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Trump’s Flip Flops

Yesterday, the first full trading day after Donald Trump posted a YouTube video outlining plans for his first 100 days, the Dow jumped to a new record, breaching 19,000 for the first time. Coincidence? Shrewd investor behavior? Insane market euphoria? Several commentators think this rally is nuts, and I never try to predict near-term market moves. But be the rally wise or foolish, it tells us something important about how investors are sizing up Trump. Bottom line, they see him systematically walking back his campaign promises and don’t believe he’ll deliver on them – much to their relief.

Let’s parse the carefully crafted language of his scripted video. Trying to sound tough on trade, he said he’d “issue a notification of intent to withdraw from the Trans-Pacific Partnership.” That’s a big yawn, considering that President Obama had already given up on TPP because he knew it could never get through Congress. Trump didn’t even mention Nafta, but other reports this week suggest he’ll renegotiate it rather than withdraw from it. This is a considerable pullback and promises even less than it appears to. In the past week I’ve spoken with former officials from Canada and Mexico, both of whom make the same point: Nafta is over 20 years old, and there are plenty of parts they’d be happy to renegotiate. What would come out of the negotiations? That’s a long way off.

On deregulation, another popular campaign promise, Trump said he’ll “formulate a rule saying that for every new regulation, two old regulations must be eliminated.” The key words are “formulate a rule,” which is easier said than done. For starters, what constitutes “a regulation,” and will any attempt be made to distinguish between piddling ones and gigantic ones? Remember that Dodd-Frank mandated adoption of the so-called Volcker rule, which could be stated in a sentence. But the rule as eventually formulated – it took over three years – is 71 pages long. Investors don’t foresee radical change to the regulatory regime but just figure some kind of deregulation is on the way, and they like that.

Trump saved his most dramatic walk-back for his most popular issue, immigration. He didn’t talk about illegal immigrants. He didn’t even mention deportations or a wall. He didn’t explain how he’d deliver on his campaign promise that “day one, my first hour in office, those people are gone,” referring to illegal immigrants who had been arrested for any reason. He just said he “will direct the Department of Labor to investigate all abuses of visa programs that undercut the American worker.” Read that sentence carefully. He isn’t ordering action of any kind on immigration, just an investigation with no set deadline. Remarkably, he doesn’t say that he necessarily has a problem with visa programs “that undercut the American worker.” He only wants to investigate “abuses” of such programs. He spoke sternly, but the substance of what he said is almost pure air.

For now Trump is speaking loudly and carrying a little stick. Investors heard his broad message: No trade war, a general tendency toward deregulation, and no immediate crackdown on immigration or illegal immigrants. They figure these severely watered down versions of his campaign stances are good for business, and they’re probably right. Whether they will satisfy his supporters, and whether they justify the Dow above 19,000, remains to be seen.


We’re taking tomorrow and Friday off for Thanksgiving. Wherever you may be, rest, renew, give thanks. See you Monday.

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What We’re Reading Today

Federal judge blocks overtime bump
A week before new rules are set to make 4 million employees newly eligible for overtime, U.S. District Judge Amos Mazzant III blocked the measure on grounds that the Labor Department lacks authority to impose it. Pushed by President Obama, the rule makes anyone earning less than $47,476 a year eligible for time-and-a-half pay. The decision, plus the advent of the Trump administration, puts the overtime change into doubt. NPR

Lufthansa pilots strike
Carsten Spohr‘s company canceled almost 900 flights today. The strike has been extended into Thursday and is expected to affect 100,000 passengers. Pilots want a 3.66% pay raise; the company has offered 2.5%. The Guardian

Facebook builds censorship tool
The software excludes certain news from users’ feeds, based on geography. It may help Mark Zuckerberg‘s company enter China. Facebook would not manage the software but would offer it to a third party that could monitor and block stories. Reuters

Meg Whitman looks to “drive down the middle of the highway”
It’s been an up-and-down year for HP Enterprise. The stock is up 60% since Hewlett Packard split into two companies, but revenues at Whitman‘s HP Enterprise fell 7% in its fourth quarter. She says she focused on revenue in the first two quarters of the year and on profits in the second half. Next year she wants to hold steady. Fortune

Building Better Leaders

Has Trump’s rise signaled the end of empathetic leadership?
The “alpha-male” business leader who’s extremely aggressive and doesn’t listen is an old model that even some women leaders use. It can even be effective so long as there’s diversity of thought when making decisions.  Fast Company

When selecting a mentor…
…don’t expect him or her to tell you exactly what to do. Instead, show that you can handle a challenge, and the mentor will help push your limits. Fortune

Retailers that don’t accept mobile payments…
…probably won’t suffer much on Black Friday; services like Apple Pay account for a small fraction of credit card use. But inability to handle mobile payments could ding a retailer’s image.  Knowledge@Wharton

Trump’s Thoughts

Trump won’t pursue Clinton prosecution
In a New York Times interview, Trump said he’s not interested in investigating or prosecuting Hillary Clinton, apparently disavowing a campaign promise. He tempered several more of his loudest campaign pledges as well, indicating he may not authorize waterboarding and refusing to say the U.S. will abandon the Paris climate accords. NYT

Trump disavows the alt-right
Trump said he doesn’t “want to energize the group, and I disavow the group.” If they’re encouraged by his election, he said, he wants to figure out why. Trump said advisor Steve Bannon wouldn’t have been hired if he were part of the alt-right. Fortune

Trump to continue business ties
Despite campaign promises that he would separate himself completely from his business if he became president, Trump said “the law’s totally on my side” to remain involved in the company. He added that the president “can’t have a conflict of interest.”  WSJ

Fortune Reads and Videos

Amazon looks to fight fakes
It’s testing tools that merchants can use to prevent counterfeiters from copying and selling their merchandise. Fortune

Barnes & Noble gets a boost…
…from the new Harry Potter book. But comparable store sales fell 3.2% in the second fiscal quarter, which CEO Leonard Riggio blamed on election angst. Fortune

Nearly 60% of Americans want Trump…
…to dump his Twitter account. Finally, we’ve found common ground. Fortune

Even Apple will hold a Black Friday event
It has teased deals, but specifics remain scant.  Fortune

Happy Birthday

Senator Chuck Schumer turns 66 today.  Biography

Nicolás Maduro, President of Venezuela, turns 54.  Biography

Papa Johns founder John Schnatter turns 55.  Famous Birthdays

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Produced by Ryan Derousseau