Subject: POLITICO's Morning Money: Goldman on how to invest 2016 — No need to worry about Brexit? — Maybe still worry — Right continues to rise in Europe
From: Morning Money <[email-masked]>
To: <[email-masked]>
Date: Mon, 23 May 2016 06:03:37 -0600

By Ben White | 05/23/2016 08:00 AM EDT

GOLDMAN ON HOW TO INVEST 2016 - From Goldman Sachs's Weekly Kickstart email: "Although prediction markets currently assign a high probability that Hillary Clinton will win the election, polls in prior contests tightened as voting day approached. Increasing political uncertainty will lift equity market uncertainty in coming months. From a portfolio strategy perspective, protectionism and tax policy are two areas of debate that have investment implications. 

"Buy stocks with high US sales and high effective tax rates and avoid firms with high foreign sales and low tax rates. ... Politics is now a topic in every client discussion. Last week we argued the S&P 500 was vulnerable to a 5 percent-10 percent drawdown and the index could fall to 1850-1950 during the next several months although it would end the year at 2100, roughly 3 percent above the current level." 

NO NEED TO WORRY ABOUT BREXIT? - Pantheon UK's Samuel Tombs: "Sterling rebounded last week and the probability of a Brexit, implied by betting markets, fell from 30 percent to 20 percent. ... [T]he evidence that support for 'Bremain' has risen recently is persuasive. [S]even opinion polls were published last week, all showing that support for the status quo has risen. 'Bremain' had an average lead of 14 percent over 'Brexit' in four phone polls, exceeding the 9 percent lead in the same polls a month ago. The shift in the online polls was more modest, but visible. ... 

"The pick up in 'Bremain' support seems to reflect voters placing more weight on economic issues, and less on immigration. The economy is now the most often-mentioned consideration among voters, according to ComRes. The barrage of warnings from the Treasury, Bank of England and IMF has paid off. ... The situation also still is relatively fluid; about 20 percent of people who have said that they will vote for either Remain or Leave in recent polls also said that they might change their minds"

MAYBE STILL WORRY - FT's George Parker and Chris Giles: "Britain will be plunged into a year-long recession if it votes to leave the EU, according to a bleak analysis of the short-term economic shock of a Brexit vote to be published on Monday by the Treasury. ... David Cameron and George Osborne hope the Treasury warning of an immediate hit to jobs, interest rates and house prices will be the clinching argument for undecided voters as the EU referendum campaign enters its final month.

"The Treasury analysis suggests that growth could be 3.6 per cent lower after two years if Britain votes to leave the EU, compared with the forecast for continued growth after a vote to remain. This would produce a recession similar to that of the early 1990s but not as bad as the one that followed the 2008 crash. Leave campaigners will point to the large margin of error implicit in the Treasury's economic model, which claims that the economy could be 6 per cent lower than the current forecast under a worst-case scenario" http://go.politicoemail.com/?qs=5a2743218d2b967917ff8590144d1603b87c4cfd3d8a7ad349875539a8eb397e

RIGHT CONTINUES TO RISE IN EUROPE - Vienna/AFP: "Austrian far-right hopes of winning a presidential runoff remained on hold Sunday as the candidates were neck-and-neck in a battle closely watched by the EU, which is struggling to contain a surge of anti-immigrant parties. ... A win would see Norbert Hofer of the Freedom Party (FPOe) become the European Union's first far-right head of state. On Sunday evening, the vote was evenly split between Hofer of the Freedom Party (FPOe) and Green-backed economics professor Alexander van der Bellen, with both on 50.0 ... 

"As a result, the winner is unlikely to be known before Monday, once the postal vote has been counted. Close to 900,000 people - or a record 14 percent of Austria's 6.4 million eligible voters - cast their ballot by mail this year. A huge influx of asylum-seekers, rising unemployment and frozen reforms has driven voters away from the two centrist parties that have dominated Austrian politics since 1945" http://go.politicoemail.com/?qs=5a2743218d2b9679e347b39944b62084c2a7e81f317750e10a6e499ba3b23ba1

The far right and far left taking over from establishment candidates? Sure sounds familiar! Though in our election one establishment-friendly candidate still seems like a lock to limp to the nomination. 

HRC ON TRUMP: MAYBE HE'S NOT SO RICH - Speaking of that candidate limping to the finishing line, Hillary Clinton on NBC's "Meet the Press" : "There's no evidence he has any ideas about making America great, as he advertises. He seems to be particularly focused on making himself appear great. And as we go through this campaign, we're going to be demonstrating the hollowness of his rhetoric' ... She also attacked him for not releasing his tax returns and proving 'that he actually has the level of success he claims to have.'" http://go.politicoemail.com/?qs=5a2743218d2b96790d7b1e41b1f265757f163fd2aff347dc0ac12c5688cbb833

BERNIE DOES IT TOO! - Bernie Sanders on Saturday in California: "[Trump] tells us is he is a billionaire. Who knows? He is probably as broke as everybody else is." http://go.politicoemail.com/?qs=5a2743218d2b967993a33bbb0006a7a56886f2285cd76cdcd5a8e4f9f1d00b5f

SENSE A THEME? - Chapter One in the "Beat Trump" playbook is to raise serious questions about whether his biggest selling point - that he is a monster success who could make America "win" again - is built on a huge pile of lies. And until Trump releases tax returns, chipping away at his personal narrative of success is not likely to be all that hard. Democrats will never pry away Trump's true believers but they could make his recent bump in the polls his high water mark. 

