Market Uncertainty Amid Biden's Drop Out and Kamala's Rise, Ep. 264

In this episode of "The Capitalist Investor," hosts Derek and Luke Lloyd delve into significant political developments and their economic implications. The key focus is the unexpected exit of Joe Biden from the 2024 presidential race, with Kamala Harris stepping in as his successor. Luke discusses historical market trends during election cycles, particularly the potential impact of a Trump victory on market corrections. Derek and Luke also explore broader issues such as COVID-19 recovery, economic stability, and societal divisiveness exacerbated by social media. They propose future episode topics, including technological advancements and historical political cycles, and express uncertainty about the Democratic Party's strategy moving forward. The hosts welcome audience engagement via email for questions and show ideas.

Transcript

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Hello and welcome to this week's episode of the Capitalist Investor. As always, you have me, diamond hands D, and no Tony the tiger this week, but we have Luke Lloyd. How we doing? We have the rockin duo. Yeah, it's a good squad, man. I mean, I miss Tony. I do. It's been a little light here in the office this week, actually. Some guys are out doing business and other countries. Yeah. Enjoying life a little bit. Well, yeah, we're holding it down here. And, you know, there's, I guess, fortunately for us, no lack of news to talk about with. Gets crazier and crazier, actually. It really does. It really, really does. But obviously, under insane circumstances, Joe Biden has dropped out of the presidential race for 2024 and seemingly has tried not. He didn't, I'm sure he didn't want to do this, but the Democrats have installed Kamala, apparently as the successor. And over the first couple market days, no really major moves yet today when we were recording, this market's starting off pretty rocky. So, Luke, what? I guess you probably have lots to say on the subject, so the floor is yours. Well, I just want to start off by saying kind of the stat that I've been saying for a while, which everyone's been looking at me like, Luke, you're an idiot. Because Trump is pro growth, you know, pro lower taxes, and it's good for the economy. So why would the market sell off if Trump were going to win? And again, if you go back just to history, every election cycle, if the incumbent loses, which would be the Democratic Party currently with the incumbent, if they lose, you typically see a 17, 18% drawdown in that election year, and we've only seen a 5% or so top to bottom correction. But what's interesting is what's happened the past two weeks. We're now 5% from the top on the market, on the Nasdaq, the S and P might be 4%. After this morning's recording of the podcast, I think it's maybe five or 6%. So it's kind of feeling like we're getting that market correction pricing in more of a Trump victory, especially what's happened over. Well, maybe not. It's probably, maybe even less. It's after the past weekend, I think if Biden would have been the best case scenario for the Republican Party, I think Trump had it in an absolute bag with Biden staying in the race. I think it's not that much different now, but I think it's a little different. I think Kamala has a better chance than Biden did because she's actually, I guess, somewhat coherently there, if that's the way you want to put that. So it's interesting. I think the market is pricing in a Trump victory, and that's why you're seeing a little bit of a correction and not because Trump's policies, just because of some of the uncertainty and shakeup that's going to do around the world. Yep, for sure. And we, I mean, look, we've been saying this for a while now, you know, kind of when will things get back to normal, right. From, from COVID really. Right. And if you're paying attention, they just really haven't gotten back to normal, quote unquote normal. And, you know, that's just kind of real life. But more specifically, the markets and the economy. Right. Because where we're sitting right now, like you said, within five, 6% of the top, it just doesn't feel like we should be there. You know, we talk about all the time we've talked about, you know, cracks in the foundation all year long. Hopefully what will happen? Will there be a normal election and someone will get elected? And then, and then we can kind of get on with this post, you know, post Covid post, you know, just conflict and get back into kind of what America does because we're not doing that anymore. And I think that's one of the bigger takeaways on the market. If we want the America of the past, we need to produce. Right. We just can't sit around, pass out government jobs, make people take seconds, part time jobs while inflation is running crazy. That's just not going to work long term, running giant deficits when our government does that, that is one of the key causes of inflation. We can't keep doing that. Hopefully after this election cycle, we'll be able to get back to business a little bit. And when that does happen, I think the market will correct and I think it's basically a stall game. But, yeah, go ahead. I don't have too much input. I need to do some more research on this. But something that just kind of popped in my head is there's still the divisiveness of the country. Right. What would have happened if Trump was not around, if it was 1, right, and he died? What would have happened to the country at that point in time? What bad things, negative things would you have seen? And I don't know the answer to that. It's a hypothetical, but I don't think it would be very good. Some of the reactions and some of the anger throughout the world, the same thing that would happen if something happened on the other side. I mean, just, that's not something that good that happens. That's very more divisiveness, not something that brings the country together. Sometimes it takes a big thing that's divisive to bring the country together in some ways. But I think you have to look to history to draw parallels. I still love, like Ray Dalio, his kind of philosophy on what made him money all throughout the years. All he did was look at historical cycles of very big parallels, economically, socially, and politically, to drive his market returns to position correctly for those returns. And, I mean, maybe you go back to look at more divisive times in history in America, maybe the civil war. We look at the stock market during the civil