Does The President Matter?

Current, former, and future Presidents have been in the news a lot lately. But when it comes to the economy, do they really matter as much as we think?                                                                                                                                                                                                                                                                                                                                                                                                                 July 23, 2024 | [Read Online]( [fb]( [fb]( [fb]( [fb](mailto:?subject=Post%20from%20The%20Peel&body=Does%20The%20President%20Matter%3F%3A%20Current%2C%20former%2C%20and%20future%20Presidents%20have%20been%20in%20the%20news%20a%20lot%20lately.%20But%20when%20it%20comes%20to%20the%20economy%2C%20do%20they%20really%20matter%20as%20much%20as%20we%20think%3F%0A%0Ahttps%3A%2F%2Fthepeel.co%2Fp%2Fpresident-matter) In this issue of the peel: - Current, former, and future Presidents have been in the news a lot lately. But when it comes to the economy, do they really matter as much as we think? - Reddit spiked on newly inked deals, while CrowdStrike can’t stop the bleeding from Friday’s disaster - Warren Buffett’s Berkshire Hathaway is selling a key holding. Is this a sign that the Oracle is getting bearish? Market Snapshot Banana Bits - Verizon shareholders are almost as upset as their customers normally are following [this quarter’s earnings report]( - The New York Fed continues to project [healthy GDP growth this year]( - The stock market is giving the finger to trends in recent years, potentially charting a [whole new path forward]( - Vice President and Democrat frontrunner Kamala Harris racks up [$100mn following Biden’s withdrawal]( Macro Monkey Says Does The President Matter? The past few weeks have been wild for U.S. Presidential candidates. From one calling Ukrainian President Zelensky “President Putin” to the other literally getting shot, and now, the former dropping out of the race, the American empire is a chicken with its head cut off… and its feet, legs, wings, and entire body. We’re only 104 days away from Election Day. So, we figured it was time to find out how much the President matters to markets, macro, and most of all, your money. Let’s get into it. The History The President is often described as the “CEO of America.” This is true in some respects, like the fact that at least half their workforce hates them. But, in most respects, it’s an oversimplification. A CEO can say, “Raise the price of product X,” and it’ll happen almost instantaneously, for the most part. When a President says, “Raise taxes,” it takes a machete to cut through all the red tape to maybe get it done within their 4-year term. But that’s not how we think about it. For most Americans, anything that happens during a President’s term is directly their fault, whether good or bad, including stock market returns. [Source]( From this chart, we might think that both Democrats and Republicans are good for the stock market. But, in all reality, it really doesn’t matter for the most part. Stocks tend to increase as companies and their products improve over time, like how an object in motion tends to stay in motion. At the Presidential level, the same is true for macroeconomic forces like inflation and unemployment. Blaming a President for poor unemployment or inflation data is usually like blaming your current boyfriend or girlfriend for your last one cheating on you. Not only are inflation and unemployment explicitly the responsibility of the Fed, but most of the time, the macroeconomic conditions inherited by a President remain throughout at least their first term.  [Source]( Just take a look at the above inflation data. Nixon, Carter, and Ford are all near the top of the list not because of their policies (besides, partially, Nixon’s price controls) but because of the slowdown of the post-war recovery and OPEC-triggered oil shocks. None of those things are exactly the President’s responsibility. And, worse yet, the White House unfortunately doesn’t have a lever to pull down gas prices or inflation. In fact, the President has actually a relatively clearly defined job. This is elaborated on [extensively here](, but when it comes to the economy, the President’s only tangible impact is felt through the Federal budget. The President sends a budget request to Congress a few months prior to the start of a new fiscal year in October. Take a look at [Biden’s 2025 proposal here](. Congress then can accept or alter the budget, almost always altering it in some way. Although the budget has to go through a bureaucratic process, the starting point, as indicated by the President’s request, carries an anchoring effect. So, the President’s only somewhat direct economic impact comes from their proposal on taxes and spending. Taken together, the President is most responsible for managing the national deficit in a given year and its impact on total Federal debt. [Source]( As we can see in the dollar amounts and percentages added to the U.S. debt in the last ~100 years, ballooning deficits is a hobby for both parties. Deficits can contribute to inflation, but outside of the potential for the country to go bankrupt, they really don’t impact everyday Americans all that much. The Takeaway? While the President is undoubtedly the most important person in any given