PRESENTING: The most important charts in the world from the brightest minds on Wall Street

Mark Neuman

Business Insider; data from Bloomberg

“Recall:

Clinton and Al Gore ‘invented’ the internet, released it to the public domain, and the tech boom culminated around Y2K.

Bush II expanded housing and credit into a bubble that yielded the Global Financial Crisis.

Obama’s relentless ZIRP via QE, reflated everything, and subsidies/incentives yielded massive debt loads and malinvestment. The debt is currently bigger than it was before the GFC.

During 8-year runs, lobbyists and professional politicians get favorable treatment from the Administration to benefit their constituents (donors.) Those in favor grab the reins and businesses flourish on account of regime friendliness. Then come the big political donations and the process feeds on itself and expands dramatically.

Eventually a changing of the guard occurs. Old beneficiaries lose favor and get kicked out, while new cronies get the red carpet. Clearly Trump has burned bridges and annoyed many in DC. He, at least in theory, turned DC on its head. He upended two political dynasties and crushed the DNC. Think of all of the Clinton friends who backed the wrong horse in November.

Donald has friends in different places than Obama (and the Clintons.) Start with Wilbur Ross and Rex Tillerson. Go from there. Compare that coziness to, say, the Obama Administration and Elon Musk. That’s just one example of a friend of the regime with the tax subsidies and credits available. It would be foolish to dismiss the idea that a shift will occur among those who have the Donald’s ear and those who had President Obama’s attention.

Some businesses will flourish under Trump, others will suffer. With a modicum of certainty, we can say the past winners will not be the future winners. It usually doesn’t work like that. That would be WAY too easy. The shift that occurred in November seems pretty big.

The timing, as always, is the hard part. A retrenchment looked possible on Election Day. But in the blink of an eye, we were at new highs. We have traded similarly for the first five months of this year as well.

This chart says we are overdue for the effects of a regime change. If you believe that we have another massive expansion coming on the heels of the past one, you are betting AGAINST this thesis and ignoring this chart. If you think trees grow to the sky and the Presidential Administration is irrelevant, then you can discard this chart.

How different will it be this time? Can THEY eliminate the business cycle completely?

We have our doubts and don’t think it will be much different this time.