A. Gary Shilling: Trump Deserves Some Credit For The Surge In Stocks

Authored by A. Gary Shilling via Bloomberg.com,

Less regulation is one campaign promise made by the president that is coming true...

Reducing government regulation is tough. It’s resisted by all those who benefit, including government employees who administer the many programs. Every president since Jimmy Carter has attempted to lower the cost of regulation. At best, any cuts have been tiny and mostly centered on trimming paperwork. But less regulation is one campaign promise made by Donald Trump that is coming true. With tax and health-care reform problematic and given the president's protectionist leanings, deregulation is probably a major driver of the stock market rally.

The size and scope of the federal government give the president immense powers. In relation to gross domestic product, federal spending rose from 16 percent in 1946 to 22 percent in the 2017 fiscal year. Executive orders give the chief executive, in effect, legislative powers. President Barack Obama issued many in his waning days, especially affecting power plants and oil pipelines. The Competitive Enterprise Institute last year found regulation cost American businesses $1.9 trillion, dwarfing the $344 billion in corporate taxes. About 56 percent of CEOs see overregulation as a major threat to their organization, more than cybersecurity (50 percent), rising taxes (41 percent) or even protectionism (27 percent). 

Whenever a new regulation is made or changed, it must be chronicled in the Federal Register. In the last years of the Obama administration, regulatory activity went parabolic, hitting almost 97,000 pages in a year. The annualized pace under Trump through July 31 was 61,330 pages, the fewest since the 1970s. This year through June, the federal government had made 1,731 preliminary, proposed or final rules, the least since 2000 and down 40 percent from the 2011 peak under Obama. Many actions taken under Trump are reversals of earlier rules made under Obama. Of 66 completed actions at the Environmental Protection Agency, a third were rule withdrawals.

Shares of banks have benefited, as those with more than $50 billion in assets are now able to merge without increased scrutiny. Scaling back the Volcker Rule would allow big banks to resume proprietary lending. The delay and likely alterations of the fiduciary requirement would aid brokers and insurers. The House has already approved a widespread rewrite of Dodd-Frank. A bipartisan group of senators recently agreed to exempt banks with less than $250 billion in assets from the “systemically important financial institutions” group that is subject to much stricter oversight, including higher capital buffers. Previously, the threshold was $50 billion. Congress also shut down the Consumer Finance Protection Bureau rule that would allow consumer class-action suits against banks as opposed to arbitration

Drug producers are gaining from faster Food and Drug Administration approvals. Miners and other dangerous companies now have relaxed accident-reporting requirements. The Interior Department indicated it would rescind proposed rules on oil and gas fracking on federal land. The Federal Communications Commission is reversing the Obama-era decision to regulate internet service providers as utilities. In another reversal, the Equal Employment Opportunity Commission will stop the scheduled collection of data from employers on how much they pay workers of different genders, races and ethnic groups. Meanwhile, the Occupational Safety and Health Administration is reducing its reporting of workplace fatalities.

Within days of taking office, Trump signed two executive orders supporting the construction of two controversial oil pipelines -- Keystone XL and Dakota Access -- that Obama had refused to back, due mostly to environmental concerns. The Trump administration is also considering reducing the size of some national monuments to free the land for ranching, hunting and fishing, mining and other commercial uses. This, too, can be done without legislation.

Using the 1996 Congressional Review Act, Congress and the president have repealed 14 of Obama’s final regulations. About 29 of Trump’s executive orders and White House directives have reduced regulations, executive branch agencies have issued additional deregulation directives, and Congress is considering 50 more.

In some cases, private sector companies wish regulations weren’t instituted in the first place, but they’ve spent so much time and money to comply with them that reversals wouldn’t be worth it. A case in point is the fiduciary standard. The Labor Department delayed its rule that investment advisers be held to the fiduciary standard of putting their clients’ interest above their own on retirement accounts. But many firms have already made the switch. Similarly, large banks that have spent huge amounts to comply with the 2010 Dodd-Frank financial regulation law don’t want it to be dismantled.


Clock Crasher Wed, 11/29/2017 - 17:28 Permalink

If you mean that John-Q Bagholder bought the Soma that DJT sold him then yes Trump should get some credit for the stock rally. You also might want to overlay stock buybacks with stocksor you can overlay TD Ameritrade, Swab etc with stocks Eventually the equity transfusion needed to keep the bond market from going to zero once that shit show implodes with extreme prejudice will come from stocks.  If they let the machines sell its going to be ugly and orderly.  If they pull the bids that the machines offer during the implosion the markets will just shut down and not re-open until they are 20 standard deviations lower.  Prisoners Dilemma 

Deep Snorkeler Wed, 11/29/2017 - 17:43 Permalink

America's CorporatocracyWhere mega-corporations grow in size and power every year,fueling inequality and working class powerlessness.The corporatocracy has merged with the aristocracyto the detriment of the semi-educated, opiated masses.Immense national wealth funnels into their hands.You voted for your own wage decline and job loss. 

adolphz Wed, 11/29/2017 - 17:51 Permalink

NOT sure  your presidents want to take credit.  It will also come crashing  Shepwave killed the rally last year when he Trump won. They were only analyst who knew that this rally would happen. The traders there will be the ones to call the top in stocks. We need them to do bit coin www.Shepwave. com

Consuelo Wed, 11/29/2017 - 17:52 Permalink

  Regulation goes something like this: - Don't dump toxic chemicals down the storm drains- Don't abuse your employees- No special favors/breaks for anyone- Let people succeed or fail on their own How complicated does it really have to be...?

luna_man Wed, 11/29/2017 - 17:58 Permalink

 DON'T FOOL YOURSELVES...trump,(scapegoat) ain't got nothing to do with it! Just so you know, I added to my "short" positions today...I'm gonna be rich I tell ya!

MuffDiver69 Wed, 11/29/2017 - 18:15 Permalink

This is historic and one can only imagine what Crooked would have done. Regulation is one area a President can have outsized impact on his own and this article only touches the tip of it..Well run red states will see a boom, but it won’t help California, New York etc much at all.. as they drown in regulation and debt...I look forward to SALT deductions ending and seeing how they react..good times..

Karmageddon Wed, 11/29/2017 - 18:14 Permalink

The danger for Trump is that if you claim it on the way up, you own it on the way down - and besides stocks are a generally poor metric for assessing a presidents on the job perfomance 

Tzanchan Karmageddon Wed, 11/29/2017 - 22:52 Permalink

Nobody mentions that the bond market has been slaughtered with inflation fears. Debt issued at lower rates gets killed by a rise in rates. I bet most if not all of the "gains" in the stock market have been offset by bond losses. Combine that with weak demand profits only rising because corporate execs issued their own bonds at record low rates and bought back gazillions in shares so naturally the Profits per share went up. All of increases in demand are on credit, not increased productivity, look out below...

In reply to by Karmageddon