Why Donald Trump is Teflon and Rising!

by Victor Sperandeo with the Curmudgeon

Disclaimers:

The opinions expressed herein are those of Victor Sperandeo. The Curmudgeon, who is a DIFFERENT PERSON, has been a registered Democrat since 1968. Yet he's voted for the Republican presidential nominee three times (Ford, Reagan, Bush Sr.) and has twice voted for 3^rd party candidates for president (John Anderson-1980, Harry Browne-1996). As noted in an earlier blog post, the Curmudgeon will NOT vote for either the Republican or Democratic presidential nominees and is hoping there's an independent candidate he can vote for in the November presidential elections.

Important to note that no journalist can seriously comment/analyze Trump's economic policies, because they have not been clearly stated. That's despite his comments on tax reform. Nor do we know if “President Trump” could work with Congress to get his economic agenda passed into law or included in the federal budget.

Introduction:

Bang! The sparks were flying spectacularly this week as the Republican establishment (Romney, Whitman, etc.) and GOP presidential candidates (Cruz and Rubio) sharply criticized GOP front runner Donald Trump. Whitman and Romney separately said if Trump wins, a U.S. recession is likely.

Victor recaps this historic week for the GOP, which may totally fracture the Republican party (it has been ruptured for some time). The GOP acrimony could produce the first contested or “brokered convention” for them since Thomas E. Dewey was chosen as the presidential nominee of the 1948 Republican Party. Let's proceed with Victor's incisive comments and perspective.

GOP Debates & Fracturing of the Republican Party:

The recent GOP debate on Thursday March 3^rd reminded me of the food fight in the movie “Animal House." Almost all discussions about the debate concluded that it was obnoxious, and not worthy of the candidates running for the office of President. John Kasich was the exception, as he was the only gentleman on the stage. What you are witnessing now is the end of the GOP like the Whig Party 162 years ago.

Peggy Noonan has a more formal, but intelligent observation of this in her March 5^th WSJ editorial titled "The Republican Party is Shattering." It's worthy of reading (on-line subscription required) at your local library. Here's an excerpt:

No one knows where this goes. The top of the party and the bottom have split. They disagree on the essentials…Donald Trump won big Tuesday night, carrying seven states. As others have noted, if it were someone else he’d be called unassailable, the victor— “time to get in line.”

If trends continue—and political trends tend to—Mr. Trump will win or come very close to winning by the convention in July. If party forces succeed in finagling him out of the nomination his supporters will bolt, which will break the party. And it’s hard to see what kind of special sauce, what enduring loyalty would make them come back in the future.

If, on the other hand, Mr. Trump is given the crown in Cleveland, party political figures, operatives, loyalists, journalists and intellectuals, not to mention sophisticated suburbanites and, God knows, donors will themselves bolt. That is a smaller but not insignificant group. And again it’s hard to imagine the special sauce—the shared interests, the basic worldview—that would allow them to reconcile with Trump supporters down the road.

It’s no longer clear what shared principles endure. Everything got stretched to the breaking point the past 15 years.

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A great deal of the reason for the total failure of the debates comes from their sponsors. The latest case is Fox News, because they try to antagonize the candidates to insult each other for higher ratings. They must believe that most viewers are bored with core concepts and key policy issues, such as the Trans Pacific Partnership (TPP), Common Core, Foreign policy (especially the rise of ISIS) related to Syria, Iraq, Afghanistan, Libya, and the Middle East. There are also domestic economic issues, e.g. should Congress audit the Federal Reserve Board?

The People's Verdict in the Republican Primaries/Caucuses:

Donald Trump is by far the leading Republican presidential candidate. He's won primaries or caucuses in 12 states, and has amassed 384 delegates (as of Sunday afternoon). That's 84 more than #2 Ted Cruz. Trump has won 46% of the delegates versus 54% for all other active candidates combined. The current delegate counts can be viewed here.

It's interesting to note that Trump has performed far better in states holding primaries, which require less organization than time-intensive caucuses. Some primaries also allow Democrats and independents to vote in Republican races.

Trump seems to be bulletproof, in my humble opinion (IMHO). A recent Politico blog post titled “How Trump Did It” states that he's planned his presidential run for years, making a pipe dream look like a prophecy.

Why is Trump the GOP front runner, considering all the insulting negatives he has spoken (way too many to list)? This is a puzzle even to people like Bill O'Reilly who hosts "The O'Reilly Factor," the #1 cable news show. O'Reilly has stated he doesn't understand (nor do others who've appeared on his talk show) how Trump can maintain and increase his lead as GOP front runner, when he can say whatever he wants without concern for offending people, religious or ethnic groups?

