The Trump Age has now officially begun.
It’s kind of exciting, kind of like Christmas when you’re a kid and you don’t know what Santa has left you — socks, a bike or a lump of coal.
But the thing about watching the markets is, you have to be somewhat agnostic about politics to be successful. You can’t count on the politicians you like to make you money any more than you fear the politicians you don’t like will cost you.
The fact is, that kind of attitude costs you.
Just like believing this Trump rally. Yes, everything is gravy right now, but now that he’s inaugurated the rubber will hit the road. And making change in Washington is harder than you think, even if you’re the president of the United States of America.
He has a healthy set of initiatives, and as he was giving his acceptance speech his tech team was uploading the new White House website. But this pace will hit the House, where members are keenly aware that they get re-elected every two years and hope to be well-funded enough to win their district. It will then hit the “deliberative body” of the Senate where many ideas go to die quietly. Riding herd on the Hill will be a very tough job.
It remains to be seen if it will help or hurt to have a team that is more Wall Street than Pennsylvania Avenue.
The markets have already priced in all the goodwill Trump brings to the White House. In a recent article in Barron’s, they put together a round table of some of the sharpest investing minds in the business, and they all agree that 2017 will only see single-digit growth in the broad-market averages.
If Obamacare repeal/replace takes longer than anticipated; if a trade war begins to brew; if tax reform is stalled, the market will start to sell. And from the levels it’s at now, that selling will be significant.
That’s why I have re-purposed the old market saw, “buy the rumor, sell the news” and gave it new life for the Trump rally: buy the election, sell the inauguration.
Now, if I were a cynical man I would tell you that the best investment anyone can make right now is in Goldman Sachs. The Trump administration is thick with Goldman players. But so was Obama’s. And so was W’s, so does that make a difference?
Goldman skated through the housing meltdown as if invisible to the watchdogs of financial oversight on Capitol Hill. Other banks — JPMorgan, Bank of America, Wells Fargo, Lehman, Citigroup — paid in some small measure for their sins and made some big law firms very happy with constant business for almost a decade.
But Goldman didn’t pay tons of fines, much less have anyone sent to the hoosegow, despite selling bad housing investments and then betting against those same investments and profiting billion from that insider knowledge.
This past week I saw an old film that brought me back to those bad old days. It was Inside Job, a 2010 documentary on the financial crisis. It was especially interesting to watch it because it was made while the tsunami was still sending waves across the global economy. And now to take a measure seven years beyond you see how nothing has really changed.
It will be interesting to see what happens in Washington now that the bankers don’t need to bribe Congress to get their way because many are in positions to run Washington as well as Wall Street.
I hope it goes well, but I don’t invest on hope. And I can’t bring myself to recommend Goldman in good conscience.
But there are two investments that I think will do very well and may do amazingly well — gold and bitcoin. Gold (as well as silver) is the tried and true currency of value. Any kind of market correction will see investors scurry to the precious metals.
Bitcoin is more of a global play that is hedge on French elections, Brexit negotiations and Chinese recovery. Offshoring money into bitcoins could be very popular in the coming months.
But for now, enjoy the honeymoon and hope for the best. Just make sure you’re prepared for the downside as well.
— GS Early