How Investors Are Preparing For Election 2020

  
0:00
-3:59

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 85,000 other investors today.


To investors,

I’ve spent the last few days talking with many of the smartest investors I know. My goal was to get an understanding of how they are thinking about various markets and assets, while also identifying what they are excited or worried about. Here are a few takeaways that I found interesting and/or worth sharing:

First, many investors feel that COVID-19 and any impending stimulus packages will have a much greater impact on markets than who wins the Presidential election. The thought process is that the President could create long-term systemic environment changes, but most of the short-term changes are going to be related to whether businesses are impacted by government-mandated shut downs, along with how much liquidity is being injected into the market by the Federal Reserve.

The general consensus is that the United States is unlikely to experience another shelter-in-place order. This doesn’t absolve the markets from reacting to negative headlines or lockdown orders in other countries. As the virus continues to run its course, the Federal Reserve and our elected officials are going to have to introduce more stimulus. The size of this stimulus package appears to fall along party lines — Democrat investors see $2B+ on the horizon and Republican investors see less than $2B in the next package. My guess is that we will end up somewhere in between at approximately $2B.

Second, every single investor I talked with brought up concerns related to taxes. There appears to be a strong fear of significant increases in various taxes — from income taxes to capital gains to inheritance taxes — under a Joe Biden administration. As one Democrat investor put it to me, “I’m a Democrat but I don’t like giving more of my money to the government.”

It is unclear what every investor is doing to mitigate these risks, but it does appear that some investors are positioning themselves to accelerate estate planning if Biden wins. There was also a recent article in Bloomberg that highlighted Ken Griffin’s recent comments about potentially moving Citadel to Florida or Texas. This article reflected something else I heard a few times — the President is important, but it may be more important to see how significant the Democrats control of lower levels of government are (House, Senate, Governors, etc).

Third, investors are definitely prepared for high levels of volatility over the coming months. Each person is positioning themselves to deal with the volatility differently, but they are all anticipating it. Some people are considering holding more cash in the short term. Others want to play the VIX. And others are acknowledging the higher probability for volatility, but claim that it won’t change their investment strategy over the medium to long-term.

Fourth, if every investor brought up tax considerations, then inflation was the second most popular topic. Majority of the investors I spoke with feel that inflation is a foregone conclusion at this point — they pointed to the Federal Reserve’s public commitment to get to 2%+ inflation or they commented about the unlikely scenario of printing trillions of dollars without inflation ever occurring. When I asked investors what they were doing to protect themselves, the answers varied drastically. Some investors are buying up precious metals and mining stocks (more stocks than the metals themselves is my feeling), while others are seeking refuge in real estate and luxury art.

It was interesting that majority of the investors I spoke with did not volunteer the fact that they held bitcoin. I would have to specifically ask and then the investors would admit that bitcoin was a part of the inflation hedge strategy. It was weird. Almost like we were talking about a dirty secret, but then once the topic was broached, investors seemed very bullish on the asset’s outlook over the next 12-24 months.

Lastly, most of the investors I spoke with brought up some version of the following — Presidential elections create opportunities for entries to new investment positions, but they rarely lead to mass selling or position exits. The general thought process is that it would be really short-sighted to bet against the United States, regardless of who is the President of the country. Almost every single investor had a feeling that the long-term impact of this election, along with all elections, is minimal at best.

I reminded one of the more bearish investors that we live in the safest, most prosperous time in human history. His response was “Yes, that is definitely not a trend that I see changing any time soon.” So with a long-term tailwind, investors appear to be paying attention to the election but they aren’t making significant investment decisions around the event. However, they are definitely making decisions based on tax and estate planning implications.

As the saying goes, “the more things change, the more they stay the same.” This election appears to be no different. Stay safe out there my friends. Have a great election day and I’ll talk to everyone tomorrow.

-Pomp


This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 85,000 other investors today.


THE RUNDOWN:

PBOC Governor Says 4 Million Transactions so Far in Digital Yuan: Yi Gang, governor of the People’s Bank of China, said a pilot program on the rollout of a digital currency in four cities has been smooth. There have been more than 4 million transactions, totaling over 2 billion yuan ($299 million) in the digital currency so far, Yi said at the Hong Kong Fintech Week conference on Monday. Read more.