For example, soon after he announced his candidacy for president in the 2016 elections, Trump insulted Mexican immigrants during his speech on June 16, 2015:

"When Mexico sends its people, they're not sending their best. They're not sending you. They're sending people that have lots of problems and they're bringing those problems with us. They're bringing drugs, they're bringing crime, they're rapists, and some, I assume, are good people."

The Washington Post immediately took issue with those remarks calling them “false comments connecting Mexican immigrants and crime.” Even though many other traditional commentators were shocked by this (and subsequent insults and put downs), the people seemed to agree and have rewarded his perceived “honesty” by voting for him in the primaries.

The Donald has been in verbal battles with the Pope (painted as the Good). He seemed to sympathize with Vladimir Putin (the Bad) and David Duke of the KKK (the Very Bad). He has not held or even run for public office and has no experience working with any branch of government. Zero foreign policy experience. Any and all these deficiencies are unique to any political election winners in the U.S. in so many ways... Why?

The Trump Card:

The explanation for this enigma or conundrum is the primary purpose of my comments this week. The subject has not been addressed or discussed in the mainstream media (print, on-line/web, TV news/talk shows, not even on social media).

The answers can be found in the psychology of crowds and the tactics used by ancient Chinese Emperors (yes, really). First, let's examine how the GOP establishment has been oblivious to the souring mood of its voters.

The coming of Trump's rise does not come from the “frustration” of many GOP voters, but from far stronger emotions. Beginning with anger and extreme malice, rage, wrath, indignation, and hatred of "the Republican establishment."

The GOP voters feel they have been cheated, lied to, and made irrelevant by being taken for granted in exchange for their votes. An example that should ring a loud bell was on June 10 2014 when VA Republican incumbent Eric Cantor (the House Majority Leader) out-spent an unknown Tea Party opponent (Professor David Brat) by 30 to 1, yet still lost the election! Cantor, along with many other seasoned political observers, were totally shocked. That had never happened since the House Majority Leader position was created in 1899!

-->The GOP did NOT TAKE NOTICE that this was a gigantic change in voter sentiment. That is what was and still is "shocking" to most political observers and myself.

The next “shocker,” was on November 16, 2015, when John Boehner was forced to resign as Speaker of the House of Representatives. That marked a tumultuous end to Boehner's nearly six-year tenure leading the fractured Republican caucus. It was a time marked by repeated fiscal clashes with the White House, failed deal-makings with President Barack Obama and Senate Democratic Leader Harry Reid. The conservative bloc of Republican Congress consistently pressed Boehner to take a harder line with Obama and Democrats, a strategy Boehner, a consummate deal maker, did not usually adhere to. "It's become clear to me that this prolonged leadership turmoil would do irreparable harm to the institution," Boehner told reporters. "This isn't about me. It's about the people, it's about the institution."

A blind deaf mute could understand the voters were out for blood and "payback" at this point. In effect anyone who wielded power in DC became the enemy! YET NOTHING CHANGED.

Moreover, the Omnibus Spending Bill of December 16, 2015 shows the GOP still acts like what they do doesn't matter. (See the $1.1 trillion hidden within 2009 pages + 233 pages of tax-extenders in the "Omnibus Spending Bill"). This humongous bill was orchestrated and pushed forward by Paul Ryan - the current Speaker of the House (who was a close allied associate of the departed loser Eric Cantor). This caused more hatred, disgust, and outrage fodder. Worse, the House of Representatives has the power to stop this kind of underhanded politics, but House Speaker Ryan did not use it.

Meanwhile, Trump talks like he is having a beer with "the people" in a corner bar. He's expressing what they feel, has become the people's choice, and is their perceived agent to change the House and Senate leaders who screwed them.

I believe the change in voter sentiment is due to "Crowd Psychology" and not "Politics" as usual. The reader may wish to study this dynamic to understand the reason behind Trump's rise in popularity. Here's a quote from a famous book - "The Crowd" by Gustav LeBon (1895) - related to the real answer:

"The masses have never thirsted after truth. Whoever can supply them with illusions is easily their master; whoever attempts to destroy their illusions is always their victim."

This is the essential reason Trump is winning. When pundits or "the establishment" of those in power attack him, it makes him stronger. It's shown by the cash spent by Jeb Bush in negative campaign ads, which was just burning money IMHO. Unless Donald does something to shatter his mantra of "Make America Great Again" or shows he will not change the status quo (which is what his supporters expect), he is likely to win the Republican presidential nomination.

Why have Trump followers acted like Kamikaze (i.e. Divine Wind) pilots?

The first Chinese Dynasty that created an "Emperor" was the Qin Dynasty 221BC (Chinese Dynasty's go back to 2852 BC). The War Lords that fought for power had Machiavellian like advisers.

