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making sense of the narrative

Can the Media live without ‘The Donald’?

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The US Media are struggling a bit with the significant reduction in Trump content in recent days. As noted back in 2016, his carefully curated character of “The Donald” would send, often outrageous, tweets at all hours of the day and the Media couldn’t get enough of them. By highlighting them, even if it was (usually) in the outrage or otherwise contemptuous mode, it benefitted both camps; the media got their clicks and The Donald got the free campaign publicity for his alter ego, Candidate Trump. In this sense it was the first Social Media Election, but also the first Artificial Intelligence (AI) Election. We know from disturbing documentaries such as the Social Dilemma that the AI is interested in driving engagement and thus will effectively encourage polarisation of views, but even on a less sophisticated level, the humans managing media outlets notice that the ‘click rates’ that drive the revenues went up with “The Donald” and thus, subconsciously or not, would encourage journalists to keep on that story.

Something similar has clearly also happened with Covid. The Mainstream Media appear to be obsessed with Covid because the public have become so. And they keep clicking. Indeed the only thing that is driving engagement aside from Covid now that the Election is over and The Donald has (largely) stopped tweeting is the fact that the Election is not, in fact, over.

We don’t want to keep talking about Politics in the same way we don’t want to keep talking about Covid, but at this moment they are important for sentiment in markets. Moreover, in many senses this is less about the eventual winner than about the integrity of the system itself.

As we suggested recently, the stories on Election irregularities persist and it is beginning to feel rather like the Lance Armstrong affair where seemingly ‘everybody knew’ that he was doping, but nobody wanted to challenge him. Plus of course he regularly denied it. The first allegations came back in 1999, but it wasn’t until 2012 that the authorities finally acted and 2013 that he finally confessed. All the while a powerful combination of big business and highly effective PR shut down anyone questioning the powerful narrative of a seven times Tour de France winner with an all American hero backstory of beating cancer and the celebrity spin of being engaged to rock star Cheryl Crow.

The reality is that ‘everyone knows’ that the US electoral system is open to fraud and indeed many states – including ones like Pennsylvania under question right now – have been found guilty of it in the past. And similar to the doping scandal there appear to be many ways of doing it, but it rather feels like there is a general reluctance to ‘let daylight in upon magic’.

We must not let daylight in upon magic

Walter Bagehot

When Victorian writer and economist Walter Bagheot made those remarks in 1867 in his book on the English Constitution , it was with reference to the Royal Family and he was essentially highlighting the role that pageantry and tradition play in separating the ‘dignified’ parts of the constitution from the ‘efficient’ parts. While the US does not have a monarchy, the dignified parts include the (written) constitution and other institutions of state. Many of those have been found wanting over the last year or so but perhaps one of those ‘still standing’ is the voting system. However, just as the British Royal Family is increasingly letting daylight in upon the theatrical magic of ‘perfect’ lives, so the US voting system is coming under some awkward scrutiny.

Historically there have been many examples of vote rigging and indeed most of the last four years the Democrats have complained that somehow Russia had rigged the 2016 Election. And yet this year apparently there was nothing to worry about. Indeed, one of the strongest campaigns from the Democrats seemed to be about the supposed infringement on rights implied by requiring voter ID, even though this is an obvious risk. Photo ID is cheap and easily available and is required for almost everything in the US, from cashing a cheque to registering at a hotel or even getting a tattoo. But not for voting apparently.

As noted in earlier posts, some reversals have a non zero probability that markets need to be aware of and the statements from some of the Trump team lawyers should not be dismissed as lightly as some are doing. Bottom line, we know there is some fraud, the question is whether it was significant enough to actually change the Election. The next week or so should be long enough to tell we think.

A Return to Bomb Back Better?

On the flip side, we should also be thinking about what a Biden Policy would look like, not least because a Trump Policy is largely ‘known’. Here, Foreign Policy is easier to determine, since to all intents and purposes it looks like a return to the Obama/Bush era, with a combination of NeoCons and Obama era operatives. Those ‘encouraged’ by the commitment to more woman on the team should not be confused that this means Foreign Policy will be any less ‘muscular’ however. Indeed, if anything, the team being assembled look more bellicose than their predecessors. Hard to remember now how spooked the markets got back in January when the US drones assassinated the Iranian and Iraqi generals, but a return to Bomb Back Better might be on the cards.

Capitalism and Crony Capitalism

Also, and to steer the conversation back towards stocks and markets hopefully going forward, it is interesting to note the announcements by Amazon that it is getting into the drug dispensary business which understandably hit companies like Walgreen and CVS. This is just a reminder of the way that the internet giants are continuing to disrupt monopolies on the one hand while attempting to create them on the other – a process known as capitalism. The important thing about the former is that the benefits, in terms of product quality and price tend to go to the consumer, while the latter they go disproportionately to shareholders, or to be more precise extremely disproportionately to the senior management of large corporations.

Thus for all the fuss about vaccines, it is interesting to see that the Pharm sector in the US is at three months lows and that while Pfizer Chariman Albert Bourla hit the high when he sold 60% of his stock the day the breakthrough was announced, he was still down 8% relative to the S&P year to date.

But this is largely because Pfizer is so huge and that, in line with most other big US corporations Mr Bourla is being ‘paid’ by existing shareholders through generous stock and option packages. By contrast, Moderna’s Bob Langer has not sold a single share and has seen his stock holding hit the $1bn mark, thanks to developing a vaccine for something that we didn’t even know existed a year ago!

The bottom line is that when investing in ‘disruptive companies’ it is important to assess where the benefit is going. If it all goes to the consumer, then great, be a consumer. If it all goes to senior management or the private equity tycoons then find somewhere where it can go to ordinary shareholders, preferably in the form of cash. Most of all, don’t fall for the line that somehow ‘the cycle’ will make ‘cheap’ companies who no longer offer competitive products go up in price. It won’t.

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