GLOBAL ECONOMICS AND POLITICS

Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.


 

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US ELECTION 2020: POLITICS, PANDEMIC, AND MARKETPLACES © Leo Haviland June 3, 2020

CULTURAL OVERVIEW: A HOUSE DIVIDED

Competing aphorisms and advice abound regarding the uncertainties, unpredictability, probabilities, risks, opportunities, and appropriate viewpoints and methods in marketplaces such as stocks, interest rates, currencies, commodities, and real estate. Political stages also fill with diverse adages, slogans, perspectives, approaches, insights, foresights, predictions, and explanations.

The American cultural scenes (economic, political, and social) and opinions regarding them interrelate, and these entangle relatively closely with numerous foreign ones in a globalized world. This reflects and encourages wide ranges in outlook and recommendations for behavior.

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American history reflects and describes a generally-shared culture, which the American Dream concept significantly reflects. However, over the span of about four centuries (and even in recent decades) that culture and interpretations of it have not been unchanging. The degree of consensus has varied. Moreover, not all groups have been equally able to participate in the economic, political, and social benefits (promises; valued “good” aspects) of the American Dream.

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Thus America, even when united, always has had some internal differences in viewpoint (including opinions on the proper applications of a generally shared cultural theory) and thus assorted episodes and varying degrees of conflict. Let’s concentrate on today’s political panorama, which reflects (is permeated by) economic phenomena and interests. Admittedly, we’re not dwelling in the Civil War era of the mid-19th century. And the present-day United States political landscape (its ideological and structural parameters) is not anarchic. Nevertheless, the nation’s current political situation displays extensive divisions across numerous fields. The number and sharpness of these splits arguably have been increasing over the past few decades, as well as increasing (or at least becoming more evident) since President Trump’s 2016 election campaign and triumph.

A rapid survey of the United States unveils a country significantly divided across belief (doctrinal) dimensions as well as group membership categories. Subjective views occur on a continuum. For example, not all so-called “conservative” opinions are identical. Or, a given “liberal” (or progressive or globalist) may support some “nationalist” policies. Of course not all members of a given racial (ethnic), sex, or age category embrace the same opinion on a given policy or set of them. Consequently, beliefs, groups, and individuals do not necessarily or inevitably all end up on the same side of a ledger. Moreover, definitions and applications of political and other cultural labels can and do change. How should we define and measure liberty, freedom, and equality?

Anyway, numerous divisions apparently exist. These reflect values, visions for what is “good”, “bad”, and “neutral”. Cultural values inescapably involve emotions, not just reasoning; and emotions permeate the reasoning.

Look not only at (and within) the leading political parties, the Democrats (blue) and Republicans (red). The political spectrum reveals a range of opinions from left-wing to right-wing. Populists (which include left and right sides in orientation) battle against the “establishment” and associated elites (“the Man”; an entrenched political/economic/social power structure). Nationalists (“Make America Great Again!” is one mantra) fight against globalists (and multiculturalists); conservatives (or alleged reactionaries) combat liberals (perhaps some of these are progressives) and socialists (radicals; anarchists). Assorted political and economic “haves” fight in assorted ways with “have-nots”. Ardent debates rage about economic inequality and opportunity as well as social mobility. Allegiance to “capitalism” and the “free market” (however defined) varies in scope and intensity. Other contentious issues include abortion, the environment (including climate change), health care, immigration, race relations, gun control, and international trade. Such viewpoints incorporate values and result in propaganda battles to advance aims and defeat foes.

Within American political life and its communities, note the language (metaphors) of war, battle, and violence. Also examine wordplay of love and friendship. For example, people may love (or hate) a political candidate or party and its policies.

Rather lofty US government deficit spending has become entrenched. And sometimes, like nowadays in the coronavirus era (which involves a war against the disease), most Americans appreciate a generous helping hand and support a large (expensive) economic rescue package. However, significant disagreement remains regarding the role and extent of the federal government in our lives. Fervent quarrels burst into the open as to the appropriateness of, relative importance of, and actual expenditure on specific programs.

