Magellan looks to ex-CIA director for intel on Trump
Oct 19 2018 at 4:53 PM Updated Oct 19 2018 at 9:04 PM
(I am not the author of this article I’m only archiving it)
“China is the most significant foreign policy challenge faced by the US economy” ex-CIA director Mike Morell said. . Josh Robenstone
Magellan Financial Group has revealed ex-CIA director Mike Morell as a key source of intelligence on the Trump administration for the funds management powerhouse.
Chairman and founder Hamish Douglass introduced Mr Morell at an event on Friday where the former spy said China was the biggest risk the US had ever faced, that the US was vulnerable under Trump if a crisis stuck and bet on a second term for the controversial president.
“If you gave me $1000 and took me to a bookie right now I would bet that Trump will win another term,” Mr Morell said.
Mr Morell has been advising Douglass and Magellan for a year and a half after being introduced by the Lowy family. Mr Morell worked with both the Bush and Obama administrations. On September 11 he flew with President George W Bush on Air Force One and by President Obama’s side when Bin Laden was killed.
Mr Morell described the China threat as the “single biggest foreign policy challenge faced by the US economy” eclipsing even the Soviet Union, saying the US was “hurtling toward a cold war against China”.
Mr Douglass and Mr Morell said the two countries were on collision course given China’s extensive resources and ambitions with the outcome riding on President Trump’s negotiation skills.
Mr Douglass described the President as a showman who was likely to make small adjustments to deals and then sell them a major win.
Mr Morell said Trump was someone who would retreat to his base under attack. He was well advised in the White House but also maintained a group of external advisers whom he spoke with regularity on a cell phone that he refused to give up.
“We haven’t had a crisis yet but when we do I don’t think that lack of process with serve us well” Mr Morell said.
Magellan Financial Group founder and chairman Hamish Douglass says there is almost an even money chance of a short and sharp correction sending asset prices down by as much as 30 per cent but does not consider the outlook to be gloomy.
Mr Douglass said the US economy was the strongest it had been in 11 years. He said the US Federal Reserve was “betting against history” by keeping rates low as fiscal stimulus continued to pour into the economy at a time when a time when un-employment was near record lows.
“At that point the market would say the game is up, the Fed is behind the curve and the market would prices in another three or four rate rises … you could see the herd running for the door very, very, quickly” Mr Douglass said.
There have only been four occasions since 1950 where un-employment has been below 4 per cent however the US Federal Reserve is predicting a multi-year period where unemployment stays low and inflation remains under 2 per cent.
Mr Douglass said the firm was cautious and its cash levels had risen to 18 per cent or within two percentage points of its cap.
He agreed that when you combined Magellan’s cash with holdings of consumer staples such as McDonalds, Kraft Heinz and home supplies company Lowes it was more defensively tilted than it had been.
“I don’t think McDonalds is really going to be disrupted, I don’t think Amazon is going to get in the hamburger business” he said.
He said it wasn’t true to say US stocks were expensive saying they on par with multiples paid elsewhere around the world.
“We are not Dr Gloom … we don’t think the world’s about to have another financial crisis but asset prices are wound up and there are some major risks that could cause a material change in asset prices.
“Do we think the markets are going to crash and drop 50 per cent, no we don’t, but do we think a 20 to 30 per cent correction is foreseeable? Yes its foreseeable. Will it happen? We don’t know.
Mr Douglass wouldn’t say whether he was deploying cash into the market but did not view the weakness in US markets as a major correction.
“We are in environment where assets are pretty expensive, we are finding lots and lots of things we can invest in but are there lot of things on my buy list that are cheap? No there are not.”