Investing under Trump

[edhopper]

cross-post from GD

I see the normal GOP refusal to regulate leading to a market collapse in a few years. (The SEC will be effectively a nonentity)
But if Trump starts trying to "negotiate" our debt, that is rescind the good faith of the Government in American Treasuries, or is Congress in their stupidity doesn't raise the debt ceiling, we could see a quick and devastating Global collapse.
In the mean time I am shifting some assets around as I evaluate what is happening and watch what these fuckers are doing.
Definitely Gold will be a big part of it, but walking the tightrope in these times will take more financial skill than I have.
And like every financial emergency that has happened in the last 50 years, the professional investment community won't see it coming.

It was suggested I also post here for some good perspective.

[elleng]

1. Thanks, edhopper.

Yes, 'deregulation' will have (and HAS had) damaging effects. Unregulated capitalism cannot thrive.

And the SEC hasn't been very effective for quite some time, certainly not on behavior of 'rulers' of the markets.

[edhopper]

2. I agree

but now we will have outright fraud and market manipulation going unchecked.

[elleng]

3. Right. It worsens steadily.

Guess I'll watch for a while, and at some point discuss with my investment adviser.

[edhopper]

4. start talking now to plan for later.

[A HERETIC I AM]

5. I think it is important to keep in mind how little nonsense the heads of corporations will stand for

No one, and I mean NO ONE wants major changes to the way things are run, with the exception of regulations. They always want less, of course.

But major changes to monetary policy or screwing with our debt (ie: Treasury bonds and their value) is not something I think Trump will be allowed to fuck with.

Bear in mind that as we speak (or type, as the case may be) the Treasury is and has been retiring 30 year bonds from the REAGAN era, when yields were as high as 13% and coupons were regularly 10%. That money is being refinanced at unbelievably low rates right now, and no one with any brains whatsoever wants to fuck with that. Someone will surely bend Cheetoface's ear and tell him in 2nd grade language how the Treas. bond market works and that he had better not fuck with it.

Having said that, I'm going to watch Treasury bond trading volume and yield. If volume spikes in the weeks and months after inauguration and yield skyrockets, that means there is a selloff happening. That would mean the rest of the world is beginning to have concerns about our ability to meet the coupon and redemption requirements. If that sentiment takes hold completely, we are well and truly fucked.

I think that is a long shot, personally. Like I said, someone will pull that asshole aside and tell him what's what.

[edhopper]

6. Except thiose same Corporate brains

went all in on useless derivatives that almost collapsed the World Economy.
I think his pick for Treas. Sec. will speak volumes.

[progree]

7. Sad that the refinancing is being done with short term debt

Last edited Tue Nov 22, 2016, 06:12 PM - Edit history (1)

As debt maturities loom, U.S. needs to extend (the average maturity of federal government debt is only 5.2 years) - Reuters, 9/1/11 (followed by a December 2015 update where the situation is virtually unchanged)

http://www.reuters.com/article/2011/09/01/us-bonds-debt-extension-idUSTRE7803QD20110901
The average maturity of marketable U.S. debt ($9 Trillion) is only 5.2 years. 70% of bonds mature in less than 5 years. We're financing long-term liabilities with short-term debt. With such short average maturity, a substantial rise in overall market interest rates will be followed relatively quickly by a substantial rise in interest on the national debt.

I think with historically low interest rates, the Treasury ought to have been -- and be -- financing a large part of the debt with 20 and 30 year bonds.

Big jump in the 10 year Treasury yields since just before the election -- from about 1.8% to 2.3% ... and a corresponding drop in the bond prices (as bond prices move inversely to changes in yields).

Not sure the corporados have a great record on preventing bubbles and collapses. It beats the hell out of me why Republicans, who are supposedly the wealthy investor class and the business owner class (leaving aside their stupid wannabe base), want to go back to wild west financial deregulation that gave us 2 crashes in the past 16 years. With a drop in the S&P 500 of 48% in the first (Dot-com) crash, and a 57% drop in the second (housing) crash. How is that good for wealthy investors and business owners?

