Saturday, November 14, 2020

Whats Next For The U.S.


What Happens Next...



I bring this all up as a crisis is rapidly brewing here in the US. President Trump clearly won re-election, only to have it snatched through blatant fraud. You can agree with that statement or you can disagree. Honestly, I don’t care what your opinion is—this article isn’t about voter fraud anyway. We’re past the point where facts matter—this is about emotions and game theory now. President Trump thinks he won and about 70 million of his supporters feel like they just had something stolen from them. They’re pissed and see every data-point as proof of a system that’s been rigged against them.

My question is: what happens next?

To start with, Trump could gracefully concede. However, we all know that won’t happen. Trump isn’t graceful (ever) and I’ve never once seen him concede anything. For much of my childhood, he was bankrupt and it never slowed him down—if anything, having his back against the wall made him stronger. For Trump, this is a minor setback and he intends to win.

Next, we’re going to see a lot of litigation as ballots are counted, some are rejected and accusations of fraud are tossed about. It will be highly partisan and volatile. Each step along the way is bound to inflame and upset both sides. Expect riots and protests. Thus far, the victims have mostly been storefront windows. It seems inevitable that the two sides will eventually clash in the streets. However, that violence is just the prelude.


A real investigation into election fraud takes time and with so many fake ballots now mixed in, it will be nearly impossible to reach a conclusion in the limited time remaining—in fact, it may never be solved. We’re going to run out of time. Then what? Do we have a re-vote? Do we let the states choose Electoral College winners? Do we defer to the 12th amendment (Google it as it’s about to become very important)? These are all highly partisan decisions that will mostly be made in states controlled by Republicans at the state level. If we go down this path, it will infuriate about half of our country and lead to further riots and chaos. Remember, these people were out celebrating last week, they’re not going to take a reversal of fortune lightly.


What if Trump does not get what he wants? I have a strong sense that Trump isn’t going anywhere. If you know anything about how Trump negotiates, he always starts with a very unreasonable ask and then walks it down. In this instance, he has multiple nuclear options to choose from. There’s also a chance that events could overtake Trump depending on what his own supporters do. In summary, I can see multiple event-paths over the next few weeks, many of them are not mutually exclusive and most of them are not favorable to equity markets. We haven’t had a true seccession crisis in America in a very long time - the market certainly isn’t prepared for it. If anything, the market is dreaming of yet another round of stimulus, which certainly isn’t coming until we know who’s in charge.








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