Donald Trump presidency — The best thing to happen to the US economy in the next five years?
Since the early hours of Wednesday morning when the results of the 2016 US presidential elections were formally announced and Donald Trump was declared as the 45th president of the United States I have changed my mind three times about whether to publish this article. Furthermore, almost everybody with whom I have discussed the idea of writing this article have advised me against writing it. I believe the views of these individuals, who are all well accomplished in academia and their respective professional careers, is predicated on a set of what I would call ‘personal views’ on Donald Trump. This is exactly the reason which has formed the basis for my going ahead with writing this article.
It is very important to me that, for the sake of completeness and avoidance of any doubt, I start by caveating the fact that this article is purely focused on the business side of Donald Trump’s approach to his presidency and not his personal and politically controversial views.
I am extremely passionate about business, the spirit of entrepreneurship and everything which it stands for. Do I agree with the politically and in some cases morally incorrect views and statements of Donald Trump during his campaign? No. Do I believe, and therefore am bullish, that his ideas make business sense? Yes.
With that said, I would like to present what is a set of evidence based views around why I believe that Donald Trump’s presidency will inject a well needed ‘breath of fresh air’ to the US, and subsequently global economic landscape by focusing on growth as it’s ‘north star’.
I will then aim to close off by linking these evidence based views to what is in my opinion a real concern for not just America, but also rest of the world, as a direct result of today’s corporate world shifting their focus away from the very same topic i.e. growth!
There is a lot of controversy around Donald Trump’s net worth which is a whole separate conversation for another day. However, what is factual is that he has achieved a tremendous level of business success. He has a solid track record for setting big targets by the way of successfully delivering real estate developments and getting them done on time and on budget. He has built a reputation for his attention to detail; something that the economy is in a desperate need of (as we will touch on throughout this article). In a net/net score world Donald Trump has demonstrated a very impressive standard of success in business. It is important to note that not all businesses that he has started have been successful. However, on a net/net score basis he is up; massively! In other words, his wins by far outweigh his losses. That is exactly what America and the world needs. He is a prime specimen of that rare and purebreed entrepreneur with unbelievable amount of self belief and tenacity and a never ending appetite that clearly pursues success at the highest level. In a business context, he has reached the top seat of what is essentially the biggest business in the world, which by his admission, has not been managed in a way that maximises it’s potential. He is a leader that is is optimistic and willing to disrupt the system with a ‘can do attitude’ and a set of ideas that will over time act as an engine for growth and propel the economy forward. So what are those ideas?
Infrastructure spending on railways, airports, utilities and a set of initiatives that will, put simply, take things back to basics by investing in the backbone of the country. Yes, this will come at a cost and it will indeed take time. However, like any other investment strategy, there is a return on this investment and that is growth. The 4% target which he has famously aimed to achieve. The stars have never aligned so favourably for a political party in Washington to dominate in a world where most of the population feel that the establishment has failed. The Republicans are now in control of the House of Senate, House of Representatives and also happen to have a Replication president in the White House. Without going into the nitty-gritty which will give this article a more political flavour and defeat the purpose, which is purely business, this dominance of Republicans makes for a more timely transition for Donald Trump’s first shovel ready infrastructure project.
Tax! 30 years since the American Tax system has seen any sign of reform. The Trump plan is aiming to lower the business tax rate from 35 percent to 15 percent, and eliminate the corporate alternative minimum tax.There is no doubt about the fact that nobody in the word innovates like the Unites States. Facebook, Apple, Google, UBER are all changing the way this planet is evolving and yet all of these, and hundreds of other extremely successful US businesses are keeping their funds well away from the US. These are profits which have been generated as result of sales in Asia, Europe and South America. The total value is estimated to be around 2.2 trillion dollars. By re-engineering the tax system, Donald Trump who is by nature very pro business, is aiming to avoid this inversion and promote the business community to repatriate their money. The ROI is (again) growth! The enabling of this repatriations will inevitably result in more opportunities at home, more investments and more importantly, more jobs for ordinary Americans.
Less regulation — According to the information published as part of the Donald Trump website, every year, over-regulation costs the US economy $2 trillion dollars and reduces household wealth by almost $15,000 dollars. Reform is Donald Trump’s solution, which again, if successfully implemented, will result in increased growth of the economy. This is a big ‘if’ and the reason for this is that history has shown that every political campaign has produced a set of policies and ideas that are heavily emphasised during campaigns and against which execution has failed as time goes on and the candidate holds office.
The word growth has been repeated throughout this article at every paragraph. Why? Because this is the main differentiator between what Donald Trump has promised to deliver versus what has been, and is lacking, in today’s 2016 world.
Here is the closing statement: The financial markets have been in a bull market for 8 years now with very little prospect of interest rates moving from the zero levels any time soon. Given that the longest ever bull market lasted 13 years, there is a strong possibility that the financial world will see a crash some time in the near future. High yield bonds have revolutionised financial engineering in a whole new way and could very well be the straw that will end up breaking the camel’s back (like the mortgage backed securities did in 2007–2008). The modern day 2016 business is purely focused on strengthening balance sheets which in turn boosts investor confidence and keeps shareholders satisfied. However, this is not being done in the conventional ways of re-investing profits back into the business by modernising and improving the operations, investments in workforce and growth at the micro level. It is simply a case of ‘borrow cheap money’ to pump into a M&A (Mergers and Acquisitions) deal and buy a bigger company which will have more assets and act as a steroid injection for the financial statements of the company. The bi-product of this process is High Yield Bonds! M&A activity has reached over 2 trillion dollars in the last five years and although the Wall Street analysts are reporting strong numbers on a quarterly basis which then result in increased valuations and record levels for equities, the average working class man on the street is worse off as result of the prolonged no growth environment, low interest rates and very low tangible productivity across the board. This is where Donald trump needs to apply his infamous attention to detail!