The 2020 U.S. Presidential Election: When the Ship Is Sinking, Does Anyone Care Who the Captain Is?
Since I started this site in 2007, I’ve always written a brief piece about U.S. presidential election results.
I wrote one in 2008, another one in 2012, and a slightly more controversial one in 2016.
This year is different for many reasons, but the most important one is that as I write this on November 4, we don’t know who won the election (for sure).
However, given that the remaining uncounted ballots are mail-in/absentee, it seems that Biden will win by narrow margins in the swing states and, therefore, win the election.
But I don’t think it matters too much.
When the Titanic hit the iceberg, it didn’t matter who was wearing the captain’s hat.
All that mattered was the number of lifeboats (not enough).
The U.S. has already hit its iceberg, and not only are there not enough lifeboats, but most people don’t even realize they’re sinking:
Icebergs, Lifeboats, and the Decline of Nations
I don’t want to veer too far into “rant” territory, and I do want to make this article relevant to career discussions, so here are the points I’ll cover:
- Key takeaways from the election results so far.
- Why the non-presidential results, including Senate and House races and ballot initiatives, may be more illuminating.
- What the results mean for the finance industry, investment banking, and your career.
- And a short investment portfolio update.
Key Election Takeaways
The main one here is that even though the Democrats will win the presidency and retain control of the House of Representatives, they did far worse than expected.
Not only were the polls “off,” but they off by very different percentages in different regions.
Places like Florida seemed moderately wrong (~5% miss), while the results in parts of the Midwest were very far off (e.g., Wisconsin, where Biden was up by ~10% in polls vs. a ~1% actual margin).
Unlike Clinton in 2016, Biden had enough of a “cushion” to withstand polling errors and squeak by, but the closeness of these results led to many panic attacks on Twitter last night.
And in an even stranger twist, it seems that Trump lost support among whites but gained support among non-white voters in the Sunbelt states – despite being labeled “racist” constantly:
Taking a step back, it’s amazing that the election was this close.
Trump has always been unpopular, there’s a raging pandemic that has crippled the economy, and the “official” unemployment rate is around 8%, up from 3-4% last year.
So… what happened?
Analysts will need to dig into exit polls and other data to say for sure, but my quick take is:
- People do not like Trump, but they don’t necessarily like Democrats that much more.
- It seems that people support the Republicans’ populist/nationalist policies, but they were quite sick of Trump the individual.
- I’m not sure how well “identity politics” is working for Democrats, given that they lost support among minority groups.
- Finally, it seems like different groups blamed Trump for COVID-19 to different degrees – but his poor approval ratings on the issue could have eroded support among senior citizens and, therefore, cost him the election.
Non-Presidential Results: The Senate, House, and Ballot Initiatives
Meanwhile, as predicted, Democrats will retain control of the House of Representatives, but it seems they will lose seats and will, therefore, have a smaller margin.
The Senate is still up for grabs, but it seems likely that the Republicans will retain control or that it will be a 50-50 split, with a few surprising results that went against the polls.
These Senate results make a big difference because Biden cannot accomplish much without a majority there.
Continued Republican control means that big tax or healthcare changes over the next ~2 years are less likely and that some of Biden’s appointments may be difficult.
Yes, there will probably be another fiscal stimulus package, but it will be smaller than if the Democrats had won a clear Senate majority.
I also find some of the state-level ballot initiatives interesting because they sometimes preview policies that might arrive at the federal level.
- Proposition 22 in California, which let Uber and Lyft continue to classify drivers as contractors rather than employees, passed by a wide margin. A victory for tech and a loss for drivers and labor groups such as unions.
- Also, in California, Proposition 15, which allows property taxes to be based on current market value rather than the initial purchase price and fixed annual increases, appears to be in a tight race.
- Meanwhile, in Florida, voters approved a $15 minimum wage by a 20%+ margin – even though Trump won the state and Republicans flipped a few House seats there.
There are other initiatives related to election conduct, affirmative action, drug decriminalization, and other issues, but the ones above are some of the most important business-related ones.
The $15 minimum wage result is not too surprising (who doesn’t want higher wages?), but the Prop 22 result might show that people like the services tech companies provide, even if they don’t like the companies themselves.
