In Search of the Perfect Investment

I will admit to making money on this. About a year ago, I bet my friends that Trump would win.

I was impressed by his oratorical skills. I believed his ability to instill fear and provide a “solution” — namely himself — would work, just as it had for every demagogue/dictator — from Hitler, to Stalin, to Mussolini, to Mao Tse-tung, on down.

And today I fear for his crazy, unpredictable ideas and his friendly Republican Congress. It’s like having a blank check to buy into mischief — the full extent of which we have no inkling.

For us as investors, there is some good news:

First, markets always always bounce back from Black Swan events like this one. Some of us are lucky to have hedged with gold. I’m guessing my SGOL (my preferred gold ETF) will rise today.

Second, you can always find bargains among the ashes. For example, CAT should benefit handsomely from the Trump’s re-build America’s infrastructure. Or the health stocks from chucking Obamacare. Or the boom in energy stocks that could occur if he removes regulatory shackles. Or the boom in defense spending.

Third, his victory forces you to examine your portfolio. The  main business concerns are Trump’s protectionist policies, with potential trade wars with China — America’s largest trading partner — and with Mexico, its third largest. You don’t want to own stocks like Walmart. But you may want to own stocks that will benefit from a cheaper dollar, like our major exporters,  e.g. Boeing.

Fourth, it’s hard to see Washington hurting real estate. After all real estate is the Trump family business. There won’t be a blind trust. The kids will run the properties. They’ll be real estate’s most effective Washington lobbyists.

Fifth, there’s always money to be made when the world goes awry. Yesterday afternoon, my smart friend figured that the market had built in a Hillary Victory. Maybe there was a trade. He bought SPXS, the triple short S&P 500, at $12.70. Here’s the chart of the last five days. Note the drop when the market exploded on Monday and Tuesday.

He’s hoping for a strong bounce this morning. He bought at $12.70. I’ve always been skeptical of triple-short ETFs, since they re-balance every day. But they will work for a day or two.

Whatever happened? A lot of Americans were fed up with Washington gridlock, Washington politicians, and figured tossing a Molotov Cocktail in would change things.

The New York Times’ Thomas Friedman wrote yesterday:

What produced all the anger that has propelled the Trump campaign? I believe it has much less to do with trade or income gaps and much more to do with culture and a lost sense of “home.” America’s becoming a minority-majority country has threatened the sense of community of many middle-class whites, and the fact that we’re in the midst of a dizzying whirlwind of technological change has threatened their economic status as well, and left many people feeling unanchored.

Women’s empowerment, which Hillary Clinton embodies, also threatens many less-educated white men. Donald Trump, presenting himself as The Strongman, promised he could build walls to contain all of these changes. A shocking number of Americans fell for it. But Trump had help.

In recent years, making people angry, sowing mistrust among Americans and delegitimizing our institutions in Washington became good business – and good politics – on the right. Fox News, Rush Limbaugh, Sarah Palin and other radio and TV fearmongers have been deliberately making people angry and mistrustful, and gotten rich doing so. The anger business is now a growth industry.

And social media, which is becoming the primary news source for many people, amplifies it all. At its worst, it marinates people in conspiracy theories and helps to foster this “post-truth” era of politics. It was all crystallized in the hysterical “lock her up” chants against Hillary for a stupid use of email that caused no known national security breach. And the G.O.P. establishment, weakened by the ability of its party members to independently raise money and run for office using the internet, threw out its moral compass and went along for the ride.

Ezra Klein put it well in an essay on Vox: “The lesson of this unnerving year is that less can be taken for granted than we thought – the American people are not immune to demagogues, and the American political system is too weakened to reliably stop them.”

Our next president has to lead us in much healing to restore the sinews of trust essential to democracy. “It’s a truism to say that we face a crisis of leadership,” said Gautam Mukunda, a Harvard Business School assistant professor and the author of “Indispensable: When Leaders Really Matter.” “But just as important, we face a crisis of `followership.'” Because after years of this anger industry, “too many Americans will not believe the truth when they hear it. We will not have effective leadership until we once again have followers who can be led. And all of that starts with trust.”

That’s why job one for our next president – before any economic or foreign initiative – has to be to try to fix the “deficits of trust among ourselves and the deficits of trust in authority” that now plague America, argued Ronald Heifetz, an expert on leadership at Harvard’s Kennedy School and author of “Leadership Without Easy Answers.” “It’s the central challenge revealed by this election.”

Here’s a chart showing share prices and crises gong back to the year 1500. To see the full chart, please click on it.

