Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Stock Trader’s Actionable Guide to Trump

Stock-Markets / Investing 2017 Feb 15, 2017 - 11:45 AM GMT

By: David_Galland

Stock-Markets

There are aspects to Trump’s public comments that concern me. He says stuff that makes me sit up and take notice, especially on the military front.

Yet, rather than blindly accepting the “news” that best supports my biases, I try to view each new Trump “event” objectively.

By contrast, the progressives/liberals unfailingly fall for every bit of click-bait that reinforces their view that Trump is a detestable, woman-hating, earth killer and the epitome of a capitalist pig.


On the other side of the philosophical wall, there are an almost equal number of people who view Trump as a Knight Exemplar, come to smite the corrupt politicos and smash down the self-loathing, politically correct, climate-alarmist, and meddling-big-government, perfect-world socialists that have all but destroyed the American dream.

The extreme distance between the two perspectives creates a tradeable opportunity. Actually, a series of tradeable opportunities, which I cover below. (For more trading ideas, subscribe to my free investment newsletter, The Passing Parade.)

This is especially true because of the extraordinary media bias that takes every small thing Trump does or says and blows it way out of proportion.

Any investor worth the moniker knows markets operate largely on emotion.

And that gives rise to the Trump Trade.

What Most People Are Missing… and How to Profit from It

A more nuanced view of Trump’s various strong words has to take into account his deep experience negotiating hundred-million-dollar deals in the hardball world of New York and New Jersey real estate.

We’re talking about sitting across the table from dozens of the world’s highest-paid lawyers and hammering out deals that mollify not just the sellers of the prime real estate, but also the zoning boards, unions, owners of neighboring properties, etc.

Succeeding in that world requires a level of focus, determination, and skill that is impossible for the average person to even imagine. It is as hardball as it comes. Anywhere.

Now ask yourself, how would someone with Trump’s negotiating credentials approach a counterparty ahead of a negotiation?

Would they signal in advance what they wanted and all that they were willing to give up in order to get what they were after?

Or would they come in hard with outsized threats and posturing, setting the stage to ultimately prevail on the points that count?

Case in point, Trump has made much of the idea that he’ll make Mexico pay for a wall between the two countries. Among the many rejoinders to the idea, former Mexican President Fox said, “I’m not going to pay for that f#&#ing wall!”

And so, thanks to Trump’s posturing, the negotiations began with arguing about who is going to pay for the wall—not even the wall itself.

Getting the opposition to negotiate at the top of the range you set, in order to eventually settle for what you actually want, is Negotiation 101. And Trump is way, way past Negotiation 101.

Viewed through that particular lens—and I think I am at least directionally correct, as Trump would be hard pressed to forget all he has learned about negotiating just because he’s been elected president—we can expect his administration to be something of a rollercoaster ride.

That’s because he has a big agenda.

And he has a lot of opposition to cut through in order to accomplish that agenda. As such, I suspect hardly a week will go by without Trump saying or doing something—loudly—that seems outrageous, ill-advised, or bullying.

And the media, as set against Trump as they are, can predictably be expected to scream as loud as they can about his latest outrage and all the dire consequences. Viewed from the negotiator’s perspective, they are playing right into his hands.

Likewise, we need to look past the posturing and try to ascertain what Trump’s end goals are.

What does Trump want accomplished in each of these situations?

In most cases, he’ll be trying to deliver on his “America First” promise. That was by far the most prominent plank in his platform and in his inauguration speech.

To get it done, he’ll need to improve the competitiveness of American business by cutting taxes, slashing regulations, and directly negotiating more equitable trade agreements with important trading partners.

In Trump’s view, he is America’s negotiator-in-chief. It’s in his blood. It’s what he does best. Therefore, you can choose to get hung up on the optics, or you can take advantage of the situation by taking stock of whatever his next target may be and trading against all the easily frightened sheeple.

To make the point, let’s return to the situation with Mexico.

Trade Idea #1: Mexico

The chart here shows the six-month performance of the Mexican Bolsa, their stock market.

Since the election, the Bolsa has traded like a yo-yo, based entirely on Trump’s pre-negotiation rhetoric and the biased media’s reaction to it.

On this particular trade, which will likely be a buy of Mexican stocks, I’m going to watch things a bit more closely before taking a position. The real money will be made by waiting until it seems Mexico and the US are on the verge of a total breakdown in trade.

In fact, what will really be happening is Trump wearing the Mexican politicians down to ensure he gets exactly what he wants.

And make no mistake, the US will come out on top. That’s because over 81% of all Mexican exports—about $310 billion worth—go to the US. Mexico’s second-largest trading partner is Canada at a miserly $10.5 billion.

There are a number of ways to play volatility in the Mexican market.

You can concentrate your investments in specific Mexican exporting companies who trade as ADRs on US exchanges. But for most investors, the best approach is likely buying a large and liquid diversified ETF such as the iShares MSCI Mexico Capped ETF (EWW).

Trade Idea #2: Pounding on Pharma

Another recent example of the Trump Trade can be seen in the pharmaceutical sector.

That Trump would take on the sector is understandable; his most ardent supporters skew toward the 50+ age demographics.

These are the people most affected by the skyrocketing insurance costs triggered by Obamacare and by the indefensibly high cost of certain drugs required for the patient to live a normal life.

A friend of mine is currently spending over $2,000 a month for a single drug, so I understand the angst on a personal level.

During his campaign, Trump promised to bring those drug costs down, and now he is ramping up the negotiations to do just that.

Here’s a three-month chart of the price action in PowerShares Dynamic Pharmaceuticals (PJP), one of the more popular pharmaceutical ETFs.

Like the Mexican stock market, you can see a sell-off after Trump won, and the subsequent gyrations as Trump began to use the bully pulpit of his presidency to set the stage for negotiating with the drug industry.

The recent spike in the index came after Trump sat down with key industry executives and offered to trade them a big reduction in regulation if they play ball with him on the pricing.

That’s what’s called a win-win in the business world. Trump gets what he’s after (or at least there’s a good chance he does), and the drug companies get relief from the time and money regulatory regime that is the bane of their business.

When the Media Sells, We’ll Buy

Given Trump’s background, you can expect the president to go in hard every single time. And the media will inadvertently help him by whipping certain members of the public—including the investment community—into a frenzy of action.

When they sell, we’ll be looking to buy. And when they buy, we’ll be looking to sell.

In the end, successful investment speculation—and make no mistake, this is speculation—requires volatility.

If nothing else, Trump is volatile. Or is happy to seem that way if, in the end, it gets him what he wants.

Subscribe to The Passing Parade

A rousing weekly romp on economics and markets with a dose of politics and other follies, The Passing Parade is published every Friday by Garret/Galland Research. Click here to get your free copy sent straight to your inbox.

David Galland
Managing Editor, The Passing Parade

http://www.garretgalland.com

Garret/Galland Research provides private investors and financial service professionals with original research on compelling investments uncovered by our team. Sign up for one or both of our free weekly e-letters. The Passing Parade offers fast-paced, entertaining, and always interesting observations on the global economy, markets, and more. Sign up now… it’s free!

© 2017 David Galland - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in