Analyzing the Long-Term Success of Trump Trade Stocks
Yesterday, Donald J. Trump was sworn into office, making him the 45th and 47th President of the United States. Since he won the election in November, people have been trying to predict what he will do when he takes office, and what he will not. This has taken the form of “Trump-Trade” stocks. These stocks and other commodities have surged since he won the election, as investors rush for a measure of security, while other positions, like pharma, have sagged under the weight of his nominations for his cabinet. Today, we’re going to review and rate each of these positions by the level of long-term success I think you can claim from buying in.
First, Fannie Mae. If you have watched or read The Big Short, then you might remember a mention of these companies. Fannie Mae is a unique financial instrument in that it is a government-sponsored enterprise, meaning that it is basically a private institution, but it was created by the government. Fannie Mae is a for-profit institution with some measure of oversight from Congress. These measures of oversight meant that it was assured that the company would be bailed out in 2008, and honestly, I think this system does make more sense if these companies are fully privatized, as it removes any implicit government support for especially risky maneuvers. These companies right now are over-the-counter, meaning they are not listed on any major stock exchange, just through a complicated set of brokers, and honestly, this entire system is too complicated for what they do: Take mortgages, bundle it together, and sell it again on the secondary market, thereby making the housing market more affordable for poorer homebuyers.
Donald Trump has promised to privatize Fannie Mae, and its sibling that does the same thing, Freddie Mae. If you hold the preferred shares, the government will be required, legally, to pretty much buy you out to take the company private, at any price; I think. People like Bill Ackman have hyped this move up so much that the stock is up 400% since July 5. This is a stay-away from me. Maybe you eke out some gains now, but you are gambling on factor veering so far away from the fundamentals, that it makes the stock market more like a seedy Atlantic City “casino.”
Since the market closed on election day, Nov. 5, Tesla stock is up $500 billion dollars, 35 percent of S&P gains. I have already ranted too much against this company and the Copium-Fueled dreams of making Tesla a robotics and AI company, and not a car company. I think if you buy into this stock today, you are completely delusional, but I have been saying that since 2018, so maybe I just don’t get it. This is a screaming sell, a screaming Elon Musk is a nutjob and a fraud, a screaming he is playing with fire when it comes to Trump, a screaming their bromance is not worth half-a-trillion in gains, and a screaming there are better options.
Private prisons are a Burnsian (Simpsons) industry, but they have exploded since the election, up 75% and 150% each for CoreCivic and Geo Group. The bet is basically a play on deportations. Donald Trump has promised to deport pretty much everybody, but there are not enough government-owned holding cells for all of these people while everything is processed, so private prisons will need to be given government contracts. This would be a great play, if morally questionable, but I think all of the value has been bought out of these companies, as they both already exceed, by a decent margin, the all-time highs they reached during Trump’s first terms. I think it will be a very volatile ride either to a 50% loss from here or to a 15% gain. In my opinion, none of these companies are worth the risk.
Then obviously there is crypto. Bitcoin is up 40% since the election, which surprised me because it has been outpaced by these common stock plays, but either way, crypto-optimism is at an all-time high. Donald Trump and cryptocurrency both looked like they were dead in the water in 2021, but they have both come roaring back. And honestly, I still do not care. Cryptocurrency is far from irrelevant, yes, and the blockchain is genuinely very cool, yes, but Bitcoin will never be what its biggest supporters believe it will be, making it wildly overvalued, another stay-away.
Out of what has fallen since DJT took office: Smaller companies, big oil, and his Truth Social company DJT. Smaller companies should be a good call but for reasons irrelevant to Donald Trump. Oil is dying, but there is some value left to extract, and buying DJT is a complete gamble.
Basically, everything is a gamble, as it always is with ole Don.