What generic cultural classifications to which individuals belong nowadays reflect (and offer opportunities for and encourage) partisanship and rhetorical conflict? These are numerous. The body politic is fractured. Noteworthy divides exist on the basis of race/ethnic, sex/gender and sexuality, age/generation, geographical location (region of the country; urban/suburban/rural), religion/faith, and level of wealth/income.

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In politics, economics, and elsewhere in culture, although a subjective consensus sometimes develops and persists, participants also can and do disagree on what information (facts, evidence, factors, data, statistics) is relevant and on the relative importance of such variables, as well as on the proper means of organizing and evaluating such phenomena. Where widespread cultural divisions exist, as in America nowadays, such diverse debates (dissonance) relating to “the facts” at times can severely challenge the abilities of even knowledgeable and experienced forecasters to predict a particular outcome, such as the 2020 American Presidential election battle between Trump and Biden, with a high degree of confidence.

Moreover, to the extent that citizens have diminished faith in political institutions and leaders, this increases (encourages) the potential for cultural splits and wars. Arguments from authority may become less compelling to the “average citizen”; many disagreements tend to become harder to resolve. It’s often difficult for enemies to make peace. This situation can boost the amount and loudness of divisive rhetoric and thus make it significantly harder to predict some outcomes.

History shows that a willingness to compromise, listen closely to and respect opposing views and values, and practice substantial civility ebbs and flows on political stages, even when differences between rivals are substantial. However, the American political scene during the Trump regime generally manifests a weakening inclination to do so by many participants. This increases the rhetorical racket.

The information revolution obviously is a complex topic. Nevertheless, the voices unleashed nowadays in cultural domains via mass communication media create and sustain Towers of Babel. And the internet in particular enables a “democratic” explosion of voices seeking to achieve some form of power, to become or remain relevant and influential. The massive amount of allegedly relevant information potentially important to “appropriate” cultural decision-making and the proliferation of supposedly satisfactory gurus and guides (opinion-makers) thereby at times can exacerbate the difficulty of predicting political and economic outcomes.

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US Election 2020- Politics, Pandemic, and Marketplaces (6-3-20)

WALL STREET MARKETPLACE VIOLENCE © Leo Haviland September 1, 2015

The long-running bull charge in the broad real trade-weighted United States dollar, and particularly its recent assault on major resistance established in March 2009, played a critical role not only in creating and sustaining emerging stock (and commodity) marketplace bear moves, but also in the recent bloody toppling of the once-mighty S+P 500 from its lofty May 2015 record peak. Interest rate levels and trends of course remain important to stock marketplace battlefields, but US dollar movements will maintain their substantial influence. The broad real trade-weighted dollar probably will remain relatively strong.

 

Moreover, the S+P 500’s decline since its 5/20/15 pinnacle at 2135 indicates that its major trend probably will no longer diverge as significantly from those of emerging equity marketplaces. Compare the pattern of the past few years, during which the S+P 500 exceeded its spring 2011 peak but emerging stock marketplaces in general (Morgan Stanley’s MSCI Emerging Stock Marketplace Index benchmark) did not. The S+P 500 probably will not surpass its May 2015 height by much (if at all); instead, it probably will continue to travel lower.

 

As “Shakin’ All Over: Marketplace Fears”; 8/13/15) noted: “Despite about seven years of highly accommodative monetary policies such as yield repression and money printing (and frequently bolstered by hefty deficit spending), the foundations of worldwide growth increasingly look shaky.” Substantial debt and leverage problems continue to confront today’s interconnected global economy. The Federal Reserve Board of course focuses on all sorts of domestic and international factors and their interrelations. However, nowadays the level and trend of the S+P 500 will continue to strongly influence its policy rhetoric and decisions.

