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Surprise North Korea Attack Coming?

Since I like to think of “risk” in rate-of-change terms (is the probability rising or falling?), I thought this was a timely risk management note, given the Trump Transition Team's edict for all Obama-appointees to vacate their offices by 12:01 Friday.

 

If you’d like to speak w/ General Emo Gardner, please send an email to sales@hedgeye.com.

 

Thanks,

KM 

 

Surprise North Korea Attack Coming? - z emo

 

South Korean news agencies are reporting military officials' comments that North Korea has built and loaded two missiles, apparently ICBM prototypes, aboard mobile launchers in preparation for test firing in the very near future. In his New Year's address, North Korean leader, Kim Jong-un, stated that his nation had reached the "final stages" of ICBM development to which President-elect Trump tweeted "never happen."  

 

This year's provocation could occur at any time and will almost certainly occur no later than March, the date of Exercise Key Resolve, the annual joint US-South Korean test of US Pacific Command warplans to defend the peninsula against North Korean attack.

 

The North Korean activity supports a long standing pattern of that nation seeking to improve its negotiating position through periodic provocative actions to include nuclear tests, ballistic missile firings and aggressive naval actions.  This year's anticipated provocation is particularly worthy of attention as it comes just as South Korea is recovering from the turmoil of the impeachment of President Park Geun-hye and as the US is undergoing a very slow-to-develop transition to the Trump administration.  

 

While North Korea has previously launched more than 20 intermediate-range ballistic missile tests, a clear threat to Japan, it has yet to demonstrate true intercontinental capability of the 3000 NM or more that would directly threaten the US.  US officials believe that the North Koreans are at least three to five years from a true ICBM operational capability, but there is no question of their intent nor that their speed of technological development has surprised US intelligence in the past. Test launches of ballistic missiles from North Korean submarines over the past year, while not wholly successful, are particularly worrisome as have been North Korean efforts to weaponize its nascent nuclear capability.

 

While the immediate North Korean physical threat to the US is currently limited, the Trump Administration is vulnerable to serious policy missteps at this juncture.  While General James Mattis is a certainty for confirmation on Friday after the inauguration, he will be the only Senate-confirmed Trump appointee in the Pentagon for some time.  To date, President-elect Trump's transition team has only announced 26 nominees of approximately 625 key policy posts.  SecDef-designate Mattis has managed to get four exceptions to the transition team's edict for all Obama-appointees to vacate their offices by 12:01 Friday: DepSecDef Work, UnderSec AF Disbrow, AsstSecNav Stackley and AsstSec Army Speer will be allowed to stay.  Recognizing the risk of empty desks, the Trump transition team has also announced that it would insert "beachhead teams"  of political appointees, who will not require Senate confirmation, into some offices. 


2 Days Away: 5 Things to Watch As Trump Draws Near

2 Days Away: 5 Things to Watch As Trump Draws Near - z troo

And so it begins...

 

President-elect Donald Trump may take as many as five executive actions on Inauguration Day, according to his spokesman Sean Spicer. Trump has previously promised to take executive actions immediately after taking office to counter some of the policies of Democratic President Barack Obama.

 

"He's got a few of them probably in the area of four or five that we're looking at for Friday," some of them logistical, Spicer said today at a news briefing. "Then there are some other ones that I expect him to sign with respect to a couple of issues that have been high on his priority list."

 

As America and the world prepares itself for the new U.S. Commander-In-Chief, here's a quick look at some key issues investors should be paying attention to from Hedgeye chief political strategist JT Taylor

 

IF A TREE FALLS IN THE FOREST... 

#TrumpCabinet #Democrats

 

2 Days Away: 5 Things to Watch As Trump Draws Near - z trump tree

 

With over 40 Democratic Representatives skipping the inauguration and Senate Dems doing whatever they can to derail Trump’s cabinet nominees, Democrats are trying to remain relevant. The wind is already out of their sails now that Senator John McCain is backing Secretary of State-designate Rex Tillerson, making his confirmation all but a sure thing.

