How to make millions on Trump win (1 Viewer)

[Tapxe]

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”


― Warren Buffett

 

[st dude]

Fair enough. But I think there are sectors and firms that would benefit Trump policies (presuming he actually means those things and that he can get them in place, to some degree). If there's any market spasm to sell-off, I'm looking at those as opportunities once the dust settles. This idea that his election will plunge the world into recession is ridiculous IMO - not because I have faith in Trump but because US policy doesn't work that way. (Now add GOP control of house houses and warming relations b/w Trump and the Hill and you might have something. But Paul Ryan isn't going to just buy in to Trump's protectionism).

I think the same goes for Clinton. If she wins, I guarantee you will see significant sell-offs in pharma and some bleed over into healthcare and maybe even bio-tech and banking.

I don't think a recession triggered by a Trump win is that ridiculous a notion at all.

But I think the Trump win would be more of a trigger than a cause. Even with the recent pullback, stocks have been on a really nice ride since the 2008 crash and the market works in cycles. We are due a recession (or very significant pullback) because stocks are relatively expensive now and because historically big rallies are followed by big pullbacks.

Like you, for me recessions and pullbacks are buying opportunities. I have slowed on buying the last couple of years and have been accumulating cash. Cash, as they say, is an option on everything.

The market and business flourished under the Obama administrations. He got no credit from Republicans, even though the crash occurred on their watch. I think its mostly cyclical and whoever takes over in a down market will see it rise.

I think whoever wins this election will see a stagnant or down market. Interest rates are rising which is hurting stocks and bonds. Hopefully they will rise high enough where I can start buying bonds again. I haven't bought a bond in years, the rates are just awful.

 

[BHM]

This thread is full of post election potential...

 

[Galbreath34]

I think the same goes for Clinton. If she wins, I guarantee you will see significant sell-offs in pharma and some bleed over into healthcare and maybe even bio-tech and banking.

I'm pretty sure that's already long baked in. The views came out long ago, and the market has expected her to win.

Long term the market gets on to the reality of the world. For 3-6 months at a time it can just flip out over irrelevant events that surprise or scare it. I'm not sure I trust either to manage the economy well, but I can't imagine an election shock to the market if Clinton wins. Primarily because she's been the presumed favorite for months so any reaction is sort of already priced in, but also because whatever people think about her she's a known commodity with a pretty narrow band of how she's expected to govern.

None of this talk about shorts or popping bubbles or shocks has much to do with what the market or economy would look like in a year or two. The OP, though, and all the talk about the reactions is about the immediate short term, and I think it's a fair prediction.

IIRC the market stumbled right after Romney did well in the first debate. Certainly Wall Street wouldn't hate Romney in office, but just the fact that there was some sudden change in expectation that Obama was coasting to victory was enough to shed a few percent from the Dow.

 

[superchuck500]

I don't think a recession triggered by a Trump win is that ridiculous a notion at all.

But I think the Trump win would be more of a trigger than a cause. Even with the recent pullback, stocks have been on a really nice ride since the 2008 crash and the market works in cycles. We are due a recession (or very significant pullback) because stocks are relatively expensive now and because historically big rallies are followed by big pullbacks.

Like you, for me recessions and pullbacks are buying opportunities. I have slowed on buying the last couple of years and have been accumulating cash. Cash, as they say, is an option on everything.

The market and business flourished under the Obama administrations. He got no credit from Republicans, even though the crash occurred on their watch. I think its mostly cyclical and whoever takes over in a down market will see it rise.

I think whoever wins this election will see a stagnant or down market. Interest rates are rising which is hurting stocks and bonds. Hopefully they will rise high enough where I can start buying bonds again. I haven't bought a bond in years, the rates are just awful.

But that's exactly why stocks aren't actually that expensive in the classic sense - rates have been suppressed as a matter of central bank policy for so long now and it is fundamentally connected to stock prices. And with blue chip dividend yields in the 3 to 7 percent range, a quarter point rise from the Fed once or twice a year isn't going to put much of a dent in that valuation. Beyond that, the US economy is doing fairly well - and certainly well relative to the rest of the world. Third-quarter GDP growth was 2.9% and projections for Q4 are in the mid-two percent range. This growth is modest but very real and evident in earnings, employment, credit, and other indicators.

