Why Bernie's Rise Now Has Traditional Wall Street Democrats (And The Billionaire Class) On Red Alert

Even Liz Warren has friends in the industry. A Sanders nomination forces the liberal establishment to make an impossible choice: evolve or endure four more business-friendly years of Trump.

Go to the blue end of the wealth management industry and it’s clear that big players are nervous about the boat rocking a little too hard.

Radical candidates like Bernie Sanders are on the rise, drawing big crowds promising a new deal and paying for it with massive wealth taxes.

Meanwhile, Biden, the ultimate status quo player, just isn’t getting any traction. Neoliberal messaging that once looked comfortably centrist now has nowhere to go.

That’s a real problem for the blue end of Wall Street. So it’s no wonder Bloomberg has become an attractive way to fill the gap, fight off the far left and maybe even be electable. 

Everyone in the business knows Bloomberg knows how the business works. Those who spent time in the New York area also remember him presiding over the era around the crash.

They’d love a nostalgic return to that era. Of course, what half of Wall Street wants isn’t enough to win elections. Even on the left, Bernie has become a problem.

Overthinking the unknown

I spent the 2004 and 2008 elections deep in family office land and our principals spent endless energy trying to apply quant mentality to the inherently irrational political cycle. 

They recognized that trying to predict the votes and then deploy capital to bend the results was futile. As media noise fed back, they said, the electorate would support the least rational conclusion.

As good neoliberals and friends of the Heinz family, they fretted over John Kerry being too dull, but lobbied for him anyway. Then Sarah Palin terrified them.

They’ve got a hard choice now. While they hate Trump, they recognize that his reality show persona has already gotten him elected once. Only Bernie really has that energy on the blue side.

But while the models say Bernie may be electable, a Sanders presidency is unlikely to protect the interests of the rich or the people who make their money catering to them.

The Sanders platform is explicit: the goal is to fund massive entitlements by cutting the wealth of billionaires in half by 2035. 

If you’re willing to sacrifice half your fortune to defeat Trump, do it. Otherwise, the calculus gets complicated. How much is this worth?

And I think that’s the opening Bloomberg saw. He hates Trump and recognizes that even if Bernie has what it takes to win the White House, his current net worth is going to fall at least $30 billion.

Instead of sitting back and passively losing either way, he’s investing a big chunk of that $30 billion in promoting a Wall Street friendly candidate. He can’t think of anyone he likes better than himself.

The logic isn’t new. Tom Steyer is already funding his own race and Starbucks CEO Howard Schultz gave the idea serious thought.

They’re frustrated. Caught between antipathy for Trump and self interest, they spend their money promoting themselves instead.

The alternative is to go quiet. We don’t hear a lot from the Koch network lately. Warren Buffett plays his cards close and largely rhetorical. People like Peter Thiel aren’t weighing in much either.

Look at Scaramucci. He’s not a full-fledged billionaire so has theoretically only $100 million at risk to Bernie’s proposals, but his clients will feel the drag and take down his AUM and fees in the process.

He’s rebranded himself as an anti-Trump personality. We’ll just have to see if he ends up endorsing any Democrat or simply sitting this one out.

Again, Bloomberg is a known quantity for these people. Love or hate him personally, he represents the status quo and a slower news cycle.

In short he’s the “boring” alternative. Back in the family office, we would have said he’s the underdog against Trump even if he gets past Bernie.

And if it’s Bernie versus Trump, self interest tips the balance of antipathy. Love one candidate, the decision is easy. Hate them both, hold your nose and vote your wallet.

So if the other centrists falter, Mayor Mike has the best shot at a happy outcome for these people.

Defense and offense

The real psychology on display here is defensive. Voting against someone is never as efficient as voting for something you actually like.

We saw this back at the office in the “Anyone But Bush” brigade. It’s playing out again now.

In that scenario, the smart money is simply waiting to see how the votes stack up, then they’ll pivot to get the best position on the outcome.

This isn’t an all-or-nothing mindset. It’s all about shades of risk and opportunity.

They know how to make money and are confident that they’ll do it again. After all, even if Bernie is elected, he’s still got to work with Congress to realize his agenda.

It took six years and unified government for FDR to get the New Deal rolling. A second and more ambitious platform will be an even tougher sell.

Bernie has sponsored seven successful bills in his time in the Senate, almost all of them Vermont-centered ceremonial proclamations.

Only three acts of legislation on his plate now have more than a 3% chance of passing. He just isn’t a deal maker.

And as long as we live in a non-imperial state, you need to make deals in order to get things done, especially if that means enforcing big wealth taxes.

If he goes all the way, we’ll just have to see. I have to say that taking his math at face value shows that billionaires need to earn back 8% a year to break even. 

They can do that in the S&P 500. But getting richer requires careful investment and the right risk orientation.

Bernie’s world looks a lot like Trump’s in that respect (and maybe only that respect). Trump incentivizes entrepreneurial ventures in pursuit of go-go returns. Bernie’s program actively discourages everything else.

Big companies will feel the drag of their own gravity. Small, nimble start-ups become the only game in town.

Back or build the right start-up, you can still get rich enough to accept the crippling tax bills. Maybe you’re comfortable with that. If not, vote in your best interest.

Either way, smart money votes for a vision of the future, not against it. Backing any nostalgia candidate is like trying to chase past returns in the market.  

We can’t go back to a pre-2008 world. We can’t even go back to a pre-2016 world. Any candidate who promises that is guaranteeing stagnation.

Is the GOP Trump’s party now? Definitely. For a lot of people, that’s a lot of fun. It’s exciting. 

But Wall Street’s GOP belonged to Mitt Romney. That was the old world. Jamie Dimon, Lloyd Blankfein and the rest of the establishment spoke that language and shared those values.

Will the Democrats of tomorrow belong to Bernie, Bloomberg or someone else? It depends on who gets the most votes in the primaries, but we know whose side Wall Street is on.

And there will be opportunities for forward-looking advisors either way. Watch the smartest money, the coolest heads. 

When the only viable candidates are blasting at maximum volume, disruption will win either way. You can't really defend against that, but focusing on the numbers helps.

And watch the long-term "random walk" of Washington rhetoric. Where is the deficit headed, no matter who is in the White House? Where does the dollar go? Get your clients ahead of those trends.


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