 

Now Dems will try to gain some traction by pushing hard against EPA-designate Scott Pruitt and his history of fighting the EPA, HHS-designate Tom Price for stock trades and Treasury-designate Steve Mnuchin for his involvement in profiting off of foreclosures during the financial crisis while owner of IndyMac.

 

Yesterday’s grilling of Secretary of Education-designate Betsy DeVos by Democrats should give her counterparts a warning that the Dems are loaded for bear and will take every shot they can to score political points against Trump.  

 

"WE MUST HAVE A BAD CONNECTION"

#GOP #Congress #Trump

 

2 Days Away: 5 Things to Watch As Trump Draws Near - z tr cong

 

A bit of a disconnect continues between President-elect Donald Trump and House Republicans. Elements of the tax bill being written by Hill Republicans have drawn criticism from Trump for being too complicated. The proposal which includes a border-adjustment measure that taxes imports, but exempts exports, has drawn the ire of Trump and some of his advocates.  

 

Add health care coverage to the list as well.

 

Don’t read too much into this just yet, we’re hearing that the Republican leadership on both sides of the Capitol are working hand-in-glove with senior staff at the transition team.

 

COMPANY MAN

#USBusiness

 

2 Days Away: 5 Things to Watch As Trump Draws Near - z trump tower

 

U.S. companies are falling into line as General Motors announced it would keep or add 7,000 jobs instead of moving them to Mexico. Meanwhile, Walmart claims it will also add 10,000 jobs this year. The GM move follows criticism from the president-elect following their plan to open a plant in Mexico last August.

 

These follow the Ford and Carrier deals that the incoming Trump Administration has had a hand in.

 

Who needs to re-negotiate trade deals when a midnight tweet or two has the same result?

 

MAY DAY

#UK #EU

 

2 Days Away: 5 Things to Watch As Trump Draws Near - z ku

 

After months of speculation, British Prime Minister Theresa May called for a clean break with the European Union. It appears as if British involvement in the single market will come to an end. This will set up a contentious split with May already announcing if they are locked out of European markets, Britain will change its economic model to remain competitive.

 

Luckily May already has the ear of President-elect Trump - who is moving a bilateral trade agreement way up on his burgeoning to-do list.

 

UNDER THE RADAR

#Russia #CyberAttack

 

2 Days Away: 5 Things to Watch As Trump Draws Near - z poot

 

While Washington and the most of the nation are looking forward to the inauguration later this week, a bipartisan group of Senators are working to sanction Russia for its cyberattacks on the election. The bill is being spearheaded by Senators John McCain and Ben Cardin. It would include new sanctions for transactions with Russia’s intelligence agencies and targeting large investments in Russia’s energy sector.

 

Also...

 

GENERAL DAN CHRISTMAN DISCUSSES GEOPOLITICS IN THE TRUMP ERA-  Join Hedgeye CEO Keith McCullough at 2:30pm ET with General Dan Christman as they discuss Geopolitics in the Trump Era.

 

BIG ENERGY WEEK AHEAD FOR TRUMP CABINET NOMINEES: Our Senior Energy Analyst Joe McMonigle has a new note on the confirmation hearings for EPA, Energy, and Interior and what the potential signs are for investors. 

 

Email sales@hedgeye.com for access and more information.

 


7 Days Away: 5 Things Investors Should Watch As Trump Era Begins

7 Days Away: 5 Things Investors Should Watch As Trump Era Begins - z wh

Just one week away... 

 

America (and the rest of the world for that matter) is just seven days away from the beginning of what promises to be a thoroughly "interesting" four years at 1600 Pennsylvania Avenue.

 

Our team of Washington Policy analysts down in D.C. have their finger on the pulse of what's going on, and what is likely to occur in the months and years ahead as President-elect Trump and his team prepare to assume power. 

 

Here's a quick look at some key issues investors should keep an eye right now.