Some days I just love Quora. 
 is the site that answers off-the-wall questions.

Here’s my favorite this week:

Q: When on a plane the guy sitting behind me told me to make my seat upright and he was rude about it. What should I have done?

A: I am 6 foot 6 inches (1.98m). Whenever a plane takes off, the person in front of me is the first person to put their seat back, and they put it back all the way. (I’ve even taken to documenting this phenomenon at too-damn-tall.com.) It’s a curse, perhaps for something bad that I did in a previous life.

So one day after a long and grueling week consulting in a different city, I was finally heading home. For some reason, the airline put a tiny plane on this route, and I was in the last row which had even less room between it and the seats ahead of me.

And, true to form, as the wheels left the ground, the guy in front of me put his seat all the way back – to the point that his seat back was less than a hands-width from my chin, his balding head in full HD just inches from that. But it had been a long week, and I wasn’t up to a battle, so I decided to wait and see if he would adjust it forward when the drink cart came through.

But he didn’t. His seat was so far back that I was not able to take my soda from my drink table to my face – I had to do a round-about move into the center aisle, and then carefully back to my face for every sip.

Then I got an idea.

Once I finished my drink, I took one of the ice cubes into my hand and waited several long minutes as it slowly turned to liquid and matched my body temperature.

And then I did it. I let loose the most convincing fake sneeze I had ever done, simultaneously flicking the water onto his shiny scalp.

It was beautiful.

He instantly moved his seat into the upright position, wiped off his head, glared at me … and never reclined again for the entire flight.

I could have been punched. I could have been berated. But it was so worth it. And I had my space, my glorious space, once again.

Harry Newton, who is still fiddling with the email software. If your email is messed up, go directly to my site. 

For my readers: I am not thinking of leaving America for Australia, where I was born. I’ve been in America since 1967. I’m a naturalized American. I will work to survive and prosper. I can smell opportunities in today’s Trump Molotov Cocktail. Stay positive, my friends. I am.

John Cassidy of the New Yorker has been following the election. He posted a piece this morning at 8:20 AM. He highlights the pitfalls of making predictions. and how all the pollsters can be wrong. And they were.

HOW DONALD TRUMP BECAME PRESIDENT-ELECT

Historians will be debating what happened on Tuesday for decades-centuries, perhaps. But there are some assertions that we can already make. The polls were wrong, for one thing: on average, going into Election Day, they had predicted that Hillary Clinton would win the popular vote by about four per cent. The early voting analyses were wrong, too: most of them said that Trump was too far behind in Florida to win that pivotal state. And journalists (myself included) were wrong: we mistakenly trusted the polls instead of what we saw before our eyes-huge crowds turning out for Donald Trump at rallies all over the country. The Clinton campaign, which as late as Monday evening was expressing a high degree of confidence, was also wrong.

Meanwhile, Trump, I hate to say it, was right: he achieved the Brexit-style upset he had promised, riding a surge of turnout among white working-class voters to carry the key southern states of Florida and North Carolina, put a scare into the Clinton campaign in Virginia, and then stormed across the Midwest and the Rust Belt, breaking through Clinton’s so-called “blue wall,” and picking up Iowa, Ohio, Pennsylvania, Wisconsin, and perhaps Michigan, which, as of early Wednesday morning, still hadn’t been officially called. Trump appeared to be heading for more than three hundred votes in the Electoral College.

I should note here that, with many votes on the West Coast still to be counted, it is still possible that Clinton will wind up the winner of the popular vote. According to the New York Times’s live forecast, which incorporates the latest voting numbers, her margin of victory will be somewhere around one per cent. But in the Electoral College, which doesn’t apportion votes directly in proportion to population, big Democratic states like California, Illinois, and New York get a raw deal. According to some estimates, Democrats need a two-point victory, or thereabouts, to reach two hundred and seventy votes in the Electoral College. In this case, as it was in 2000, that handicap was too large to overcome.

Pending a fuller analysis of the voter returns, any conclusions must be preliminary, but at least five factors seem to have been key to Trump’s victory in the Electoral College.

First, despite all the talk of his lack of campaign organization, Trump’s base of white working-class voters turned out in large numbers. This trend, first visible in western and northern Florida, extended all the way up the East Coast and then spread across the Midwest. The Times’s Nate Cohn and his colleagues were among the first to point to this trend. Early on, Cohn said that the votes Trump was stacking up in Florida counties with a lot of white voters could be enough to fend off the expected late surge of Clinton voters from Palm Beach, Broward, and Miami-Dade counties, and that these numbers would have implications in other parts of the country, too. So it proved.

