National Post (National Edition)
Canadian view from Connecticut.
EX-NHL OWNERS TAKE U.S. ELECTION ONE DATA POINT AT A TIME
HAVING THE REPUBLICANS IN CONTROL OF THE SENATE IS KIND OF THE BEST SCENARIO. YOU ARE GOING TO HAVE A BIT OF A GRIDLOCK, AND THERE IS NOT A CLEAR MANDATE, AND SO NOTHING RADICAL IS GOING TO HAPPEN. — DARYL JONES, HEDGEYE RISK MANAGEMENT
The crowd at a Manhattan gastropub on Tuesday night — election night — was pro-Democrat, a mixed, socially-distanced bag of party organizers, union bigwigs, left-leaning New York City councillors and campaign donors, all of whom were entranced, if increasingly alarmed, by the events unfolding on the television screens as the evening wore on.
An election they had hoped would herald a big blue wave rolling across the United States wasn't going to be a blowout, nor a repudiation of President Donald Trump, but a fight to the bitter end with an uncertain outcome.
Counted among that crowd was Daryl Jones, a burly, bearded Albertan wearing a Labatt Blue ballcap and drinking rye and cokes. Typically, on an election night, the man known as “Jonesy” to everyone except his mom back in Bassano, Alta., would have watched the results come in with “Mucker,” a.k.a. Keith McCullough, a fellow Canadian from Thunder Bay, Ont.
The two are best friends, former college hockey teammates at Yale University, former part-owners of the NHL's Arizona Coyotes and, for the past 12 years, business partners at Hedgeye Risk Management LLC, the Connecticut-based investment research firm McCullough founded in 2008.
Instead of sitting barside with his buddy Tuesday, Mucker was at home recovering from COVID-19, and pinging Jones with messages as part of a group chat with a couple of other Hedgeye analysts trying to make market sense of the election results for their clients, which range from large Canadian pension funds to hedge funds to day traders.
“It was fascinating watching peoples' reactions as the night wore on, just the ebb and flow of the emotions,” Jones said.
As a Canadian, Jones couldn't vote. He doesn't even have a green card, although he does have an American-born daughter and he did recently buy an apartment in a Trump building in Connecticut that, he said, was selling at a significant “discount” because of the president's unpopularity.
But the 46-year-old wasn't agnostic as to the outcome, having held several fundraisers for Jaime Harrison, another buddy from Yale who wound up on the losing end of a Senate race in South Carolina to Republican incumbent Lindsey Graham.
Harrison's defeat stung Jones on a personal level, and yet, professionally, the blue wave that didn't occur was, he said, an ideal outcome for stock watchers, at least in the near term. Indeed, if Joe Biden is to be the next U.S. president, he will likely need to make nice with what could be a Republican-controlled Senate to get anything done.
“Having the Republicans in control of the Senate is kind of the best scenario,” Jones said. “You are going to have a bit of a gridlock, and there is not a clear mandate, and so nothing radical is going to happen.”
What could happen to the stock market is another story, however. Jones predicts a period of slow growth, accelerating inflation and a U.S. dollar made weak by monetary stimulus.
A weak dollar is great for commodities, real estate, gold prices and, typically, the stock market.
But over the longer haul, into the second half of next year and beyond, a weak dollar could trigger runaway inflation. On top of that risk are the job numbers south of the border. They have improved, but unemployment still remains at 6.9 per cent, and unemployment is one of those things that eventually comes “home to roost,” Jones said.
Persistent unemployment, soaring inflation and American households barely getting by is bad enough, but then also toss in a global pandemic with no fixed end date. Several European countries are entering or are already in another round of lockdowns. The U.S. is more chaotic, and complex, with COVID-19-limiting measures differing from state to state. But, in general, the more prevalent the virus, the worse off the economy.
“Even setting aside what the government does, by and large, people will self-police themselves,” Jones said. “And if cases are accelerating, you will see less mobility — people aren't going out to restaurants or going away for vacations — and that's bad for GDP.”
In sum: investors should make hay while they can since there is every indication, in Jones' analysis, that the stock market is due for a comeuppance, not tomorrow, but not too far over the horizon.
Of course, things could be worse. Jonesy and Mucker could still own a piece of the Arizona Coyotes, an NHL plaything that was a blast to be a part of, but one that came with a host of enduring challenges, chief of which: How do you sell fans and sponsors on a winter sport in the middle of the Arizona desert? Now, imagine that same question amid COVID-19.
But the Canadians in Connecticut haven't given up on hockey: They co-coach a kids' team and are also invested in a company that makes backyard rinks and is tearing it up, with year-overyear growth of 500 per cent as people get ready for a pandemic winter.
As for the election, well, if Jones had a vote, he would have cast it for the Democrats. As it turned out, he woke up early Wednesday morning with a hangover — blame the rye and cokes — and scarfed down some bacon and eggs.
“You can take the Albertan out of Alberta,” he said, “but...”
FASCINATING WATCHING ... REACTIONS AS THE NIGHT WORE ON.