ASIA UP; JAPAN DOWN - Reuters: "Asian shares rose on Monday after a solid session on Wall Street, while the dollar moved away from recent highs though remained supported as investors bet that the U.S. Federal Reserve was on track to raise rates sooner rather than later. ... But Japan's Nikkei stock index extended losses, shedding 1.1 percent on worrying economic data and reports that Japan's sales tax increase would proceed as planned." http://go.politicoemail.com/?qs=5a2743218d2b967940d56598ba2a7a613f479244b4d6e02f63afd7fbb0b5a883

GOOD MONDAY MORNING - Who woulda thunk it? Oklahoma City crushed Golden State last night 133-105 and have the Warriors down 2-1 and in serious trouble. M.M. is super psyched for DC native Kevin Durant ... Email me on [email-masked] to talk sports, politics or finance and follow me on Twitter @morningmoneyben for all the aforementioned topics. 

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES - Colin Wilhelm on unions' bid to stop the Puerto Rico bill -- and to get Morning Money every day before 6 a.m. -- please contact Pro Services at (703) 341-4600 or [email-masked].

DRIVING THE WEEK - President Obama visits Vietnam and Hiroshima, Japan in one of his last big foreign trips as president. Prior to Hiroshima, President Obama will spend two days in central Japan for his final G-7 meeting ... Senate Finance has a hearing Tuesday at 10:00 a.m. on "Debt versus Equity: Corporate Integration Considerations." ... Senate Banking has Iran sanctions hearing at 10:30 a.m. Tuesday and 2:30 p.m. Wednesday ... Second estimate of Q1 GDP at 8:30 a.m. Friday expected to rise to 0.9 percent from 0.5 percent.

MONDAY FUNNIES - This gun enthusiast is apparently very worried about losing the constitutional right to wax their arms. http://go.politicoemail.com/?qs=5a2743218d2b9679c265b3541324237e3acea19b0bf484c5a49d4208e167af52

POLL BLAST ONE: THE RACE IS CLOSE - POLITICO's Matthew Nussbaum: "Donald Trump holds a razor-thin lead over Hillary Clinton in a Washington Post-ABC News poll released Sunday. The presumptive Republican presidential nominee leads by just 2 points, 46 percent to 44 percent, over the Democratic front-runner among registered voters - essentially a dead heat, well within the poll's 3.5 percentage-point margin of error. 

"The poll indicates a race in which Clinton once held a commanding lead is shaping up to be extremely close. Clinton led Trump 50 percent to 41 percent in a March Post/ABC poll. The new poll also tested a race in which 2012 Republican nominee Mitt Romney jumps in. In that matchup, Clinton captured 37 percent of those surveyed, with Trump 35 percent and Romney at 22 percent" http://go.politicoemail.com/?qs=5a2743218d2b96795537d54b79b4bcb1f1e7f13412125d99dc87fa5b3719b4c2

POLL BLAST TWO: THE RACE IS REALLY CLOSE - "Clinton edges past ... Trump by just three points in a new national NBC News/Wall Street Journal poll released Sunday. Clinton leads Trump 46 percent to 43 percent, within the poll's 3.1 percentage-point margin of error. ... Clinton led Trump 50 percent to 39 percent in an April NBC News/Wall Street Journal poll" http://go.politicoemail.com/?qs=57dbb1574a9e3e7b4f6aa766b4b9aeff706d942859df21a2e5a196700ffad53e

GREECE APPROVES AUSTERITY - Bloomberg: "Greek lawmakers on Sunday approved additional austerity measures required to unlock more emergency loans from the euro area, ahead of a meeting of finance ministers that will assess the country's compliance with its bailout program and determine the scope for debt relief.

"Prime Minister Alexis Tsipras secured backing for measures ranging from the taxation of clothing made from crocodile skin to the sale of bad loans to distressed debt funds, after winning the support of the 153 lawmakers from the governing Syriza and Independent Greeks parties in the 300-seat chamber. Syriza governing party lawmaker Vasiliki Katrivanou voted against articles setting up a new privatization fund and the creation of a fiscal break mechanism of contingent measures" http://go.politicoemail.com/?qs=57dbb1574a9e3e7bf3642f2b79942059a48814c2659a525e1378463817ab2d96

CUBAN ON WALL STREET - Dallas Mavericks owner Mark Cuban on NBC's "Meet the Press": "[T]here's an issue right now for me with market structure. I think we're at a significant risk, with high frequency trading because what's happening and, you know, the original goal of Wall Street was to be able to create a source of capital for companies to grow, create liquidity and allow investors to invest. 

