On Oct. 11, 2019 Vanity Fair Hive’s William D. Cohan wrote “A Decision Between Sickness And Death: Wall Street Tries To Get Its Mind Around a Warren Presidency.” This article is so important that the full article is below:
You can tell Wall Street is getting more than a little worried that Elizabeth Warren may become the next president of the United States when research reports start popping up about what her presidency might mean for the financial markets. Spoiler alert: It’s not good.
In a note to his high-net-worth clients on October 8, Barrett Tabeek, a financial adviser at Matauro, LLC, an affiliate of AXA, the giant French insurance company, makes clear that a Warren presidency won’t be good for corporate earnings, which means she won’t be good for the stock market, which means she won’t be good for shareholders who have no doubt gotten quite used to the stock market highs unleashed by Donald Trump’s massive tax cut for corporate America. “Everyone has their hierarchy of what’s important,” Tabeek wrote, “and Warren is an unapologetic populist who, if in power, would enact policies designed to reduce corporate earnings to benefit other stakeholders.” In the group that stands to benefit from a Warren presidency, Tabeek puts “workers,” then the “environment” and “those with lower incomes,” and finally “women and minorities.”
While he’s adamant that he’s not being political in his four-page note, Tabeek evaluated 10 of Warren’s policy proposals—among them, “ban fracking,” “increased taxes on the wealthy,” “break up big tech,” and “reinstate Glass- Steagall”—and pretty much declares that they will reduce corporate profits, reduce incomes for the super-wealthy, and raise gasoline prices for consumers. “The bottom line is that from a market standpoint, all of these policies would be negative for stocks, with some being downright negative for the broad markets (by reducing corporate earnings broadly) while others would be material negatives for certain sectors (large-cap tech, prison stocks, defense stocks, etc.),” he wrote. “How negative would these policies be for stocks? No one knows exactly, but it’s safe to say they’d be negative.”
Wall Street’s best hope, Tabeek notes, is that most of the policies that Warren would like to enact would need congressional approval, “and as such they are unlikely to be approved, at least based on what we know now.” He wrote that polls suggest that Warren is “more liberal than most Democrats (and obviously Republicans) so even if Democrats were to sweep (controlling Congress and the presidency), it’s unclear how many of these policies would be enacted,” although he pointed out that some of her policies, such as having the EPA ban fracking, could be done by executive order. But actually, Tabeek is significantly more pessimistic than many others on Wall Street, who don’t yet see Warren as either the inevitable Democratic nominee yet or that she would necessarily govern—if she’s elected president—as radically as she comes across in her stump speeches. For all her regulatory fervor, she still describes herself as a capitalist—and she hasn’t yet passed through the crucible of a general election, which can sometimes, though not always, have a moderating effect.
Robert Wolf, who has his own advisory firm and has been described as Obama’s favorite Wall Street banker, sees Warren as “having the most momentum in the populist lane” while Joe Biden, Obama’s former vice president, is “still the guy in the moderate lane.” He hesitates to say that Bernie Sanders is out of the picture, especially since within days of suffering a heart attack, he announced that he had raised $25 million from 1.4 million unique donors, “which is just off the charts in both ways.” He also can envision Sanders playing a key role, should he decide that his health scare prevents him from pushing forward with his campaign. Such a move, if it were to happen, would obviously favor Warren. “There’s no question that the role he decides to play—whether he continues onward or decides to align his movement with Elizabeth Warren—will definitely be one of the major steps in the primary season,” Wolf says. (There’s no indication, yet, that Sanders plans to pack it in.)
Wolf is much less worried about Warren’s policies than he would be about Sanders’s policies. “She’s to the right of Bernie, but much to the left of Biden,” he continues. “She wants to promote capitalism, and we still need to figure out what that means to her. The way she comes across is: She wants capitalism to be fair and balanced and regulated. And I think that we need to better understand what it means ‘to be regulated’—which is fine, as long as we keep the ‘fair and balanced.’ It’s to be determined what that all means, and I’m not losing sleep yet, because, in my opinion, we’re still in an environment where there’s a big difference between populist rhetoric and the ability to execute a plan when you need congressional approval.”
