Leon Cooperman Shudders at Prospects of Warren as President

Leon Cooperman

Billionaire investor Leon Cooperman recently quipped on Thursday in an interview on CNBC that “they won’t open the stock market if Elizabeth Warren is the next president.”

To say that Elizabeth Warren as president would be Wall Street’s worst nightmare may not be an exaggeration at all. This is a scenario that is unthinkable as they come, as even though presidential power has its limitations, having a president so passionately opposed to capitalism and free enterprise as we know it would indeed be a singular event in American politics and she could do plenty to seek to disrupt our economy to serve her left-wing political ambitions.

Warren has already given us a good glimpse into her mind with some of the things that she has sponsored or supported, such as Medicare for All, a $2.75 trillion wealth tax, breaking up tech companies just because she thinks that they are too big, taxing securities transactions, and just being staunchly opposed to what goes on in financial markets and not seeing what happens match well enough with her socialist agenda.

U.S. politics does have a distinctly socialist flavor to it, although American socialism is well tempered by a strong regard for capitalism and when the two collide, capitalism wins out for the most part and is preserved. With a genuine socialist president, and one that has demonstrated a fundamental misunderstanding of what the economic effects of her policies would be, this would certainly take the relationship between the presidency and the economy and the financial world to a whole new place, and a dark one.

While we might think that leaders of countries are well advised enough that they would refrain from acting in a way that is clearly uninformed, we don’t have to look any further than President Trump to see that presidents aren’t always that aware of the consequences of their actions or are well informed at all about certain issues.

This doesn’t just happen in the United States. Canadian Prime Minister Justin Trudeau has made eliminating credit card transaction fees part of his re-election platform. It seems no one has told him that without these fees, it would be impossible to use a credit card in Canada again, because payment processors such as Visa and MasterCard won’t want to just donate their services from now on.

We can only hope that if he does get another term, someone will explain to him the basics of how credit cards work, and that if the merchant doesn’t pay these fees there will be no one left to pay them, as the credit card issuers can’t because they use this money to help pay their own bills. These fees do need to be paid by someone though, but there would be no one that could do it, so they just wouldn’t be able to be used anymore. The fact that an idea like this could ever make it to a political platform shows just how little our leaders may know about finance.

Elizabeth Warren has shown that she is on the further reaches of this sort of misunderstanding, to the point where a complete lack of impracticality or even actions which would be financially devastating do not serve as barriers to her political goals. If challenges such as conjuring up $3 trillion a year and bringing down a trillion dollar a year industry which Medicare for All would involve doesn’t discourage you, nothing will.

Thankfully, most of Warren’s outrageous ideas are ones that would require congressional approval, and Donald Trump has certainly shown us that a lot of things simply are not up to the president, and he often resorts to Twitter to express his displeasure of not having a lot more power and to use his high profile to vent. We would see plenty of venting from Warren as well if she were sitting in his chair, as she appears to be at least his equal in terms of passion, which is saying something.

Warren’s political views do stand out even more than Trump’s though, and while he does sit further to the right of your average American politician, Warren and Bernie Sanders both sit far to the left, and either winning the president would place them even further away from the mainstream than Trump ever has managed.

If you are a populist, as they are called, where the goal is to seek change and the end matters much more than the legitimacy or overall effect, then this would be seen as a good thing. This really isn’t about one political ideal versus another though, as the risk with populism is that it is prone to turn its head away from the bigger stuff, the country’s economy for instance, in favor of benefiting certain segments regardless of how it might serve as a detriment to our economic well-being overall.

The worries here therefore need to extend well beyond Wall Street, as even though what happens in the financial world matters a great deal, what happens in the broader economic world matters even more, and they are also well connected.

While we can still rest easy about the big stuff, things that would require being passed in both the House and Senate, a president can still do quite a bit on their own, and when their gun is locked and loaded and aimed at disrupting the financial world, this is not a risk that is insignificant.

Managing an economy requires that we not look to constrict it too much, it by way of presidential decree or otherwise, and if we have a president that does not show the proper regard for the importance of this, this can be a real problem. If the goal of a president is not the country’s well-being overall but certain disadvantaged segments, even those disadvantaged segments can be further disadvantaged along with everything else if we seek to knock things down a few pegs and delight in the notion.

Capitalism and socialism can co-exist pretty well provided that we understand that we cannot use socialism to infringe upon capitalism too much. The goal needs to be to allow capitalism to flourish, and then perhaps utilize the fruits of it to pursue our political goals.