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What’s the bottom line? Reviewing these various US and diverse international stock marketplace scorecards together, spring 2015’s similar time for highs followed by significant price declines is noteworthy. This underlines the likely slowing of worldwide growth in general. It also shows that stock trend benchmarks for America are nowadays rather closely connected to those elsewhere, including emerging marketplaces. The similar timing of lows in August 2015 emphasizes that worldwide equities in general currently are “trading together”. Renewed roughly simultaneous retreats in emerging and advanced nation stock benchmarks would be an ominous sign to equity bulls and for world GDP growth rates.

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Wall Street Marketplace Violence (9-1-15)

MARKETPLACE FIREWORKS © Leo Haviland July 6, 2015

Statistics and stories constantly bombard marketplaces. In today’s marketplace environment, and especially when an especially enthralling news item bursts into view, many gurus and coaches scream about current or prospective crises, panics, and bubbles (overvaluation).

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Recent debt-related troubles in Greece and Puerto Rico and the collapse in the Chinese stock battleground are not isolated or entirely unique (special) marketplace events. They are signs and symptoms of widespread and intertwined marketplace phenomena. They are examples of and interconnected with current problems and related (linked) marketplace price movements around the globe.

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It is a truism that times change, but that does not mean that times necessarily are entirely or substantially different. Some historians may hearken back to the 2007-09 worldwide economic disaster; the United States real estate catastrophe and the demise of Lehman Brothers were not mere flare-ups. They did not stand alone. Debt, leverage, and credit problems were worldwide, even if they varied to some extent from place to place; their consequences erupted around the globe.

The Federal Reserve, European Central Bank, Bank of Japan, Bank of England, and China’s central bank have engaged for many years in highly accommodative monetary programs. Despite lax policies such as sustained yield repression and massive quantitative easing (money printing), international debt, leverage, and credit problems did not disappear. They persisted and have reappeared. These central bankers have provided cosmetic fixes, not permanent ones, to such difficulties. Remarkably easy money policies, aided by political deficit spending, have helped to spark and sustain worldwide GDP growth since around early 2009.

Yet that past success does not guarantee future triumphs. Is worldwide growth decelerating? Probably. Note the downward growth revisions in recent months for 2015 for the United States by the International Monetary Fund (Article IV Consultation, released 6/4/15) and the Fed (Economic Projections, 6/17/15). Indications of a Chinese slowdown preceded its recent stock tumble. There have been concerns about the property marketplace, shadow (and other) banking, and increasing debt. “China orders banks to keep lending to insolvent provincial projects” declares the front page of the Financial Times (5/16-17/15, p1). Note the continued bear marketplace trend in base metals in general. Through May 2015, China’s year-on-year electricity output was about flat, up only .2pc (National Bureau of Statistics).

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Some issues obviously matter more to some traders (and marketplace sectors) than others. But in today’s interconnected global marketplaces, various key stock, interest rate, currency, and commodity playgrounds intertwine in diverse and often-changing fashions. Moreover, these arenas are never separate from the “real” economy. So flashy economic stories about one marketplace or nation can spark or accelerate modest and sometimes even dramatic price travels in numerous venues.

And regardless of which exciting tales currently capture substantial trading and media attention, they usually reflect and interconnect with crucial (and so-called “underlying”) economic (financial, commercial) and political phenomena. These noteworthy variables, issues, trends, and opinions regarding them not only capture the attention of many marketplace players, but also necessarily remain major factors for Wall Street price action and Main Street prosperity.

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The debt and leverage (credit) problems in the United States and elsewhere which developed prior to yet culminated in the Goldilocks Era arguably remain unsolved, or have appeared in related forms. For example, America in general has a love affair with debt. The overall consumer debt burden has lightened somewhat since the darkest nights of the 2007-09 crisis. However, federal debt has jumped up. Thus America’s overall indebtedness remains quite significant. See the essay, “America’s Debt Culture” (4/6/15).

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Marketplace Fireworks (7-6-15)