PayPal Raises Crypto Buying Limit to $15K/Week for ‘Eager’ Customers: PayPal’s cryptocurrency service is going to expand rapidly in 2021, executives said on the payments giant’s third-quarter earnings call Monday evening. That includes crypto services coming to Venmo and international customers in the first half of 2021, PayPal CEO Dan Schulman said. Read more.

Mastercard President Says Crypto Patents Will Pay Off When Central Bank Digital Currencies Arrive: Mastercard President Michael Miebach said the payments processor’s massive trove of cryptocurrency patents will give it an edge once central bank digital currencies debut. Mastercard's cryptocurrency intellectual property "puts us in a good position" for a CBDC future, Miebach told analysts during the firm's Oct. 28 Q3 earnings call. Read more.

Cybersecurity Threats to Corporate America Are Present Now ‘More Than Ever:’ Securities and Exchange Commission Chairman Jay Clayton is telling corporate America it needs to get much more vigilant on security. In an interview Monday on CNBC’s “Power Lunch,” stressed that significant cybersecurity threats remain, despite the ongoing coronavirus pandemic and election season. “Cyber risks have not gone away with the unfortunate, unforeseen risks we’ve faced with Covid and other uncertainties in our economy,” he said. “They’re still there, and they’re there more than ever.” Read more.

Uber and Lyft Rise as Investors Expect California Voters to Pass Prop 22: Uber and Lyft shares rose 4.2% and 7.3%, respectively, as investors expect California voters on Tuesday to pass Proposition 22, which would allow the ride-sharing companies to maintain their current business model. If it passes, Proposition 22 would exempt ride-sharing and delivery companies from a new California law that forces such gig economy companies to reclassify their workers as employees rather than contractors, and offer benefits such as sick leave and unemployment protection. Read more.


LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE


Mario Gabriele is the Founder and Writer at The Generalist, a new publication that covers the technology industry from idea to IPO. He previously worked at a number of venture capital firms, including Charge Ventures and Red Sea Ventures.

In this conversation, Mario and I discuss:

  • How Mario built The Generalist so far

  • Why he enjoys writing so much

  • How he has handled a hedge fund bully who is threatening him

  • His stories on Ant Group and Audience + Wealth

I really enjoyed this conversation with Mario. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE


Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

  1. Want to sell your wonderful internet business? Tiny partners with founders to give them quick, straightforward exits that protect their team and culture. We’ll make an offer within a week, close the deal within a month, and keep your business operating for the long term. Get in touch at tinycapital.com, and we’ll let you know within a couple of days.

  2. Athletic Brewing is re-imagining beer for the modern adult. They love beer. But they also love being healthy, active and at their best. The non-alcoholic beers are fully flavored, clean ingredient, and a fraction of the calories of full strength beer - they fit in any occasion. Check out www.athleticbrewing.com for more details and free shipping nationwide.

  3. Choice is a new self-directed IRA product that allows you to buy Bitcoin with tax-advantaged dollars, while still holding your private keys. You can go to retirewithchoice.com/pomp to sign up today.

  4. Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

  5. BlockFi provides financial products for crypto investors. Products include high-yield interest accounts, USD loans, and no fee trading. To start earning today visit: http://www.blockfi.com/Pomp

  6. Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

  7. Coinlist — Smart investors know being early is critical to success in crypto. CoinList is where early adopters invest in, earn, and trade the best new crypto assets before they list on other exchanges. Sign up via coinlist.co/pomp and earn $10 in BTC after you trade $100.

  8. Nifty Gateway is the premium NFT platform. They release content from the best NFT artists in the world twice weekly, and have featured many world famous artists including Kenny Scharf, Trevor Jones and WhIsBe. Sign up for an account in advance to participate in the drops: http://www.niftygateway.com

  9. OKCoin.com is the leading crypto exchange for both beginners and experienced users. You can fund your account in under 2 minutes, and get access to the most advanced trading engine, all while paying the lowest trading fees in the industry (0.1%). Visit www.okcoin.com/pomp and open your account today. 


You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable.

Nothing in this email is intended to serve as financial advice. Do your own research.