Towards a Theory of 'Trump Ideology'

A few weeks ago we suggested that, while there are clear signs of their being some kind of doctrinaire, ideological approach(es) behind whatever might be called a 'Trump Programme', it was perhaps too soon to elaborate it methodically.

Work in progress, maybe: but here's an interesting stab at it:  Trump as an auto-immune disorder.  What's particularly good about this is that it offers a thoughtful angle on one critical aspect of the puzzle, namely, why aren't the legendary Checks & Balances working?   I have a bit of a theory on this myself; but here's a much more fully-developed one.  It also makes a neat point about the difference between business conducted in markets, and business conducted via barter-like deals, which I think we could profitably come back to another time.

Not too long, and well worth adding to the evolving body of intelligent ruminative literature.  A couple of extracts: 

Other tinpot dictators – like Modi, Erdoğan, Putin, Xi**, Orbán – and their countries are distinct from the US in an important way. These autocrats do not have comparable democratic institutions. They can capture, subvert or sabotage democratic traditions in their own countries, using their own means. In each of them, there are longstanding traditions of inequality (such as caste in India), vigorous and celebrated imperial histories (Turkey, Russia and China) and deep traditions of racial and religious nationalism (Hungary and India).  But they do not have the special strengths of American democracy: a sturdy commitment to separation of church and state; the distribution of powers between legislature, judiciary and executive; and a deep antipathy towards tyrants, royal or otherwise... [Trump] has hit upon an original formula: to reverse-engineer the liberal institutions designed as guardrails against people like him.

 Trump loves wealth, ostentation and deals, but he hates markets, not because of their imperfections but because they, in principle, rest on ... supply and demand, the rationality of prices, all of which are safeguards against political fiat, personal greed and efforts to cook up macro outcomes for micro reasons. This hatred of markets unites all of today’s autocrats, because markets make their oligarchies unstable and their nationalist fiscal policies responsive to global finance ... they fear the power of global financial markets to shake their national economic goals.  [Trump] disdains the market – because it obeys no master other than its own rules of price, volume and scale. His weapon against it is tariffs, which he wields in the hopes of bringing it under his control. The market relies on the social contract, that agreement between individuals and government that is based in trust and predictability. Since Trump despises the market, he must dismantle the social contract, in all its forms and guises.

ND

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** Not sure "tinpot" is exactly appropriate for Xi ...

Greensill - and Other Goings-On in the City

It is much to be regretted that CU finds himself unable to write more about Greensill** because it is a story rather up our street.  The DTel has a fairly good piece here, offering the common-sense approach to risk management in circumstances where some newcomer seems to be claiming to have discovered the philosopher's stone in a basic area like supply-chain finance.  Is this likely?  No, it isn't - even if he is fronted by Call-Me-Dave.  (Blair doesn't have the monopoly on ex-PM avarice: and let's see how the financial exploits of Boy Genius stack up ten years from now.)   Not rocket-science at all.

Just once in a while, something new(ish) really does crop up.  Securitisation was one helluva smart innovation in its time, and those quickest onboard the train (Guy Hands / Nomura / Terra Firma and, errrr, Enron) did some very good, sound business in the early days.  By the time we get to sub-prime mortgages however, the whole thing has spiralled right out of control, all rigour and discipline gone.

Which bring me to the next puzzle: the remarkable rise of the brothers Issa and their petrol forecourt 'revolution'.  I understand clearly enough how high-throughput, well-located petrol stations might have an eminently financeable profile - better even than Guy Hands' pubs, maybe.  (I say "maybe" because the margins are notoriously tight, too.) 

What I don't understand is how this rather obvious attraction could have been missed by the pretty sharp operators of big supermarkets, oil companies etc.  "Retail is detail", and they don't miss much.  So if these assets were already sitting on the balance sheets of big, smart players, (a) they would (surely?) already have been effectively leveraged to the full already, even if as part of overall corporate finance; and (b) couldn't be prised away into new ownership at anything other than a full price. 

So who've been the suckers here?  All insights gladly received.

ND

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** "I can't write at length about Greensill unfortunately, too much real life conflict. Suffice to say, he is a right twat who has met a fair ending. How people decided such an arrogant bore was worth backing to the tune of billions is beyond me"  - CU, here (BTL)

Oatly: Failure of the capital markets

Now, you may or may not know of Oatly. They sell very carb-heavy milk substitute. Personally, I am a big fan and it has more or less replaced milk in my coffee.

Today though I am frustrated because of the news today that it has raised £200 million for expansion. Whilst I maybe a happy customer and pleased to see the company growing, I am dismayed by the use of celebrity endorsement. 

Clearly, Oatley approached the mega US fund Blackstone to help with a capital raise. They in turn have found some of their own money, but then plied the celebrity contacts they have such as Oprah Winfrey to find the £200 million. As part of the deal, the celebs have then lent their name to the launch which will help promote the company. 

The frustration for me is that all of this is in keeping with the trend away from the capital markets we have seen in recent years. Private funds, Private equity and private debt are all the rage. Going public, once the ultimate sign of success is relegated to a second order issue. In the US they have constantly lowered the amount of public equity needed, so that companies like Facebook can have what are effectively share listing when most of the money is still tied up with the original management - this used to be the key trade-off of going public, but no longer.

So we have companies like Oatly, doing well and now only available to the already rich and famous. If they do go public it will be the likes of Jay-Z who do best. Private Equity is not friendly towards retail investors. At least Blackstone is, maybe we have to console ourselves with owning shares in them. 

Increasingly though public markets are falling in terms of capital allocation. This is in my view is a bad outcome for Western society. If means the value created by new business goes increasingly only to those founders and the already wealthy investors they started with. The little guy misses our more and more, even the little guy's helpers - the pension funds - are not really in this game anymore. 

There is not much on the face of it you can do to stop this, rich people should be free to invest where they like and management free to raise capital from all legitimate sources. However, Governments could do more to reduce reporting requirements and increase tax incentives to go public so that we don't always see the rich getting richer.