Blain’s Porridge. US Part 2 – Waiting for dust to settle.

We may not know the final numbers yet, but the betting market odds and the election maths are now clearly telling us that Biden will likely win. As mail-in votes are counted he is overtaking Trump in the key remaining states. Biden may not win all the remaining battleground states, but he will likely win enough to take the White House. The Democrats are unlikely to win a Senate.

That should be a win-win for America.

A Biden presidency and a Republican Senate would be a schweet result. With Trump out the picture the US political process, the legislature can regain a modicum of common sense and decency. The chances of reaching agreement on a large stimulus and infrastructure package in return for keeping taxes low will rise significantly in a new House. Give it a while for Congress and the Executive to work together. The new government may be forced to reach gridlocked compromises, but it could be credible.  If so it will be dollar and US positive.

Trumpist Republicans are reacting predicably – screaming fraud, denying the counts, and claiming the election is being stolen. Nope. There is no evidence of any fraud around this mostly closely watched election. What happening is what happens when votes are counted – someone wins and someone loses.

Before I get accused of being a bitter Democrat trying to steal the election Trump claims to have already won, I have no absolutely axe in this election. I favour policies that will address American growth and inequality – and believe Real Republicans are as well placed to do that as anyone.

In this morning’s extraordinary Television performance, Trump made his agenda clear. In his mind he won the election and no one – especially not voters – is going to tell him he didn’t. We are potentially in for a messy courtroom battle, violence and tension. Its high risk.

It doesn’t need to be the end of the world.

I suspect Real Republicans will face up to the future, and be distancing themselves from Trump’s assault on the democratic process – making it clear he should go with dignity and grace. It’s similar to Margaret Thatcher 30 years ago – when she was forced to step away as it became clear she would ultimately lose the leadership election. She went from Scary Witch to National Treasure in a heartbeat.

In terms of markets, standfast till the final results are tabulated and announced. Try to ignore the shouty noise from Trump supporters. Allow the legal process to work through. Then let’s figure the long-term effects based on how we see engagement between the parties. In coming days the noise may well make gold – and even bitcoin – look favoured investments!

What does it mean for markets? Will Biden be able to force through Tech regulation? Will it even be a priority? Will it benefit fundamentals? Where else is worth investing? What will stimulus and infrastructure spending mean for bonds – little as the Fed remains in control of the yield curve. More on all these to follow!

Bill Blain

Shard Capital