Today we have Valarie Jarrett and Karl Rove. The Qin Dynasty had Xunzi (“Master Xun”) who was one of the most sophisticated and influential philosophers of China's Warring States period (479–221 B.C.E.). He considered himself a follower of Confucius and was one of the central early figures in the consolidation of what came to be thought of as the Confucian tradition.

Xunzi's significance has often been underestimated by most prominent Confucians. His writings address topics ranging from economic and "military policy,” through the justification of traditional authority and institutions, to action theory, and the philosophy of language. The policy adopted was to choose a CORE GROUP of followers rather than try to appeal to all the different kingdoms and factions. That kept the core followers loyal and believing all the promises to them were true.

Fast forward to today: What do most politicians do? They try to appeal to EVERYONE. This is why the current voters distrust the Republican establishment and virtually all politicians! It is why elected Republican office holders despise Trump because he refuses to appeal to all voters. Muslims and Latinos are voters, but Trump's insults and demeaning statements are obviously not appealing to them. Trump has chosen “American's FIRST,” which evidently does not include immigrants or illegal aliens (who are cheap labor and/or future voters for Democrats).

Trump is getting 30-40% of the GOP voters in his corner no matter what. Later, he can attempt to bring other groups to the table after he wins the GOP nomination... Now I'm sure he hasn't any idea of Xunzi or Han Fei Tzu or other ancient Chinese leaders. They taught children of their followers how to prosper as princes. Yet the Donald is unknowingly executing the very successful tactics used over 2200 years ago in China!

Sidebar: Romney's verbal assault on Trump this week

The Mitt Romney's speech against Trump on March 4^th was like Bernie Sanders criticizing Venezuela for its economic failure (of Socialism and the Bolivarian Revolution) It was absurd, if not hypocritical, to hear a man who instituted a single payer government health care plan (when he was Massachusetts Governor) say Trump is not a “conservative.” IMHO, Romney could not define “capitalism,” and is more than a Neo-con without one Constitutional principle in his mind that he does not try to work around. He stated he was for the progressive income tax, which is a Marxian dictate. He was a coward about defending his own success as he made too much money but he only paid 15% in taxes.

In contrast, Trump states his net worth and wins public support. That shows capitalism is still desired by much of the people of the U.S., but it has to be camouflaged to be sold by Congress to obtain power, and therefore has become at best “Socialism lite.”

This is the hypocrisy of the Neo-Cons and Rhinos that is offensive and glaring. They attack Trump for what they often do themselves!

Closing Comments:

1. Trump is not an intellectual or idealist. He is a great marketer, brand creator, a tough negotiator, and a successful businessman (in real estate development/building). He is also a pragmatist¹.

Note 1. Ayn Rand wrote: "The pragmatists declared that philosophy must be practical, and that practicality consists of dispensing with all absolute principles and standards—that there is no such thing as objective reality or permanent truth—that truth is that which works, and its validity can be judged only by its consequences."

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2. Trump is popular because the public believes he can “get things done.” He says he can and will change things for the better, but without a prescribed ideology to back that up. This really is no different than any other politician on the stage today², but they try to hide it.

Note 2: No politician today follows the Constitution or the supreme law. Whatever happened to the U.S. as a structured, rules based Republic of limited government? Who in the GOP ESTABLISHMENT talks of limited government as per the Constitution? NO ONE!

The problem with the GOP powers that be is that they are disdainful of Trump, because he is "not controllable" and thereby can change their power structure. His strong point is he supposedly does not take money from special interests, which the GOP is especially known for. Of course, both parties sell special favors (via custom made laws) for money to be used in campaigning for their own selfish power.

3. To attack Trump is a losing cause, IMHO. Better to blame the GOP establishment leadership. Let's examine two of them:

a] Paul Ryan's claim to victory in passing a $1.1 trillion omnibus spending bill was to preach that the U.S. can now sell domestic oil overseas! Wow- how great is that for the 322 million American people?

b] Mitch McConnell's Freedom Index rating is quite low, according to the New American. The Conservative Review states:

“McConnell is the consummate D.C. insider and calculated politician who rarely lets conviction get in the way of a "good" political move…McConnell has failed to lead for conservatives on most critical issues during his time in leadership. In the few instances where he has publicly or privately spearheaded an initiative, it was for some of the most unpopular causes with conservatives.”

→ To not stand up for the principles of what the GOP voted their elected officials into power is the cause of the anger and the reason why Trump is so popular.

4. Let's close with a quote by Donald Trump that is apropos and extremely relevant:

"Sometimes by losing a battle you find a new way to win the war."

The GOP does not seem to get this message, but we hope our readers do!

Good luck and till next time...

The Curmudgeon
ajwdct@sbumail.com

Follow the Curmudgeon on Twitter @ajwdct247

Curmudgeon is a retired investment professional. He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996. He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.

Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever changing and arcane world of markets, economies and government policies. Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.

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