When economic and political goals do battle and the political goals win, the economy simply loses, and now you’re forced to get by with less and also have lesser means to further your political goals.

The reason why Elizabeth Warren ever becoming president would be something we should fear has nothing to do with our political beliefs actually, and has everything to do with her intent to put the brakes upon economic prosperity to chase her pipe dreams and fashion the country more in accordance to what she sees fit rather than what would be good for the country’s economy and the country as a whole.

Warren May Not Be Rising as Fast as We Think, But Too Fast Nonetheless

Warren has risen in the polls, although a recent poll showing her only 6 points behind Joe Biden may not be that representative. Polls can differ quite a bit, and we therefore should never just be putting too much stock into one and need to look at the average results of recent polls. When we do, Biden is still maintaining a fairly comfortable 10.5-point lead, so Warren’s apparent surge seems overstated by the 6 points.

With Sanders in third, and Sanders and Warren both commanding about 16% of voters, if and when it comes down to a showdown between either Biden and Warren or Biden and Sanders, it’s much more likely that Sanders’ supporters will support Warren over Biden, as well as Warren’s supporters being more likely to switch to Sanders, due to their being closer in beliefs.

This would at least serve to narrow the gap, if not eliminate it. The good news, if wanting to keep either Sanders or Warren out of the White House is good news, is that their views are polarized enough that among the rest, Biden should be the clear favorite.

Donald Trump should be rooting for Warren though, as he stacks up against her much better than he does against Biden, who would likely crush him. Warren, on the other hand, would at least make the race more interesting, as Warren only has a 5-point lead over Trump, and that’s close enough that he may have a chance of winning the electoral college.

Biden is more of a traditional democrat, more along the lines of Obama or just about every other candidate that has come along from that side of the floor, but there’s nothing traditional at all about Warren who is much more of an extremist at least among American politicians.

Leon Cooperman is predicting a bear market with stocks lasting a year and knocking things down by 25% if either Warren or Sanders wins the presidential election, but that might even be a modest assessment.

Where the stock market goes isn’t really a measure of progress or a lack of progress economically, and it’s the economy that matters, but this bear market would be inspired more by economic deterioration than just investors getting skittish or even horrified.

Who is in the White House has always had some effect upon financial markets and the economy, although in the case of Warren or Sanders, we are talking about people who will be loading their guns on day 1 and aiming them squarely at Wall Street, which Warren sees as fat cats doing little or nothing to support the thinner cats out there, who she is an unabashed champion of.

Left wing politicians have criticized what is called the trickle-down effect all along, but without the properly understanding the matter. When the economy is strong, wealth does trickle down somewhat, but when we try to restrict it so that more may trickle down, this leads to even less trickling. We have near full employment now and having a job is a nice amount of trickling, but if unemployment rises, or if growth slows further, there simply will be less to pass on.

Part of the reason why things are humming along quite well with our economy is that Trump cut taxes, and presumably understood that this was a good thing for the economy. Even with this stimulus, we’re barely moving forward, and while Trump is also to blame here with his tariff party, any party that Warren throws will involve looking to do the opposite of what these tax reductions did. Her wanting higher ones, and placing heavier restrictions on business, clearly takes us in the wrong direction at a time where it is important to keep things together and avoid a potential recession.

It’s far too early to start worrying about these things, but just a year-long bear market of 25% isn’t really that big of a deal, but a recession could be, and this would actually be the big worry if Elizabeth Warren became president. While the chances of this happening over the next few years remains low, our economy is still fragile and Warren’s ambitions would certainly impact things in a way that would take us well toward one, even with the limited number of things she could do on her own.

Cooperman advises us to “vote right and vote often.” The “often” part is amusing, but it does hit home as far as how important he sees keeping either of these leftist candidates out of the White House is.

Perhaps the saving grace here is that Warren’s extremism would present a lot more fodder for election-time bashing than we normally would see, and if her pie in the sky can be made to fall more on her face, that could really help contain her popularity among the more moderate voters that she needs to do well with.

In the end though, we need to have the electorate maintain at least the tiny bit of understanding that they have about the importance of a healthy economy. We need to be able to set our anger and discontent aside and make sure that we think things through, which is the one thing Warren needs to work on the most. Her getting this is probably way too much to hope for, so we need to make sure that we do.

Eric Baker

Editor, MarketReview.com

Eric has a deep understanding of what moves prices and how we can predict them to take advantage. He also understands why so many traders fail and how they may help themselves.

Contact Eric: eric@marketreview.com

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