Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Dow Long-term Trend Analysis - Coronavirus Triggering a Stocks Bear Market? - 27th Feb 20
Trump or Sanders? Both will pile up the Debt - 27th Feb 20
Oil Price Is Now More Volatile Than Bitcoin - 27th Feb 20
A Digital “Fedcoin” May Be Coming… And It Would Be Terrifying - 27th Feb 20
India's Nifty 50 Stocks: Does the Bad Jobs Outlook Spell Trouble for Stocks? - 27th Feb 20
How Crypto Currencies Are Helping Players Go Private - 27th Feb 20 -
Gold and Silver The Die Is Cast - 27th Feb 20
US Economy Permanently Addicted to Zero Interest Rates - 27th Feb 20
Has the Stock Market Waterfall Event Started Or A Buying Opportunity? - 27th Feb 20
Advantages of Enrolling in a Retirement Plan - 27th Feb 20 - LS
South Korea Coronavirus Outbreak Data Analysis Warning Rate of Infection is Exponential! - 26th Feb 20
Gold Price Long-term Trend Analysis Forecast 2020 - 26th Feb 20
Fake Markets Are on Collision Course with Reality - 26th Feb 20
Microsoft is Crushing the S&P 500, Secret Trait Of Stocks That Soar 1,000%+ - 26th Feb 20
Europe's Best Ski Resorts For The Ultimate Adventure - 26th Feb 20
Samsung Galaxy S20+ vs Galaxy S10+ Which One to Buy? - 26th Feb 20
Gold Is Taking on $1,700 amid Rising Coronavirus Fears - 26th Feb 20
Is This What Falling Through the Floor Looks Like in Stocks? - 26th Feb 20
Gold Minsky Moment Coming - 26th Feb 20
Why Every Student Should Study Economics - 26th Feb 20
Stock Market Correction Over? - 26th Feb 20
US Bond Market Yield Curve Patterns – What To Expect In 2020 - 25th Feb 20
Has Stock Market Waterfall Event Started Or A Buying Opportunity? - 25th Feb 20
Coronavirus IN Sheffield! Royal Hallamshire Hospital treating 2 infected Patients, UK - 25th Feb 20
Dow Short-term Trend Analysis - Coronavirus Trigger a Stocks Bear Market? - 24th Feb 20
Sustained Silver Rally Coming? - 24th Feb 20
Should Investors Worry about Repo Market and Buy Gold? - 24th Feb 20
Are FANG Technology Stocks Setting Up For A Market Crash? - 24th Feb 20
Gold Above $1,600 Amid FOMC Minutes and Coronavirus Impact - 24th Feb 20
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

Here’s Why Market Deregulation Will Be Bad For Stocks

Stock-Markets / Market Regulation Jun 14, 2017 - 04:13 AM GMT

By: John_Mauldin

Stock-Markets

BY PATRICK WATSON : Deregulation was one of President Trump’s top campaign promises. Expectations for it helped spark a post-election stock rally that boosted highly regulated sectors like banking and biotech.

I’ve thought all along people expected too much. Presidents don’t get a magic wand on Inauguration Day, and they can’t bring on major change just by talking about it.

Now, formerly bullish investors and business leaders are starting to curb their enthusiasm.


Tax reform is already getting pushed back to 2018 and possibly later. And the Obamacare replacement plan—as well as the tax cuts that are part of it—is going nowhere fast. At least one GOP senator says a deal is unlikely this year.

If those are off the table, can we at least count on regulatory relief?

To some degree, yes... but we may have already seen most of it. If your investment strategy counts on deregulation to boost stock prices, you might want to reconsider.

Trump’s Wordplay

Deregulation was high on the priority list in January. Congress passed legislation reversing some of the Obama administration’s last-minute initiatives. President Trump signed an executive order telling agencies to rescind two regulations for each new one.

Except, that’s not what it said.

The actual order, which you can read right here, says agencies must identify two regulations for repeal for each new one they issue.

