Will The President Influence Your Investments?
Welcome to the Real Estate Espresso Podcast, your morning shot at what’s new in the world of real estate investing. I am your host, Victor Menasce. On today’s show, we are taking a look at what the US might look like post-election. The race is probably too close to call. The left-leaning media are predicting a Harris victory, and the right-leaning media are predicting a Trump victory. Anyone who says they know definitively can’t possibly know. Voter turnout will have a major impact in the swing states. In those regions where the vote is close, a larger turnout from one group versus another could be enough to make the difference.
If President Trump wins his second term, you can expect a few changes. You might consider the possibility of Elon Musk being tapped for a new role in the Trump Cabinet focused on government efficiency. You can expect a concerted effort to cut government waste. This would be accompanied by a reduction in the size of government, leading to a lot of job losses in the public service. Some government departments may be eliminated altogether. One of the lessons from Elon Musk is that you can indeed cut a significant portion of the workforce without dissolving a company. His acquisition of Twitter and subsequent reduction of the workforce by 80 percent had many people, including myself, doubtful that the company could survive cuts that deep.
But how does it work when you cut employees, in the case of Twitter, by 80 percent and yet the operation still runs smoothly? Could you cut two-thirds of the jobs in your organization and still have it function properly? There’s three possible answers regarding Twitter. One is that most employees didn’t actually have any work to do, or if they did, maybe it didn’t matter or was unnoticed before. What can be inferred from this to two-thirds of the jobs at your work? The second explanation is that the remaining people now do the work of three or four people and that they’re somehow okay with that. Given that there appear to be no real upside in doing that, the likely outcome is that many of them would quit as soon as they can. Besides, the best ones with the most marketable skills would likely leave first. The third option is that they figure out how to work more efficiently. That’s the hope at least, because the easiest way to get more efficient is to stop doing some things and focus only on the essential tasks.
The tax code, as my friend Tom Wheelwright often says, functions as a series of incentives. The purpose of the tax code is not only to extract revenue from the population. Were it so, it could be described in very few pages. It’s the thousands of special cases and exceptions that require tens of thousands of pages of the tax code to be described clearly, and you can bet that Congress will continue to cram new legislation with special interests. No change should be expected in this behavior regardless of who occupies the White House.
We are currently living in two economies, those who have assets and those who just have a job. Those who have assets are not feeling the pain of inflation anywhere near those who are employees. The hidden tax of inflation is hurting those who struggle to keep up with rising costs due to stagnant incomes. In both cases, no matter who’s in the White House, we’re going to see a government debt surge. At the current rate, the national debt could reach $50 trillion by 2030, and that’s if we don’t have any wars or any recession between now and then. At some point, someone in the world will need to purchase all those bonds. If the supply of that debt exceeds the demand, interest rates can be expected to surge. The only way that the U.S. will maintain low-interest rates is if it retains its global reserve currency status. Otherwise, the demand for U.S. bonds would be the same as that for Italy or perhaps worse, like Argentina or Ecuador.
I often hear from investors that they’re waiting to see who’s going to win the election before making any new investments. I pose this thought to them: imagine the election is over, and you now know who’s going to be sitting in the Oval Office. What would you do differently in terms of investments based on the knowledge of who’s in the Oval Office? More often than not, they can’t provide an answer. Real estate investors, like all investors, prefer certainty. The lack of knowledge about who’s going to occupy the Oval Office creates a sense of uncertainty. However, will this really influence investment strategy? As you consider this, have an amazing rest of your day. Go make some great things happen, and we’ll talk to you again tomorrow.
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