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Trump’s Biggest Mistakes

What do you think has been President Trump’s biggest mistake while in office?

Whether you like Trump or not, you can’t deny that Trump’s leadership style has led to many far-reaching decisions.

In many respects, he’s just doing what he promised during the 2016 campaign…

Trump cut taxes and reduced regulation. He is remaking the federal judiciary. Unemployment numbers and food stamp numbers are down. Mile by mile, he’s building (or rebuilding) a “wall” on the Mexico border; this, despite every sort of political power play and legal landmine his opponents can toss at him.

Meanwhile, Trump has resisted numerous opportunities to get the U.S. deeper into foreign wars. He wants to get out of Afghanistan and Syria. He’s trying to make a deal with North Korea. He sidestepped bombing Iran after that country shot down a U.S. drone in June.

Trump is dramatic, but he’s getting things done.

Still, everybody makes mistakes. Indeed, whatever a President decides to do, somebody will be mad.

Blistering criticism comes with the office. And every President is subject to criticism, whether it’s Trump, Obama, Bush II, Clinton, etc. going back to George Washington. Everybody took heat in one way or another. Nobody gets a free ride.

So, back to that original question… Has Trump made any huge mistakes? I’m asking because the other night I was at dinner with friends. We went around the table with everyone limited to “just one” mistake by Trump.

The rule was to keep it real. Criticism had to be serious; no bellyaching.

The discussion was intriguing…

“Trump should’ve fired FBI Director Comey about one minute after being sworn in,” said one dinner colleague.

Fair enough. Comey was nobody’s friend just after the 2016 election. He had dissed Hillary in July 2016 while letting her skate over the “emails” matter. Then about two weeks before the election, Comey brought Hillary’s name up again in a negative light. Democrats were furious.

Indeed, quite a few Democrats were finished with Comey by the end of 2016. They blamed Comey for giving Trump a last-minute edge in votes that put him over the top on election day.

Comey had few friends in Washington after election Day 2016. If Trump had dismissed Comey on January 20, 2017, it would’ve been a tempest in a teapot.

Instead, Trump allowed Comey to hang on at the FBI for several more months. And as we now know, Comey was Trump’s nemesis. The former FBI boss did his best to undermine the new President.

By the time Trump fired Comey in mid-2017, the overall setup was ripe to appoint a “Special Counsel.” We had the Mueller effort for two more years.

“Trump came into office without a long list of names. Without reliable people to put into important positions in government,” said another dinner partner.

True! Before he entered the political arena Trump was a New York businessman. He donated to campaigns and dealt with politicians, of course. But he wasn’t steeped in the milieu of American politics and national-level Big Policy.

The problem for Trump is that the U.S. Presidency is about as “political” an office as you’ll ever see. When you’re in the White House, you’re surrounded by the biggest school of sharks on the planet.

Before Trump came into office, and across modern U.S. history, all Presidents were “political” in one manner or another. They had served in the House or Senate, or as governors or as Vice President.

Based on their previous efforts, all former Presidents had long lists of “names.”

And “names” are critical to governance. Or as President Reagan once noted, “People are policy.”

Past Presidents had lists of qualified, reliable people to put into cabinet seats, sub-cabinet offices, secretaries, assistant-secretaries, deputies. These are the policy-makers who staff government. They are the muscle behind any administration.

If you’re President, you want people on the name-list who are whip-smart about particular aspects of governance; total policy-wonks. They know the issues inside-out, and have fast learning curves.

The country is filled with these kinds of political players and policy-wonk wannabes. On any given day, many “names” hold political offices at the federal, state and local levels. Or they work on Congressional staffs.

If they’re not pulling a government paycheck, “names” fill the ranks of big-time law firms, universities, think tanks, K-Street lobbying houses, big-name corporations and banks, and more.

These “names” are the farm team of any administration. They play ball on the outside during the out-years. But they’re eager to be drafted up into the major leagues – into the big stadiums – when their guy becomes President.

So yes, one of Trump’s biggest mistakes was not having a long name-list. In fact, over the past two years, Trump’s administration has left many important offices vacant. And there are still Obama-era holdovers sitting at some government desks.

It’s kind of astonishing that Trump didn’t see this problem up front.

But in my mind, this is peanuts compared to Trump’s actual biggest mistake while in office…

“Trump’s biggest mistake was hitching his political wagon to the rising stock market as the barometer for the health of the economy,” said another colleague.

Bingo!

