This article was published by The McAlvany Intelligence Advisor on Friday, December 9, 2016:
AT&T’s Chief Executive, Randall Stephenson, spoke to a UBS investment conference on Tuesday, introducing a new phrase that more and more American companies will shortly be adopting: “upside sensitivity” studies. He spoke of how less government oversight and lower taxes would impact his business, expressing optimism that “a more moderate approach to some of those regulations is in the making under a Trump administration.” He then added:
It we achieve any kind of meaningful corporate tax reform I am quite convinced that it is going to change this trajectory in terms of capital investment. I can’t remember the last time [we] did an upside sensitivity in [our] business plan, but we are doing an upside sensitivity plan now.
U.S. Steel CEO Mario Longhi calls the paradigm shift a “significant driver.” In an interview with CNBC on Wednesday, Longhi said he’d like to bring back up to 10,000 jobs to the US:
We’re already structured to do some things, but when you see in the near future improvements to the tax laws, improvements to regulation, those two things by themselves may be a significant driver to what we’re going to do….
I’d be more than happy to bring back the employees we’ve been forced to lay off during [the Great Recession].
His company used to employ 37,000 people, but that dropped to just 21,000 as of last December. At fault were not only the Great Recession and its almost immeasurably small recovery, but also excessive regulations:
There was a point in time in the past couple of years that I was having to hire more lawyers to try to interpret these new regulations than I was hiring engineers. That doesn’t make any sense.
Stephenson and Longhi may be late to the game, as others, with massive investment capital in hand, are already making their moves. On Tuesday Masayoshi Son pledged to invest $50 billion in the United States, which he said would create 50,000 jobs. On that news, shares of SoftBank, a Japanese multinational telecommunications giant founded by Son in 1981 (think Sprint and Yahoo, in which Son has invested heavily), were in such demand that trading had to be halted briefly to accommodate all the buy orders.
With a little convincing, Carrier and Ford have had their paradigms shifted: both have decided to keep their Indiana and Kentucky plants in the US instead of moving them to Mexico.
Investors are ahead of everyone. Investors Business Daily published its Economic Optimism Index on Tuesday, showing its rise to levels not seen since before President Obama took office. Especially notable was the jump among Republican investors, from 50.6 just before the election to 86.6 on Tuesday, the highest ever recorded by that index dating back to its launch in 2001.
Investors poured nearly $50 billion into ETFs invested in American companies in November, the most recorded since 1998, according to State Street Global Advisors. Chortled State Street: “While the jury is clearly still out on President-elect Trump’s decree to make America great again, as he has yet to take office, the post-election fervor has certainly made U.S.-based fund flows great again.”
That optimism has driven stock indexes to record highs, especially the Russell 2000 Index (RUT) which tracks small companies most likely to benefit from Trump’s policies. Since November 9, RUT is up more than 10 percent.
On a side note: IBD’s Economic Optimism Index also measured how unhappy Democrats are with the Trump rally: their “sentiment” plunged from 60.3 the day before the election to 28.2 as of last week. They obviously haven’t yet incorporated “upside sensitivity” into their thinking.
MarketWatch.com: Opinion: Why a Trump economic boom isn’t so farfetched