That was what I was getting at in comparing an emotional response to the election result and the underlying fundamentals of the economy and securities. A market spasm has to be supported by something fundamental or it will revert back to where it was. But even a proper correction is quite different than a recession.

And while the MIT economist quoted earlier may believe a Trump presidency would "plunge the world into recession", estimates I have seen place negative impact generally in a range between .5% and 1.0% of GDP. Some of the more extreme scenarios (such as Moody's analysis that has total "peak to trough" GDP impact of 2.4%, which could bring growth to zero or possible result in mild recession) are based entirely on "full adoption" of Trump's economic policies.

Also what I was getting at earlier - the President doesn't get automatic adoption of his/her plan for taxes or trade or immigration or any of that. It has to be done on the Hill and even if Trump were elected, if the GOP doesn't have both houses, it is unlikely that much of his policies would be adopted at all. Even if the GOP somehow take the White House and both houses, we still have a very unusual political situation where majority leaders on the Hill don't share policy views with their nominee. While the President certainly impacts executive policy (including regulation and enforcement), Trump's plans to reduce regulatory "interference" with business might be one of the few areas where the economic impact is positive.

Anyway, that's why I'm a bit dubious of the statement that a Trump presidency would "plunge the world into recession" and we should all get short or go to cash. I don't think either of these candidates will be seen in economic circles as a good thing - but if our system of checks and balances can keep them from tinkering too much with things, the underlying economy is decent and companies are making money (which means that shareholders can make money). It just might have to be a bit more selective. Just my view - reasonable minds might disagree. I might even feel differently tomorrow.

Good discussion.

 

[superchuck500]

This is interesting. So a cheap way to put a bet on the longshot Trump win would be to buy puts on the Mexican peso. I'm trying to find a peso-based ETF to do that with.

All over the world stock markets have wobbled as investors seek the best place to put capital should Donald Trump become the next U.S. president. But, one analyst has explained to CNBC a simple short term trading strategy in the event of a Trump win.

"You think about where the (Mexican) peso goes. You buy Swiss francs and gold if you think Trump's going to win. It's a really easy strategy, actually," according to Peter Toogood, managing director of investment at consultancy The Adviser Centre. The Swiss currency being seen as a safe haven in times of economic stress.

"Short the peso, go long gold and Swiss franc – you've got your perfect 'Trump is elected' strategy," he told CNBC Wednesday.

There

 

[porculator]

It's actually probably a good short term idea to buy gold either way. If Trump gets elected, the markets panic. If Hillary gets elected, the type of people that buy gold will panic and buy more.

 

[LombardiGras]

I wouldn't bet on a Trump presidency because I just can't believe it would happen!

 

[superchuck500]

I wouldn't bet on a Trump presidency because I just can't believe it would happen!

Indeed.

That's kind of why I like an option play - it's not really an investment per se. Sort of like dropping $2 on a longshot at the Kentucky Derby. Not likely, but if it happens, you get a nice payday. If it doesn't, you didn't venture that much.

 

[st dude]

The market had a huge jump this morning in reaction to the FBI announcement clearing Clinton.

I think this supports the suggestion in the original post that a Trump victory Tuesday would cause a big pullback Wednesday in the market.

This is not, by the way, a pro trump or anti Trump post. I am just observing how the markets likely view the election. The markets like stability, and Clinton is the more status quo candidate.

Ultimately the market is driven by earnings, so pullbacks based on over reaction to an event that does not bear directly on earnings present a buying opportunity for some.

Dow surges, up 250 points after FBI clears Hillary Clinton in latest email probe

"In terms of the market and its possible response on Wednesday, today's reaction to the FBI news is obvious evidence that market participants have wrapped up the world in a nice and easy box," said Peter Boockvar, chief market analyst at The Lindsey Group.

"Hillary wins, good for stocks. Trump wins, bad for stocks. But, anyone who thinks deeper than this knows that the response is going to be much more nuanced. Ask any owner of a healthcare, financial or defense stock," he said in a note.

 

[efil4stnias]

The market had a huge jump this morning in reaction to the FBI announcement clearing Clinton.

I think this supports the suggestion in the original post that a Trump victory Tuesday would cause a big pullback Wednesday in the market.

