July 2018 Commentary

  • The Manafort Trial: Donald Trump’s former campaign chairman, Paul Manafort, has been key person of interest in special counsel Robert Mueller’s investigation into election meddling and potential Trump campaign violations. In October of last year, Manafort was first indicted (in Washington D.C.) on 12 federal charges that included money laundering and failing to register as a foreign agent. Furthermore, in February of this year, Manafort was indicted for a second time (in Virginia) on an additional 18 counts of tax evasion and bank fraud. His current trial in regard to tax evasion and bank fraud is currently underway in Virginia, and his second trial related to money laundering and registering as a foreign agent is set to take place in DC next month. To make matters even worse, a federal judge revoked Manafort’s bond in June after prosecutors accused him and former Russian intelligence operative Konstantin Kilimnik of witness tampering. As of late, 26 witnesses including Manafort’s bookkeeper, CPA, and tax accountant have testified to assisting Manafort in committing the alleged financial crimes. Manafort’s close business associate, Rick Gates, was also called to the stand by the prosecution and testified to illegally concealing over a dozen foreign bank accounts from authorities at Manafort’s direction. Ironically enough, Gates also testified to embezzling hundreds of thousands of dollars directly from Manafort himself during their dealings.

    • Our Takeaways: If prosecutors are successful at presenting the evidence for the alleged crimes Manafort committed and convincing the jury to reach a guilty verdict on the vast majority of the charges, then the trial will likely reaffirm – in the eyes of the public – the credibility of Mueller’s investigation after enduring an onslaught of routine twitter attacks from the president. Why is this significant? The midterm elections this November are fast approaching and it’s where all 435 seats in the House and 35 of the 100 seats in the Senate will be contested. In other words, Manafort’s trials over the coming weeks could both help indicate the strength and direction of Mueller’s investigation and help indicate the social/political sentiment of the nation a month prior to elections. Overall, the expectation at this time is that Mueller’s team will be successful.

  • Doubled Edged Tariffs: Back in early March of this year, Trump took to Twitter to declare, “Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!” By June 1st, and to the dismay of several of our own allies, there were tariffs of 25% on steel imports and 10% on aluminum imports. Fast forward through June and July and what we are witnessing now are the anticipated, negative consequences of such a tariff. While the main winners of a steel and aluminum tariff are American steel and aluminum producing industries (assuming those industries have been largely immune to any retaliatory tariffs from foreign governments), the losers are consumers and Americans working within manufacturing industries that require steel and aluminum for production of consumer goods.

    • Our Takeaways: Although Trump may have had good intentions in regard to imposing steel and aluminum tariffs, his course of action is [maybe] benefiting American companies that sell steel and aluminum while taking a toll on American companies that depend on steel and aluminum. For example, Whirlpool Corporation (an American company dependent on steel and aluminum) fell about 15% after their earnings announcement since the company is expecting to pay $350 million more on raw materials this year than previously expected. Take Ford Motor Company (an American company dependent on steel and aluminum) as another example. In late July, Ford reported a 48% year-over-year drop in net quarterly earnings and has repeatedly cited the increased costs in steel and aluminum as a $1.6 billion dollar threat to its bottom-line for 2018. Overall, the president might be hailing the tariffs as a success for American steel and aluminum producers, but it is proving to be disastrous for steel/aluminum-using industries that are estimated to employ 80 times more Americans as steel/aluminum-producing industries.

  • To Tweet or Not To Tweet: In a recent tweet from Tesla’s CEO,Elon Musk, the high-profile billionaire entrepreneur has stirred controversy among Tesla shareholders and drawn critical attention from the Securities and Exchange Commission after announcing, “Am considering taking Tesla private at $420. Funding secured.” Upon the announcement, Tesla’s stock jumped nearly 13% and has elicited at least two lawsuits accusing Musk of tweeting “materially false and misleading information...to exact personal revenge and ‘squeeze-out’ short-sellers who had purportedly been badgering him for months.” The lawsuits against Musk might be successful if the plaintiffs can prove that Musk and Tesla did not actually secure funding for such a buyout.

    • Our Takeaways: Financially sensitive items like this should most likely fall under the “do not tweet” category, especially if the ink is barely dry on the deal or if there is just no deal at all. While the first 7 words from Musk’s tweet were more opinionated and aspirational, the last 2 could prove problematic with regulators if funding was not, in fact, secured. To date, neither Musk nor anyone else has stated who would be funding the transaction. At the purported buyout price of $420 per share, Tesla would be valued at slightly under $72 billion. Overall, when it comes to Musk making claims or future projections, he tends to fall short more often than not.

  • Collusion & Crime: Over the past few weeks, Rudy Giuliani has raised eyebrows after asserting that “collusion is not a crime” while appearing on a variety of news talk shows. Despite the president having repeatedly asserted for months that there was “no collusion”, Giuliani, a former U.S. Attorney for the Southern District of New York and current attorney for Trump, first made the statement during an interview in late July on “Fox & Friends”. Moreover, Giuliani elaborated on his comments during a follow-up interview on CNN where he stated, “You start analyzing the crime – the hacking is the crime. The president didn’t hack. He didn’t pay them for hacking.” Interestingly enough, Giuliani has told Axios Media that there are two topics the president’s lawyers want to rule out in order to agree to a Trump sit-down with Mueller: 1) Why Trump fired FBI Director James Comey; and 2) What Trump said to Comey about the investigation of former national security adviser Michael Flynn.

    • Our Takeaways: First off, Giuliani probably should not be making the rounds on daytime news talk shows since his comments only tend lead to more and more questions that are not doing him or the president any favors. If there was “no collusion” that took place, it might seem reasonably odd to suddenly start going off on tangents saying “collusion is not a crime.” Additionally, it appears that the president and the president’s legal team are attempting to set unreasonable restrictions for a potential meeting between Trump and Mueller in order to preemptively spin the potential results of such a meeting. The questions that Giuliani wants to take off the table are central questions to Mueller’s investigation on whether or not Trump obstructed justice. Overall, the expectation going forward is that the president’s legal team will likely continue to denounce and discredit the special counsel’s investigation – a course of action that will further divide republicans and democrats, and likely create rifts within the republican party itself right before the midterm elections.


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