So, regulating and breaking up Big Tech may be more difficult than expected.
On the other hand, it might not mean much because this proposed law was poorly written and may have had unintended consequences.
Impact on the Finance Industry, Investment Banking, and Your Career
I’ll start with the broader picture: Trump vs. Biden barely makes a difference in the fiscal and monetary outlook of the U.S.
Because in either case, we’d see continued fiscal stimulus and money printing, along with a virus that seemingly cannot die… which will spur even more stimulus and money printing.
The main variable is degree: a lot (Biden / full Democratic Congress), a moderate amount (Biden / split Congress), or a somewhat-lower amount (Trump / split Congress).
And another variable is type: higher taxes and much higher spending (Biden) or similar taxes and moderately higher spending (Trump).
No one cares about reining in the deficit or returning to sound money, so we’ll see more spending and printing until something “breaks” (which it will… eventually).
These problems started decades ago, and they explain, in part, why there’s so much income/wealth inequality.
For some great examples, take a look at wtfhappenedin1971.com:
These problems will not “go away” unless something major happens, such as a New Deal 2.0 and a completely new monetary system.
Moving to specific policies now, we could see the following changes under a Biden administration:
- Potentially Higher Taxes: This one probably won’t happen in the near term due to the Senate, but I could see the personal tax rate for high earners increase – even if the corporate tax rate stays the same (or vice versa). It may take another election cycle to see these changes, though.
- More Antitrust Scrutiny – This one is a big “if” because Obama barely did anything about antitrust, despite making noise about it early on. But I do think Biden has more populist leanings than Obama, so we could see more challenges to large M&A deals.
- Less-Restrictive Immigration Policies – This one is good news if you’re an international student and you’re crazy enough to want to work in the U.S. in the current environment. Biden will probably make it easier to win visas of all types… but it probably won’t be at the top of his priority list as the pandemic is raging.
It’s almost impossible to make reasonable predictions here because:
- It’s not clear who the power centers in a Biden administration will be, and if they’ll take an Obama 2.0 approach (i.e., defer to big companies and elites) or more of a populist angle.
- We’re in a highly unusual environment due to the virus, recession, and partial-recovery-but-still-weak-economy, which means that “normal” policies may be off the table for a while.
If I had to bet money on changes to the finance industry, I would guess that deal activity will fall, and after-tax pay will be lower.
But it might be a bit easier to break in as an international student, assuming the pandemic ever ends.
In terms of careers, my views haven’t changed much.
I think investment banking is still one of the best entry-level fields, but its long-term appeal has declined.
In addition to all the other issues from working at big banks – deferred and stock-based compensation, politics, bureaucracy, etc. – the potential reductions in deal activity and after-tax pay will weigh on these firms.
Longer-Term Predictions and Investment Updates
I’m not going to publish a full portfolio update, but I will post a quick update to my mid-2020 version.
The usual disclaimer applies; i.e., this is not investment or legal advice, I am not a financial adviser, do your homework, and do not follow anything I suggest.
Since my last update, I’ve continued to increase my positions in Bitcoin, gold, and silver, and I’ve reduced my exposure to U.S. equities.
However, with these election results, I am a bit less bullish on crypto and precious metals.
Yes, all fiat currencies will continue to fall, and I expect the USD to fall more than others, given the amount of money printing relative to GDP.
However, it may not be quite as rapid a drop as I had expected earlier this year.
I’ve also opened a brokerage account denominated in EUR; I don’t think the euro is much better than the dollar, but I don’t want to be tied to a single currency.
And my long-term outlook for the U.S. has not changed: it’s not going to explode in a giant fireball, but it is heading for 3rd world status.
I went back to the country in September and passed through a few major cities, and they seemed to be in worse condition than cities in actual 3rd world countries.
If you’re from another country, you should stay far, far away.
With “virtual classes,” there’s no point even enrolling in a degree program currently.
And if you’re a U.S. citizen, I would recommend finding a way out.
You can’t do much at the moment because of travel restrictions and closed borders.
But you can work on developing skills that give you the option to leave, such as remote work, an online side business, or some other source of income.
So, find your lifeboat and escape before the ship breaks in half.
If you act quickly, you might be able to do it while the other passengers haven’t yet noticed the iceberg.
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