"Frankly, my dear, I don't give a damn!" - Gone with the Wind
The next week, the last week of Mr. Obama's presidency, the week before Mr. Trump's inauguration, means nothing. A week of "air." Whatever is said by anyone at the Fed, by anyone in Mr. Obama's cabinet, by anyone in government at all, are just words whispered into the wind before Mr. Trump takes office.
On January 20, the world stops, resets, and then restarts. The United States of America, like some giant computer, is going to get rebooted. Legacy erased, history erased, policies erased, as Mr. Trump presses Ctrl-Alt-Del. Then, in that one second of time that separates our two presidents, off we go on our new adventure.
Remember what Bilbo used to say: It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to. - J.R.R. Tolkien
There is no part of the World that will feel this as much and as quickly as the financial markets. Bonds, equities, commodities, currencies, emerging markets, and all of the rest, will be the first recipients of America's change of presidents. The hammer will come down, the gavel will bang and Rudyard Kipling's, "Gods of the Marketplace," will shiver with fear and quiver with anticipation.
As I pass through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Marketplace.
Peering through reverent fingers I watch them flourish and fall... - Rudyard Kipling
Now, I don't know about you, but I would prefer to flourish rather than fall. Falling is such an awkward affair and it leads to failing, which is such an unpleasant experience. "Avoid it at all costs," I say, and Mr. Trump's presidency is going to give both the flourishing, and the falling and failing, plenty of opportunities to be reckoned with, in my estimation.
One of the biggest "get it right or get it very wrong" decisions is going to be in the energy sector. Here, in bonds or equities or the commodity itself is going to be a critical decision that you must make. "Flourish or fall and fail indeed," is located just here.
Now, my commentary, "Out of the Box," does not have the reach of the Wall Street Journal or the Financial Times but it is distributed to around 5,000 significant financial institutions in some 48 countries. Last week, I heard from one of them who is an important "one of them." He is, in fact, a prominent central banker in the Middle East. He told me that it is his belief that oil will trade in the $40-50 range all year and that OPEC is scared out of its minds of America's shale oil production.
"As they should be," I state with conviction.
I believe that one of Mr. Trump's first moves, in his "Make America Great Again" campaign, is going to do whatever it takes, anything it takes, to make the United States energy self-sufficient and an exporter of oil and natural gas as quickly as is humanly possible. I see tax credits coming, tariffs on imported oil, and global economic carrots and sticks that will be forcibly used to accomplish this task. The gong is going to be struck and the sound and fury will be felt around the world.
The technology in this space is startling. The abilities of the shale oil companies to improve fracking, re-fracking and horizontal drilling are moving quickly ahead. Consequently, the costs of producing energy are coming down in price by leaps and bounds. It is my belief that $40-50 oil can be quite profitable for American oil companies, some already, and some quite soon, while the OPEC nations and their minions are just in huge trouble as a result.
I think that the current oil-producing nations are doing everything possible to prop up the price of oil but that it is only a matter of time before they falter as, perhaps not their wells, but their capital runs dry as their social programs can no longer be afforded. Many of these countries are one-trick ponies and, in my view, they are about to be "tricked out."
I see the "line in the Arabian sand" as Saudi Arabia's 49% sale of Aramco (ARMCO). Once that is done, "Watch out!" I expect 2017 to exhibit civil unrest, insurrections and perhaps revolutions in some of these countries as they can no longer support their ambitions or their aspirations. Personally, I shall not be sorry to see some of them go.
Much has been made of the opportunities in the banking sector and I believe this is a sound and prudent call. I, too, think the American banks will do well under America's new administration. Even more so, though, I think wise decisions in the American energy sector will not only flourish but catapult returns, even if oil flat-lines in the $40-50 space.
Technology, politics and taxes will be the driving forces and a 50-year cycle will be broken as a result. The energy sector, in my estimation, will be the major offset to America's buildup in our infrastructure and our military spending as we "buy American, spend American and tax American" under Mr. Trump's presidency.
If we all did the things we are capable of doing, we would literally astound ourselves. - Thomas Alva Edison
I am prepared to be astounded!