 

GIVE ‘EM ENOUGH ROPE

#Dissension #Trump #Cabinet

 

7 Days Away: 5 Things Investors Should Watch As Trump Era Begins - z donald

 

Following the election, we opined that Donald Trump would allow his Cabinet to have more power than previous administrations. It now appears that this approach may end up causing him some aggravation before being sworn-in.

 

Secretary of State-designate Rex Tillerson in his hearing announced that he supports the Trans-Pacific Partnership (TPP) - a major split from the president-elect.  Add that to Homeland Security-designate John Kelly breaking with Trump on several key issues during his hearing including increased outreach to Muslims. Trump giving his Cabinet a longer leash could come back to haunt him or sideline them.

 

TRUMP’S "OTHER WALL" ... OR FENCE?

#BusinessConflicts

 

7 Days Away: 5 Things Investors Should Watch As Trump Era Begins - z trump business

 

While Trump announced that he would not sell his business or place his assets in a blind trust, he and his lawyers set up strict rules for how the company will be run for at least the next four years. The president-elect will no longer have any involvement in his company going forward. And the company will no longer enter into new foreign deals.

 

Conflicts of interest between Trump and foreign governments abound and the aim of the self-imposed guidelines should ease these concerns. The independent Office of Government Ethics has another view calling the plan “wholly inadequate.”  Let’s just say we don’t think we’ve heard the last on this front.

 

A STORM IS BREWING

#SEC #Icahn

7 Days Away: 5 Things Investors Should Watch As Trump Era Begins - z icahn

 

Trump regulatory advisor and activist investor Carl Icahn, is reviving a battle between shareholders and powerful business groups. Icahn, who supports more shareholder power, was brought in to oversee regulatory change and is in favor of loosening SEC rules that currently give corporate managers power over shareholders.

 

Capitol Hill Republicans have good relations with the U.S. business community and are likely to oppose these changes putting them at odds with the incoming Administration.

 

BULLY/BEAR PULPIT

#StockMarket #Trump

 

7 Days Away: 5 Things Investors Should Watch As Trump Era Begins - z tr twit

 

Trump continued his role as the market-maker-in-chief during his press conference. After commenting again about the delays and overruns in Lockheed's F-35 program and how pharmaceutical companies are "getting away with murder," the stock market reacted. Pharmaceutical makers and biotech shares dropped by about two percent.

 

It certainly showed companies across the country that Trump may have the upper hand for the next week - plus four years.

 

SCOTUS PICK SOON

#SupremeCourt

 

7 Days Away: 5 Things Investors Should Watch As Trump Era Begins - z sc

 

Lost amongst all the talk about Russia, conflicts of interest and confirmation hearings galore, is that a pick for a SCOTUS nominee is imminent. Trump is planning to announce a nominee within two weeks of inauguration. Democrats are gearing up to drag out the process. They still believe the seat was stolen from them.

 

Trump is keenly aware that he needs to make the nomination as soon as possible in order for his justice to sit on the bench when the final sitting of the Court begins on April 17th.


PREMIUM INSIGHT

Fox News And Media Leaks May Boost AT&T-Time Warner Deal

Fox News And Media Leaks May Boost AT&T-Time Warner Deal - time warner

More media reports that the President-elect may look for reasons to fight the T-TWX deal. Ironically, the reports boost the deal's prospects.


5 Things To Watch Right Now In Washington

5 Things To Watch Right Now In Washington - z dmm

Presiding over a fiery press conference... 

 

...his first formal news conference since his Nov. 8 election victory, President-elect Donald Trump on Wednesday went after CNN and Buzz Feed hard for publishing what he called "fake news," denounced the publishing of claims he had been caught in a compromising position in Russia, and attacked U.S. intelligence agencies over the information leak.

 

Trump also discussed his plans to bring U.S. manufacturing jobs back from overseas plants and denounced drug companies for "getting away with murder" on pricing. Healthcare stocks took a hit following Trump's comments.

