I try to keep my ego out of the stock market but decades ago, I went for control of Caesar's World. New Jersey regulators turned me down. My financial package seemed too leveraged for them. Later, Trump got involved in Vegas deal making, too.
Casino owners then ran “grind joints.”They hated Trump who was upsetting their operating equilibrium. Later, Trump built his mammoth Atlantic City casino which crapped out. It was over-scaled for its market. When I asked Merrill Lynch’s deal honchos why they financed it, they replied feebly. “Well, we bought the name.”
My experience with Presidents is all bad news. President Truman’s reaction to North Korea’s flooding of troops into South Korea in 1950 led to my call up as a ROTC second lieutenant. Truman called Korea a “police action,” but for us it was war in a Siberian climate. We made do with the quartermaster stores’ leftovers from World War II. For those of us on the front line, coming down with frostbite proved a painful experience. My most precious possession then was a pair of army issue woolen socks. I treasured them as a reserve in my field jacket pockets.
Late fifties, when Vietnam led to a national draft, I remember Donald Trump called on his doctor for a medical draft exemption and he got it toute de’suite.
Youngly, I learned that life is unfair. Still in my twenties, my Street career was then interrupted by the Berlin Crisis. I was called to service, again. The quest for making serious capital was deferred.
Shocked to learn Trump’s Foundation, even after he was well established, was not more than $4 million. Gus Levy, chairman at Goldman Sachs, had taught me how to give away money. “Martin”, he’d say, “I’m going to call your card at the Federation dinner. Be ready with a nice increase over last year.”
Years later, when I left employment by the Rosenwald family, founders of Sears, I ran down to Gus to tell him my news. “Martin”, he said “ I know you'll do fine on your own. Julius Rosenwald, founder of Sears, was kept alive by Goldman Sachs in 1929. The market hadn’t much liquidity then. Goldman, as banker, helped Rosenwald meet his pledges.
When I sit back and ask myself what Donald Trump means as our President, I came up with a bunch of dire responses. Weakness in financial markets can be laid at the feet of our President. For sure, financial regulation covering income taxes, capital gains, agency spending and tax relief for individuals and corporations mount up.
For those with sizable wealth, can you keep serious capital investments intact? Super volatile growthies in technology, healthcare, even energy and financial services like banks, do get hit hard. Tesla dropped 20%, overnight.
If you think the most vulnerable market sectors embrace banking and technology as well as consumer durables like automobiles, the issue becomes how much do you reduce outstanding exposure.
Risk structure implemented by banks and long standing investment firms which manage trillions upon trillions in family assets stick to their traditional 60/40 ratio.
This pie chart on asset allocation looks neat and definitive, but can turn deadly. Seems a conservative construct, but not so. Stocks and bonds can decline in tandem and cost you mid-teens portfolio shrinkage. Sometimes, more.
I believe the market sells at 20 times my next 12 month earnings projection, vulnerable enough even minus the add-on Trump risk. I‘ve reduced equity exposure to 25% of assets from 60%. I may miss the onset of the next bull market. I’ll catch another bus and get reinvested. Enduring Trump fully invested isn’t tolerable.
I’m referring to the typical pie chart for investment used by banks and other houses for investment implementation. It adumbrates the illusion of stability, conservatism and growth but never mentions loss ratios in markets when bonds and stocks underperform in unison rather than contrapuntally. In bad years bonds don’t bail you out fast. You can drop serious capital (20%). I’m sure many investors have no idea they are unprotected for a bear market.
For the first time in my life (I’m 93). I’m a major investor in 2 and 10-year Treasury Notes which I could hold to maturity in an edgy setting. When I first came down to Wall Street in 1958, I used money brokers to buy stocks margined at 10% of assets. Advisors pushed utilities, not semiconductors or electric cars then. Semiconductors still to come from AT & T.
The Magnificent 7 list is jaded ‘n outdated. Decades ago, J.P. Morgan needed to liquidate false growthies (1-decision stocks).
Nothing lasts forever. Ask our wrecking ball President.