war and how it performed and what stocks performed better, like those kind of things. Like, it's actually, things really weren't that much different in a lot of ways during different periods of history from an economic standpoint. I mean, economically, behaviors tend to become the same throughout history. So I think maybe that's an important kind of parallel we need to draw is what kind of political device in this draws market returns. I don't have the answer that maybe that's a different podcast another time. Yep. You know, it's definitely, it's definitely interesting to think about. And there are, you know, I obviously, I'm much, much older than you are, but I'm still only 44, and I've obviously watched from afar, you know, my whole life, and I just cannot remember anything even remotely close to the environment that we're in right now. It is just the one of the major things that, that bothers me about this cycle is. Lisa, you want to come through? Yeah, go ahead. We'll just cut this out. I thought I saw you creeping over there. What was I saying? Environment is worse. It's been history. So we'll come back. The kind of, you know, one of the major things that we see is the divisiveness that's going on. But one of the major things that bothers me is just no one's even willing to have a conversation anymore. It's. It's like if person a has, has, you know, a thought and person b has a thought, we used to be able to talk about it in kind of, you know, say our piece and then kind of move on that that is what is really lacking in the last, you know, six to eight years, I would say. And everyone's to blame, quite honestly. I think it's a let's go. There's a reason for that, I think. And it's definitely, I think the echo chambers we've created on social media. You know, it was back in the. Before social media, everyone felt like they had a voice, but they didn't have an outlet for their voice. You know, no one gathered together in the street and shout out their political opinions. Like, everyone kind of kept it to themselves. And now it's like everyone has an opinion and tries to be an expert on every subject. Right? They try to be an economic expert. They try to be a political expert. They try to be, you know, an expert in pharmaceuticals, like, everything. So, listen, it's good that everyone's maybe more intelligent in some ways, of going deeper into the rabbit holes of certain things to try to understand and become educated in some ways, but it's not necessarily good when you have a bunch of people coming together just shouting about things and who's a note, who knows what's factual and unfactual. So it's definitely. My whole blame is on the majority of social media. The echo chambers have been created. So the question is, is, you know, there's gonna remain and continue to be divisive, probably. I just watched Silicon Valley, the HBO show rewatched the whole series. We are, like, almost at the very end yesterday, one of the episodes on season six, they were talking is Gavin Belson is his name. He's like the. Basically Jeff Bezos, Elon Musk, whatever it be, of a tech company on that show. And one of the things, after he failed, he started a thing called tethics, and it's basically tech ethics. And it kind of reminded me that there are not much ethics that kind of apply in a lot of today's world when it comes to data, how much data is on us and things like that, and how much of our privacy do we really have? And with every opinion that we throw out there on social media, basically a whole virtual world in person is being created for us. I think there's a documentary on Netflix about that, but it kind of gets you thinking, like, what is the end result of this? We go back to no technology because everyone just fed up because we see the. Maybe the negative side effects of technology in this world. Or do we continue to progress with technology to drive inefficient bad results and divisiveness as a country that ends up making the country non existent at some point down the road. Yep. Yeah. It's basically the terminator scenario, right? Yeah. Progressing with technology, and it's. It doesn't have to be as literal. I think it's a very metaphorical kind of sense of where we're heading as a technological world. Absolutely. Yep. Absolutely. And we're, in my opinion, at least we're careening in that direction. We're screaming as fast as we can right towards that direction. Yep. So that was good. I really like that combo. We should go deeper into some of the things we talked about. Like, those are really good things, you know, kind of, I didn't come to talk about, but kind of where the conversation led, you know, when it comes to. Let's talk about one episode about the future of technology, Terminator scenario, let's talk about historical cycles of political divisiveness. I think those are good to hit on. Deeper. Yeah, for sure. So what do you think as we, you know, sit here around, probably around Thursday, the, July 25, who do you think the democratic nominee will be? I think it has to be Kamala. They have to keep the money. I think they lose, from my understanding, and again, I'm not. I'm not a political expert. I talk about politics. I care about politics, but it's not like I spend every single day, you know, trying to keep up with everything that gets going on. From my understanding, they lose all the money they've raised if they do not nominate Kamala. So it has to be, it's a money game, like anything in this world. It's all about money in some sort of way. So I think Kamala will be the nominee. I can tell you. No, I have no idea who she's going to pick as vp. I mean, Gavin maybe. I don't know. That's my only kind of thought. Pete buttigieg. I don't know. I don't. Unless something crazy happens in the next four months, like, something that we just can't see happen, I don't still see how the DNC could ever pull this together without cheating. Yep. Yeah. And that's. That's still a topic of conversation. I mean, I don't, and I don't know how they would cheat. I'm not gonna come to any conclusions with that. But I'm just saying, like, that's. I don't know. I don't see how. I know how they would cheat. I'm not gonna go deep into that. There's some things going on around this world I don't want to hit on. All right, well, obviously, big news this week. So will continue to monitor and talk about it and how it kind of relates to the markets. But if you guys have any questions or comments, show ideas, hit us up at info@swpconnect.com and we'll talk to you next time. Bye.