CNBC threatens Trump with "JFK style assassination!

[MikeWB]

The crucial lesson Trump should learn from JFK
Jake Novak   | @jakejakeny
9 Hours Ago

Forget the opinion polls, President-elect Donald Trump appears to feel like he has a very good thing going with the continuing list of corporate CEOs coming to Trump Tower and then making announcements about boosting jobs and/or investments in the U.S. He even tweeted about it again Wednesday morning, insisting these deals are indeed because of his efforts and not the result of previously arranged agreements.

But this trend could turn sour for him, the country, and the markets if he isn't careful. And it can happen fast. And the proof comes from a historical source that may surprise you: President John F. Kennedy.

Trump may seem like a reckless trailblazer, but at least half of that characterization is wrong. He's not the first of our nation's leaders to single out a company or industry with a public comment and send that company or industry's shares into a major tailspin. The all-time champion in that regard was President Kennedy, who went to war with the American steel industry in 1962. And it was a war both sides, and the country basically lost.

It started when Kennedy leaned on the steelworkers unions to accept a smaller pay raise so the White House could help keep steel prices down. Kennedy thought that when the unions agreed, U.S. Steel would uphold its end and hold prices steady. But it didn't. Just after the union agreement, U.S. Steel announced a $6 per ton price increase. An infuriated Kennedy responded with a decidedly non-Camelot-sounding tirade against the company at a news conference a day later. A massive retaliation effort by what seemed like the entire Kennedy administration followed, and four days later U.S. Steel backed off its price hike decision.

But it was Pyrrhic victory. The extraordinary interference in the steel industry by the White House chilled many other industries, the markets, and even led to cautionary comments about that interference from organized labor. A month later, that angry and frightened sentiment hadn't abated and it led to a major stock market selloff that was the worst since the 1929 market crash. Steel shares fell 50 percent and it seemed like the entirety of corporate America had turned against the White House in despair. Kennedy's push by the end of the year to cut and simplify tax rates helped to improve White House-business relations just a bit, but not completely.

And what made the Kennedy spat with the steel industry so unique was the fact that both sides were blindsided by each other's actions. Kennedy was shocked when U.S. Steel raised prices because he mistakenly thought he had struck a deal with the company. And U.S. Steel was shocked that Kennedy singled them out in a news conference a day later because presidents simply didn't do that. Obviously, Kennedy's assassination makes it impossible to truly gauge the full political damage caused by his fumbled interference with U.S. Steel. But we do know that more than a year after it began, there were still open self-inflicted wounds in Washington, Wall Street, and steel country.

"While politicians and political activists have been mobilizing and preparing for massive changes under Trump, big investment groups don't appear to be doing the same."
Fast forward to 2017 and it can't be hard to imagine a similar scenario playing out once Trump takes office. It's not necessarily that the White House will be looking to hurt an industry or any industry would want to hurt the administration. But it's easy to see how a misunderstanding or a perceived deal breaking down could lead to circumstances getting out of control for everyone involved and the American economy and consumers in general.

And yet, it sure seems like Wall Street is not taking such a possibility seriously enough. While politicians and political activists have been mobilizing and preparing for massive changes under Trump, big investment groups don't appear to be doing the same. As CNBC's Mike Santoli points out , Wall Street is too complacent. He notes the lack of market volatility: "...the VIX (volatility index) has been so docile as a polarizing, rule-breaking president prepares to assume office and seems bent on upending decades of normal governing procedures and recasting the tax and health care systems, while questioning some core tenets of postwar Western trade and security relationships."

Santoli is right that Wall Street needs to take heed, but of course, it's Trump and his team that should be exercising caution right now. If just one major corporate CEO comes out of a White House meeting without a big smile or a warm handshake, things could go south for more than just that company and its sector's stock prices. And if that company or sector happens to provide an essential need to the country, like Big Pharma, the consequences could literally become dire.

What does the mean for everyone involved? The all-too-easy answer is Trump needs to stop tweeting and bashing companies. But if he must wield that big stick from time to time to maintain his bargaining position, he needs to be extremely careful and pursue deals that really can be made, and make sure those deals aren't going to be nixed or reversed in a publicly devastating way like U.S. Steel did to JFK in 1962. For someone who once fronted one of TV's top reality shows, carefully choreographing those kinds of announcements and statements shouldn't be too hard.

And Wall Street needs to impress on the President-elect that his interference with private industry can do more than hurt just one or two sectors at a time. Remember, the JFK/U.S. Steel fight brought the entire market down.

To be clear, no company or investment firm should be publicly panicking. Financial professionals need to project some level of calm even in the most unsure times. But their customers need to be warned of the new massive risks Trump could pose to the markets and the entire U.S. economy.

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