Nikki in NH

THIS IS NOT INVESTMENT ADVICE. INVESTING IS RISKY AND OFTEN PAINFUL. DO YOUR OWN RESEARCH.

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I came to New Hampshire to meet Nikki Haley for the same reason I went to Riga, Taipei, Kyiv, Mississippi, Santiago—-to see things firsthand.  You pick up things in person that you miss on Google. And tomorrow here in New Hampshire is a vote that Nikki Haley is supposed to lose but, if she wins, changes a lot of things.

I didn’t know much about her before driving up here and, to be clear, I am a market guy, not a political savant. I am not rigidly wedded to a political party. I like New Hampshire’s motto—-live free or die. I’ve never come to a New Hampshire primary before and I can’t vote here. But the stakes are high and if, against expectations, Haley were to win here, things will change fast.

And she could win. DeSantis dropped out. Registered independents are allowed to vote in the Republican primary here and these days more people identify as independent than as Republican or Democrat. And most Americans don’t like Trump or Biden. If she wins the nomination, polls suggest she crushes Biden. And the US budget deficit is forecast to be >5% of GDP in perpetuity and Haley is…an accountant. She seems like a person that will bring spending under control and even though inflation is already under control, the scars from the high inflation are in place and the deficit is outsized.

The election matters for more than that, though. The remarkable thing about America, the thing that brought my Grandfather and many others here is that the system is a) less prone to internecine violence b) creates extraordinary wealth and c) while it gets wildly off course again and again (Civil War, Vietnam, Iraq 2, Trump) there is just enough flexibility built into the system that it corrects. The Constitution is augmented to forbid slavery. The US pulls out of Vietnam and then, decades later, builds profitable factories there. Bad leaders are voted out.

If Haley, against all odds, wins, it suggests to me this corrective feature is still in place.  I fear if Trump wins he can do enormous damage, yes in terms of shredding institutional norms but also by creating a pliant Fed that then destroys the integrity of the US Treasury market. The Treasury market is like electricity—almost no one understands how it works but if it falls apart, you will notice quick. Study what happened in Turkey under Erdogen, who gained control of the central bank, which subsequently printed and destroyed the value of the local currency.

The election also matters on the international stage. The free world does indeed look to the US. Ukraine and Taiwan hang in the balance. If the US system, once more, shows a degree of flexibility to select a new, young leader who is a capable administrator it is a stinging rebuke to Russia and Putinism. Out with the old, in with the new.

It is also probably quite bullish for US Treasuries because it is clear she wants to pull back on spending a lot.She spoke about that last night. I’d even say her policies might be deflationary. And if Treasury yields sink below 3%, the stock market would probably go up even more.

I went to two events, one at a brewery, the other at Exeter’s local public high school. I shook hands with her and listened to her speak. I watched the crowd. I spoke to the people next to me. The first thing that struck me was how regular people --- in the first event about 50 people in a bar—-truly can matter. Haley came in, sipped a beer and gave a short speech. She made fun of Trump. Viewed through the prism of what I’ve seen in Russia, China and other places, the gathering seemed remarkable.

Like most accountants I’ve met, Haley seems utterly uncreative. I for one don’t want my accountant to be creative. Her stump speech is about fiscal responsibility, secure borders, boosting reading scores and supporting veterans. (Her husband serves and she knows their challenges first-hand). I could have pulled most of the speaking points from George Bush 1 (1989-1993).  She lacks the soaring rhetoric of an Obama or a Clinton. She does have some bold proposals, like introducing term limits to Congress, which she called the most expensive retirement home that exists.

She is also utterly poised. She seems like the PTA mom who remembers your birthday and the names of all your kids. When people sneezed in the audience, she broke her speech and said “bless you.”  She seems shockingly youthful compared to our current leaders. She says she likes Guns and Roses and seems genuine when she says it. She seems normal. The raging narcissism of Trump is completely absent. The halting speech and gait of Biden are also absent.  While some of her economic facts were flat out wrong, her speech was coherent. She met the “would I want to have a beer with you” test.

She doesn’t take questions because she flubbed on a few “gotcha” questions in the past, like the cause of the Civil War. Instead of the bold verbal joust, she instead seems like she carefully reads the center point of the public mood and acts on that, which is, in the end, what a representative is supposed to do.

If she wasn’t a Republican with two terms as South Carolina Governor under her belt and a spell representing Trump and the US as Ambassador to the UN, she could be a poster child for the left. She was born to Sikh Indian immigrants. She would be the first female US President. She has two children, one of whom is married to an African American. Both kids and the son-in-law were in attendance last night.

Her background is more like Obama’s than Bush’s. Given how much of the country dislikes DEI, there is not a whiff of this in her speech. No “first woman” President. No building a country for “all Americans.” But if you stare at her, she is an emblem of the hope the US holds out to all people. I’ve been to the area in India where her parents are from. I can well understand why they left.

Her South Carolina background also interests me. There is a lot of corruption in the state. In my previous job, I met with the former Treasurer, Thomas Ravenel, before he was convicted for cocaine distribution. As far as I can tell, she came out of this experience clean, which speaks to a strong moral compass, again a little like Obama in Chicago. She took down the Confederate flag at the State Capital only when the public mood was just right, oh so carefully calibrating the timing.

I know she is supposed to lose. But last night my sense was that, if she pulls off an upset here, things could shift, the spell of Trump broken. Maybe that is more wish than reality on my part. If she does win, I see it as bullish US Treasuries, stocks and US power.  I came away wondering, yet again, if the improbable American experiment can have yet another chapter or, as with so many things, whither. Now we watch.