Don’t trust banking behemoths’ 2020 election predictions

Don’t trust banking behemoths’ 2020 election predictions

November 1, 2020

With Joe Biden up in the polls, pre-election positions should be easy. Load up the truck on shares of any company that can benefit from his embrace of the Green New Deal, like solar-panel companies. Sell Treasuries because Biden’s spending plan looks like President Trump’s — only on steroids.

Also, buy stocks. If you think Trump was good for the markets over the past four years, Biden’s planned $2 trillion spending spree as he gets into office will turbocharge markets like never before, the Wall Street experts say.

And yet look closely, and solar-company stocks have risen over the past year but they aren’t shooting to the moon. Yields on Treasury bonds aren’t spiking wildly. And the stock market appears to be in a panic.

There are a couple of reasons for this. Some traders say investors are finally pricing in all those new taxes Biden is planning, or that Biden’s poll numbers in battleground states are shakier than the consensus indicates. Or maybe Trump will come close enough to contest the election, sending stocks into a tizzy of uncertainty for weeks after Election Day.

The confusion of the smart-money crowd tells us something about Wall Street. The geniuses who run the big banks and financial firms and too often dominate economic commentary have never been that smart, and probably shouldn’t be trusted to either predict the election or how good (or bad) things will get whoever is elected.

One reason I know this: The behind-the-scenes confusion I’m witnessing among major traders. Wall Street cares a lot about the presidential election and not just because it impacts their tax bills. They trade on the impact the likely winner will have on stocks, which is exactly what they’re doing now, feverishly, as we get close to Tuesday.

Several top players in the business over the past few days have called me, of all people, for a read on the presidential polls because they’re trading blindly on this one.

“My clients are mostly split,” said one adviser to major hedge funds. “About 60 percent of them think it’s Biden’s to lose, but the rest say they’re betting on Trump.”

The other reason to always suspect Wall Street wisdom is its lousy track record. Moody Investors Service recently made some news predicting that a Biden victory would be great for the economy.

Forget about his tax increases, new regulations, likely fracking bans, or having a socialist like AOC giving Biden tips on the economy. The smart dudes at Moody’s said Biden’s big spending plans would cancel any negative impact of his tax hikes.

But since when is a government-controlled economy more efficient than the one we have now, where pre-COVID unemployment was at record low levels, and working-class people started seeing wage increases for the first time in years?

Another question: When was the last time Moody’s gave investors fair warning to any major financial event? The 2008 banking crisis? Nope. The dot-com bubble bursting in 2000? Nope.

Go back in history and you’ll see that for every one Moody’s gets right, they get a lot more wrong.

I don’t want to pick on Moody’s because it’s an easy target. The mighty Wall Street firm Goldman Sachs (another Biden-economy booster) is less obvious but just as qualified for an award. Recall: Its former CEO touted the end of the 2008 financial crisis before it ­really began, leading to Goldman needing a government bailout to survive.

The point is when you see left-leaning TV pundits praising Moody’s for its Biden analysis, remember it’s mostly devoid of context. And based on its record (and settlements totaling almost $7 billion for its role in the 1MDB scandal), Goldman should probably stick to banking and stop making predictions that can sway a presidential election.

Bezos buying CNN? We don’t ‘C’ it

Last week, Wall Street media bankers were buzzing about CNN, but it had nothing to do with something Chris Cuomo did or said. The talk in banking circles was that Amazon founder and CEO Jeff Bezos — the world’s richest man — wanted to buy CNN from its parent company, AT&T.

AT&T is struggling with debt and an odd cultural fit with the news channel; it’s run by some pretty conservative dudes in Dallas. So the deal made sense. Bezos has the money to buy how many billions CNN would cost, and he has a nascent media empire since he also owns, personally, The Washington Post.

If old media is your hobby, why wouldn’t a collector like Bezos just add to his collection?

When I broke the deal-speculation story, some of the biggest cheers came from my friends at CNN, who can’t stand the stodgy white dudes they have to call boss. That’s particularly true now that the network’s chief, Jeff Zucker, could soon be leaving (his future there, as described by a friend of his, is “50-50”) and CNN is facing cost cutting from the bean counters in Texas, which might mean layoffs.

Sorry to disappoint you, guys. While the deal makes sense on paper, a person close to Bezos tells me he has no interest, at least not yet. Maybe he’s waiting for a new president to approve the purchase, since the current one hates him so much. (Trump refers to him as “Jeff Bozo” for WaPo’s negative coverage of the administration.) Or maybe Bezos wants to add a few more dollars to his estimated net worth of $187 billion before making his move.

Bottom line, CNNers: Those stodgy white dudes in Dallas will be your boss for some time.

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