The Remade In America, Redux

“Never bet against America.”

– Warren Buffett, at the I.O.U.S.A. premiere, 2008

November 6, 2024— Buffett has said it’s a fact that should scream to ordinary investors: “Never bet against America.”

He said as much during the premier of our film I.O.U.S.A. which he hosted at the Qwest Center in Omaha, Nebraska on August 22, 2008 – just six weeks before the collapse of Lehman Brothers and the great bailout period began during the global financial crisis that was ignited, first on Wall Street, then across all sectors of the economy, for several years.

Making the film was an foundational experience for me in understanding the market and its players, including the influence of politics.

If you’ve seen the film, you know it forecast the financial crisis of 2008 almost to the day… by following the four great deficits the US has yet to overcome: trade, savings, budget and leadership.

The bailout period following the crisis remade the American economy and ushered in a wave of heavy government regulation, difficult taxation policies, irrationally low interest rates. Through it all Buffett maintained his steadfastness.

Ironically, Buffett helped make the film successful. When we called him to make the invitation, he actually answered the number we’d been given. He agreed to sit for an interview based loosely on his now infamous Fortune article on Squanderville and Thriftville, published in 2003.

Once Buffett agreed to appear, we immediately landed luminaries like Alan Greenspan and Paul Volcker to sit for the film, too. Former Treasury Secretary Robert Rubin said to us after he agreed, “If Buffett’s in the film, it must be a good one.”

Buffett also ended up tanking the film at the premiere. After watching the film with us, simulcast to 450 theatres around the country, he opened the Q&A session which was aired live on CNBC, with the statement: “I must be the token pollyanna of the group, I don’t see the problems pointed out in the film as an impediment. Never bet against America.”

Buffett’s four-word mantra will easily be among the candidates for his epitaph when he finally sheds his mortal coil.

Following his lead, partially, we began focusing in 2011-2012 on the small cap miners and manufacturaers who were throwing off the yoke of government to effectively lead the way out of the mess government had made of the financial markets during the aftermath of the ‘08 crisis.

We entitled the campaign at the time, Remade In America. Here’s a snapshot, I took this morning:

That part of the campaign focused on the deployment of fracking technology in the shale fields and how new tech was leading the way to a new era of energy independence for the U.S.

“Back then everyone still felt very depressed,” writes John McCrea this morning. John was our leading researcher on the project at the time, “and beat down by the crisis and ensuing Great Recession.”

“They had been mired in doom and gloom … and painful, personal financial loss … for 3 years. And were getting bombard left and right with bleak stuff like End of America. They were in need of — and craved — hope.”

Now that the election is behind us, we’re expecting a new era of innovation… a redux of the Remade in America theme. Part of that will be in the energy space, but much of it will be across the entire economic spectrum. And this time, smaller companies could finally and definitively take the lead in the stock market.

To kick it off, our guest essay this morning is from long-time friend James West, who runs his own outfit called The Midas Letter. It’s a quick rundown of what to expect on the morning after the election… in terms of the investment markets, at least. Enjoy – Addison

Trump Victory Winners and Losers

James West, The Midas Letter

Not a minute to lose.

So many are surprised by Trump’s win by a significant margin, though in the financial world, where all that matters is how much tax the government is going to take, it was expected. While it remains to be seen how much of Project2025 actually makes it into policy, there are opportunities that cannot go overlooked for the financially agile.

First, and maybe most obviously, I think $DJT and $TSLA are obvious wins. Both are up significantly in the pre-market.

With the implied reduction in tax revenue for the US government, gold and silver should see strong buy-side interest as the reduced income means more bond issuances to cover interest payments.

Obviously crypto is a big winner, with Trump being touted as the “first Bitcoin president.” Currently, the stuffing is getting knocked out of the precious metals sector as a result of the crypto segment eating gold and silver’s lunch.

But here’s the question: if the argument against gold being part of the US dollar reserve asset backing is that there’s just not enough of it, how does that square with Bitcoin’s maximum issuance of 21 million bitcoins?

The immediate kneejerk market response of gold going lower while $BTC surges is likely going to be short-lived, because Bitcoin will quickly price itself out of the market with no ability to expand its volume beyond that 21 million. Though let us not dismiss the idea that the Bitcoin mandarins could be coerced into some sort of modification to accommodate Trump’s ambition for it.

There is likely going to be a sharp increase in drill permitting in the oil and gas sector, which will no doubt benefit some publicly traded names with US domestic prospective holdings. Drillers, too, should be the beneficiaries of Trump’s victory.

When Trump was last in office, here is a list of ChatGPT-generated policy initiatives that were deemed favourable to business and industry:

1. Tax Reforms: The Tax Cuts and Jobs Act of 2017 reduced the corporate tax rate from 35% to 21%. This significant cut increased after-tax profits for many companies, enabling them to invest more in expansion, hiring, and research and development.
2. Deregulation: The previous administration focused on rolling back regulations across various industries, including environmental protections and financial oversight. This reduction in regulatory burdens lowered compliance costs and gave businesses greater operational flexibility.
3. Trade Policies: Emphasizing “America First,” tariffs were imposed on certain imported goods to protect domestic industries. While this benefited some manufacturers by reducing foreign competition, it also led to increased costs for businesses reliant on imported materials.
4. Energy Sector Support: Policies favored the expansion of fossil fuel industries by opening up federal lands for drilling and reducing restrictions on coal and oil production. Energy companies benefited from increased opportunities and reduced regulatory hurdles.
5. Infrastructure Initiatives: Proposals for large-scale infrastructure projects aimed to modernize roads, bridges, and airports. Such initiatives could create jobs and boost industries related to construction, engineering, and manufacturing.
6. Healthcare Policy Changes: Efforts to modify or repeal parts of the Affordable Care Act were intended to reduce healthcare costs for businesses. Changes could lead to more customizable health plans and potentially lower premiums for employers.
7. Immigration Policies: Stricter immigration controls were designed to protect domestic labor markets. For businesses, this could result in a tighter labor supply, impacting industries that rely on immigrant workers.
8. Investment Incentives: Tax incentives and opportunity zones were established to encourage investment in underdeveloped areas, stimulating economic growth and offering new markets for businesses.

Trump and the Project 2025 Agenda

The biggest question we now have to face is how much of the Project2025 Agenda is actually going to be implemented?

In a worst case scenario for business and private citizens alike is the implementation of the fundamentalist Christian authoritarian theocracy expressed in the pages of the Project2025 manifesto.

And to what extent is the “this is the last time you’ll need to vote” statements that were part of his early campaign going to manifest?

The American people might yet be the biggest losers of the electoral outcome if a militarily enforced dictatorship is what is planned for America. The rest of the world will be similarly influenced toward non-democratic governance, or at the very least, authoritarian theocratic elements in the political apparatus of many countries will feel emboldened and empowered. ~~James West, The Midas Letter

Regards,

Addison Wiggin,
Grey Swan

P.S. We’re grateful our Grey Swan forecast for a contested election did not come to fruition. We were not looking forward to debating whether Donald Trump is a threat to democracy for the next week or so while the electoral votes got sorted out.

Turns out, democracy actually works. It just didn’t give the Democratic establishment the results they were expecting.

Send your thoughts on the election results to addison@greyswanfraternity.com.