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Portfolio positioning and Trump presidency


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Although I am absolutely horrified by the prospect of a Trump Presidency, I have to at least figure out how to position myself for the 20 to 40% chance that he will win.  Other than too much whiskey, how would you gear up for getting Trumped.

 

Basically, I think that there is a 20% chance of him winning and a 70% chance of markets really gyrating, and in 2017 real risk (10 to 60%) of a 2008 level crack-up, with horrible trade wars possible.

 

My thinking is to have a higher than usual amount of cash, plus a very small amount in a volatility instrument.  (Personally, I'm hoping that we have seen his highwater mark, but...)

 

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Guest cherzeca

frankly i see a trump election as a nonevent for markets.

 

will he commence a trade war with china in his first year. dont think so.  he will bluster. he actually might improve our trade deficit by getting china to negotiate.  but in a democracy of divided govt, as long as the congress is not controlled by republicans, trump wont have a big effect on markets....and frankly, even if congress is controlled by republicans, these are not trump style republicans.

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It'd be nice to overhear this from the oval office in the first week of a Trump presidency:

 

"Carl, say that again. I can sell the GSE warrants for how much?"

 

Thats good. 

 

Trump has so many inherent conflicts of interest with his branding business that he will be impeached in the first couple of hours.  Buy stocks in anything he isn't involved in so you dont get caught when he avoids paying the bills. 

 

Seriously, I think the market will correct after the election, regardless of the outcome.  Thats how first terms work, isn't it?

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Although I am absolutely horrified by the prospect of a Trump Presidency, I have to at least figure out how to position myself for the 20 to 40% chance that he will win.  Other than too much whiskey, how would you gear up for getting Trumped.

 

Basically, I think that there is a 20% chance of him winning and a 70% chance of markets really gyrating, and in 2017 real risk (10 to 60%) of a 2008 level crack-up, with horrible trade wars possible.

 

My thinking is to have a higher than usual amount of cash, plus a very small amount in a volatility instrument.  (Personally, I'm hoping that we have seen his highwater mark, but...)

 

Assuming this is a serious question......

 

First of all you need to figure out how confident you are in your estimate of Trump winning the election. Then you need to figure out the odds of various market scenarios in a Trump presidency. Next you need to compare your estimates to what is already priced in to the market. Once you have all that figured out then you can trade accordingly.

 

Good luck.

 

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Find out what he's going to build that huge wall out of and invest in that. And if Hilary wins of course we will all die in a nuclear war, so just sell everything and enjoy what time you have left.

 

He would likely decide to build the wall out of gold.

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Find out what he's going to build that huge wall out of and invest in that. And if Hilary wins of course we will all die in a nuclear war, so just sell everything and enjoy what time you have left.

 

He would likely decide to build the wall out of gold.

 

Hitler promised a VW in every driveway, allegedly.

 

Perhaps Gold plated urinals in every government office?

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frankly i see a trump election as a nonevent for markets.

 

will he commence a trade war with china in his first year. dont think so.  he will bluster. he actually might improve our trade deficit by getting china to negotiate.  but in a democracy of divided govt, as long as the congress is not controlled by republicans, trump wont have a big effect on markets....and frankly, even if congress is controlled by republicans, these are not trump style republicans.

 

+1

 

I think the bigger event should be that corporate profits have now been declining for 8 quarters...but maybe that's just me. The markets certainly don't seem to care.

 

 

With or without Trump - coal is on the way out. It's just a matter of when. Most coal stocks that I own/watch have doubled or tripled from their January bottoms. No doubt there are still returns to be juiced out of them, but every % higher that it goes means you have to get more and more accurate with your estimate of depletion. I'm not particularly comfortable making those estimates and will likely start reducing exposure soon.

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Although I am absolutely horrified by the prospect of a Trump Presidency, I have to at least figure out how to position myself for the 20 to 40% chance that he will win.  Other than too much whiskey, how would you gear up for getting Trumped.

 

Basically, I think that there is a 20% chance of him winning and a 70% chance of markets really gyrating, and in 2017 real risk (10 to 60%) of a 2008 level crack-up, with horrible trade wars possible.

