David Einhorn reveals how he's trading the Trump presidency http://finance.yahoo.com/news/david...s-trading-the-trump-presidency-173651011.html Closely-followed hedge fund manager David Einhorn, the founder of Greenlight Capital, laid out how he’s preparing to profit from a Donald Trump presidency. “Rather than look backward, we’d like to share our views of what a Trump Presidency (TP) might look like and why we believe we are well-positioned for 2017. In short, we believe that the post- Great Recession easy money policies have been good for Wall Street but bad for Main Street. It’s possible that the TP reverses these policies, which would be good for Main Street but rough on Wall Street,” Einhorn wrote in a letter dated January 17. Einhorn continued: “While it’s hard to know exactly where President-elect Donald Trump stands from day to day, his main economic policy objective appears to be employment. To that end, he has proposed corporate tax cuts, infrastructure investment, and military build-up, combined with anti- immigration policies and trade protectionism. To the extent that he can implement these policies, the economy should accelerate, and given that we are starting with less than 5% unemployment, a labor shortage could develop.” Einhorn, who has long been critical of the Federal Reserve’s ultra-easy monetary policy, expects that rates will go up and this will be good for growth. “In response, monetary policy is poised to tighten. Conventional wisdom says this will slow growth, but we continue to disagree. Our Jelly Donut thesis on monetary policy contends that ultra-low interest rates deprive households (savers) of income to the point that the harm overwhelms any of the limited benefits. We believe that raising rates from, say, 0.5% to 2% would give needed income to savers without significantly impacting corporate investment decisions,” he wrote. Einhorn’s “Jelly Donut” thesis, which he first introduced in a Huffington Post blog in 2012, essentially has to do with something being “too much of a good thing.” In other words, lower rates and quantitative easing were fine at first just like that initial donut tastes really, really good. But if you keep eating donut after donut after donut, or continuing to keep rates at or near zero for a long time, you’ll see a diminishing return. “Further, rates rising from ultra-low to merely low would add a fiscal stimulus because the higher interest payments to holders of newly issued Treasuries and on overnight liabilities at the Fed will add to the deficit. In the near term, this stimulus combined with the benefit to savers will add fuel to an accelerating economy and a tightening job market,” he wrote in the new letter. There’s also a risk of the economic expansion ending, he warned. “Ultimately, wage inflation could become a drag on corporate profitability and higher inflation may force the Fed to raise rates substantially, potentially causing the next recession.” Greenlight is preparing its portfolio by going long Apple (AAPL), which Einhorn sees benefitting from repatriation of foreign cash and tax reform. He’s also long General Motors (GM), which he expects will benefit from more jobs, higher income for savers, and higher wages that should drive demand for cars. He’s also going long a “variety of long low-multiple, tax-paying US value stocks.” These are companies that will benefit from corporate tax cuts. He named AMERCO (UHAL), Dillard’s (DDS), and DSW (DSW) as examples. Meanwhile, he’s short a so-called “bubble basket,” which are stocks that don’t really have profits and are therefore unlikely to benefit from corporate tax cuts. He’s also short the oil frackers on the notion that they’ll “sink cash into money-losing holes” with Trump’s “drill-baby-drill” attitude. He’s also betting against Caterpillar (CAT), noting that the company’s biggest segments are mining and energy and selling machines used for infrastructure are only a small part of the business. Greenlight continues to own gold to protect against Trump changing his mind on core policy beliefs. “Ultimately, we believe the case for gold is broader: greater economic, geopolitical and policy uncertainties, much wider budget deficits, and the possibility of an inflation problem all support gold (to say nothing of what might be required to redecorate the White House to Mr. Trump’s tastes).”
his theory that savers will boost the economy doesnt seem right. he is not taking into account all the extra interest payments from people that have debts or get into debt. mortgage rates for instance, are up quite a bit
I think that it's worse than that. We're on year 8 of ultra-low to zero interest rates and the "saving generation" is essentially into their retirement years. "Peak consumption" is behind us, equity withdrawals or re-allocations are happening and/or ahead of us. The "Millennial's" are the most heavily indebted generation and their earning power is capped by all sorts of cross currents (technology/third world labor pressures/sluggish growth, etc, etc...). Central banks have essentially bailed out the boomer generation, but at the cost of making all asset markets prohibitively expensive for everyone else.
True. Savers are mostly retired people and old folks that don't have the much propensity to consume (other than ordinary expenses) and they already receive a record share of GDP in terms of transfer programs (SS, Medicare Medicaid). If they get extra returns on their savings, I doubt they will spend much. But young generations are loaded with debt, the extra payments will hurt them quite a bit and they will have a lower propensity to consume. The corporate sector is more difficult, they do have a net saving surplus so they could invest more if they have extra funds avaliable but its unlikely as those existing extra funds didn't seem to have induced them to invest at this point. Perhaps Einhorn should stick at valuing equities as that seem to be his expertise. In terms of monetary policy he seems to be a little lost
Ill tell you how Im trading the trump presidency, just go long or short anything that Trump shoots his mouth off about on twitter, its been free money so far im sure the market will adjust, but i created a thread dedicated to this, put it in PnR cause it had to do with Trump maybe should move it, cause none of the traders are going to probably watch it, but check it out if your interested in the free money the golden haired god is throwing out. https://www.elitetrader.com/et/thre...ket-just-follow-the-donald-on-twitter.306070/
Wanted to create a thread solely dedicated to the free money Trump is handing traders on a weekly basis, so far batting a thousand on these trades, I will try to keep this thread updated in real time from now on, but to start it off I want to just demonstrate a couple trades that were total lay ups, some of these i missed, cause i piled into other stuff, so admittedly i havent destroyed the Trump trades the way some guys have, but here is a couple trades to start it off, from now on i will keep these updated in real time, so we got a 4 year record of how much the Donald slot machine pays off. 01/11/2017 Trump Holds his first press conference says "We need to start renogotiating drug prices. Instant reaction short PFE, i managed to get in during the press conference short 7k shares at 33.15 only took it for .60 cents, it continued to go almost 2 more dollars, he literally broke a chart that was on the verge of breaking out. View attachment 169991 01/18/2017 Trump says "We are going to have to put a tariff on chinese steel and aluminum. My reaction, Long AA at 33.15 he literally made the chart break out of course im a pussy so i didnt hold, but this is to document how far these things go, you also could have boughten X or AKS (both steel companies) on the Trump comment, but i went with AA cause it was breaking out on the daily. Both AA and PFE still look like good trades you could have held on too if you werent a daytrader who doesnt like holding things, both charts look perfect. View attachment 169992 Anyways this is just the start, he also blew up comcast CMCSA one day, and Toyota another Day, both more free money if you just follow the Donald, I know im going to take heat from people calling me a hindsight trader but from this day foreword i will update this thread in real time, my goal this year is to make 100k just off of Trump, I guess we will see if he loses his edge after being in office for a while, but if not this is going to be a fucking goldmine for traders. Gl to all and feel free to add your "Trump" trades everytime the Golden haired god dishes out some free cash.