Key Economic News:
The Debt Limit, Government Funding, and Disaster Aid: In early September, the Republican-led Senate approved legislation to raise the debt limit, secure funding to avoid a government shutdown, and provide $15 billion in disaster aid for hurricane victims. Republican leaders such as Mitch McConnell and Paul Ryan were aiming for a longer-term extension on the debt limit, but were caught off-guard when Trump began to side with top Democratic leaders such as Chuck Schumer and Nancy Pelosi.
Our Take Away: Fiscally, nothing here was actually resolved. Instead, the can was simply kicked down the road since the recent quick fixes will last until December. From this point, Congress will need to develop and institute longer-term measures to fund government operations, raise the government’s borrowing capacity, and restore basic utilities to areas devastated by the latest hurricanes. Regardless of what has been tweeted by the President, the vast majority of Puerto Rico is still without power and the rest of the Caribbean is not faring any better. Over all, the team has only seen Band-Aids applied to a much more critical wound that will further deteriorate over the coming quarter.
Military & Medicare: On one side, Republican lawmakers are advocating for an increase in defense spending to meet Trump’s push for an even more formidable military and stronger borders. Meanwhile, Democratic lawmakers are advocating for universal, government-provided health coverage among other social programs.
Our Take Away: To merely skim the surface, one critical point that is routinely overlooked within Washington is how to responsibly finance any type of spending. The issue is only further compounded with renewed debate over another tax cut – one that could rival what was observed during the Bush administration. At this time, the team is sharing a stance echoed by Senator Bob Corcker in that, “The greatest threat to our nation is us. The way we handle our finances, we as a nation are the greatest threat to our nation. It’s not ISIS. It’s not North Korea. It’s not ascendant China. It’s not Russia. We are the greatest threat.”
Bitcoin Bubble: The value of Bitcoin plummeted during the first two weeks of September. This was driven largely by Chinese regulatory action that now includes a pending ban on cryptocurrency exchanges (following an earlier ban on initial coin offerings). Then there also were comments from J.P. Morgan’s Jamie Dimon, who called it a "fraud" and said he would fire any bank employee "stupid" enough to trade bitcoin.
Our Take Away: In recent months, we have had a few individuals from other firms reach out to Gold Sail to ask whether we currently trade or anticipate on trading cryptocurrencies in the near future. The answer to this for the foreseeable future is a stern no. Moreover, the reason why we will be abstaining from such activity is two-fold: 1) this is not an area related to our current fund’s specific strategies or our trading expertise; and 2) cryptocurrency exchanges are still finding their place within the greater global economic machine and political environment. While we do not necessarily agree with Jamie Dimon’s comments about Bitcoin being a “fraud”, we thoroughly believe participation in such markets with investor capital at this point would be tantamount to trading experimentation rather than trading strategy.
Key Political News:
The DACA Conundrum: Trump decides to end DACA (Deferred Action for Childhood Arrivals). This policy from the Obama administration allowed minors who entered the U.S. as illegal immigrants to receive a two-year period of deferred action from deportation and eligibility for a work permit.
Our Take Away: While the announcement to end DACA created incited more public outrage, the team believes this move from Trump is meant to create a bargaining chip out of DACA. As we all know, Trump is asking for tougher border security and stricter immigration enforcement measures. DACA is most likely another piece on the chessboard for Trump that he will leverage while negotiating for his wall and set of immigration bans.
The Russia Investigation: Robert Mueller is seeking to interview at least six of Trump’s officials with respect to the ongoing Russia investigation. They include Hope Hicks, White House Communications Director; Sean Spicer, former Press Secretary; Reince Priebus, Trump's former Chief of Staff; Don McGahn, White House Counsel; James Burnham, Deputy White House Counsel; and Josh Raffel, spokesman for Jared Kushner.
Our Take Away: If there is anything that can be concluded at this time, the Russian investigation is far from over. With the actions and conduct of Trump’s former campaign manager, Paul Manafort, under closer scrutiny, these latest individuals to be questioned are no surprise given the sheer scale of Mueller’s investigation. From the team’s perspective, the key people that might have the most to offer the investigation (and further extend the investigation) are Priebus and Kushner.
Key Social News:
More Natural Disasters: Mexico was hit this month with two devastating earthquakes; one 8.1 earthquake off of their southwestern coastline on September 8th and one 7.1 earthquake outside of Mexico City on September 19th. These are some of the strongest earthquakes for the region in over a century and have killed nearly 300 people.
Our Take Away: The devastation seen throughout September between these earthquakes in Mexico and the hurricanes along the Caribbean/Gulf of Mexico are somber reminders of the fragility of life and the vulnerabilities of our infrastructure. The recovery from these catastrophes will surely take years and the lasting economic impact will be widespread as people and industries begin to rebuild.
Social Media Influences: Concerns are being raised over data security and information distribution on Facebook and Twitter. More specifically, these social media giants and government agencies are working together to investigate how news/information can be manipulated to benefit foreign agendas.
Our Take Away: Any news regarding another country using a social media/tech company to influence American citizens will undoubtedly be discomforting. However, while the topic is a hot-button issue at the moment, the team does not expect this to negatively impact any firm in any severe way. At the end of the day, billions of people will continue to use social media sites and share content regardless of its credibility.