America's Continental Divide

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by: Mark J. Grant

Election day in America was a day full of rancor and the evening was one spent waiting and guessing amid twenty-four hours of great uncertainty. In the end, it was a draw, of sorts. The Democrats gained control of the House while the Republicans strengthened their position in the Senate. I am not sure if anyone can claim an out-and-out victory, as both sides got something. Now it will be a question of attitude. Will the Democratically controlled House spend their time on legislation or investigation. It is anyone's guess and probably it will be some of both.

Given that the Republicans control two of the three branches of government, I think they are in a somewhat stronger position. Politics, as always, will influence the markets in America and I think it is reasonable to expect some periods of calm and some moments of confrontation. Our country is certainly politically divided now, and one can only hope that civility and rational thinking will return to our legislative bodies, now that the mid-terms are behind us. I have no issue with different points of view. I have great issue with the lack of manners and the lack of politeness demonstrated, on both sides, during the elections. I remind the members of Congress that "for the good of the nation" is far more important than "for the good of the Party."

I'm in love with this country called America. I'm a huge fan of America, I'm one of those annoying fans, you know the ones that read the CD notes and follow you into bathrooms and ask you all kinds of annoying questions about why you didn't live up to that. I'm that kind of fan. I read the Declaration of Independence and I've read the Constitution of the United States, and they are some liner notes, dude.

-Bono

All eyes today will once again turn to the Fed. I am somewhat hopeful of a "play down" here. With our elected government doing everything in their power to grow the economy, the Fed may make some noises that the continual and rapid rise in interest rates will slow down.

Rising rates, of course, do everything to halt an economic expansion and so the Fed has been running counter to the desires of both the President and Congress. The Fed is an independent institution, no doubt, but it is still part of the government as defined by the Federal Reserve Act of 1913. "Independent" in my view, does not mean "Stand Alone" and it would be a good observation, on the part of the Fed, to acknowledge that fact.

I spoke Tuesday at the ALTSMIA conference. The subject was alternative investments and I was delighted to see innovation and technology improvements on the center stage. If you weren't in attendance it is a venue that you may wish to consider for next year. Any number of good ideas were bandied about by some very bright people.

I continue to pay attention to our upcoming 5G rollout. I have had any number of conference calls with some very large institutional money managers on the subject. You might consider the antenna manufacturer's as a beneficiary as we will need lots more of them. You may also wish to consider the companies that make them, for your bond and stock portfolios. Also, this should be a boon for the telephone companies that will provide the services. I say services because this virtually instantaneous new method of communication allows for internet, content and control of various objects and machines from remote locations with almost no time delay.

I would be spending some time on this subject because the new 5G technology will change a great many things and the earnings and revenues of some of the holdings in your portfolios. There are winners and losers alike here and to identify them early, and take action, is something that I think all of you should be focusing on now. It may also have a marked impact on the Healthcare Sector as an object in your pocket could call the hospital or first responders immediately if you fell down, blacked out or had unusual heart palpitations. There is far more to the new 5G network than meets the eye.

Another Round is coming up with Italy. They have to submit their new budget to the European Commission by November 13. I think the new one is going to be virtually a carbon copy of the old one. If the EU rejects, again, the Italian budget it is also likely to come with sanctions and fines and other forms of recriminations.

The EU will forecast a 2019 budget deficit for Italy of 2.9%, compared with the coalition's target of 2.4%, La Repubblica reported. In 2020 it could even breach the EU ceiling of 3%, the newspaper said. The commission will project growth a third lower than Italy's forecast of 1.5%, the newspaper also stated.

Italy and the EU are engaged in a high stakes game of "Chicken." If the EU rejects the Italian budget, once again, and imposes penalties, then a political war could breakout with the Italians refusing to accept them. Push is coming to shove, in my opinion, and I would either be short certain Italian possibilities or out of the any investments there in either equities or debt. If the situation worsens then it is likely to affect the money center European banks, in various nations, and I would be cautious about those credits as well.

A warning is worth more than a good idea and, once again, I issue my warning.