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“What does Trump know that Wall Street doesn’t?”
Ty J. Young Editorial
Love him or hate him, Donald Trump is seemingly always in the news. One comment he made recently on Fox Business Network’s “After the Bell” initially seemed to fly under the radar.
When asked about the stocks he owns Trump stated to host David Asman: “I’m selling stocks. I’ve never been a big stock person. I bought in 2011 because it was a great deal to make money, it was the only deal in town. But I have never believed in other people controlling my money. And I certainly don’t believe in how the country is being run right now by our government, so I’m selling.”
Trump immediately caught flak from other media, claiming he didn’t know much about the market. The media questioned how he could blame the government for the market’s performance, as if the two were connected.
I) What does Trump know that Wall Street seemingly doesn’t?: It turns out – a lot!
1) Monetary policy affects markets: Printing money, keeping interest rates low and buying mortgage notes ALL impact the ups and downs of the stock market, and therefore your portfolio.
2) Fiscal policy affects markets: Borrowing, spending and high taxes hurt businesses – the same businesses that issue stocks you may own in mutual funds in your 401K.
3) Regulatory policy affects markets: Your investment could be unfairly targeting by a rogue government agency through crony capitalism and the picking of winners and losers in the marketplace. For example, the government has all but put the coal companies out of business through regulation.
It’s scary to see the media so “wrong” on something that should be so obvious. The best comment from Trump in our opinion was not wanting his money “controlled” by other people. One of our common themes has been “control what you can control.” That means avoiding the government’s intervention into the marketplace with products that provide principal protection guarantees. Yes, government intervention can artificially stimulate a stock market bubble, but that’s what it is – a bubble. As a country, we are increasingly moving away from free market principles and the fundamentals of product creation, job growth and wage growth. These are things Trump knows very well.
II) What do Trump, and rich people in general, know that you need to know?
1) It’s not how much you make, but how much you get to keep: Ben Bernanke, the former Chairman of the Federal Reserve, maintains most of his portfolio in Treasury Securities and fixed annuities. Those are products that protect his principal. (http:www.bloomberg.com/apps/news?pid=newsarchive&sid=alOhCMZGtEx8)
2) The rich invest in products with guarantees: Over 60% of all investment portfolios in the $1 million to $5 million range are comprised approximately of cash, bonds, and annuity products. Fixed annuities represent 20% of ALL investments made by the wealthy investor! (http://www.marketwatch.com/story/do-rich-people-buy-annuities-2013-03-26)
3) Control what you can control. Often, when wealthy investors do invest in stocks, it is with companies where they have a controlling interest. Unless you “control” the company, you are not in “control” of your money. Combined with government intervention, it is better to find products with guarantees rather than play with the ups and downs of the market.
III) What you need to know:
1) Government affects markets: They can stimulate the price UP artificially, and their policies can cause harm in the marketplace, affecting stocks negatively. Both actions, either long or short term, can end up hurting the value of your portfolio.
2) Rich people only bet on sure things: They don’t just throw darts at a board. They look for the “sure” thing.
The unprecedented rise in the stock market from 2009 has been remarkable, but only if you ignore its primary cause – the artificially low interest rates and quantitative easing (money printing) of the federal reserve. The downturn we hit in August and September could have been the beginnings of a broader sell-off. Instead, the Fed didn’t raise rates, and the market kept chugging back up.
Follow the strategies of the truly successful – safety of principal, reasonable rates of return, and guarantees against loss due to market fluctuation. You can have the same investment strategies as the wealthiest investors. Call us now to find out how! 877-912-1919.