He thinks of Wall Street in simple terms: 40% are staunch Democrats who will vote for Elizabeth Warren over Donald Trump; 40% are staunch Republicans who will vote for Donald Trump over Elizabeth Warren. Then there’s the 20% in the middle. In 2008 that 20% went for Barack Obama. In 2012 it went for Mitt Romney. In 2016 it went for Hillary Clinton. “I don’t know where they’re going to go today,” he concludes. “Because an incredible number of people in financial services are exhausted by the Trump chaos.”
Another Wall Street bigwig and longtime Democratic Party stalwart likes to use a football metaphor when it comes to figuring out who the Democratic nominee will be. He thinks Warren has one spot in the Democratic Super Bowl locked up; the other spot looks like it will go to Biden but there are a host of more centrist Democratic candidates—Kamala Harris, Pete Buttigieg, Cory Booker, Amy Klobuchar—who are going to use the next debate, scheduled for October 15, to try to displace Biden as the inevitable challenger to Warren. But they can’t go after Biden directly. “People have already been burned by that stove,” he says. He says they will go after Warren, instead of Biden, in order to displace Biden as Warren’s challenger. It’s a subtle strategy. “It’s a little bit of a bank shot,” he continues, “but you’re going out to be the alternative to Elizabeth Warren. Elizabeth Warren, on today’s facts, has a spot at the Super Bowl. That could change. The trick here is for someone to basically say, ‘I am the person who can take on Elizabeth Warren. Let’s get down to the two of us or three of us.’” And what are his Wall Street brethren thinking about Warren? “They’re all whiny,” he says. “Every time they open their blanking mouths, they probably gain Warren another 50,000 votes.”
But another longtime Wall Street banker who has also been involved with Democratic politics has been impressed with Warren’s political skills. “She’s putting together a great campaign,” he says. “She has a great message. She’s resonating. She is smart politically, smarter than the rest of them.” He likes that she doesn’t “sugarcoat” things. And many parts of her message are resonating with him. In small groups, he says, she tones down her anti–Wall Street rhetoric and she’s becoming more moderate. “She’ll [now] put it differently,” he says, “which I don’t disagree with, which is ‘Do you think our country would be better off if we had less inequality?’ Well, I can’t argue with that. Of course, the answer is yes.” He seems genuinely impressed by her. “I think she’s incredibly smart and much more reasonable towards what she wants to do for this country than people think,” he continues. “A lot of what she does is against my own personal interest, but I think she has the greater interest at heart. And I like that. Okay. And she does not talk crazy.” He thinks she can win if she focuses her message on having wealthy individuals pay higher taxes than they are now, rather than talking about remaking capitalism by attacking corporate America. (He also thinks Tom Steyer, the billionaire and former hedge fund manager, is someone to watch at the next debate.)
When he first started talking to people on Wall Street and in corporate America about Warren, their reaction was “Elizabeth Warren. Oh, my God, this is crazy. Forget it.” He doesn’t hear that anymore. “I hear, like, ‘Nah, might not be so great, but God, this guy Trump is killing me.” He talks to corporate CEOs across America. He says they are worried. “They are very worried about Donald Trump,” he says. “Where we are as a country, and what Donald Trump’s next term looks like. They get the uncertainty. The unpredictability. The craziness. The losing our station in the world.” Somewhat incredibly, on Wall Street, Trump is now viewed as a worse choice than Warren. “The prospect of a 2020 election between Elizabeth Warren on the one hand and a lame duck Donald Trump on the other—scary as hell—has people nervous,” another senior Wall Street banker tells me. “It feels like it’s going to be a decision between sickness and death.” He’s hoping for political gridlock—a Warren victory with a Republican Senate or a Trump victory with a Democratic House—so neither person can really get much done legislatively. He says many of his Wall Street brethren think Warren would be worse than Trump, for them. “Trump has not declared war on Wall Street,” he says. “Wall Street hasn’t gotten damaged by Trump whereas they can feel the damage coming with Warren.”
He has a different point of view. “I think both Elizabeth Warren and Donald Trump are existential dangers to the United States, to what we stand for, to the pillars of our society, to the economic and political leadership internationally,” he says. “They’re both really dangerous to the United States. I happen to think that Trump is more dangerous. So when I have to pull the lever, I’d probably pull it for Elizabeth Warren and hope and pray that there is enough of a moderate middle in the legislative branch to prevent insane things from happening.”
Copyright 2019 DJ Cline All rights reserved.