Identifying a regulation to repeal is not the same as actually repealing it. Many in the media and on Wall Street missed that part.

The reason Trump’s EO was so meekly worded is because even the president can’t wipe out most regulations by the stroke of a pen. There’s a legal process for both making and repealing them.

Agencies have to gather information, study costs and benefits, allow public comment, etc.

This takes time—and with good reason.

Some regulations may be bad for business, but constantly and arbitrarily changing regulations would be even worse. Stability is one reason the United States is the world’s largest economy.

It’s possible, if not likely, that this EO will ultimately get rid of some regulations. But it won’t happen until somebody sets the process in motion and stays with it to the end.

And that won’t happen until “somebody” is there to do it.

Missing Managers

Presidents appoint the top leadership in most government agencies, with the Senate’s advice and consent.

We hear about the cabinet secretaries and see them on TV, but the real work of running the agencies happens just below. The assistant secretaries, undersecretaries, etc., are critical to getting anything done… like repealing regulations.

Yet the White House seems in no hurry to fill most of those jobs.

As of last week, more than four months into the Trump presidency, 79% (442 of 559) of the key positions requiring Senate confirmation still have no nominee. Click here to see the full list.

It’s unclear what is taking so long. One theory: The White House wants to leave those jobs vacant, thinking it will paralyze the bureaucracy.

But paralysis, in this context, simply keeps the status quo in place. It cedes power to unelected bureaucrats and Obama holdovers.

If you’re a business waiting on some kind of answer from the USDA, you could be waiting a long time. Ditto at other departments.

Those regulations business groups dislike will not rescind themselves. It will happen only when reform-minded people are in place and pushing for it. And that’s nowhere near happening yet.

Winners and Losers of Deregulation

What the deregulation people are betting on might eventually happen, but we don’t know when. Will it even matter?

You bet it will—but maybe not in the way you think.

Government regulations don’t affect every business equally. Compliance costs money that small newcomers often don’t have. This protects established industry leaders from new competition, which is bad for everyone.

Other things being equal, the winners of deregulation should be the smaller players that previously lacked compliance capacity.

Conversely, deregulation’s losers should be the larger companies whose size and lobbying muscle previously insulated them from innovative competitors.

Now, add something else to this equation.

As a general rule, the publicly traded companies whose shares you might own are among the biggest players in their markets. The start-ups that might disrupt them are usually private.

Why, then, do we assume deregulation is good for stocks? It might be the opposite. And why are public company CEOs pushing for it?

The answer is that larger businesses don’t want full deregulation. They want selective deregulation that reduces their compliance costs while still hindering potential competitors.

Unfortunately for them, they may not get anything at all.

How Regulation Influences Growth

Some regulations are necessary. They ought to serve the public interest—which may not be in the interest of whoever is being regulated.

However, some regulations are outdated or counterproductive, so periodic pruning is a good idea, if it’s done wisely.

At the Strategic Investment Conference last month, Jefferies & Co. strategist David Zervos estimated that needless regulation reduces economic growth by 10%. That means our present GDP growth rate of around 2% might rise to 2.2% if we rationalized the regulatory state.

While 2.2% would be an improvement, it still isn’t stellar. Trump administration officials say their agenda of tax reform, spending cuts, and deregulation can raise real GDP growth to the 3% range.

Very few economists think 3% growth is likely or sustainable, even if Trump and the Republicans get everything they want—and I’m very sure they won’t.

Without faster economic growth, it’s hard to justify today’s stock prices, let alone higher ones in the future. At some point, this will be obvious to everyone, and markets will adjust. The only question is when.

Subscribe to Connecting the Dots—and Get a Glimpse of the Future

We live in an era of rapid change… and only those who see and understand the shifting market, economic, and political trends can make wise investment decisions. Macroeconomic forecaster Patrick Watson spots the trends and spells what they mean every week in the free e-letter, Connecting the Dots. Subscribe now for his seasoned insight into the surprising forces driving global markets.

John Mauldin Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules