Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Fox in the Henhouse: Why Interest Rates Are Rising - 23rd Apr 18
Stocks and Bonds, This is Not a Market - 23rd Apr 18
Happy Anniversary Silver Investors! - 23rd Apr 18
The Hottest Commodity Play In 2018 - 23rd Apr 18
Stock Market Correction Turns Consolidation - 23rd Apr 18
Silver Squeeze, Gold Fails & GDX Breadth - 23rd Apr 18
US Economy Is Cooked, the Growth Cycle has Peaked - 23rd Apr 18
Inflation, With a Shelf Life - 23rd Apr 18 - Gary_Tanashian
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

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.


© 2005-2018 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

6 Critical Money Making Rules