I have never been hurt by what I have not said.
-Calvin Coolidge
FRACAS IN FARMVILLE: Last night IN Gov Mike Pence and VA Sen Tim Kaine squared off in Farmville, VA for the first and only VP debate. Kaine’s goal from the start was to make Pence, generally even-keeled, spend the whole night trying to defend Donald Trump’s missteps well as his 180-degree differences with his running mate and he didn’t disappoint. But Pence stayed composed even through many interruptions while the formerly affable Kaine assumed the traditional role of attack dog and followed the Clinton campaign mantra of attack Trump first, attack Trump second, and then defend Hillary Clinton. Pence did not deliver a race altering performance, but with a solid showing he accomplished two things; first, he calmed some jitters about the ticket clearing the decks for Donald Trump going into the second presidential debate and second, he cemented his standing as a contender who could potentially face Clinton in 2020 should things not go as planned in five weeks.
Our bottom line: Kaine scores points by keeping Dems on offense and plays to the party faithful, but Pence walks away with a win, calming anti-Trump conservatives, giving a lifeline to skeptical voters and resets the race after two bad weeks for the ticket handing Trump a blueprint for how to put the negative attention on Clinton this Sunday.
HELP ME, HELP YOU: As the Trump campaign continues to dodge self-inflicted issues stemming from his attacks on Gold Star Families and Miss Universe to tax avoidance, Clinton’s campaign continues to beat him over the head with them. While Clinton did hit Trump with some good zingers, we don’t see this sort of campaign benefitting her. Clinton spent about two-thirds of her broadcast budget ($53 million) on negative ads attacking Trump, yet still has not been able to pull away from a man who has higher unfavorables than she does. We think Clinton should be spending more of that money trying to bring down her own unfavorable ratings instead of rolling around in the mud.
DEUTSCHE BANK’S $50 TRILLION PROBLEM: Is Deutsche Bank the next Lehman Brothers? Many on Wall Street are asking that question. While different, the Deutsche/Lehman comparison is disconcerting in its similarities. Deutsche Bank has $50 trillion in gross derivatives exposure. (Yes, “trillion” with a “T”). To put that in perspective, the bank’s derivatives exposure is roughly 14 times the size of Germany’s entire economy. Meanwhile, the ECB’s negative interest rate policy is squeezing profitability and, in an election year, German Chancellor Angela Merkel can’t rescue Deutsche without massive political backlash. We reiterate our 3Q16 Macro call, #EuropeImploding.
REASSESSING HER ROLE MODEL: Again, control for the Senate comes down to four races, NH, IN, NV, and PA. In NH, incumbent Kelly Ayotte faces major backlash from Granite Staters by first saying Trump is a role model for children before flipping her position in a tweet following the debate. Ayotte is in a heated competition with Gov Maggie Hassan currently leading by only 1.6 points. Whether or not we’ll see any impact is unclear. but it’s missteps like these that could hand 50 seats to the Dems.
NOTE: We’re not publishing tomorrow and will return on Friday.
