Why the US Mid-Term Elections Matter for Australia

Before I get into today’s topic, a quick housekeeping note. This is the last time you’ll hear from me in this capacity in Money Morning. I’m taking a week off with the family, and upon my return will launch a new project.

It will be a new daily e-letter (free, of course) with a uniquely Australian flavour. Launch date is planned for 19 November. I look forward to you joining me then…

Righto, onto today’s essay…

The most important event going on in the world right now is the mid-term elections in the US. It may not seem like a big deal to us here in Australia, but it is. The results probably won’t be known until the end of the day here, depending on how tight the vote is.

In this free report, economy expert reveals four ways you could cash in on the global infrastructure boom. Download now.

Why are the mid-term elections such a big deal?

Because for the first time in I don’t know how long, the two political parties represent vastly different ideologies and paths for the US and global economies. The Republicans and Trump represent a nationalist path, one that puts the US economy ahead of global interests.

While there are many strands to this, in short it involves making the US economy competitive again, and not merely a consumer of Asian factory output.

Over the past few decades, the US economy has lost its manufacturing base to China. It’s been replaced by a service economy, fuelled by low interest rates, rising assets prices and increasing debt.

The Republicans (rightly, in my view) see this growth model as structurally flawed. There is only so much debt driven growth an economy can produce before it blows up.

It blew up in 2008. And the response was more debt! This was the background to Donald Trump getting elected.

In a recent debate between former Trump adviser Steve Bannon and establishment spokesperson David Frum, Bannon’s opening remarks were about exactly this.

That is, he connected the rise of Donald Trump and ‘populism’ to the bailout of Wall Street, at the expense of the ‘little man’, in 2008.

The people are finally reacting against the prevailing economic orthodoxy. If Trump is successful in carrying out his ‘populist’ plans, it will result in massive structural change to the global economy.

Supply chains will shift, currencies will realign, and small economies like Australia will suffer unless we get with the program and toughen up. That is, we need to get globally competitive, stop swapping houses with each other, and stop selling out our energy assets, which leaves up with high, uncompetitive power prices.

The Democrats, on the other hand, represent more of the same. That is, debt-fuelled growth and a ‘globalist’ agenda.

Globalism has a certain type of allure. On the surface, it promotes international cooperation, and the world working together to grow and solve problems that impact all of us.

Beneath that façade the allure wears off. Globalism represents the concentration of power into unelected institutions that wield inordinate influence. The greater the concentration of institutional power, the less that is in the hands of the people.

That’s when national sovereignty gives way to rule by institutions.

Not surprisingly, the ‘establishment’ loves globalism because of this concentration of power. And intellectuals (the cultural elite) support this because they think they’re smarter than everyone else and know how the world should be.

This is why the establishment and cultural elites hate Trump. This is why this election is such a big deal, and why the outcome will have huge implications for the Australian and global economy.

Alexander Downer hopes the Democrats win

By the way, I’m guessing Alexander Downer hopes the Democrats win both the House AND the Senate. Downer, of course, helped kick off the investigation into the Trump/Russian collusion thing by supposedly reporting on a conversation he had with Trump adviser George Papadopoulos.

In a recent tweet, Papadopoulos wrote:

Decided am going to start talking to Australia directly. Australians need to know that Alexander Downer was an errand boy for the Clinton’s, who, should FISA be declassified, might have single-handedly disrupted the US-Australia relationship to safeguard his ties to the Clintons.’

That’s a pretty heavy claim. So far, Downer is keeping his head down. As well he might…

His ‘meeting’ with Papadopoulos in London in May 2016, when Downer was Australia’s High Commissioner to the UK, was a shady affair.

The official version is that Papadopoulos told Downer, under the influence, that he had some dirt on Hillary Clinton, via the Russians. But even Downer now denies this.

According to Papadopoulos, the meeting came after a number of other suspicious interactions with western intelligence officials. The gist of it is that Papadopoulos thinks he was being set up, with the ultimate aim of linking Trump to Russian election interference. It was a ‘deep state’ sting operation.

The question is whether Downer was acting in an official capacity (there was another Australian intelligence official at the meeting) or not. Either way, it’s not a good look.

Clearly, Downer saw little risk of his involvement at the time. He obviously thought Clinton would win the election. Now, he’s no doubt hoping the Democrats win back control of the investigative committees looking into all the pre-election dodginess.

My guess is that they won’t. Downer will soon have to tell Australia exactly what he was up to in May 2016. That should be very interesting…


Greg Canavan,
Editor, Crisis & Opportunity

PS: The growing Chinese middle class could translate into a massive investment opportunity for Australians. Get the details here.

Greg Canavan is a Feature Editor at Money Morning and Head of Research at Fat Tail Investment Research.

He likes to promote a seemingly weird investment philosophy based on the old adage that ‘ignorance is bliss’.

That is, investing in the Information Age means you have all the information you need at your fingertips. But how useful is this information? Much of it is noise and serves to confuse, rather than inform, investors.

And, through the process of confirmation bias, you tend to read what you already agree with. As a result, you often only think you know that you know what is going on. But, the fact is, you really don’t know. No one does. The world is far too complex to understand.

When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases.

Greg puts this philosophy into action as the Editor of Crisis & Opportunity. As the name suggests, Greg sees opportunity in a crisis. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines traditional valuation techniques with charting analysis.

Read correctly, a chart contains all the information you need. It contains no opinions or emotion. Combine that with traditional stock analysis and you have a robust stock-selection strategy.

With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the basic, costly mistakes that most private investors do every time they buy a stock.

To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Money Morning here.

And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here.

Official websites and financial e-letters Greg writes for:

Money Morning Australia