The stock market is important, and it’s been on a rampage since the Crash of 2008. But if you’re a long-time reader of Agora Financial letters, you know that the problems of 2008 are still with us. Nothing that killed the economy in 2008 has been truly fixed.

That is, in 2008 the economy crashed. The Fed waved its magic wand for low interest rates and cheap money. Since 2008, the market has been generally rising. Money flowed from the Fed to Wall Street, where it inflated asset values. But not much of that lucre ever spilled back out onto Main Street.

Despite the rising market since 2008, the U.S. economy is actually less well-off. As Agora’s own Bill Bonner likes to note, the value of the stock market is today about half of what it was in the early 2000s, as compared to the price of gold.

Along these lines, it’s arguable that during the past decade the stock market bubbled-up out of all proportion to the fundamentals of the listed companies. We see all manner of mis-priced assets, asset inflation and general mis-allocation of resources across the U.S. and global economy. Here are a couple examples…

Look at the crazy share pricing for companies that don’t make money. Consider “gig economy” plays like Uber and Lyft; or the upcoming listing for “We” (aka “WeWork”), a business that rents real estate for “co-working” space and loses lots of money.

Or consider Theranos, the fake blood-testing company that spent much of the past decade burning cash and delivering nothing.

Or Tesla, the money-losing electric car firm that’s destined to crash and burn now that “real” car companies like Porsche and BMW are selling product. Then again, even Ford Motor Company just saw its bonds downgraded to “junk” status.

Point is, there’s a lot of fluff in the stock market. So, focusing on the market is just looking at one particular shiny thing. It’s not reflective of the underlying problems within the overall economy.

Fixating on the stock market was an unforced error by Trump. And it’s a far cry from 2016 when Trump actually campaigned against the bloated market.

“We are in a big, fat, ugly bubble,” said candidate Trump about the stock market in his first debate against Hillary in September 2016.

Here’s what Trump was talking about; look at this chart of the Dow Jones over the past 20 years.

DOW Chart

You can see the massive market crash-down in 2008, followed by the Fed-fueled recovery of 2009 and beyond.

From 2008 to 2016, under President Obama, the market went up, up and up some more. Looks good on paper, but how real was it?

Under Obama, unemployment was up, numbers of food stamp recipients were growing, government regulation was increasing, U.S. competitiveness was declining.  Federal debt, and interest payments on the debt, were growing far faster than the economy.

And then came Trump…

“The only thing that looks good is the stock market,” Trump added in the fall of 2016, describing the Obama economy. “But if you raise interest rates even a little bit, that’s going to come crashing down.”

Trump nailed it. The stock market was in a Fed-induced bubble. Raising rates would be the kiss of death; we’ve seen hints of it in recent months.

But in November 2016, candidate Trump won the election. And the stock market kept on rising.

Trump quickly made the stock market a key metric for his success as President. Whenever “the market” moved up, Trump patted himself on the back.

So here we are now, ten years post-Crash, in Trump’s third year in office; and staring at a weakening business cycle. All with 14 more months until the election of 2020.

Will the stock market stay healthy, such that Trump can point to it and say that he’s doing a great job? Or will the business cycle turn? On these questions, the 2020 election hangs in the balance…

Global events indicate tightening. Global trade volumes are falling. Leading indicators are fading. Central banks are buying gold to de-dollarize. Oil prices are stagnant. Diesel truck and engine sales are tumbling. Copper prices are declining, which is a harbinger of tough times ahead.

The U.S. economy – and much of the global economy – certainly appears precarious. There are odds in favor of a crash, which would undercut one of Trump’s key claims to fame.

Perhaps the market will surprise us and stay firm for another year. The ten-year “expansion” will move towards a twelve-year run, and break every historical record in the economics books.

If not, we’ll have a crash. It’ll hit in the year leading up to an election.

That same stock market – the “big, fat, ugly bubble” – will be the key to Trump’s undoing.

Looking ahead, two pieces of advice for Trump… Stay out of war and keep the economy humming.

On that note, I rest my case.

Thank you for subscribing and reading.

Best wishes,

Byron King

Byron King
Managing Editor, Whiskey & Gunpowder
WhiskeyAndGunpowderFeedback@StPaulResearch.com

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Byron King

A Harvard-trained geologist and former aide to the United States Chief of Naval Operations, Byron King is our resident gold and mining expert, and we are proud to have him on board as the managing editor of Whiskey & Gunpowder.

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