According to the network exit poll, Trump carried white voters who don’t have a college degree by a huge margin: sixty-seven per cent to twenty-eight per cent. Since these voters still make up about forty per cent of the over-all electorate, they gave Trump a very solid base. Their support enabled him to make progress in lower-income white Democratic areas, of which, until yesterday, there were still many, such as Lackawanna County, Pennsylvania, where I watched Trump speak on Monday night. In 2012, President Obama carried Lackawanna County by twenty-seven percentage points. On Tuesday, Clinton won it by just three and a half points. That was a stunning shift.

Second, Trump appears to have done better than expected among college-educated white voters. Going into Election Day, the Democrats had been confident that they would carry this group for the first time in decades. According to the network exit poll, though, this group voted for Trump, forty-nine per cent to forty-five per cent. In Pennsylvania, which both sides regarded as a crucial state, the effect could be seen in some of the affluent areas surrounding Philadelphia, which the Clinton campaign had been hoping to carry by big margins. In Bucks County, for example, Clinton beat Trump by just 0.6 percentage points, a smaller margin than President Obama achieved over Romney in 2012.

The third factor was that, in some parts of the country, Clinton failed to rack up the margins of victory she needed among minority voters and the young. Take African-American voters: according to the network exit poll, Clinton got eighty-eight per cent of the black vote. That was obviously a strong performance, but in 2012 Obama got ninety-three per cent. Perhaps more surprising, given Trump’s comments about immigrants, he appears to have fared better than Romney did with Latino voters. The exit poll indicated that sixty-five per cent of Latinos supported Clinton, while twenty-nine per cent voted for Trump. In 2012, Obama got seventy-one per cent of the Latino vote, and Romney got twenty-seven per cent.

Among young voters, too, the Democratic candidate saw a drop-off compared to 2012, when Obama secured sixty per cent of the vote from people between the ages of eighteen and twenty-nine. On Tuesday, Clinton got fifty-four per cent of this group. In a tight election, which this one was, such changes can make all the difference.

Fourth, and this cannot be avoided, men were primarily responsible for Trump’s triumph. Over-all, according to the exit poll, women voted for Clinton by a margin of twelve percentage points, fifty-four per cent to forty-two per cent. Men voted for Trump by the same twelve-point margin, fifty-three per cent to forty-one per cent. The exit polls don’t explain this split-but sexism surely played some role.

And yet race and class do seem to have trumped (pardon the pun) gender. White women without college degrees, who make up about seventeen per cent of the voting-age population, voted for Trump over Clinton by a whopping twenty-eight-point margin, sixty-two per cent to thirty-four per cent. If the members of this group had split their votes fifty-fifty, say, they would have delivered a victory to Clinton. But, to a large extent, they voted with their male peers.

Finally, and this shouldn’t be ignored either, the relatively well-to-do went for Trump. According to the exit-poll figures, people who earn less than fifty thousand dollars a year-who make up a bit more than a third of the population-voted for Clinton over Trump by a margin of about eleven points, fifty-two per cent to forty-one per cent. The roughly two-thirds of the population who earn more than fifty thousand dollars a year voted for Trump. The margin was considerably smaller, but because there are a lot more of these voters their numbers were enough to pull the Republican tycoon to victory.

How can this finding be reconciled with the thesis that the white working class was the driver of Trump’s victory? A large part of the answer is that a lot of white voters without college degrees earn more than fifty thousand dollars a year. The lowest-paid voters tend to be younger people and minorities, and they went for Clinton. In that sense, she won the working-class vote.

To be sure, these are just polling numbers, and pollsters had a horrible night on Tuesday. The network exit poll, however, is a huge exercise, in which several thousand researchers question tens of thousands of actual voters outside voting places all across the country. It is generally thought to be much more reliable than pre-election polls-but it did turn up some oddities, particularly in regards to people’s attitudes to Trump.

Just thirty-seven per cent of respondents to the exit poll said that Trump was qualified to be President; sixty-one per cent said that he was unqualified. In addition, only thirty-four per cent of the respondents said that he had the right personality and temperament to be President, and seventy per cent said they were bothered by his offensive remarks about women. According to these metrics, at least, Clinton’s numbers were much better. Fifty-three per cent of respondents said that she was qualified to be President, and fifty-six per cent said she had the right personality and temperament for the job.

And yet, on January 20, 2017, it will be Trump who will be inaugurated as President. Go figure.