along the current front-line. It was also made clear Trump will not send US troops to defend non-core interests – which do not include the Baltics (Nato members), or Ukraine. Trump needs to make his position clear to America’s overseas allies at the earliest opportunity to ease transition. Same question on Taiwan.
• I’m going to have to rethink much of what I thought about populism – it’s not a trend, a movement, an aberration… it’s a political reality, as fundamental as the emergence of elected left-wing political parties in the early 1900s.
• I’m going to have to rethink geopolitical outcomes and likely event-lines.

In terms of why Harris lost – with hindsight the time to have countered Trump was years ago. Not in the courts – which made a martyr of him – but when Joe Biden allowed hubris to overtake him, thinking he could stand for a second term. Had he stuck to the script, done the right thing, and mentored the next round of Democrat leaders into a primary series of the best talents in American politics… the Republicans may have been forced to drop Trump and match them. I am now certain the Democrats would still have lost. You simply can’t beat the reality of how the electorate felt cheated by inflation and rates.

What did I learn last night? Lots. I need to think about it.

America is divided, but not as much as we fear. I met a Republican I’ve repeatedly butted heads with on an email chain, and we agreed to differ, got on famously, and will have lunch together. We can de-escalate fears of civil dissent around the result – but America remains divided betwixt red and blue.

There are clearly issues. The older folk in the room think the Media is biased against Trump – they are right. The younger members felt Harris was mugged by social media algorithms directing voters to support Trump – I suspect they are also right. Musk and Twitter need attention.

America is land of contradictions. They are incredibly rude at each other in public, yet utterly charming in private. I’m going to spend a day in glorious sunny Georgetown, have lunch with chums, catch the Redeye home, and normal porridge service resumes… Friday.

Out of time, hungover, and feeling its not the end of the World after all. Thinking about the next reality is going to take some time…

Bill Blain

Morning Porridge

Founder Windshift Capital