"But what we've evolved to now with things like high frequency and algorithmic trading, but in particularly high frequency trading, is that it's all about financial engineering. ... And so, if you put just a miniscule tax on each trade and possible even a smaller tax on each quote, you're going to see Wall Street, you're going to see markets gear back toward actual investments" http://go.politicoemail.com/?qs=57dbb1574a9e3e7b8333ec640ca4eed0139f97b20e29d6336973db123bf3e858

MARKETS START TO GET THE FED RIGHT - HFE's Jim O'Sullivan: "Fed officials had been expressing the view that markets were pricing in too much pessimism and not enough Fed tightening, but it took the more hawkish-than-expected FOMC minutes to get a meaningful reaction. The amount of tightening being priced in over the next year and a half is still far too low, in our view, but at least the implied probability of a move at one of the next two meetings is no longer negligible.

"We think the probability of another tightening move as soon as the June meeting is higher than the estimated 28 percent priced into markets, although we agree it is still below 50 percent. We see a better-than-50 percent probability of a move by the July meeting. We continue to forecast two quarter-point moves this year and four next year"

ICYMI: TIM O'BRIEN ON TRUMP'S WEALTH - Bloomberg View's Timothy L. O'Brien: "What were the 'incredible' numbers the presumptive Republican presidential nominee disclosed in the new filing? More than $557 million in 'income,' up from $362 million he disclosed in an FEC document filed last July. Hold on, though. In a press release, the Trump team also described that $557 million as 'revenue.' 

"To be clear, 'income' is meant to be the amount of money Trump puts in his own pocket each year and 'revenue' is the amount of money his businesses pull in (before expenses and other goodies that reside above the bottom line). As he did in his July release, Trump appears to be conflating income and revenue in his public disclosures. These figures also look a little odd when paired with reporting from Crain's Aaron Elstein, which showed that Trump received a New York State tax break reserved for households with annual incomes of $500,000 or less" http://go.politicoemail.com/?qs=57dbb1574a9e3e7bf2aa50673d3793d9b840dcf86e27c2b35118d0cbb98a59c7

DOMESTIC MANUFACTURERS BEAT EXPORTERS - WSJ's Lisa Beilfuss: "The fortunes of U.S. manufacturers are increasingly divided between those looking outward and those looking inward. Global industrial giants are struggling under the weight of a strong dollar, reeling commodity markets and weak demand in emerging and advanced economies alike, from Brazil to Europe to China. But domestically oriented U.S. manufacturers are faring better, with steadier business buoyed by the relatively brighter auto, housing and job markets.

"The split conditions, seen throughout the latest corporate earnings reports and gauges of U.S. factory activity, reflect broader tensions plaguing the global economy. While the world's largest economy - the U.S. - is struggling to accelerate, it is performing better than many of its counterparts struggling just to stay above water. ... At Nation Ford Chemical Co. in South Carolina, about 20 miles outside of Charlotte, N.C., president Jay Dickson is having a hard time finding enough workers to keep up with brisk business ... At Caterpillar Inc., on the other hand, some gears are stuck" http://go.politicoemail.com/?qs=57dbb1574a9e3e7bcc57ef24e57f1334b4ff6e0663ea4549ff7d0458501f16ab

STILL TOUGH FOR WOMEN ON WALL STREET - NYT's Susan Antilla - "Smith Barney paid $150 million in arbitration awards and settlements in the [Boom Boom Room] case, and it and other Wall Street firms rushed to set up anti-harassment training, employee hotlines and programs to recruit women. Twenty years later, permanent change is less obvious. ... Complaints persist about pay and promotion disparities and a lack of women in senior management roles, and frustrations are growing about the limited ability of individuals to seek damages in court. ... 

"Women are slowly joining the senior ranks of Wall Street firms. Last year, women at Deutsche Bank represented 20.5 percent of the firm's directors and managing directors, up from 17.1 percent in 2011, according to its 2015 human resources report. Goldman Sachs's latest class of managing directors was 25 percent female, the highest proportion since that title was created in the mid-1990s. The least progress has been made in pay. Last week, a managing director at Bank of America Merrill Lynch filed a gender-discrimination complaint in federal court in New York, noting that her 2015 bonus was $1.55 million while her male counterpart's was $5.5 million" 
http://go.politicoemail.com/?qs=57dbb1574a9e3e7b2dd0029c12518819d42ab6f0d0fc5cad0defb81b164a64d1

SPEAKING OF BOYS CLUBS - Bloomberg's Keri Geiger: "A managing director suing Bank of America for gender discrimination by what she called an in-house 'bro's club' has set traders on Wall Street buzzing because of a host of other practices alleged in the complaint - including front- running, lying to customers and manipulating bond prices. ... 

"The lawsuit by Megan Messina, a 42-year-old co-head of the global structured credit products team, describes practices similar to those at the center of a longstanding investigation of the bank by federal prosecutors in Charlotte, where the bank is based." http://go.politicoemail.com/?qs=57dbb1574a9e3e7bba2e516ad0896d372b752214b8806142bf5f5764f2c2233a

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