country, their impact on the economy is way overblown. Any impact a President has is indirect and must go through steps of approval from Congress and the Judiciary, even if some approvals come after the fact. Pointing the finger at any one President is ignoring the bigger picture. The economic role of the President is to direct the country’s vision—guiding policy debates and setting aspirational goals. So, no matter what people say about “Bidenomics” or Trump’s “big, beautiful economy,” the President is far from solely responsible. And—if consumer spending falls—it’s not the President’s fault. That is your fault, so please do better. What's Ripe Reddit (RDDT) 5.3% - A lot of kids dream of one day signing a deal with the NFL, NBA, MLB, or any other major sporting leagues. Reddit just did it with all of them. - Announced Monday, the social site struck a deal with the above-listed league as well as NASCAR to bring exclusive content to Reddit’s fan forums. - The exclusive content includes things like AMAs with players and unique league-sponsored content, hopefully attracting new ad dollars to the platform. Nvidia (NVDA) 4.8% - The U.S. has been c*ck blocking Nvidia from the Chinese market in a variety of ways, but CEO Jensen Huang is determined to slide in the DMs. - Reports emerged on Monday indicating that Nvidia is constructing specialized Blackwell chips—its new and most advanced hardware—to send to China. - The China chips have been downgraded to adhere to export restrictions but remain some of the most powerful in the Asian and international markets. What's Rotten Ryanair (RYAAY) 15.4% - The budget airline whose CEO has advocated for [standing]([room on planes]( is paying the price in the global race to the bottom in airfares. - Ryanair revealed a 46% YoY plunge in net income last quarter, citing lower ticket prices and the busy Easter weekend falling in its prior quarter. - You know it was especially bad because the plunge in profits and 1% revenue decline came despite a 10% increase in traffic. Other Euro airlines fell, too. CrowdStrike (CRWD) 13.5% - CEO George Kurtz’s public humiliations via a weekend-long media shaming tour haven’t stopped the bleeding. Shares continued to plummet on downgrades. - Although CrowdStrike claims to have fixed the issues that sparked global IT outages on Friday, investors aren’t buying it. - Guggenheim analysts downgraded shares to Neutral from Buy on the view that this error will hurt CrowdStrike’s deal-making abilities, at least in the short term. Thought Banana Buffett Gets Bearish? When the guy famous for saying “Never bet against America” starts selling America, maybe we should be a little concerned. Late last Friday, Buffett’s Berkshire Hathaway filed a Form 4 with the SEC, a document describing a change in beneficial ownership for an insider of a company. In English, Buffett is selling shares from a huge holding. The victim this time around? Bank of America. What Happened? Aside from Apple, Bank of America is Berkshire’s largest holding, even after last week’s sale of 34mn shares. Following the sale, Berkshire's stake in BofA remains enormous at 999mn shares. That gives the firm a ~12.8% ownership stake, keeping Berkshire as Bank of America’s largest shareholder… by a long shot. Although clearly still bullish enough to own almost 13% of the firm, the BofA sale adds to recent dispositions of U.S. bank stocks in recent years. Since 2020, Berkshire has completely exited positions in J.P. Morgan, Goldman Sachs, Wells Fargo, BNY Mellon, and U.S. Bancorp. Each of those exits began with a partial sale, increasing in proportion with each successive sale until emptying the bank (no pun intended). It’s not clear that Buffett and Berkshire are looking to exit Bank of America entirely. But, if historical trends are even somewhat indicative of future outcomes, we can expect BofA to meet a similar fate. Shares are already down 1.4% on the market’s recognition of this trend, anticipating further sales to come. The Takeaway? National and international banks have perhaps the highest degree of direct exposure to a country’s and the world’s economic performance of any industry. If Buffett and Berkshire have spent the last few years getting rid of this exposure, that could be indicative of a view from the Oracle of Omaha that economic performance will worsen in the coming years. Scary stuff. But maybe Buffett is just low on cash. After all this inflation, having $100bn today is like having only $80bn in 2019. Get this guy some Social Security checks! The Big Question: Is Buffett simply reallocating or getting bearish on the U.S. economy? What other speculations can we imagine to justify the sale? Banana Brain Teaser Previous The letters D, G, I, I, and T can be used to form 5-letter strings such as DIGIT or DGIIT. Using these letters, how many 5-letter strings can be formed in which the two occurrences of the letter I are separated by at least one other letter? Answer: 36 Today For the past n days, the average (arithmetic mean) daily production at a company was 50 units. If today’s production of 90 units raises the average to 55 units per day, what is the value of n? Send your guesses to vyomesh@wallstreetoasis.com ❝ Despite some severe interruptions, our country’s economic progress has been breathtaking. Our unwavering conclusion: Never bet against America,” Warren Buffett How Would You Rate Today's Peel? 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