The Daily Alpha: Alternative Thinking on Hedge Funds and the 2016 Presidential Election

May 6 2016 | 10:27pm ET

Alternative Thinking on Hedge Funds and the 2016 Presidential Election
By Garrett Baldwin, Alpha Pages Managing Editor


“Steven is a professional at the highest level with an extensive and very successful financial background."

That’s Donald Trump naming his new fundraising chair, Steven Mnuchin, chairman and CEO of Dune Capital Management.

 You might know Steven from his time as a partner at Goldman Sachs or as chairman of OneWest Bank Group. He and Trump have known each other for 15 years. In fact, back in 1008, Trump sued lenders including Dune Capital over a construction loan tied to Trump Tower in Chicago.

The New York Times reached out to Mnuchin about his new role with Trump. The press is curiosu about Trump’s previous comments about hedge funds “getting away with murder” for exploiting the “carried interest” loophole.

"[Hedge fund managers] shift paper around and they get lucky," Trump said last year. "They are energetic. They are very smart. But a lot of them—they are paper-pushers. They make a fortune. They pay no tax. It's ridiculous."

Mnuchin had no comment expect to say that many hedge fund managers are beginning to show support for Trump.

Strange fact: Steven Mnuchin was a Clinton donor who has given a lot of money to Democrats over the years. I’m starting to get a bit dizzy…

‘He said corporations spend ‘80 to 90 percent of profits on shareholders and management,’ calling that ‘a big problem’ and linking the impact of ‘hedge funds and billionaires.’”

The “He” is Bill Clinton who spoke in Bend, Oregon this week and continued to pillage hedge funds and corporate spending habits. The Clintons continue to move left on issues related to taxes and hedge funds, practically running against the 1990s version of the Clinton approach.

Remember, it was Clinton who signed the the National Securities Markets Improvement Act (NSMIA) in 1996. Within seven years, hedge funds’ assets surged by 10-fold, and then have doubled again since. Don’t expect Hillary to talk about Section 209 of NSMIA.

Exit question: If 1996 Bill Clinton ran against 2016 Hillary Clinton, who would win?

“I think you need to prepare for a Trump presidency.”

That’s Jeffrey Gundlach, CEO of DoubleLine Capital.

During a presentation at the Sohn Conference, Gundlach recommended that investors sell the utilities index and shift to mortgage REITS.

But the key quote from Gundlach’s talk was his expectation that Trump can win and offered a key tagline that made him bullish on Trump.

“Let’s face it, Donald Trump is extremely comfortable with debt.”

(Meanwhile, Leon Cooperman said during Sohn that he was more comfortable with Hillary Clinton. Here’s a roundup of that.)

Anyway, back to Gundlach, whi isn’t the only one stating Trump’s comfort with debt. The candidate himself claims his experience with debt will help the nation handle its $19 trillion hole.

"I'm the king of debt," Trump said yesterday.

During an interview with CNBC on Thursday, Trump argued that increased interest rates would make it ever more difficult for the nation to pay off its bills. He would then make two very bold claims about the future of the U.S. economy…

First, he would “likely” replace Federal Reserve chair Janet Yellen, who he praised for her work in recent years, but hinted that a “Republican” alternative would be a better choice…

How Yellen’s political leanings matter doesn’t make sense given that both parties created the $19 trillion debt that faces the country.

Second, Trump promoted the idea of infrastructure investment as a way to boost the economy.

Great, more Keynesianism as a solution to eight years of Keynesianism.

Then Trump argued that he can pay off the U.S. national debt in eight years if we just…

You know what? After reading this, I’m going to the bar...


We have to run the full quote because it’s Yuval Levin’s entire piece on National Review…

And it’s that brilliantly simplistic in its delivery. Afterward, ask yourself: Whom do your trust?

“For many years now, it has been the practice of the intelligence community to start providing classified intelligence briefings to the presidential nominees of the two major parties (those who aren’t incumbents, who get them anyway) soon after the party conventions.

This year, that will mean giving these very sensitive briefings to a woman who is clearly guilty of gross failures to protect classified information and a man who seems less trustworthy and disciplined about what he allows out of his mouth than almost everyone in America. 

Just a snapshot of this less than glorious election year.” 

And for another chaser of reality… Check out Michael Dougherty at The Week.

We only focus on the elections as it impacts the hedge fund and alternatives industry.

Friday seemed to be the perfect storm of reaction following the Sohn Conference.

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