 

My thinking is to have a higher than usual amount of cash, plus a very small amount in a volatility instrument.  (Personally, I'm hoping that we have seen his highwater mark, but...)

 

Assuming this is a serious question......

 

First of all you need to figure out how confident you are in your estimate of Trump winning the election. Then you need to figure out the odds of various market scenarios in a Trump presidency. Next you need to compare your estimates to what is already priced in to the market. Once you have all that figured out then you can trade accordingly.

 

Good luck.

 

It is a very serious question; although some of the answers are well...

 

Anyway I have put in my estimates of the probabilities as well in my original post. 

 

I do not think that the market has priced any probability of him winning in. (Brexit anyone?) The vix would be much higher. Now the question is would he be true to his word and basically ignite a trade war?  That is the real unknown. What is known is that he is a fool and he could get many, many things, very, very wrong.  I could see a huge (note the word) spike in gold, but that would only be a 'sentiment' indicator, something that is not for me, unless there were a great gold company to buy (is there such a thing??? ;) )

 

So other than having cash on hand, I don't really have any coherent way to hedge the portfolio.

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So other than having cash on hand, I don't really have any coherent way to hedge the portfolio.

 

Having cash on hand at current market level and overall situation might not be bad even if you had no concerns about election.

 

Also since bonds yield close to nothing, cash at this point in time is almost a substitute for the bond portion of your portfolio. And bond portion may or may not be 20%-40%...

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Whoever is elected, I don't will make a large long term difference. For all the strum und drang of the campaign, both candidates want to roll back trade and borrow heavily. Rightly or wrongly however, I do think markets will react much more violently in the short term in the event of a Trump election. I would use that opportunity to sell coal stocks and gold both of which I think will pop on the news. 

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I think it is really interesting at how complacent the posters on this topic are.  That in part really worries me.  (But only in so far as the possibility of Trump winning, which happily is still less than 50%.) The impression that I get is that, ho-hum, it doesn't matter financially who gets in. I think that Trump has the potential to really be a phase shift, in a really bad way.

 

You can bet that Clinton would neither ignite a trade war, threaten to nuke N.Korea, repudiate Nato or try to renege on US debt, Trump well, I hope not, but I would not make that bet.

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Guest Schwab711

I think it is really interesting at how complacent the posters on this topic are.  That in part really worries me.  (But only in so far as the possibility of Trump winning, which happily is still less than 50%.) The impression that I get is that, ho-hum, it doesn't matter financially who gets in. I think that Trump has the potential to really be a phase shift, in a really bad way.

 

You can bet that Clinton would neither ignite a trade war, threaten to nuke N.Korea, repudiate Nato or try to renege on US debt, Trump well, I hope not, but I would not make that bet.

 

I would imagine some part of the population has said this about every president ever elected. I am far less confident on who be elected relative to one year ago but I am absolutely positive the country will continue to chug along just fine regardless of who is president.

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You can bet that Clinton would neither ignite a trade war, threaten to nuke N.Korea, repudiate Nato or try to renege on US debt, Trump well, I hope not, but I would not make that bet.

 

I disagree. I really think Hillary is really dangerous. She's one of the most cold heart and soulless people I've ever seen. Trump is not going to destroy anything. He's not insane but just plays the part.

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Excluding the odd war, do Presidents actually have much power to change market economics, or is it only the perception of change that moves the markets.

 

That said, I used to be a cynic and think the Fed had only temporary, cursory influence outside of the rare short-term extreme initiatives like Volker took but otherwise pretty much sought to take credit (no pun intended) for 'nudging' changes in the face of natural market movements.  I think I've been proven wrong over the last few years of ZIRP.  :-(

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I think I've been proven wrong over the last few years of ZIRP.  :-(

 

I think you've actually been proven right. The Fed has wanted to raise rates since 2013. They feel forced to continue ZIRP by the markets and current economic conditions. Sure, they have control over the Fed Fund Rate (FFR) and their reverse repo rate, but "real economy" rates are not within their purview.

 

They can barely even influence short-term rates. Look how deposit rates at banks haven't budged since they raised the FFR last year and how Libor has been rising this year despite the fact that the Fed as been on hold.

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