 

At a bare minimum, it's going to be an interesting and entertaining four years.

 

Here's a quick look at other related key issues investors should keep an eye on.

 

ALL SMOKE, NO FIRE

#Trump #Cabinet #ConfirmationHearings

 

5 Things To Watch Right Now In Washington - z tillerson

 

As confirmation hearings began yesterday, three Trump nominees will face the most scrutiny in the Senate starting with Secretary of State-designate Rex Tillerson who will face tough questioning for his well-publicized ties to Russia, but now will see questions about Exxon’s business dealings in Iran.

 

Secretary of Treasury-designate Steve Mnuchin will be probed for his over questionable business practices between a bank he ran and a movie studio he chaired. The last pick that may face the toughest time is Secretary of Labor Nominee Andrew F. Puzder who is an outspoken critic of raising the minimum wage and Obamacare.  

 

Despite the fireworks we expect all of Trump’s nominees to sail through -  especially with coverage over the next 24 hours focusing on President Obama’s farewell and President-elect Trump’s first press avail in months.

 

TALKING TAXES

#TaxReform #Paul Ryan

 

5 Things To Watch Right Now In Washington - z paul ryan

 

In an effort to bring team Trump into the fold, senior advisors to the president-elect met with Speaker Paul Ryan regarding the House Republican plan for tax reform. Ryan, who is steeped in tax policy, is working from his “Better Way” tax proposal which will serve as the blueprint for the effort starting in the Ways and Means Committee.

 

While Congress is leading the charge, Ryan and incoming chief of staff Reince Preibus are looking to ensure that both sides are singing from the same hymnal - especially when it comes to border adjustability as well as territorial tax proposal ending taxation of overseas profits of U.S. multinational corporations.

 

RAMPING UP REGULATORY REVERSAL

#RegulationNation #RedTape

 

5 Things To Watch Right Now In Washington - z regulation

 

The little used and very powerful Congressional Review Act (CRA) will be dusted off in the early days of the Trump Administration. The law has only been used once in its 20-year history and will  make up for lost time the coming months. Trump and Congress both want to overturn many Obama era rules even though employing CRA will have a negative impact on executive power; once a rule is overturned by the CRA, a new rule that is substantially the same cannot be issued making it difficult for any future president to propose a rule that covers a similar area.

 

REPEAL, RINSE, REPEAT

#Obamacare 

 

5 Things To Watch Right Now In Washington - z obamacare

 

What was thought to  be a quick and easy repeal of Obamacare has run into a buzzsaw of sorts.  A diverse mix of Hill constituencies from Libertarian KY Senator Rand Paul to conservative AR Senator Tom Cotton to moderate TN Senator Bob Corker have all expressed varying levels of discontent to repealing the law without a plan for replacement. All of them are now pushing for immediate replacement of the ACA.  And, just in time - President-elect Donald Trump is now calling for a replacement plan within weeks of repeal.

 

DON’T DUST OFF THAT RESET BUTTON JUST YET

#Russia

 

5 Things To Watch Right Now In Washington - z reset

 

Senator Ben Cardin (D-MD), Ranking Member of Senate Foreign Relations Committee is preparing a bill that would provide congressional authorization for economic sanctions against Russia. The bill has bipartisan support - notably from Senators John McCain and Lindsey Graham. This could cause an early faceoff between the Senate and President-elect Trump over the direction of U.S. policy with Russia.


PREMIUM INSIGHT

Will Trump Be More JFK or Eisenhower On Foreign Policy?

Will Trump Be More JFK or Eisenhower On Foreign Policy? - trump eis or jfk

Hedgeye National Security analyst LTG Dan Christman USA Ret. dissects the "grand vision" that will shape President-elect Donald Trump's foreign policy agenda. On this grand vision, "two presidential narratives have competed for over half a century," Christman writes, Eisenhower and Kennedy. Christman thinks Trump is more like Eisenhower. Here's why.


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