The research and analysis division of The Economist Group, the EIU, a sister company of The Economist British newspaper, actually felt the need to put the number "12" on the risk associated with Trump being elected President.
The number is a function of probability of an event - in this case Trump becoming President, still "moderate" - and the impact - a qualitative judgement of the likely damage to companies' capacity to operate at target profitability. Trump's risk number is a 12 out of 20, That is same as "The rising threat of jihadi terrorism destabilises the global economy", higher than "Chinese expansionism prompts a clash of arms in the South China Sea" which is an 8, and lower than "Beset by external and internal pressures, the EU begins to fracture" which is a 15.
Per the EIU website:
"We are outspoken in our views. Unlike our sister company, The Economist newspaper, much of our work is bespoke for clients and remains confidential. But we share the same fierce passion for independence and integrity. Clients work with us because we are not afraid to tell them what we really think. We never pander to internal agendas or work to buttress some preconceived strategy. We have no vested interest in any specific recommendation—we do not undertake follow-on work to help clients to implement strategies or plan M&A. We just analyse the facts and present our conclusions. We believe that our clients execute better strategies as a result."
The important thing to understand is that their "clients" are major international corporations, financial institutions, and individual investors among the 1%. In other words, everyone the average American loves to hate but on whom the American economy depends.
Donald Trump being the Republican nominee is something American workers and retirees depending on those 401(k)'s and IRA's should worry about. From August to November the economic risk will be considered...risky(?)... by the international investment community. American's don't care, of course. We should, but we don't.
During that same upcoming period problems in the tech economy in Silicon Valley have been forecast in the Silicon Valley Mercury News "Silicon Beat" page with one statement being " if we’re in a bubble, watch for it to burst in the second half of this year" and another statement being "some economists believe Santa Clara County and San Francisco have already seen their best days in the current economic cycle".
Even this is reported without mentioning the context of the housing bubble in the same area because no one thinks "big picture" in America. We have become the distracted culture - think "squirrel".
Like it or not, the only portion of our economy - the tech sector's "unicorns" - will need investors to think it's a good time to assume greater risk this summer and fall. It's explained like this:
"More than 60 percent of “unicorns” — private companies valued at more than $1 billion — likely will need to raise more capital in the next three quarters. Nearly four in 10 unicorns will need more funds in the final two quarters of this year."
Trump the Erratic, and to a lessor degree, Sanders the Socialist, represent red flags to investors who otherwise would not care about the election. Our economy this summer and fall will need venture capitalist and other investors to pull money out of their secure "mattresses" and gamble it on a stable American economy. Otherwise a meaningful number of tech companies in Silicon Valley and the San Francisco Bay Area will fail, while others will make significant layoffs.
The other domino that likely would be pushed over is the inflated housing market in this region. That would hit not only property owners but banks and mortgage companies - underwater anyone?
Americans are foolish, waking up every fourth year to participate in elections after three years of just sitting around fuming while other, more important elections go by. This time that foolishness could trigger a serious economic downturn in 2016-17. It won't be Trump's fault, nor Sanders'.
Not that the "undemocratic" Chinese system seems to do any better at keeping a stable economy. But if you must want us to have a democracy, fellow Americans, you must participate more regularly than you tweet. Otherwise you may kill the unicorns.
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