Used to be a financial crash was about a once in a generation thing. If we have another crash in the next 9 years, it will be 3 crashes in 25 years, i.e. 3 crashes in a generation.

[A HERETIC I AM]

8. Let me ask you this: (edited)

What is better?

Paying $4.40 a year in interest or $28.80 a year for the same amount?

The $4.40 is what the annual yield is currently on the 90 day T-Bill. Rolled out 3 more times, that is.

The 30 year Treasury Bond currently has a 2.88% coupon.

As long as the auctions on the short maturities are nearly or fully subscribed, it makes perfect sense to use them while yields are so low. Those yields BTW are set at the auctions, so the Principal Dealers have a lot of say as to what they are. If those dealers feel they can not sell bills at such low rates, they'll bid them higher.


Edit: FWIW, I understand the point being made in the article you linked and it is perfectly valid. That concerns is even greater with the unpredictability of a Trump in the White House. If he scares the international bond market, the scenario discussed in the article could certainly occur.

[progree]

9. I'm thinking about the future, not the best short-term deal now

Last edited Thu Nov 24, 2016, 05:53 PM - Edit history (4)

I think the interest rates we have seen in the last several years are at almost unprecedented lows, at least post WWII, and will inevitably return to more average levels, even swinging above average levels at times. Regardless of who is in the White House. Then 2.88% will look real cheap across the longevity spectrum, whether 90 days, 10 years, or 30 years.

Just like I'd lock in a 30 year fixed rate mortgage now, rather than temporarily saving money with a lower interest rate adjustable rate mortgage. But that's just me I guess. Maybe I've lived too long and seen too many swings in inflation and interest rates over many decades.

I remember back in the late 70's and early 80's when everyone thought high interest rates and high inflation was baked into the economy and we'd have to live with that for at least a generation. Now some people think today's ultra-low interest rates and inflation are the new normal from now on. I very much don't think so.

I remember the late 90's when we were told -- and the conventional "wisdom" was -- that there would be no more recessions or at worst only mild ones because the Great Maestro, Alan Greenspan, had found the secret to maintaining a Goldilocks economy. And soon we would have Dow 36,000. And that we were all going to the moon, and we were all going to the stars. Instead we got two monster crashes / recessions in just 8 years.

And then we were told that mortgage-backed securities and derivatives were perfectly safe because they were diversified across different housing types and geographically across the country, and that housing prices have never gone down on a nationwide average basis, though they have occasionally done so in some local markets. Well we all know how that turned out.

[bucolic_frolic]

10. I trade but keep an open mind

Price - what you pay for an investment - is everything. It's more important
than what you buy. I'm not a very good trader, but am making some small
progress. I want to buy high quality when the prices are down. Watching
charts is essential. If I learned anything from the Great Recession, it is to
buy great companies at firesale prices - value - and hold. I want to diversify
into Europe a bit. Commodities - oil, metals - are fine, but buy when they're down,
and buy best in breed. Cash is a choice, and often a good one after a market
run up like we've had since 2009. I watch general market trends, sectors. I pay
attention to the simplest asset class trading system - Decision Moose - because
it tells me what is overvalued, and what might move, in the simplest investments - ETF's.

At all points in life, look for great companies at low prices. OH, the one's I've passed by.
When I bought my first Nike's in 1982 - 18.99 on sale at Macy's subsidiary - Nike was $8.
Citibank, Chrysler - 1991 - $10. Apple at $20, 1996? Amazon, 2000.

The lesson is, a dozen small investments in great companies can fund your entire life if you
hold for 20, 30, 40 years. You must invest if you want to grab the most important financial
aspect of our society - participation in the growth of the population, prosperity, technology,
intellectual property that drives it all forward.

In a nutshell, that is what I have to tell you. It sounds good, but I'm just implementing this
system, and it's tough going. So hope some learn from my long term learning curve.

[bucolic_frolic]

11. PS

5% of stocks earn 90% of the money. The rest are often not worth your time.

[Hokie]

12. My financial planner introduced me to that concept

He threw out the term FANG effect. It stands for Facebook-Amazon-Netflix-Google because those companies have a big effect on the S&P 500.