Parallels between Brexit and US Presidential election polls. Buy gold!

You can’t write off Donald Trump’s chances of becoming the next US President whatever the polls might suggest.  Most polls put Hillary Clinton in the lead – but not by much – and if the battleground states go the way the polls are suggesting it would only take Florida to move from a likely Democrat win to a Republican one to swing the electoral college votes in favour of The Donald.  The latest electoral map with no ‘toss-ups’ (i.e those states which appear to be tending one way or the other are in as wins for whichever candidate is in the lead at the time) suggests a Clinton victory with 292 electoral votes against Trump’s 246 – it takes 270 to win the nomination.  But, one of the states which is down as a Clinton victory on this basis – Florida with 29 electoral college votes – is far too close to call and seems to be trending in Trump’s direction.  Do the maths.  If Florida ends up for Trump, and the other states stay as predicted, Clinton would end up with 263 electoral college votes and Trump with 275!

Both candidates are hugely unpopular with a large sector of the US public and it may just come down to which candidate’s campaign can get the votes out.  Parallels with Brexit here.  The Exit campaign had more committed voters than the Remain campaign and other polls have suggested that Trump supporters may be more likely to turn out than Clinton ones.  With Bernie Sanders now stating he is an independent, rather than  a Democrat, some of the big numbers who wanted him as the Democratic nominee may well decide not to vote.  That would be a serious blow for Clinton

There’s also the question of the accuracy of polling.  The high profile political, economic and celebrity supporters appear to be almost all anti-Trump.  His candidacy is ridiculed by many supposed opinion-leaders.  Because of this one suspects that a number of people contacted in telephone polls will not like to admit they will be voting for Trump, even though that’s the way they will go.  More parallels with the Brexit polls.  With nearly all the big political and economic guns pressing for a Remain vote it appears that some questioned in telephone polls did not give an honest answer as to which way they would vote because they feared they would seem to be naïve to the poll conductors.  Human nature.  You don’t want to sound ignorant, uninformed or perhaps racist when talking to a stranger.

So don’t be totally surprised if the polls stay roughly where they are now, assuming neither candidate totally disqualifies themselves, but the result comes out differently.

Interestingly, a respected Professor – Alan Lichtman of DC’s American University – claims to have developed a formula of 13 key points which has correctly predicted the last eight Presidential elections.  If the incumbent political party fails to meet at least six of these points, they will lose the election. See article on the website: Professor Who Accurately Predicted Last 8 Elections Says Trump Will Win for details of the specific key points in Lichtman’s analysis.  In his view the Democratic party fails on at least six of these.

If Trump were to win, the American political and economic elite will be shell-shocked – not to mention most of the African American and female population of the U.S.A.  Markets will probably be thrown into turmoil in the U.S. – and around the world too – as Trump is seen as both mercurial and unpredictable.  He’s basically a hard-nosed businessman perhaps unsuited to the diplomatic niceties that global leaders expect from other political leaders.  Getting his own way regardless of opposition would be the norm.  Thus a Trump victory would be the biggest Black Swan event of the year and would generate huge global uncertainty.  Gold thrives on uncertainty.  Need I say more.

It takes one back to the episode of The Simpsons TV cartoon where Lisa Simpson becomes President and on entering the Oval Office is informed that the previous President – one Donald Trump – has bankrupted the country.   In any realistic financial terms, if Trump wins he will be inheriting leadership of a nation which is already technically insolvent anyway.  He has already sounded off about the Fed driving America to rack and ruin and could take steps to drastically change the status quo, but whether his remedies might make the current situation better or worse, who knows?

Prior to the UK’s Brexit vote we advised readers to buy gold against the possibility – small though it may have seemed at the time – of the UK voting to leave the EU – not only because we felt the gold price would rise in the aftermath of such a vote, but also that the pound sterling would fall.  Gold would be a wealth protection insurance in such a case, but without serious downside risk attached. if the vote went as the polls were predicting  That proved to be wise advice!

Perhaps now we should suggest that Americans do likewise with a similar potential scenario in sight should Trump come out on top  Resultant uncertainty could drive the dollar down and gold up – which amounts to the same thing in some economists’ minds.  Roll on November 8th and free us all from our uncertainties.

The above is a lightly edited and updated version of an article I have already published on the website