This is not, by the way, a pro trump or anti Trump post. I am just observing how the markets likely view the election. The markets like stability, and Clinton is the more status quo candidate.

Ultimately the market is driven by earnings, so pullbacks based on over reaction to an event that does not bear directly on earnings present a buying opportunity for some.

Dow surges, up 250 points after FBI clears Hillary Clinton in latest email probe

Well, Facebook would disagree ....bigly. lol

They BEAT both Earnings and Revenue estimates and lost 10% over a 2 day period.

I thought for sure we were headed for $140+....i hate the market.

 

[superchuck500]

Well, Facebook would disagree ....bigly. lol

They BEAT both Earnings and Revenue estimates and lost 10% over a 2 day period.

I thought for sure we were headed for $140+....i hate the market.

Well, when your valuation is almost 60 times future earnings, you lose 10% when the analysts see signs that those future earnings might be deteriorating.

 

[efil4stnias]

Well, when your valuation is almost 60 times future earnings, you lose 10% when the analysts see signs that those future earnings might be deteriorating.

MEH.

Tech stocks are so fickle...its about right. i had sell point at $138. go figure. lol.

 

[st dude]

Well, Facebook would disagree ....bigly. lol

They BEAT both Earnings and Revenue estimates and lost 10% over a 2 day period.

I thought for sure we were headed for $140+....i hate the market.

Well, when your valuation is almost 60 times future earnings, you lose 10% when the analysts see signs that those future earnings might be deteriorating.

Chuck is right, to maintain a 60 multiple you have to show your company is capable of crazy growth.

Now multiples are different for different industries and different for public vs private stocks, but I can never get my head around giant multiples.

As an investor I have been involved in a number of restaurant sales, both individual restaurants and multiple restaurants with franchise rights included.

When you are selling one restaurant, without franchise rights, you might get 4 or 5 times earnings. If your restaurant has an ebitda of 200k, maybe you get a million for it. You are buying a future cash flow.

When you are selling a group of restaurants with franchise rights, the multiple goes up to somewhere between 6 and 10.

If facebook is at a 60 multiple now, in our restaurant analogy that would be like paying 12 mil for a store that does 200k. You are buying the potential to grow. Facebook, of course, has the ability to grow much faster than a restaurant company.

When the market does pull back, its these high multiple stocks that get killed. Here are some more reasonable multiples. These stocks, except for the ones with cash problems, can be good buys because there is not that much room for the stock to fall:

Delta Air Lines Inc (DE) DAL 3.87
Noble Corp plc NE 6.44
Yahoo! Inc. YHOO 6.64
Valero Energy Corp. VLO 7.03
American International Group Inc AIG 8.91
AFLAC Inc. AFL 9.26
Assurant Inc AIZ 9.42
Denbury Resources, Inc. (DE) DNR 9.50
Unum Group UNM 9.59
Deere & Co. DE 9.69
Travelers Companies Inc (The) TRV 9.94
CF Industries Holdings Inc CF 9.94
Lincoln National Corp. LNC 10.04
Ford Motor Co. (DE) F 10.23
Hess Corp HES 10.36
International Business Machines Corp. IBM 10.39
Verizon Communications Inc VZ 10.48
LyondellBasell Industries NV LYB 10.52
Masco Corp. MAS 10.55
Murphy Oil Corp MUR 10.69
Chevron Corporation CVX 10.72
AT&T Inc T 10.88
Capital One Financial Corp COF 10.91
Allstate Corp. ALL 10.92
Goldman Sachs Group, Inc. GS 10.95



Growth companies often sport much higher multiples. They can be really good investments, its just hard for me to pay 60 times what any company makes. I have done it though and with new companies sometimes they might be losing money when you buy them.

 

[dtc]

Well I am certainly not predicting a Trump win. Wall Street is just like Vegas, you get rewarded more for longshot bets that win. If Wall Street did not see Trump as a long shot, the sell off would be already built in to the market.

People were LOLing at those predicting a brexit win, almost no polls predicted it. That's why the mkt dropped 11 percent in Europe and 600 points here.

One is always more likely to win betting a favorite, you just win more taking the underdog.

This morning's opening moves should tell you all you need to know about what the market wants.

The minute the FBI nonsense came out the market sat dead and the minute the new info came out led to all 30 Dow stocks up and all markets up at open more than 1%.