A few days ago on Bloomberg Radio Tom Keene and Barry Ritholtz interviewed Stephen Stanley of Amherst Pierpont Securities, focusing on his gloomy outlook for GDP growth. Twice Stanley stated that the “policy environment” was holding back growth. First he observed that “Some of the reasons potential growth has slowed are not permanent reasons. The policy environment has been very unfavorable toward business investment and that is something that obviously could change over time.” A couple of minutes later, in response to a question from Tom Keene about weak capital spending, Stanley said, “Investment has been the biggest disappointment relative to expectations for several years now. A lot of that has to do with the hostile backdrop. Corporate tax reform just sits there, and never happens. The regulatory environment has been difficult for a lot of industries. Firms are only doing what they have to do. They replace machines that break down . . .”
So how did Messrs. Keene and Ritholtz—ever eager to elucidate future economic developments for their thousands of listeners—follow up on Stephen Stanley’s dour assessment of the “policy environment?” Did they ask for more specifics? Challenge his assumptions? Find out what policy changes Stanley hoped to see out of Washington?
Not a chance. Nothing. Nada. Rien. You see, in BloombergLand, the wretched “policy environment” crafted by Obama Administration is off limits. Whether because of the network’s obvious liberal bias or the myopia of Wall Streeters obsessed with the Fed, the broader “policy environment” is a no-go zone. Bloomberg reporters and pundits would rather spend a month at the Chernobyl Nuclear Exclusion Zone than explore how Obama has stunted economic growth and killed jobs, thereby increasing inequality and hurting the poor. (The affluent Washington bureaucrats who live in suburban Maryland are doing just fine; Baltimore’s poor blacks, not so much. Let’s blame the police and Fox News.)
Why does this matter to investors? Because, as Stephen Stanley clearly implied, a new Republican administration with pro-growth policies could jump-start economic growth, proving Larry Summers and fellow Secular Stagnationists wrong. With the torrent of revelations about Hillary and Bill starting to make the Corleone Family look like amateurs, a Republican administration appears increasingly possible. This would be much more positive for equities than for bonds.
Copyright Thomas Doerflinger 2015. All Rights Reserved.